But when you talk to traders and economists, the whisper story is that Bernanke and the Fed are no longer truly independent of the Obama White House and Treasury. As a result, Bernanke will not be able to slow down the...]]> Sat, 30 May 2009 00:00:00 -0500 Get ready, folks: America is about to buy a car company. As of Monday, we the taxpayers will own more than 70 percent of GM. Whether the company will be formally renamed Government Motors remains to be seen. But that's what it will be.

Instead of putting the failed car enterprise into bankruptcy six months ago -- where Carl Icahn or Wilbur Ross could have bought it -- the Bush administration chose Bailout Nation. Under Team Obama, that bailout has morphed into full-scale government ownership. Twenty billion dollars of TARP money is already invested in GM, with another $50 billion on the way. And that number could easily double unless GM car sales miraculously climb back to 14...]]> Thu, 14 May 2009 00:00:00 -0500 Does anybody really believe that adding 50 million people to the public health-care rolls will not cost the government more money? About $1.5 trillion to $2 trillion more? At least.

So let's be serious when evaluating President Obama's goal of universal health care, and the idea that it's a cost-cutter. Can't happen. Won't happen. Costs are going to explode.

Think of it: Can anyone name a federal program that ever cut costs for anything? Let's not forget that the existing Medicare system is roughly $80 trillion in the hole.

And does anybody believe Obama's new "public" health-insurance plan isn't really a bridge to single-payer...]]> Tue, 05 May 2009 00:00:00 -0500 When I first visited with Jack Kemp in his congressional office in Washington, D.C., in the late 1970s, I couldn't help but notice the row of books on his desk. There was Friedrich Hayek, Ludwig von Mises, Benjamin Anderson, and Milton Friedman. And of course there was Jude Wanniski's The Way the World Works.

Jack extracted big ideas from these big books, and he applied them to an American nation that was in big trouble. His detractors called him a jock, just as they called Ronald Reagan a dunce. Yet both men proved their critics wrong.

Working with Wanniski, Arthur Laffer, Robert Mundell, Alan Reynolds, Steve Entin, Norman Ture, and many others, Jack developed an agnostic...]]> Thu, 30 Apr 2009 00:00:00 -0500 In the early 1980s, Ronald Reagan's popularity and policies moved American politics firmly to the right. In only 100 days, Barack Obama's politics and policies have shifted America way to the left.

The president is seeking to change the whole relationship between the government and the free-enterprise private sector. He is steering the country away from democratic capitalism and toward his big-government command-and-control vision. We are witnessing a triumph of government bureaucrats over entrepreneurs, investors, and small businesses.

And with Sen. Arlen Specter switching from Republican to Democrat, Obama can now move the nation even further to the left. A...]]> Wed, 22 Apr 2009 00:00:00 -0500 How far will the Obama administration move to assert regulatory control over key sectors of the economy? Are we moving away from democratic capitalism, and toward some sort of corporatist state-directed economy? That could be the biggest stock market and economic-growth issue facing us today.

Stocks plunged almost 300 points on Monday over new fears of bank nationalization. On Tuesday shares recovered about 100 points after Treasury man Tim Geithner testified that repayment of TARP loans would be okay in some cases. But Geithner added that the decision to let banks repay the federal government will largely depend on the credit needs of the broader economy.

So while some...]]> Tue, 14 Apr 2009 00:00:00 -0500 Is bailout nation about to strike again? Sure looks like it. According to a bunch of front-page news stories, life-insurance companies are about to get TARPed. This is nuts.

The public is clamoring for and end to TARP and bailout nation. That's a key message coming from the heartland tea parties that are cropping up spontaneously around the country. This is turning into a real populist uprising against rising taxes (especially state, local, and property taxes), TARP, and all the federal bailouts -- and the trillions of dollars of deficits and debt being used for financing.

If Team Obama ignores this uprising, it has a political tin ear.

