Sunday, March 30, 2014

The Other Side of the Global Warming Story


Jay Lehe published in Hotchkiss Magazine

January 29, 2014
Prepared for the Washington State Senate
Among my studies in physics, has been the study of climate, present, past and future, ever since the 1970s when the popular press was warning of an advancing ice age, and on into the 90s when global warming took over with unsubstantiated anecdotal evidence and mathematical models.  Models that are unable to calculate past temperatures when all the variables are known, or the future whether a year or 10 down the road. They continue to predict doom a century from now if mankind does not alter its proclivity to lighten man’s burden with inexpensive fossil fuel.
There are 117 mathematical models used by the Intergovernment Panel on Climate Change (IPCC) to assess man’s impact on our climate.  They do not agree with one another to any reasonable extent.  If a single model could give a discrete answer with a high confidence level they would need only that one.  But 117 separate groups of climatologists and mathematicians have come up with 117 model guesstimates which do not agree with each other.  None has come close to calculating backwards in time what the temperature of the earth was when all the variables used in the equations are known as part of our historical record, nor have any models in existence the past 10 years been able to predict with reasonable accuracy what the earth temperature actually turned out to be 10 years forward.  None have predicted what we know now, that the temperature of the earth has been stable for the past 17 years. Yet with all this complete predictive failure, the IPCC chooses to take an average of these 117 models and say today in their latest report that their confidence in these average model predictions has increase from 90% to 95%. This would be laughable were governments of the world not continuing to bankrupt themselves by significantly increasing the cost of their energy through attempts to avoid fossil fuels while continuing to spend tens of billions of dollars on carbon emission reduction and failed attempts at using wind power and solar power. This is so though no where on earth have these so called renewable sources of energy ever replaced a single conventional power plant as their intermittent availability requires 100% conventional power plant backup.
Production of the equivalent of a standard 1000 megawatt power plant, fueled by either coal, gas or nuclear material requires 300 square miles of wind turbines or 175 square miles of either fields of photovoltaic cells or mirrors to collect the sun’s energy.  And yet the beat goes on to eliminate the aforementioned dependable energy sources while keeping wind and solar alive with massive government subsidies.
The subsidies will end eventually, perhaps in five to eight years, when our richness in inexpensive shale gas and oil will awake the public to the absurdity of subsidizing energy sources that the physical laws of the universe make impossible to harvest economically. The wind and solar farms will ultimately stand idle as monuments to the folly of the near religious faith in mathematical climate models. `
The media has promoted unwarranted fear and unmitigated arrogance as to man’s impact on his climate. I will attempt to set the record straight or at least level the playing field with some irrefutable scientific facts.
1 - While temperatures have fluctuated over the past 5000 years, today’s earth temperature is below the average for these past 5000 years.
2 - Temperature fluctuations during the current 300 year recovery from the Little Ice Age, which ended around the time Washington’s soldiers were freezing at Valley Forge, correlate almost perfectly with our sun’s changes in activity level.
3- The National Aeronautic and Space Agency (NASA) has determined that during the time the Earth was warming in the past century so was Mars, Pluto, Jupiter and the largest moon of Neptune.
4- We know that 200 million years ago when the dinosaurs walked the Earth, average Carbon Dioxide concentration in the atmosphere was 1800 parts per million, more than four times higher than today.
5- If greenhouse gases were responsible for increases in global temperature, then atmospheric physics shows that higher levels of our atmosphere would show greater warming than lower levels.  This was not found to be true during the 1978 to 1998 period of .3 degrees centigrade warming.
6- 900.000 years of ice core temperature records and carbon dioxide content records show that CO2 increases follow rather than lead increases in Earth temperature which is logical because the oceans are the primary source of CO2 and they hold more CO2 when cool than when warm, so warming causes the oceans to release more CO2.
7- The effect of additional CO2 in the atmosphere is limited because it only absorbs certain wave lengths of radiant energy.  As the radiation in that particular wave length band is used up, the amount left for absorption by more of the gas is reduced.
8- While we hear much about one or another melting glaciers, a recent study of 246 glaciers around the world  indicated a balance between those that are losing ice, gaining ice, and remaining in equilibrium.
9- It is amusing that the polar bear has become the symbol of global warming while its North American population has increased from 5000 in 1960 to more than 25,000 today.
Although the court of public opinion already weigh climate change as a very low economic priority, the media continues to uncritically accept and vigorously promote shrill global warming alarmism. The United States government budgets $6 billion a year for climate research supporting a growing industry of scientists and university labs that specialize in the subject of man caused climate change rather the search for evidence wherever it might lead.  It all adds up to a significant institutionalization of the impulse to treat carbon as a problem.
Climate change is not a scientific problem that found political support.  It is about eco-activists and politicians who found a scientific issue they feel can leverage them into power and control. The environment is a great way to advance a political agenda that favors central planning and an intrusive government.  What better way to control someone’s property than to subordinate one’s private property rights to environmental concerns.
While the most extreme environmental zealots may be relatively few in number, they have managed to gain undue influence by exploiting the gullibility of many ordinary and scientifically untrained people, willing to believe that the planet needs saving from man’s excesses.  Perhaps it is a psychological throwback to those earlier civilizations that offered human sacrifices to the gods, to assuage their sins and spare them from punishment in the form of drought, flood, famine or disease. There are certainly many parallels between modern environmentalism and religion.

