Sunday, May 6, 2012

Quick Hits - May 6, 2012

D-Day for Europe 2012....

Big election day in Europe.

In France, Socialist Francois Hollande faces off with President Nicolas Sarkozy in the French Presidential run-off election. 

In Greece, the first major national elections since the Euro-bailout, the country's troubled reform / austerity program needed to receive the bailout, and it's future in the Eurozone / Euro currency.

First, the update from France...

The Socialist candidate Francois Hollande has defeated the incumbent Nicolas Sarkozy gaining about 52% of the national vote.  Sarkozy is not only the 1st French President to be defeated after 1 term in office, but he is also the 11th Eurozone leader to be swept out of office largely by the Eurozone debt crisis.

Hollande's policies are going to cause some real concern in the Eurozone beyond his promises to increase taxes - including setting a new 75% income tax rate for the 'wealthy'.  Hollande is also seen to be looking to take on the 'Merkozy' fiscal pact signed earlier this year - calling for it to be renegotiated or blocked entirely as well as watering down the regulations around the European Central Bank to force it to lend more to EU member states to 'promote growth'. 

Hollande is a firm believer of Keynesian economics - that higher government spending and greater government control can promote economic growth than depending on / releasing the private sector to generate economic growth.  He strongly opposes the austerity measures promoted by both Merkel and Sarkozy - which are being pushed across Greece, Spain, Italy, and under Sarkozy, in France to reduce government spending, entitlements, and the level of the national debt.

As Germany's Der Spiegel notes [link above]...
This melange of messages suggests that the expected new president of France, which is Germany's most important partner in the euro zone, hasn't learned a thing from the frequent crises that have emerged over the past 15 years. They were all fuelled by distortions that had been created through excessive borrowing -- by both private households and governments. But if politicians like Hollande have their way, the party will just keep going. Under their vision, growth is supposed to supplant urgently needed reforms -- a French pension system that allows 60-year-olds who are still capable of working to retire, a vastly oversized French state apparatus and a French labor market that is saddled with high wages and short working hours that is causing the country to become less and less competitive internationally.

But perhaps these fears are exaggerated. Perhaps Hollande will quickly learn the harsh, raw reality that campaign rhetoric and European reality aren't the same thing.

The new man in the Élysée Palace may fare the same as Mitterrand once did. When France's first Socialist president came into office in 1981, he brought with him a classic leftist agenda: higher minimum wages, more generous pensions, a shorter working week and also a wave of nationalizing businesses. Two years after Mitterrand took office, France slid into a state of economic disaster. The president was forced to abandon his socialist utopia and subject the country to a bitter course of austerity.
The Financial Times is already reporting that the wealthy in France are already eyeing a move away from the regressive tax policies promised by President-elect Hollande - looking to move to Britain which has a maximum income tax rate of 50%.

This should come as no surprise to anyone.  As various US states imposed a higher tax burden on the 'wealthy' in the name of 'fairness' - the result was that many of the targeted wealthy utilized their mobility - and left New York, New Jersey, Illinois, California, and Connecticut to other states that did not impose such a tax burden on them.  The same happens with businesses as well - when corporate tax rates and fees become onerous and uncompetitive.

So, what does the Sarkozy loss mean to us here in the United States?
First, to call Sarkozy's policies "austerity" is to insult both austerity and socialism. The French government--like other European governments--sought to close its budget gap primarily by raising taxes, not by cutting the size and cost of government. Neither Sarkozy nor Hollande had the courage to confront the basic, failed structure of France's welfare-state economy, which is the fundamental cause of its budget problems.

Insofar as French politicians have relied on tax increases as the key to deficit reduction, that is far closer to the policy of U.S. President Barack Obama and his Democrats than to the approach of the Tea Party and the Republicans. Even so, American media commentators like Joan Walsh and Paul Krugman are blaming Congress and "austerity" for slow economic growth--though federal spending keeps growing.

Another media angle will, no doubt, be to draw analogies between Marine Le Pen's National Front and the Tea Party. It is true that Sarkozy has suffered from a split conservative vote, and that the effect of a Tea Party (or Libertarian) split in the U.S. would be to hand a victory to Obama and the Democrats. But the similarities end there.
Basically, Sarkozy was trying to walk the double yellow line in the middle of a very busy road.  One in four in France works for the government.  Despite the end of the 35 hour work week - which effectively outlawed working more than 35 hours in a week, or the limited efforts to try to promote the private sector - the French system far closer to full statism than the US.  They embrace entitlements and centralized economic planning and control far more than we do - and as noted in the above quote, France today is very similar to the model advocated by the US progressives as a stepping stage to full statism.

We already are not learning anything from the Eurozone crisis - and the policies of President Obama are accelerating our dash to catch-up to the failing Eurozone nations.  But we will be given a new opportunity to learn of what not to do as we watch Hollande execute his leftist / Keynesian agenda.  He will not stimulate growth and will only exacerbate and accelerate France's slide into being similar to Greece, Spain, and Italy.