While commercial...]]> Tue, 31 Mar 2009 00:00:00 -0500 Sen. Bob Corker (R., Tenn.), probably the most knowledgeable man in Congress about the car bailout, and someone who argued months ago in favor of a pre-planned government-sponsored bankruptcy for GM and Chrysler, calls the Wagoner firing "a major power-grab by the White House on the heels of another power-grab from Secretary Geithner, who asked last week for the freedom to decide on his own which companies are 'systemically' important to our country and worthy of taxpayer investment, and which are not." Corker calls this "a marked departure from the past," "truly breathtaking," and something that "should send a chill through all Americans who believe in free enterprise."

Mr. Corker...]]> Sat, 21 Mar 2009 00:00:00 -0500 Note that the $250,000 cut-off point for the tax is the same line drawn in the sand in Obama's budget for tax hikes on investors and successful earners. The president is proposing a tax rate of 40 percent, not 90 percent. But connecting the dots between Speaker Pelosi and Pres. Obama, it will be interesting to see if the president dares sign this bill.

And even though the 90 percent tax is a reaction to the AIG bonus fiasco, you have to wonder if the very-liberal-left House Democrats have a much broader agenda: to completely overturn the supply-side tax cuts of Ronald Reagan and John F. Kennedy.

A bit of history is in order. Following WWI, the...]]> Wed, 18 Mar 2009 00:00:00 -0500 But as things stand now, there still is no clear roadmap for the dissolution of AIG. There are ideas, but nothing is set in concrete.

And as for the $165 million or so in AIG bonus payments, the Obama administration -- including the president, Treasury man Tim Geithner, and economic adviser Larry Summers -- knew all about them many months ago. They were undoubtedly informed of this during the White House transition.

So there's no big surprise. Nobody should be shocked. But President Obama is doing his best play-acting ever. He knows full well that the nationwide outcry against federal bailouts and takeovers is only going to get worse on his watch. His poll numbers are...]]> Sat, 14 Mar 2009 00:00:00 -0500 Out of the blue, bank stocks mounted an impressive rally this week, jumping nearly 40 percent on the S&P financial list. One after another, big-bank CEOs like Vikram Pandit of Citi, Ken Lewis of B of A, and Jamie Dimon of JPMorgan are telling investors they will turn a handsome profit in the first quarter, their best money gain since 2007. This is big news. And it triggered the first weekly stock gain for the Obama administration.

But this anticipated-profits turnaround doesn't seem to have anything to do with the TARP. It's about something called the Treasury yield curve -- a medical diagnostic chart for banks and the economy.

...]]> Fri, 20 Feb 2009 00:00:00 -0600 All this took place on the air to the cheers of traders. Santelli called for a new tea party in support of capitalism. He's right.

Obama's so-called mortgage-rescue plan amounts to $275 billion in new debt that will have little if any lasting impact on deeply corrected housing prices or the mortgage-default problem that stemmed from the insistence of government to throw home loans at lower-income people. A modest reduction in mortgage rates will have little impact on home prices, as Harvard professor Ed Glaeser has shown. And by the way, re-default rates on modified mortgages have been running 50 percent to 60 percent. This is not going to change. So why...]]> Wed, 11 Feb 2009 00:00:00 -0600 You can say a lot of things about President George W. Bush's big-government mistakes. But blaming the Bush tax cuts for the credit-crunched downturn is utter nonsense. It's ideological politics at its worst. (It's worth noting that while Obama was trashing supply-siders on Monday night, Scott Rasmussen's latest poll showed 62 percent of U.S. voters wanting the stimulus plan to include more tax cuts and less government spending.)

Later in the news conference, Obama acknowledged how businesses that suddenly couldn't get credit pulled back on their investment and laid off workers -- workers who then cut back on their spending. That -- along with the Fed's stop-and-go monetary policy...]]> Sat, 07 Feb 2009 00:00:00 -0600 Mustard seeds planted a while back are now pointing to economic recovery. The huge energy tax cut is one such mustard seed. The related inflation collapse is another. By the way, in today's jobs report, wages rose again, and now stand nearly 4 percent higher than a year ago. With zero inflation, that's a real increase in worker purchasing power for the 92.4 percent, or 135 million workers, still employed.

