The Oath of Obama, Why His Stimulus Plan Will Fail and What to Do Instead

Keynesian and Monetarist economic central planning always comes to a nasty end, as shown by the Austrian School's Henry Hazlitt, F.A. Hayek, Ludwig von Mises, Leonard Read and Ron Paul.
by Jake Towne, the Champion of the Constitution
(libertarian)
Thursday, January 22, 2009

 (Video of Barack Hussein Obama's presidential oath)

Practice and cue cards makes perfect, guys.   So, Obama said he would:

"I, Barack Hussein Obama, do [indecipherable] swear that I will execute President to the United States faithfully and will to the best of my ability Preserve, Protect and Defend the Constitution of the United States."

I felt pretty embarrassed for these two gentlemen but hey, the Presidential Oath is all part of the fun, pomp, and Washington games these days.  They added the extra bit about God helping out, but hey, the more theatrics and help the better I suppose, as the Constitution requires only:

"I do solemnly swear (or affirm) that I will faithfully execute the Office of President of the United States, and will to the best of my Ability, preserve, protect and defend the Constitution of the United States."  (Article 2, Section 1, Clause 8)

Section 2 describes the duties of the President. Commander in Chief of the Army, Navy, and State Militias.  Commission all the Officers of the United States.  Power to pardon.  Power to make foreign treaties if ratified by the Senate.  Appoint Ambassadors, other public Ministers and Consuls, Judges of the Supreme Court, and all other Officers of the United States. Deliver State of the Union addresses.  Convene Congress if necessary and adjourn them to when he thinks proper.  Lastly,  and possibly most importantly, "he shall take Care that the Laws be faithfully executed."

Good luck, and I would like to offer Obama some help since he has also proposed a plan to "Save the Economy."  You can view it here at the Campaign for Liberty website: "Why Obama's Stimulus Plan Will Fail... And A Better Alternative"

As for Mr. Bush, well,  murder does not have a statute of limitations.  Better ask Obama for a pardon.

The AP published a story saying that Roberts and Obama repeated the Oath correctly a day later.  Great job guys.

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We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.

As always, unlike the NFL, the author grants full permission to allow any accounts of, rebroadcasts, retransmissions, repostings in part or full of this article to your blog or anywhere else in order to promote the Restoration of our Republic.

Veritas numquam perit. Veritas odit moras. Veritas vincit. Truth never perishes. Truth hates delay. Truth conquers.

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 Nolan Chart Facebook Group Page Created

Summary of Articles and Bibliography for Jake, the Champion of the Constitution (1/1/2009)

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Other Recommended Articles by the Author

Anthropogenic Global Warming or an Ice Age, Which Is It? (PART 2/2)

Israeli Conscientious Objectors - The Shministim (The Gaza Slaughter PART 1/6)

The "Great Slump" of 2008 (PART 1/2)

Bernanke's Great Lie - The "Gold Standard" and the Great Depression (PART 2/2)

Fred Thompson Wishes You Some "Holiday Cheer!"

The Money Matrix - What the Heck Are Derivatives? (PART 10/15)

The End for the Dollar and all Fiat Currencies (1/5)

The Next Bubble to Pop! (2/5)

Rioting at the Gates of Thermopylae: The Ramparts of the FED & Central Banks Shudder
Published: December 14, 2008
M1 hits 37% growth!! "Most of the significant American banks, the larger banks, are bankrupt, totally bankrupt." - Jim Rogers, 12/11/2008

Words of Advice for the next Secretary of State

The Drones Did It!
Published: November 8, 2008
"The catch-all phrase - The War on Terror. In all honesty, has no more meaning than if you want to wage a War on criminal Gangsterism. Terrorism is a Tactic. You can't have a War against a Tactic. It's deliberately vague and nondefinable in order to justify and permit perpetual War anywhere and under any circumstances." - Dr. Ron Paul. Pakistan's Chaos Continues.

