It's Not a Smart Move to Link Obama Tax Hikes to Nazi Invasion

A reader has asked me to weigh in on the mini-controversy that was triggered when a Wall Street financier said fighting Obama's tax hikes was like a war and that the battle was "like when Hitler invaded Poland in 1939." While it seems clear that Stephen Schwarzman was not saying Obama was a Nazi or that his policies were akin to those pursued by the National Socialist Workers Party, he obviously should have used a better analogy. Even if the intent is totally innocent and/or intellectually legitimate, it distracts from the core message when you make references to Nazis or fascism (indeed, I've made this point in previous posts about whether Obama is a socialist). Here's an excerpt for those who want to know more about the story.

The billionaire Blackstone private equity boss Stephen Schwarzman, who is among Wall Street's most visceral proponents of the free market, has been obliged to apologise after comparing Barack Obama's tax policies to the Nazi advance across Europe at the beginning of the second world war. The tycoon, whose empire stretches from Hilton hotels to the Weather Channel, United Biscuits and the London Eye, has worked himself up into a lather about a proposed tax hike on so-called "carried interest" profits - the gains made when private equity firms buy and sell businesses - from 15% to as much as 35%. "It's a war," he told a board members of a non-profit organisation, whose members leaked Schwarzman's remarks to Newsweek on condition of anonymity. "It's like when Hitler invaded Poland in 1939." ...Schwarzman expressed regret for his comments, telling the New York Post: "I apologise for what was an inappropriate analogy." But he added: "The fundamental issue of the administration's need to work productively with business for the benefits of the overall economy is still of very serious concern not only to me, but also to large parts of the business community."

P.S. Obama's tax hikes are very misguided. But the best analogy is that this is like...um...when the Germans bombed Pearl Harbor.

Germany's Wealthy Über Statists

It's hard to believe that anybody would classify the Germans as a master race after reading this Spiegel article. Bill Gates and Warren Buffett plan have a nutty (but at least non-coercive) plan for rich people to give away big share of their fortunes. The German billionaires are rejecting this plan. But not because they are sensible and want capital in the hands of those who know how to create wealth. Instead, they think private charity intrudes upon the government's responsibility.

Germany's super-rich have rejected an invitation by Bill Gates and Warren Buffett to join their 'Giving Pledge' to give away most of their fortune. The pledge has been criticized in Germany, with millionaires saying donations shouldn't replace duties that would be better carried out by the state. Last week, Microsoft founder Bill Gates attempted to convince billionaires around the world to agree to give away half their money to charity. But in Germany, the "Giving Pledge," backed by 40 of the world's wealthiest people, including Gates and Warren Buffet, has met with skepticism, SPIEGEL has learned.

Here's an actual section of an interview with a rich German. The most astounding comment is when he basically says that private charity is bad because the state should decide how resources are allocated.

SPIEGEL: But doesn't the money that is donated serve the common good?

Krämer: It is all just a bad transfer of power from the state to billionaires. So it's not the state that determines what is good for the people, but rather the rich want to decide. That's a development that I find really bad. What legitimacy do these people have to decide where massive sums of money will flow?

SPIEGEL: It is their money at the end of the day.

Krämer: In this case, 40 superwealthy people want to decide what their money will be used for. That runs counter to the democratically legitimate state. In the end the billionaires are indulging in hobbies that might be in the common good, but are very personal.

Obama and the "S" Word

According to a new poll from a Democratic firm, an astounding 55 percent of people think "socialist" is a term that describes Obama. Here's a blurb from a National Review post.

Deep in the poll, they ask, “Now, I am going to read you a list of words and phrases which people use to describe political figures. For each word or phrase, please tell me whether it describes Barack Obama very well, well, not too well, or not well at all.” ...When asked about “a socialist,” 33 percent of likely voters say it describes Obama “very well,” 22 percent say “well,” 15 percent say “not too well,” and 25 percent say “not well at all.”

I've already commented on this issue twice, remarking that Obama technically is a fascist, but that it is much better to call him a statist or corporatist. But there is the tricky issue of whether a word should be defined by experts (to the extent economists are experts on anything) or whether it is more appropriate to accept the common understanding of what a word means. I don't have a firm opinion on that issue, but if socialism now means someone who believes in lots of government intervention and redistribution, then Obama is a socialist (heck, Bush also would be a socialist). But if we stick with the official definition, which involves government ownership of the means of production, then Obama has relatively few policies that meet that standard.

Here's what the Christian Science Monitor reported on the issue. The most amusing part of the story is that self-identified socialists are insulted to be linked to Obama.