Then, of course, the Federal Reserve has been pumping in money to offset credit and asset deflation. The old Milton Friedman M2 money measure has grown by $590 billion since early September for a 20 percent annual rate of increase.

In the short-run, as...]]> Fri, 30 Jan 2009 00:00:00 -0600 Clinton economic adviser Alice Rivlin made the same point in testimony before the House Budget Committee. Her message: Divide up the package and slow down the process.

And Sen. Richard Shelby told CNBC that Washington should "shelve the stimulus package" and instead attack the banking and credit problem first -- probably with a government-sponsored bad bank that would relieve financial institutions from their toxic-asset problem. Mr. Shelby believes the credit crunch remains the biggest obstacle to economic recovery.

Later in the day when I interviewed Senate Republican leader Mitch McConnell, he agreed with Shelby that the stimulus plan should be shelved. For the first time...]]> Tue, 27 Jan 2009 00:00:00 -0600 The surprising number of no votes suggests that both parties will keep Geithner on a short leash. And it was President Obama who ran over to the Treasury Department to swear Geithner in right after the Senate vote. This was unusual, but it's clear the new president is trying to stop the bleeding of his new Treasury man. Instead of a hoped-for early confirmation to get the next stage of the financial-bailout package moving, Geithner wound up being one of the last cabinet officers confirmed.

But Geithner's gaffes are not all tax related. He tripped up again last Friday when it was discovered that he attacked China in written responses to Senate Finance Committee questions....]]> Tue, 20 Jan 2009 00:00:00 -0600 Media commentators regularly compare the current downturn with the Great Depression, which seems like a big stretch. And there's a good chance Reagan was dealt a much tougher hand than the one Obama is holding today.

For one thing, inflation today is zero. Back in Reagan's time it was double-digits. Interest rates today are historically low. In Reagan's day, they were 15 percent to 20 percent. We have suffered a tremendous oil shock, as did Reagan. But today's shock has completely reversed. And while today's recession is over a year old, Reagan inherited a recession that began in 1979 and didn't end until late 1982.

Obviously, we now have...]]> Fri, 09 Jan 2009 00:00:00 -0600 Nobody really believes infrastructure spending will end the recession or create permanent new jobs. However, it's interesting just how much the Obama plan has changed since the election. The size has been roughly constant. But the mix of tax cuts and spending increases is now totally different.

Instead of $100 billion worth of tax credits, there are now $300 billion worth of tax cuts. This includes a big new piece for business, more cash-expensing for small-business investment, and a restoration of the five-year tax-loss carry-back, which will especially help banks and homebuilders. It might even result in tax refunds for businesses, and might also allow banks to rid themselves of...]]> Sat, 03 Jan 2009 00:00:00 -0600 The Republican leader is drawing a clear line in the sand. Okay, good. But the GOP has got to do more. It must start talking about tax cuts to grow the economy. And it must get back to the supply-side by talking about lower marginal tax rates on individuals, businesses, and investors.

We don't need bailout nation. Nor do we need the government picking winners and losers in a massive, Keynesian, new-New Deal spending extravaganza. And it's not Obama's middle-class tax cut that's going to get us out of this economic jam. At best his vision is incomplete. But at worst his aversion to successful earners and investors is a real obstacle to full economic recovery.

Social historian...]]> Wed, 31 Dec 2008 00:00:00 -0600 The Republican leader is drawing a clear line in the sand. Okay, good. But the GOP has got to do more. It must start talking about tax cuts to grow the economy. And it must get back to the supply-side by talking about lower marginal tax rates on individuals, businesses, and investors.

We don't need bailout nation. Nor do we need the government picking winners and losers in a massive, Keynesian, new-New Deal spending extravaganza. And it's not Obama's middle-class tax cut that's going to get us out of this economic jam. At best his vision is incomplete. But at worst his aversion to successful earners and investors is a real obstacle to full economic recovery.