Thursday, February 27, 2014

Connecting the Dots in the IRS Scandal

Bradley A. Smith wrote in WSJ:

The 'smoking gun' in the targeting of conservative groups has been hiding in plain sight.

Feb. 26, 2014 7:47 p.m. ET
The mainstream press has justified its lack of coverage over the Internal Revenue Service targeting of conservative groups because there's been no "smoking gun" tying President Obama to the scandal. This betrays a remarkable, if not willful, failure to understand abuse of power. The political pressure on the IRS to delay or deny tax-exempt status for conservative groups has been obvious to anyone who cares to open his eyes. It did not come from a direct order from the White House, but it didn't have to.
First, some background: On Jan. 21, 2010, the Supreme Court issued its ruling in Citizens United v. FEC upholding the right of corporations and unions to make independent expenditures in political races. Then, on March 26, relying on Citizens United, the D.C. Circuit Court of Appeals upheld the rights of persons (including corporations) to pool resources for political purposes. This allowed the creation of "super PACs" as well as corporate contributions to groups organized under Section 501(c)(4) of the Internal Revenue Code that spend in political races.
The reaction to Citizens United was no secret. Various news outlets such as CNN noted that "Democrats fear the decision has given the traditionally pro-business GOP a powerful new advantage."
The 501(c)(4) groups in question are officially known as "social-welfare organizations." They have for decades been permitted to engage in political activity under IRS rules, so long as their primary purpose (generally understood to be more than 50% of their activity) wasn't political. They are permitted to lobby without limitation and are not required to disclose their donors. The groups span the political spectrum, from the National Rifle Association to Common Cause to the Planned Parenthood Action Fund. If forced out of 501(c)(4) status, these nonprofit advocacy groups would have to reorganize as for-profit corporations and pay taxes on donations received, or reorganize as "political committees" under Section 527 of the IRS Code and be forced to disclose their donors.
Now consider the following events, all of which were either widely reported, publicly released by officeholders or revealed later in testimony to Congress. These are the dots the media refuse to connect:
• Jan. 27, 2010: President Obama criticizes Citizens United in his State of the Union address and asks Congress to "correct" the decision.
• Feb. 11, 2010: Sen. Chuck Schumer (D., N.Y.) says he will introduce legislation known as the Disclose Act to place new restrictions on some political activity by corporations and force more public disclosure of contributions to 501(c)(4) organizations. Mr. Schumer says the bill is intended to "embarrass companies" out of exercising the rights recognized in Citizens United. "The deterrent effect should not be underestimated," he said.
• Soon after, in March 2010, Mr. Obama publicly criticizes conservative 501(c)(4) organizations engaging in politics. In his Aug. 21 radio address, he warns Americans about "shadowy groups with harmless sounding names" and a "corporate takeover of our democracy."
• Sept. 28, 2010: Mr. Obama publicly accuses conservative 501(c)(4) organizations of "posing as not-for-profit, social welfare and trade groups." Max Baucus, then chairman of the Senate Finance Committee, asks the IRS to investigate 501(c)(4)s, specifically citing Americans for Job Security, an advocacy group that says its role is to "put forth a pro-growth, pro-jobs message to the American people."
• Oct. 11, 2010: Sen. Dick Durbin (D., Ill.) asks the IRS to investigate the conservative 501(c)(4) Crossroads GPS and "other organizations."