The Greek voters also appeared to have delivered a stinging and complete rebuke to the two major incumbent parties, the Socialists (Pasok) and New Democracy.    Included in their rebuke - a rejection of the austerity program the incumbent parties enacted in order for Greece to receive their EU bailout earlier this year.

The financial blog, Zerohedge, has been watching the Greek results - and reports the following:
As we expected, the previous unofficial poll forecasts were total rubbish, and according to exit polls from NET TV, the results are as follows:

• New Democracy: 17-20%
• Pasok: 14-17%
• In a stunner, Syrizia, or the coalition of the radical left - a vehement anti-Bailout party - gets more votes than the ruling PASOK party: 15.5%-18.5%
• Independent Greeks: 10-12%
• Finally, and not surprisingly in the aftermath of the French results, the ultra right Golden Dawn gets 6-8% of the vote and will make it into Parliament

Tallied across, up to 60% of the new parliament will be anti-bailout (at least according to exit polls), and hence "Domino toppling." Good luck with that pro-bailout coalition government. Needless to say these results are very ugly and make any prospect of a pro-bailout coalition cabinet virtually impossible. Suddenly the fate of the European experiment is in the hands of the ultra right and the far left - yup, Neo-Nazis will determine the future of Europe.
So, what we have in Greece is basically a combination of the far left and the far right - who've agreed on their anti-bailout positions - defining how and where the country goes.  The far left opposes the austerity measures - and will seek to return to the previous levels of government spending and entitlements despite the fact that they are untenable and unviable.  The far right, the nationalists, are angry at the EU, Germany in particular, for their positions on what Greece had to do regarding receipt of the bailout - and see these actions as taking away Greek sovereignty.

What we could see in the short term is a combination of both directions in a new coalition government - a return to the massive statism and entitlements and telling the EU, ECB, and in particular Germany, to 'stuff it' when it comes to austerity, payback, and being in the Eurozone in any manner not on Greek terms.

I also suspect that these results are going to roil the stock markets in Europe and the US over the next several days - if not longer.

The 'official launch' of President Obama's reelection campaign has been, for all practical purposes, fodder for bloggers and journalists because of it's absurdity.  A case can be made that President Obama started his reelection campaign on January 21, 2009.  There is no doubt, based on the President's fund raising activities starting the spring of 2011 where he has held more fundraisers than the previous 5 President's combined, that his campaign has been active.  The fact that the campaign has cycled through an easy half-dozen slogans prior to 'Forward' - also provides evidence that the President is on the campaign.  Add also in the campaign / reelection speeches over the last year that were masquerading as policy the OBL Spike the Football campaign speech from Afghanistan last week.

Given all of that, let's give the President the benefit of the doubt - and say he's now officially kicked off his reelection.  Did he kick it off to an half-empty stadium at Ohio State University?

One of the key policy directions for President Obama is to push the development and increased use of renewable energy over energy that is generated by fossil fuels (coal, natural gas, oil) or even nuclear.  This is also a major policy direction for the progressive agenda - and one that progressives in a number of states are actively pushing by mandating via legislation that require local utilities to acquire larger and larger amounts of their electrical power from renewable sources.

That policy is having consequences - mainly in higher electricity prices.
Politicians keep promising to reduce energy prices, but they keep ignoring one easy step: repeal renewal energy standards. Twenty-nine states have these rules requiring local utilities to purchase between 20% and 33% of their electric power from renewable sources. They were enacted over the past decade when lawmakers bought into the fad about cheap "clean energy." Their real effect has been to force utilities to pay above-market prices for electricity, which means higher electric bills for consumers.

No state has learned that lesson the hard way more than Minnesota. In 2007 the legislature mandated that utilities ramp up their renewables to 12% this year and 25% by 2025.

Utilities absorb some of the cost, but Mr. Glaess estimates that annual residential utility bills are between $50 and $100 higher per household due to the renewable mandate. That may be nothing to a $10,000 donor to the Sierra Club, but tell that to family of four living on $25,000 a year in Fergus Falls.

The costs will rise as the mandates tighten. An analysis by the Freedom Foundation of Minnesota found that Green River Energy utility had $22 million in losses in 2010, $35 million in 2011, and this year it is projecting another $35 million loss. A 2011 study by the Beacon Hill Institute, a think tank focusing on state polices, found that from 2016-25 the Minnesota mandate will raise electric costs for businesses and households by $15 billion. By 2025 the average family will pay $265 a year in higher utility bills.

And what are consumers getting in return? The environmental benefit is almost zero since no state can do much to alter the global volume of carbon emissions. The renewable mandate was also sold as a way to gain "green jobs" and, as the Environmental Protection Agency puts it, "stimulate market and technology development" in states. But the mandate fails that test too, because Minnesota imports much of its wind power from North Dakota.