Social historian...]]> Fri, 26 Dec 2008 00:00:00 -0600 And then in today's meeting Biden talked about the stimulus package with all that new spending. It's going to be an avalanche of government spending.

In today's Wall Street Journal, Nobel Prize winning economist Robert Lucas said all this spending isn't necessary. Let the Fed take care of the economy, he argued. He wrote, "It entails no new government enterprises, no government equity positions in private enterprises, no price fixing or other controls on the operation of individual businesses, and no government role in the allocation of capital across different activities. These seem to me important virtues."

Lucas is right. We do not need bailout nation. Nor do we...]]> Wed, 17 Dec 2008 00:00:00 -0600 However, the really big news is not the fed funds target. It's this sentence:

"The focus of the Committee's policy going forward will be to support the functioning of financial markets and stimulate the economy through open market operations and other measures that sustain the size of the Federal Reserve's balance sheet at a high level." (Italics mine.)

The Fed goes on to say it will purchase large quantities of agency debt -- meaning Fannie and Freddie -- and more mortgage-backed securities (quite possibly toxic assets). In other words, it wants to drive mortgage rates down. What's more, the Fed may buy long-term Treasury securities, also to drive bond yields...]]> Sat, 13 Dec 2008 00:00:00 -0600 If Sen. Corker's plan had prevailed, with UAW support, many believe it would have had 90 votes in the Senate. GM could have gone forward with a clean-as-a-whistle balance sheet under a three-part restructuring plan that included a $60 billion bond-refinancing cram-down, a renegotiation of the $30 billion VEBA health-care trust, and a pay-restructuring plan that would put Detroit compensation levels in line with those of foreign transplants Honda, Toyota, Nissan, and BMW.

Average compensation for the Detroit little three is $72.31. Toyota's average wage is $47.60, Honda's is $42.05, and Nissan's is $41.97, for an average of $44.20. So Corker's idea was to bring that $72 a lot closer...]]> Sun, 07 Dec 2008 00:00:00 -0600 It's a tough choice -- especially for Republicans, most of whom want to vote against bailout nation and stop big-government encroachment on our free-market economy. That's the right theory. But are the economic risks simply too great to employ it?

Various polling surveys say bailout nation, and a federal rescue for autos in particular, is very unpopular. At least 60 percent are polling against a bailout. The TARP bailout of banks is increasingly unpopular.

Meanwhile, the pressure for more bailouts grows daily. The Avis rental-car company wants a bailout from TARP. A company called BlueFire Ethanol wants a bailout. The trade association for equipment-leasing...]]> Tue, 25 Nov 2008 00:00:00 -0600 When asked about tax hikes on Monday, Obama said the debate is between repeal and not-renewal. In other words, repeal the Bush tax cuts in 2009, thereby raising tax rates on capital gains and successful earners, or wait until the Bush tax cuts expire at the end of 2010. Investors want to hear the latter, and Mr. Obama said his team will make a recommendation.

Here's my thought on his team. Summers, Geithner, and Romer will all recommend no tax hikes in a recession. Maybe for Keynesian reasons; maybe a nod to supply-siders. Obama talked about a liberal-conservative consensus. But what's especially encouraging is the appointment of Ms. Romer, who easily could serve as CEA head in a...]]> Wed, 19 Nov 2008 00:00:00 -0600 But all this brings up a whole new problem in American finance: How are we going to transport and deliver trillions of dollars of new government money? It's not an easy task. We've moved beyond show me the money. This is throw me the money. And shovels alone won't do.

We'll need to convert Caterpillar earth movers into money movers. We'll need new streamlined helicopter fleets to drop money from the sky. We'll need a trucking armada and full use of the railroads. And we'll need an army of smaller trucks and SUVs to reach folks in the off-road areas. And let's not forget FedEx and UPS -- we'll need them to make sure the money arrives on time.

We may even need high-level...]]> Fri, 14 Nov 2008 00:00:00 -0600 In other words, free-market capitalism is the best path to prosperity.