Police State Stomps on Iraq Veteran's Face as McBama Sanctions Attack on Freedom of Speech: The Story of the Hempstead 15 (Part 1/3)

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This essay will make three key points as to why Obama's stimulus plan will fail and then will suggest a much simpler plan that will not end in failure and should actually improve the situation. The first reason why Obama's central economic planners will fail is because they are too focused on full employment rather than full production. The second reason is that the American economy, or any economy, is far too complex for any central planning group. The third reason is that Obama's proposal of more stimulus spending is exactly what got us into this mess. I even submit to you that Obama's team has no idea how to even produce a pencil; in fact none of us do. Let me explain.

(Cartoons from "The Road to Serfdom in Cartoons" by FA Hayek, courtesy mises.org, link at bottom)

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The Rallying Cry is "Full Production!" not "Full Employment!"

Last year I traveled to the mountainous and rain-forested Xishuangbanna region on the Chinese-Burma border. In one motley collection of huts far, far away from the nearest (dirt) road, the villagers I met lived in a subsistence economy, as close to a tribe of hunters and gatherers you can probably find on this planet. While they are literally dirt poor (but still managed to live happier lives than many city-folk, in my estimation), one fact I noticed is that they have zero unemployment. That's right! Zero! Everyone has a job and is fully engaged, mainly in providing a food supply.

In fact, even in modern economies, I argue, full employment is exceptionally easy. All you have to do is use inferior capital equipment, build in plenty of inefficient bureaucracy (like many, but explicitly I do not mean ALL, government jobs), or other forms of busy work. I will revert to China, where I have lived for over three years, once more. Half of the population still farms their own private plots of land, but if they were to try American-style, highly mechanized farming over much larger plots of land, much higher yields would be realized from far less effort. There would also be, temporarily, much higher unemployment. In fact in China, part of the reasons these people still live serf-like lives is because their central planners cannot figure out quite what to do with them all. Even Fred Thompson with his "digging holes" parody recognizes the truth of this claim.

As Austrian economist Henry Hazlitt in his chapter "The Fetish of Full Employment" points out in Economics in One Lesson:

"The economic goal of any nation, as of any individual, is to get the greatest results with the least effort. The whole economic progress of mankind has consisted in getting more production with the same labor. It is for this reason that men began putting burdens on the backs of mules instead of on their own; that they went on to invent the wheel and the wagon, the railroad and the motor truck...

"Translated into national terms, this first principle means that our real ohjective is to maximize production. In doing this, full employment - that is, the absence of involuntary idleness becomes a necessary by-product. But production is the end, employment merely the means. We cannot continuously have the fullest production without full employment. But we can very easily have full employment without full production...

"The real question is not whether there will he 50,000,000 or 60,000,000 jobs in America in 1950, but how much shall we produce, and what, in consequence, will be our standard of living?"

On that note, let's now look at Obama's plan. [To his credit, Obama is fully aware that the economy will get far worse before it gets better, although it could also be argued that to say otherwise is delusional.] Just like Hazlitt warns to avoid, in his January 10 speech on the economy, Obama notably focuses on "creating jobs," not optimization of our economic production. In fact, the sole mention of production is reserved for alternative energies, which are great, but the trouble there lies in that the central planners, not a free market, will decide which technologies to pursue or not pursue. Like a true Friedmanite Chicago Shock School cadet, Obama sums up with:

"It's not too late to change course but only if we take immediate and dramatic action. Our first job is to put people back to work and get our economy working again. This is an extraordinary challenge, which is why I've taken the extraordinary step of working even before I take office with my economic team and leaders of both parties on an American Recovery and Reinvestment Plan that will call for major investments to revive our economy, create jobs, and lay a solid foundation for future growth."

Therefore our central economic planners must take "immediate and dramatic action." Now, notice that by "reviving the economy," he really means to create jobs. In the Romer/Bernstein paper Obama references, they claim 3.3 to 4.0 million jobs will be created by Q4 2010, or two full years later. I could spend another article demonstrating that their voodoo BLS employment statistics and Keynesian GDP math are complete hot air, but let us just take note of page 9/14. On this page, these central planners have lovingly estimated the job growth in each sector to the nearest thousand from the funds they plan to distribute. Notably missing is the 92,000 new soldiers that Obama plans to create to support more war-making. How do these Keynesians know what our economy should look like in two years? That Industry A should be favored over Industry B? I assure you, they do not have a clue. As I will shortly demonstrate, they do not even know how to make a pencil.