A 2012 study by the Manhattan Institute compares states with renewable mandates to those that allow utilities to purchase the cheapest electricity available. The states with mandates paid 31.9% more for electricity than states without them. Residents of North Dakota, a state without a mandate, pay $7.63 per kilowatt hour for electricity. Neighboring Minnesota pays $10.76.
While renewable energy should remain a goal - at the present time it remains economically unviable.  This is reinforced by the fact that its use has to be mandated via legislation as opposed to its ability to offer a price competitive alternative to traditional fossil fuel or nuclear sources.  It doesn't need to be at or below the prices of fossil fuel, but the 'surcharge' for green cannot be 50% higher.

Let's also consider that when it comes to electricity - this is one of those basic services that all regardless of class need to use.  If we think about the poor - they are also the one's in the least financial position to be able to afford the $265 / year higher electrical bills.  How do they pay them?  Under the progressives, they don't.  The government will - as it redistributes wealth. 

There's a program that exists today that's gives us a model of how well this will work out. 

Years ago, the Federal government started a program, funded by a tax on one's telephone bill, to ensure that every person had a land telephone line.  Over time, this program has expanded to also provide cell phones and mobile service to designated people...

It's now a government program that has run amuck - with individuals getting multiple cellphones and service from the government.  Costs have also skyrocketed.  to the point where a GOP Congressman is trying to bring sanity and controls back to the program...

Remember that 'gutsy call' by the President a year ago last week?

Former Vice Chief of Staff of the Army, General Jack Keane, told Mike Huckabee on the later's FNC program that Barack Obama had intel that Osama Bin Laden was in that Abbottabad compound in May of 2010 - a full year before the raid was launched.  The President had initially refused to launch a raid for a number of months - wanting far more absolute proof that the al-Qaeda founder and leader was there...

Former Attorney General Michael Mukasey also has reported that the Obama Administration had drafted a memo designed to protect the President from any responsibility or blame if the mission launched in May 2011 to kill or capture Osama Bin Laden failed - where the military leadership would have to take responsibility for the failure.

“That was a highly lawyered memo (designed to protect the president politically)… I think there’s going to be more that’s going to be tumbling out about that escapade but so far that memo is enough.“

Gutsy call, Mr. President.

Saturday Night Live used to be a relevant program.  There were the early years - the years of the 'Not Ready for Primetime Players' - the ensemble cast that featured Belushi, Ackroyd, Curtain, Murray, Morris, etc.  Then it went through a cycle of times when it was boring, unfunny, and irrelevant interspaced with a few times when it was funny and relevant - bringing Eddie Murphy, Dana Carvey, Mike Myers, Phil Hartmann, Billy Crystal, and Dennis Miller to entertain us. 

But now it remains trapped in one of those down cycles - boring, unfunny, and all but committed progressives who look for an alternative to getting their 'news' on the Comedy Channel or Bill Maher.

While bashing Sarah Palin, Mitt Romney, Michelle Bachmann, Rick Perry, and Rick Santorum remains a key focus - it's clearly not on their agenda to poke fun at President Obama in a manner like how Dan Ackroyd tweeked President Carter.

Last night's SNL episode was supposed to kick off with a sketch that was poking a little fun at President Obama and his spiking the football tour.
In the skit, President Obama addresses Americans soon after the first anniversary of the killing of Osama bin Laden — and he makes sure to remind viewers that all credit for the raid on the terrorist leader’s compound belongs to him.

“I hope you had a safe and joyous first anniversary of his killing,” the president, portrayed by Fred Armisen, begins.

“Unfortunately, I wasn’t able to be at home this year, as I had to fly to Afghanistan, to remind President Karzai that, exactly one year ago, we killed Osama bin Laden, and that the decision to do so was a gutsy one,” the president continues. “And was mine.”

The president then outlines what gifts are appropriate on the anniversaries of “Killing Osama bin Laden Day,” and reminds his audience that “heavy drinking, and Killing Osama bin Laden Day, are never a good combination.”
Instead it was scrapped in favor of a [lame] sketch to bash FNC's Fox and Friends morning program.

The script for the original opening sketch is at the link above.

Gutsy call NBC.

This Day in History

1864 - Both Union and Confederate forces continue their desperate struggle in the Wilderness forest of Virginia.  In very bloody, confused, and close ranged fighting in the dense forest area - both armies lost nearly 1/5th of their total strength in 2 days of fighting.  But neither army was broken...

1937 - The German airship Hindenburg, the largest dirigible ever built, explodes as it arrives for landing / docking in Lakehurst, New Jersey.  The airship carried 36 passengers and a crew of 61.  36 died in the fireball that resulted.  The accident marked the end of the focus on rigid airships / lighter than air passenger travel.

1942 - US Lt. General Jonathan Wainwright unconditionally surrenders all US troops in the Philippines to the Japanese as the last major bastion, the island fortress of Corregidor, falls.

1994 - The rail tunnel connecting Britain and continental Europe under the English Channel, aka 'The Chunnel' officially opened.  This was the first direct connection between Britain and continental Europe since the Ice Age.

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