During a gloomy period of financial crisis, recession, big-government rescues, and ailing banks and industrial companies, Bush has provided a strong visionary dose of big-picture economic prosperity and optimism that can lead the United States and the rest of the world out of their economic doldrums.

Here's another uplifting passage from Bush: "Free-market capitalism is far more than an economic theory. It is the engine of social mobility -- the highway to the American dream. And it is what transformed America from a rugged frontier to the greatest economic power in...]]> Tue, 04 Nov 2008 00:00:00 -0600 Well, for almost two years Obama has talked about cutting taxes for 95 percent of the people. McCain has no such record. And even though McCain has launched a strong Joe the Plumber investor-class tax-cutting surge in the last days of the campaign, it may not be enough to significantly impact Tuesday's voting results.

This is bad news, since Obama has some pretty strange views on taxes. Just look at his recent explanation for the decline in third-quarter gross domestic product. He calls it "a direct result of the Bush administration's trickle-down, Wall Street first, Main Street last policies that John McCain has embraced for the last eight years and plans to continue...]]> Sat, 25 Oct 2008 00:00:00 -0500 I've never forgotten that advice. Mundell was saying: Choose the best policies as put forth by the great economic philosophers without being too rigid.

Of course, John Maynard Keynes was a deficit spender during the Depression. Milton Friedman warned of printing too much or too little money. And Mundell, along with Art Laffer, Jack Kemp and others, revived the importance of reducing high marginal tax rates to reward work, investment and risk. The idea was to make each of these activities pay more after tax, and in the process boost asset values across the board. This incentive model of economic growth was used effectively by President John F. Kennedy and the...]]> Sat, 11 Oct 2008 00:00:00 -0500 Behind all this, the credit system is completely frozen. Banks are now loathe to lend even to each other in the overnight markets that are so vital to the daily financing of American business. And the profits outlook is deteriorating badly, sparking fears that we may have a deep and prolonged recession.

And yet, much good may ultimately come of this terrifying correction.

I commend everyone to read the Wall Street Journal op-ed of Friday written by John Steele Gordon, an eminent financial historian. Gordon writes that there have been financial panics roughly every 20 years throughout American history. He goes all the way back to Alexander...]]> Thu, 09 Oct 2008 00:00:00 -0500 The investor class is a huge voting bloc. Shareholders in recent national elections represented nearly two out of every three votes cast. And most surveys put the investor-class population at slightly over 100 million. This includes direct investment through brokerage accounts, although the vast majority of investor-class members own IRAs, 401(k)s and defined-benefit plans, such as state and city pension funds.

So why aren't the presidential contenders trying to connect to investors? More glaringly, why isn't McCain?

After the debate, I checked in with TechnoMetrica's Raghavan Mayur, who puts out the respected IBD/TIPP poll. Mayur...]]> Tue, 07 Oct 2008 00:00:00 -0500 The financial crisis and economic downturn clearly have buried Sen. McCain in recent weeks. Some of McCain's supporters think he can turn the page on the economy Tuesday night and instead attack Obama on character and qualifications. That doesn't seem realistic.

The recession economy and the financial crunch are front and center. Folks are asking: Can I get a loan? Will I have a job? Can I keep my house? Unfortunately, Sen. McCain's message overemphasizes government spending cuts, almost to the exclusion of stimulative and expansive tax cuts. This just doesn't seem like the right time for a government spending freeze, at least to the exclusion of other pro-growth policy levers....]]> Wed, 01 Oct 2008 00:00:00 -0500 IndyMac was in fact taken over by the FDIC, becoming the IndyMac Federal Bank, while WaMu was acquired by JPMorgan Chase and Wachovia by Citigroup. So far as I know, not a single depositor at these banks has lost money. This is huge. And it suggests to me that if the Congress is unable to craft a deal for Treasury purchases of toxic assets, the nation is still in good hands as a result of the good offices of the highly professional, credible, and trustworthy Federal Deposit Insurance Corporation, run very well by Ms. Bair.