In the Obama-Biden planned economy, what is the #1 priority? Check it out here, of course it's "IMMEDIATE ACTION TO CREATE GOOD JOBS IN AMERICA." This is followed by #2, relief for struggling families, which, I agree with in principle, although some of this aid will be made necessary by the unavoidable ineptitude of the central planners.

Next is #3, "direct, immediate assistance for homeowners, not a bailout for irresponsible mortgage lenders." Now, these homeowners did make a conscious decision to sign a mortgage, and will benefit at the cost of taxpayers who do not own a home (a classic divide-and-conquer strategy), but this is an improvement over giving money to banks and auto companies. Also, the central planners will need to decide which mortgage lenders are "responsible" and "irresponsible" or "partly responsible." However, so far, not a word about Full Production!

This is reserved for #4, "a rapid, aggressive response to our financial crisis, using all the tools we have." In other words, "we are going to try like crazy to spend our way out of this." In the subsection entitled "Manufacturing and Green Jobs," we finally see that Obama simply plans to create a hodgepodge of different funds, staffed by bureaucrats, who will dispense funding at their whims to successful applicants. A bonanza for Big Government, and corporate corruption, but a disaster for the free market and the full production it could provide. Three of the five bullets are devoted to clean technology and environmental jobs which will "create 5 million new green jobs." 3, 4, 5, 6 million jobs, whatever! All these central planners need is cash and they can churn out good, well-paying jobs better than any private company ever could! It is that easy! Right?

Well, just for curiosity, let's take a look at the price tag. To be fair, the total amount fluctuates daily and may exceed $1 Trillion, but on January 10 the AP reported $775 Billion, so let's use this figure. [Strangely, our central planners at change.gov have forgotten to provide a price tag, probably since they can not estimate the amount of pork Congress will require to pass it!] Romer/Bernstein prophesize 3.675 million jobs in 2 years, plus or minus a cool half million. That works out to $211,000 per job created. Now of course, the intent is to use some of these funds to buy capital, namely manufacturing equipment and raw material supplies, but if we do a little math, we could just cut a $80,000 check to about 10 million unemployed, who with a frugal lifestyle could survive on for over a couple years, which is roughly when our all-knowing central planners Romer/Bernstein (p 5/14) foretell this depression will end.

However, make no mistake. By focusing this Keynesian stimulus plan on creating jobs, in all reality most of the $775 billion will be wasted on paying for the government officials to disburse the bailout (hey more non-producing jobs!), corporate corruption, and incredible inefficiencies. In reality, the Obama-Biden plan will likely create and sustain higher levels of unemployment than right now, just like FDR's New Deal did. [Think the New Deal ended the Great Depression? Think again! Read "Bernanke's Great Lie."]

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The Complexity of Economies: Obama's Planners Don't Even Know How to Make a Pencil

Few essays since Hazlitt's work have more beautifully expressed the intricacies of economies than Leonard Read's short essay "I, Pencil" which I encourage you to read. In this essay, Read takes a simple object, a pencil, and tracks its production from start to end and you may be surprised to find that thousands upon thousands or people are involved in the entire commercial process. Here is an excerpt:

"My family tree begins with what in fact is a tree, a cedar of straight grain that grows in Northern California and Oregon. Now contemplate all the saws and trucks and rope and the countless other gear used in harvesting and carting the cedar logs to the railroad siding. Think of all the persons and the numberless skills that went into their fabrication: the mining of ore, the making of steel and its refinement into saws, axes, motors; the growing of hemp and bringing it through all the stages to heavy and strong rope; the logging camps with their beds and mess halls, the cookery and the raising of all the foods. Why, untold thousands of persons had a hand in every cup of coffee the loggers drink!

"The logs are shipped to a mill in San Leandro, California. Can you imagine the individuals who make flat cars and rails and railroad engines and who construct and install the communication systems incidental thereto? These legions are among my antecedents.