The assertion is getting louder: President Obama is a socialist, a wealth-redistributing wolf in Democrat's clothing gnawing at America's entrepreneurial spirit. ...So, is Mr. Obama trying to form The Socialist Republic of America? Or are the accusations mainly a political weapon, meant to stick Obama with a label that is poison to many voters and thus make him a one-term president? ...[Some] refute the idea that government involvement in failing industries defines a president as socialist – or that wealth is being redistributed from the Forbes 500 richest Americans to the nation's "Joe the plumbers." What Mr. Johns, Mr. Gingrich, and others brandishing the "socialist" s-word are really complaining of is a return to the policies of John Maynard Keynes, the English economist who advocated vigorous government involvement in the economy, from regulation to pump priming, says labor historian Peter Rachleff of Macalester College in St. Paul, Minn. "Socialism suggests getting rid of capitalism altogether," says Dr. Rachleff. "Mr. Obama is not within a million miles of an ideology like that." For what it's worth, socialists deny that Obama is one of them – and even seem a bit insulted by the suggestion. "I have been making a living telling people Obama is not a socialist," says Frank Llewellyn, national director of the Democratic Socialists of America. "It's frustrating to see people using our brand to criticize programs that have nothing to do with our brand and are not even working."

A Totalitarian Future for Europe?

I don't often agree with the statist president of the European Commission, but Mr. Barroso may be right when he warns that some nations are at risk of descending back into dictatorship. But while he may be correct in his diagnosis, his proposed solution is more of the policies - redistribution, handounts, bailouts, and subsidies - that have caused nations to get in trouble in the first place. At best, this approach postpones the day of reckoning - but it also causes a much bigger collapse.

During my recent visits to Europe, I was surprised by the level of pessimism from all segments of the population. The general assessment is that Europe is heading downhill and that there is little hope of changing direction because too many people have been convinced by politicians that they are entitled to mooch. But, as Margaret Thatcher famously warned, the problem with socialism is that you eventually run out of other people's money. That is what is happening in Europe. But rather than sober up, the Greeks and others are rioting in hopes of finding new victims to consume. Many people I talked to expressed concern that this attitude eventually would cause economic collapse and lead to some sort of anti-democratic rule. The optimists (if you can call them that) think the result may be some sort of soft despotism dictated by Brussels and enforced by bribes from (mostly) German taxpayers. Others are more dour and fear the rise of more malignant forms of dictatorship.

Here's a blurb from the U.K.-based Daily Mail:

Democracy could ‘collapse’ in Greece, Spain and Portugal unless urgent action is taken to tackle the debt crisis, the head of the European Commission has warned. In an extraordinary briefing to trade union chiefs last week, Commission President Jose Manuel Barroso set out an ‘apocalyptic’ vision in which crisis-hit countries in southern Europe could fall victim to military coups or popular uprisings as interest rates soar and public services collapse because their governments run out of money. The stark warning came as it emerged that EU chiefs have begun work on an emergency bailout package for Spain which is likely to run into hundreds of billions of pounds. ...Leaders are expected to thrash out a rescue package for Spain’s teetering economy. Spain is expected to ask for an initial guarantee of at least £100 billion, although this figure could rise sharply if the crisis deepens. News of the behind-the-scenes scramble in Brussels spells bad news for the British economy as many of our major banks have loaned Spain vast sums of money in recent years. Germany’s authoritative Frankfurter Allgemeine Newspaper reported that Spain is poised to ask for multi-billion pound credits. Mr Barroso and Jean-Claude Trichet of the European Central Bank are united on the need for a rescue plan. The looming bankruptcy of Spain, one of the foremost economies in Europe, poses far more of a threat to European unity and the euro project than Greece. Greece contributes 2.5 percent of GDP to Europe, Spain nearly 12 percent.

Sleazy and Dishonest Ad from General Motors Shows Added Reason Why Big Government and Big Business Is a Toxic Combination

It is now fully apparent that General Motors did not pay back any money to taxpayers, and certainly did not pay back the full amount, as stated in the reprehensibly dishonest ads produced by the company. The Obama Administration took part in the lie, which exposes an additional reason why it was a terrible idea to give the company a bailout. For all intents and purposes, taxpayers paid for the GM ad, and the purpose of the ad - at least in part - was to help the Obama Administration. Welcome to corporatism (the nice way of saying it) and national socialism (the not-so-nice way of saying it). Here's a great video from Reason.tv explaining GM's gross prevarication:



The good news is that others are now aware of the Obama/GM scam. Here's an excerpt from the New York Times:

G.M. trumpeted its escape from the program as evidence that it had turned the corner in its operations. “G.M. is able to repay the taxpayers in full, with interest, ahead of schedule, because more customers are buying vehicles like the Chevrolet Malibu and Buick LaCrosse,” boasted Edward E. Whitacre Jr., its chief executive. ...Taxpayers are naturally eager for news about bailout repayments. But what neither G.M. nor the Treasury disclosed was that the company simply used other funds held by the Treasury to pay off its original loan. ...It’s certainly understandable that G.M. would want to spin its repayment as proof of improving operations. But Mr. Grassley said he was troubled that the Treasury went along with the public relations campaign and didn’t spell out how the loan was retired. “The public would know nothing about the TARP escrow money being the source of the supposed repayment from simply watching G.M.’s TV commercials or reading Treasury’s press release,” Mr. Grassley said in a speech on the Senate floor last Wednesday, saying that “many billions” of federal dollars remained invested in G.M.

More on Obama and Socialism

I got some interesting feedback about my pseudo-defense of Obama against the accusation that he is a socialist. It was a faux defense because my goal was simply to point out that Obama is guilty of a different form of statism. For those interested in more information, Jonah Goldberg's Liberal Fascism book is first rate (and he has a discontinued blog on the topic for those too impatient to wait for a book), and Steve Horowitz does a great job addressing this topic for the Freeman:

Talking the talk of “free markets” but proposing policies that mostly amount to collaborations between well-placed private-sector interests and the State is the hallmark of “corporatism,” or “state capitalism,” or even economic fascism. From the bailouts of the banking system to “green jobs” to health insurance “reform” to various pieces of the “stimulus,” the real winners from the Obama administration’s policies (and Bush’s before him) have been those in corporate world lucky enough to be in the favored industries and to have sufficient political connections to benefit from the changes. Rather than take over various industries, Obama seems to believe he can work with industry leaders and labor to negotiate and manage them collectively in the national interest. This is the essence of the “third way” of Italian Fascism. It is not socialism, as private ownership is nominally maintained, but it is not capitalism, since private owners are not fully allowed to make independent decisions based on perceived profitability. Those decisions must take a back seat to predetermined national priorities. Again, consider the health insurance package. It’s not a single-payer system, which would arguably be more truly socialist. Instead, we will have a system of nominally private insurance companies heavily regulated and controlled so that they serve political goals, such as trying to guarantee that everyone has insurance regardless of income or medical history.

Keep in mind, though, my point about it being foolish to call Obama a fascist since the term is now inextricably linked to racism and militarism. Far better to point out that he is a statist or a corporatist.

Obama Is Not a Socialist

Newt Gingrich writes in the Washington Post today to defend his assertion that Obama is a socialist. He cites several examples of the President's big-government agenda, which are excerpted below. These are all examples of bad policy, to be sure, but other than the student loan takeover, these are all examples of fascism rather than socialism. Socialism, technically speaking, is government ownership of the means of production. Fascism, by contrast, involves government control and direction of resources, but cloaked by a system of nominal private ownership.

Calling Obama a fascist, however, is counterproductive. Other than a few economists and historians, people don't understand that fascism developed (with Mussolini perhaps being the best example) as a social/economic system. Instead, most people associate it with Hitler's lunatic ideas on matters such as race and militarism. That's why I prefer to call Obama a statist or a corporatist. Those words accurately describe his governing philosophy without creating the distractions caused by calling him a socialist or fascist.

Creating czar positions to micromanage industry reflects the type of hubris of centralized government that Friedrich von Hayek and George Orwell warned against. How can a White House "executive compensation czar" know enough to set salaries in multiple companies for many different people? Having a pay dictatorship for one part of the country sets the pattern for government to claim the right to set pay for everyone. If that isn't socialism, what word would describe it?

Violating 200 years of bankruptcy precedent to take money from bondholders and investors in the auto industry to pay off union allies is rather an anti-market intervention.

Proposing that the government (through the Environmental Protection Agency or some sort of carbon-trading scheme) micromanage carbon output is proposing that the government be able to control the entire U.S. economy. Look at the proposals for government micromanagement in the 1,428-page Waxman-Markey energy tax bill. (I stopped reading when I got to the section regulating Jacuzzis on Page 442.) If government regulates every aspect of our use of power, it has regulated every aspect of our lives. What is that if not socialism?

Nationalizing student loans so that they are a bureaucratic monopoly. This will surely lead to fraud on the scale we see in Medicare and Medicaid, from which more than $70 billion per year is stolen.

Expanding government mortgage intervention to 90 percent of the housing market.