Who is Sheila Bair? Forbes just ranked her the second-most powerful woman in the world, behind German chancellor Angela Merkel. Before coming to the FDIC, Ms....]]> Sat, 27 Sep 2008 00:00:00 -0500 In the meantime, as the Treasury holds the loans, the government will get monthly cash-flows coming in on the mortgages, or on any other loans that it owns. So it is win-win for taxpayers. First, taxpayers get the cash flow generated by the assets. (Something like a 10 percent interest rate.) Second, if the loan is sold for profit, the taxpayers will own that profit. And the new law must of course stipulate that all the cash flows and/or profits go for debt-reduction to protect taxpayers.

I don't think a lot of folks understand this win-win scenario. Let me repeat: The taxpayers own the bonds the Treasury buys; the taxpayers own the cash flows generated by the bonds; the taxpayers...]]> Wed, 24 Sep 2008 00:00:00 -0500 This is similar to the RTC story twenty years ago, when Bill Seidman presided over similar asset sales from bankrupt S&Ls and wound up making money for Uncle Sam and his taxpayers. A long prosperity wave followed.

In fact, industry insiders tell me the Federal Reserve and the SEC may be moving toward a five-to-seven year amortization plan for the scoring of bank losses from the sale of this distressed paper. This is very constructive. Fed head Ben Bernanke also is talking about getting rid of mark-to-market accounting and moving towards "hold to maturity." This is good.

But the credit arteries are now clogged with a terrible virus that can be removed by the Paulson rescue...]]> Fri, 19 Sep 2008 00:00:00 -0500 All this was necessary. A collapse of AIG would have been unfathomable -- it is simply too interconnected globally. But it turns out this rescue mission only elevated investor fears. Shareholders are asking: "Who's next?"

The bears are now raiding Morgan Stanley and Goldman Sachs, two national treasures. Meanwhile, the Reserve Fund -- an original money-market fund launched by Bruce Bent, a hard-nosed friend of mine who for decades has supported conservative political causes -- has seen its net asset value drop from $1 to $0.97. That's a shocker. And the reason? The fund's holdings of Lehman commercial paper were unsupported by letters of credit.

Money-market funds are...]]> Tue, 16 Sep 2008 00:00:00 -0500 Last March, acting in conjunction with Fed head Ben Bernanke, Paulson safeguarded the banking system and the whole global financial structure by backstopping a JPMorgan-Chase deal to acquire the ailing Bear Stearns with $29 billion of loan guarantees. The action succeeded in stabilizing markets, but it put U.S. taxpayers on the hook big-time.

Then last week Paulson stepped into the breach again by backstopping mortgage lenders Fannie Mae and Freddie Mac. It was a necessary action. It stopped a global money meltdown. But it raised the stakes for taxpayers once more.

So this time around, as the Lehman stock headed for zero, Paulson said enough is enough.

Paulson's view...]]> Thu, 11 Sep 2008 00:00:00 -0500 And look at all these headlines. The Washington Post has "Palin Energizing Women from All Walks of Life." In particular, white women with children at home give Palin a favorable rating of 80 percent.

Then there's this lead story in the Wall Street Journal: "Palin Lifts McCain's Support." A WSJ/NBC poll now has the presidential race even, and it's the Palin effect that explains the shift.

One-in-four Hillary Clinton voters now say the Palin pick makes them more likely to vote for McCain. And traditional Republican states like Georgia, Montana, North Carolina, and Alaska -- which Obama thought he'd fight for -- are now safely back in the McCain camp.

A Bloomberg news...]]> Fri, 05 Sep 2008 00:00:00 -0500 I agree completely. A three-house Democratic sweep is a vital issue and McCain and Palin should be raising it. A three-house sweep is bad for the economy and the stock market. And will someone tell me exactly why the St. Paul Republican's aren't mentioning the economy?