"Consider the millwork in San Leandro. The cedar logs are cut into small, pencil length slats less than one-fourth of an inch in thickness. These are kiln dried and then tinted for the same reason women put rouge on their faces. People prefer that I look pretty, not a pallid white. The slats are waxed and kiln dried again. How many skills went into the making of the tint and the kilns, into supplying the heat, the light and power, the belts, motors, and all the other things a mill requires? Sweepers in the mill among my ancestors? Yes, and included are the men who poured the concrete for the dam of a Pacific Gas & Electric Company hydroplant which supplies the mill's power! Don't overlook the ancestors present and distant who have a hand in transporting sixty carloads of slats across the nation."

So on with the all of the other parts, the pencil factory, the distribution to stores, et cetera. The same could be done with modern devices like plasma TVs or computers, or even just a birthday cake or dinner entree. The main point of "I, Pencil" is that yes, planning must be done, but economic planning is best done in the millions of individual, free transactions done for the mutual benefit of both parties, not done by central planners like Paulson, Summers, Geithner, Rubin, Romers, Bernstein, Bair, and Bernanke who really have no idea how to make a pencil, or anything else for that matter.

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A Game of "Spenda"

In addition, what if one studies how we arrived at our current situation? The answer is tied to massive government spending over the Bush years, but even as far back as WWII, resulting our massive $10+ Trillion national debt. The answer is tied to the massive amounts of new dollars created from thin air, then spent, by the Federal Reserve. We have really been engaged in a game of "Spenda," which this comedian turned into a satirical game based on the tottering tower game of Jenga.

Why all this spending? It is because our government, central bankers, and almost all modern-day economist still subscribe to the benefits of government spending to ease downturns, which follows the teachings of Lord Keynes and Milton Friedman. However, this strategy is only a stalling tactic; it falls apart when the currency implodes. As Ron Paul warns, when the dollar dies so does our entire economy. I wrote more on this here "The End for the Dollar and all Fiat Currencies (1/5)". Unfortunately, our fractional reserve banking system is helplessly insolvent, as I proved in "Rioting at the Gates of Thermopylae," even going so far as to predict the breakdown of Citigroup, which just occurred.

My point is playing "Spenda" this time will likely not work; in fact, even if it does, this only means that the next downturn will be downright disastrous. Those who have studied the Austrian School's Misesian boom-bust cycles are already aware that all depressions and recessions in America in the last hundred years were all brought on by inflationary (usually war) spending, then resolved by government spending, and each aftermath has push the dollar closer and closer to its demise. [The lovely truth about boom-bust cycles is that they do not need to exist if sound money is used, as I am explaining in my Money Matrix series.]

So, in summary, the Obama-Biden Plan for economic central planning will not work as the focus is on job creation, not maximizing economic output. Furthermore, the plan will not work since the chosen, unelected central planners cannot possibly imitate the billions of mutually beneficial trades that occur naturally in a vibrant free-market economy. This was the great lesson learned from the monumental failure of communist Russia. Lastly, Keynesian deficit and stimulus spending only postpones the inevitable Misesian "crack-up boom."

Now for the tougher part of this essay. What WILL work? What could Obama do differently?

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IDEA #1: Eliminate the 2008 Federal Income Tax. Replace the Obama-Biden Plan with this stimulus.

Obama: "Will you tell me what's wrong with the economy?"

- From Ayn Rand's Atlas Shrugged, when John Galt (Jake) is held prisoner by President Thompson (Obama) and told at gunpoint he should "fix" their economy:

Let me explain go into some detail. If you check the 2008 White House budget, you will find that total planned government outlays were $2.9 Trillion. (pg26/342). Total receipts were $2.5 Trillion, so the planned deficit was $0.4 Trillion, although $0.8-1.0 Trillion will be added due to last year's bailout nonsense. Also, if we recall that the total size of the bailouts is now close to $8 Trillion, a $1.2 Trillion income tax refund begins to look fairly "cheap."

2008 Receipts (pg35/342) -
$0.35 Trillion from corporate income taxes
$1.2 Trillion from federal income taxes
$0.9 Trillion in Social Security, Medicaid, Medicare, etc.

Total $2.5 Trillion

Now, what if Obama (and don't forget Congress) would do the unprecedented, and instead of spending $775 Billion we do not have, decide to not collect income taxes due this April?

• Each individual will then naturally make the best decisions for themselves, whether it is to save, pay down debts, or spend on desired goods and services, which would create more jobs.
• There is no cost to pay government to administer the Obama-Biden Plan.
• There is no need for the government to spend most roughly $15 billion in IRS spending and tax preparer fees, although rebate checks for the amounts currently withheld would need to be mailed. (source)
• Many of the IRS's 92,000 employees and many tax preparers can be fired. While this would add to the total amount of unemployed, their jobs are NOT AT ALL economically productive, so our total production will not suffer. In fact, when they return to work, our overall production will be boosted.

IDEA #2: SLASH GOVERNMENT SPENDING

My Austrian mindset is very different from Obama's Keynesian brain. For instance, from his January 10 speech, he said:

"We'll create nearly half a million jobs by investing in clean energy by committing to double the production of alternative energy in the next three years, and by modernizing more than 75% of federal buildings and improving the energy efficiency of two million American homes."

Well, I am not nearly so arrogant to believe that I could decide how best to produce alternative energy, and I have already explained why it would be best for Obama to not even try. However, when he says we can modernize the heating, cooling, and powering of "75% of federal buildings," I think instead, how about we CLOSE DOWN 75% of federal buildings. Why, in the depths of a possibly monster depression, would we want to spend money on our ultimately completely unproductive departments of Labor, Agriculture, Homeland Security, Energy, Education, CIA, IRS, etc.? Why not slash all congressional and departmental staff budgets by 50%? Yes, there would need to be a temporary support of these people, but just think of the fantastic increases in our production with a larger, unbridled workforce! However, this would also be a longer-term project spanning out over Obama's first term, and would also need a task force to execute.

IDEA #3: SLASH MILITARY SPENDING. END THE MILITARY EMPIRE.

Does it not strike anyone else as extremely silly to be fighting wars on foreign soils while the American people struggle to support their families? The United States of America spends roughly $1 Trillion annually to maintain our overseas military empire with over 700 bases in over 130 countries. The wars in Iraq and Afghanistan are both lost causes, and do not forget that the Iraq War was initiated by Bush under false pretenses. Bring home the 40,000+ troops in Germany and Europe, the ~40,000 in South Korea, the ~40,000 in Japan! Declare WWII as OVER. Declare the silly War of Terror as OVER.

Some veterans will be need of assistance due to PTSD, war wounds, etc. and must be treated properly, in my opinion no matter how expensive, since this is owed by the American people. All troops based abroad could be returned to bases within the USA. This would result in a consumer spending boost around the bases' local areas. Any unnecessary soldiers could be returned to the private sector. This reduces the tax burden on the taxpayer to finance an army in the field, and will result in a net increase in economic output when the new citizen finds employment.

IDEA #4: UNDISGUISED AID TO INDIVIDUALS FAMILIES WHO NEED IT.

Obama's plan includes a similar component, but I wish to be more specific and frank. Our politicians have committed to, and to a large extent, We the People currently desire, and will need, a social safety net. Although I am an enemy of the Welfare State, I am socially liberal and do not see any excuse as to why our fellow Americans should need of food or shelter. However, make no mistake; the ultimate goal should be to phase the Welfare State out, which could be done over a much longer timeframe.

My opinion is that this undisguised aid should be focused only on necessary levels of food and shelter. [I did not list clothing as fortunately in the United States, unlike many countries I have visited, has an immense reserve of clothing thrift stores and unused clothing in private wardrobes. I have faith that Americans would give spare (in truth, completely unneeded) clothing to those who need it, or sell to thrift stores for small fees. Actually, one of the key truths would be realized here: that a government is simply not needed to provide such aid, and over time this could be applied elsewhere, particularly if federal income taxes are banned.] For shelter, a full disclosure of the KBR concentration camps should be made available to the public; these may actually be able to support quite a few. By maintaining only the necessary food and shelter, this will provide an impetus to eventually return to the work force and seek to increase their living standards.