As we head into the closing night in St. Paul, there has so far been no reference to the weak economy. There has been no economic-recovery message and no growth message. There has been no reference to the populist revolt against high gas prices at the pump, which is the main cause of the economic slump. There has been no reference to the 70 percent of Americans who are tired of high gas prices and want to drill for...]]> Wed, 03 Sep 2008 00:00:00 -0500 Coming from the natural-resource rich state of Alaska, Palin is an experienced energy expert. She knows more about the economics of energy than senators McCain, Obama, or Biden. And in this year of the oil-shock economy, Palin's role will be absolutely crucial.

"Obama is way off-base on all that. I think those politicians who don't understand that we need more domestic supply of energy flowing into our hungry markets [are] living in la-la land. And we're in a world of hurt if they're agenda continues to be to lock up these safe, secure, domestic supplies of energy."

That's what Palin told me in a CNBC interview in late June. I call it drill, drill, drill. But in fact...]]> Thu, 28 Aug 2008 00:00:00 -0500 But there's more to this Obama-Biden-bounce deficit than the Clinton cold shoulder. Another Gallup poll says 50 percent of Americans expect their taxes to be raised under Obama. And make no mistake about it: There are many doubts about the Illinois senator regarding his experience, his foreign policy, his economics, and his prior political and spiritual relationships. Despite some good moments Monday night, Michelle Obama didn't erase these doubts. In the end, only her husband can do it. And only Obama can unite the badly split Democrats at this late date.

Reagan united a split GOP in 1980. George W. Bush united the McCain, Forbes, and cultural-conservative factions in 2000....]]> Sat, 16 Aug 2008 00:00:00 -0500 Well, okay. But in 1997 the capital-gains tax was cut from 28 percent to 20 percent. That provided an 11 percent increase in retained income for the extra dollar put at risk by investors. In 2003, President Bush reduced the cap-gain levy to 15 percent, providing another 6 percent incentive.

With Sen. Obama's 20 percent rate on investment, investors would suffer a 6 percent incentive loss on their cap-gain incomes and another 5.5 percent incentive drop on dividends. The cost of capital would rise under Obama and investment returns would decline by more than 11 percent. Uncle Sam will keep more and investors will retain less, all while the economy is languishing.

...]]> Tue, 05 Aug 2008 00:00:00 -0500 On the Stephanopoulos Sunday news show, House Speaker Nancy Pelosi underscored her refusal to allow a drilling vote. Asked about the Republican rebellion in the House, she said, "What you saw in the Congress this week was the war dance of the handmaidens of the oil companies." She went on to say, "We are spending all of this time on a parliamentary tactic, when nothing less is at stake than the planet, the air we breathe, our children breathe."

Oh really? Voters have a much different view. Polls suggest that two-thirds to three-quarters of the nation wants to drill. To wit, while a just-released Obama campaign ad attacks McCain as a tool of big oil, McCain has taken his first-ever...]]> Wed, 30 Jul 2008 00:00:00 -0500 But Big Mac is gonna put an end to this if he's elected come November.

"Americans should be outraged at the latest sweetheart deal in Washington," writes McCain. "Congress will put U.S. taxpayers on the hook for potentially hundreds of billions of dollars to bail out Fannie Mae and Freddie Mac. It's a tribute to what these two institutions -- which most Americans have never heard of -- have bought with more than $170-million worth of lobbyists in the past decade."

Fannie and Freddie represent the worst of Washington's bailout fever. Using government power for private profit is how Wall Street Journal editor Paul Gigot puts it. Privatizing gains while socializing losses is...]]> Tue, 15 Jul 2008 00:00:00 -0500 For decades, Fannie and Freddie sold pools of mortgage-backed securities in the bond market and raised cash for their own accounts under the previously untested assumption that someday the implicit guarantee of the full faith and credit of the U.S. government would become explicit. That explicit promise has now become the new reality.

Fannie and Freddie paper is owned by institutions and investors worldwide. And yes, if there had been a run on these banks, the global financial system would have titled precariously toward calamity. So the bailout was wise, at least in the short run.

But what happens in the longer run?

Mr. Paulson's dramatic Sunday-evening...]]>