In light of the impending baby boomer wave of retirees, the government will need to do this anyways since, unless you are living in la-la land, the Madoff-Ponzi scheme that is the Social Security, Medicare, and Medicaid system is going to collapse in the next decade, or will die with the dollar's demise. The Social Security promise has already been made, however, and we as Americans should do our best to honor it, although for many this will simply NOT be the comfortable retirement they may have dreamed their government would provide. The best benefit we can give to our younger generation is to give them the option to opt out of this future yoke.

Let there be no mistake. There needs to be a future focus on ENDING the Welfare State situation. We the People can do this with the above, but most critically we need the below.

IDEA #5: ABOLISH THE FEDERAL RESERVE SYSTEM.

If we have learned nothing else in the past century and past several months, it is that our central bankers planning our monetary policy have a horrendous track record. If you do not realize just how powerful this quasi-private banking cartel is, please read "The Money Matrix - How the FED Works (PART 6/15)". There is no better example of central economic planning error upon grievous error than in the track records of former FED Chairman Alan Greenspan and the contemporary Ben Bernanke. Fiat Federal Reserve Notes can be replaced by fiat United States Notes issued from the US Treasury on a 1:1 basis immediately, and our country and our world will be much the better for it. For a further list of reasons why the FED really only offers "CHAINS We Can Believe In" please read "END THE FED! Flyer for The International - The Movie".

IDEA #6: REFORM THE MONETARY SYSTEM AND REINSTATE HONEST MONEY.

America has forgotten what money truly is, as I explain in my Money Matrix series. Actually, this is the true reason for the current financial and economic crises, the wild growth of OTC derivatives would simply not have been possible with Honest Money. The Founding Fathers explicitly stated in Article 1, Section 10 of the Constitution that only gold and silver coins may be used as lawful money. The dollar, in fact, is defined as a specific mass of silver, and this definition has never been amended. At the very least, our monetary system must be debated in a national forum.

IDEA #7: REFORM THE FINANCIAL SYSTEM.

I confess I do not have much expertise in this area, I am just an engineer after all, but I have read the recommendation of Michael Lewis and David Einhorn in the New York Times this month and also the Nolan Chart's James Quinn and find it hard to argue with their practical advice. Please see the below source list for more details, and feel to leave any comments or questions below.

Yours in Liberty,

Jake, the Champion of the Constitution [Reach the Author Here!]

"I hold it that a little rebellion now and then is a good thing & as necessary in the political world as storms in the physical." - Thomas Jefferson in a letter to James Madison, 1/30/1787

Source List

• Hayek, Friedrich A. 1944. The Road to Serfdom. In cartoon. 5min video of cartoon.
• Hazlitt, Henry. *** 1946. Economics in One Lesson. Timeless!
• Lewis, Michael and David Einhorn. 3 Jan 2009. "The End of the Financial System As We Know It" and "How to Repair A Broken Financial World." NY Times articles with solid advice on how to correct the financial system. Many could have written the first half, but kudos to Lewis and Einhorn on the second.
• Quinn, James. 2009. "Unintended Consequences - 2009 & Beyond"
• Rand, Ayn. "Anthem" (1938) A short 25-page novella set in a future of totalitarian government control.
• Rand, Ayn. 1957. Atlas Shrugged. PDF.
• Read, Leonard E. 1958. I, Pencil. Famous short essay on economic intricacies.

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©2009 Jake Towne, the Champion of the Constitution, all rights reserved. You must have written permission from the author in order to republish this work.
Published: Thursday, January 22, 2009
Last modified: Tuesday, February 10, 2009

The views expressed in this article are those of Jake Towne, the Champion of the Constitution only and do not represent the views of Nolan Chart, LLC or its affiliates. Jake Towne, the Champion of the Constitution is solely responsible for the contents of this article and is not an employee or otherwise affiliated with Nolan Chart, LLC in his/her role as a columnist.

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