• April 2011: White House officials confirm that Mr. Obama is considering an executive order that would require all government contractors to disclose their donations to politically active organizations as part of their bids for government work. The proposal is later dropped amid opposition across the political spectrum.
• Feb. 16, 2012: Seven Democratic senators— Michael Bennet (Colo.), Al Franken (Minn.), Jeff Merkley (Ore.), Mr. Schumer, Jeanne Shaheen (N.H.), Tom Udall (N.M.) and Sheldon Whitehouse (R.I.)—write to the IRS asking for an investigation of conservative 501(c)(4) organizations.
• March 12, 2012: The same seven Democrats write another letter asking for further investigation of conservative 501(c)(4)s, claiming abuse of their tax status.
• July 27, 2012: Sen. Carl Levin (D., Mich.) writes one of several letters to then-IRS Commissioner Douglas Shulman seeking a probe of nine conservative groups, plus two liberal and one centrist organization. In 2013 testimony to the HouseOversight and Government Reform Committee, former IRS Acting Commissioner Steven Miller describes Sen. Levin as complaining "bitterly" to the IRS and demanding investigations.
• Aug. 31, 2012: In another letter to the IRS, Sen. Levin calls its failure to investigate and prosecute targeted organizations "unacceptable."
• Dec. 14, 2012: The liberal media outlet ProPublica receives Crossroads GPS's 2010 application for tax-exempt status from the IRS. Because the group's tax-exempt status had not been recognized, the application was confidential. ProPublica publishes the full application. It later reports that it received nine confidential pending applications from IRS agents, six of which it published. None of the applications was from a left-leaning organization.
• April 9, 2013: Sen. Whitehouse convenes the Judiciary Subcommittee on Crime and Terrorism to examine nonprofits. He alleges that nonprofits are violating federal law by making false statements about their political activities and donors and using shell companies to donate to super PACs to hide donors' identities. He berates Patricia Haynes, then-deputy chief of Criminal Investigation at the IRS, for not prosecuting conservative nonprofits.
• May 10, 2013: Sen. Levin announces that the Permanent Subcommittee on Investigations will hold hearings on "the IRS's failure to enforce the law requiring that tax-exempt 501(c)(4)s be engaged exclusively in social welfare activities, not partisan politics." Three days later he postpones the hearings when Lois Lerner (then-director of the IRS Exempt Organizations Division) reveals that the IRS had been targeting and delaying the applications of conservative groups applying for tax-exempt status.
• Nov. 29, 2013: The IRS proposes new rules redefining "political activity" to include activities such as voter-registration drives and the production of nonpartisan legislative scorecards to restrict what the agency deems as excessive spending on campaigns by tax-exempt 501(c)(4) groups. Even many liberal nonprofits argue that the rule goes too far in limiting their political activity—but the main target appears to be the conservative 501(c)(4)s that have so irritated Democrats.
• Feb. 13, 2014: The Hill newspaper reports that "Senate Democrats facing tough elections this year want the Internal Revenue Service to play a more aggressive role in regulating outside groups expected to spend millions of dollars on their races."
In 1170, King Henry II is said to have cried out, on hearing of the latest actions of the Archbishop of Canterbury, "Will no one rid me of this turbulent priest?" Four knights then murdered the archbishop. Many in the U.S. media still willfully refuse to see anything connecting the murder of the archbishop to any actions or abuse of power by the king.
Mr. Smith, a former chairman of the Federal Election Commission, is chairman of the Center for Competitive Politics.

Monday, January 13, 2014

Are Critics Of Fed's QE Fighting Last War?

Editorial in Forbes, January 20, 2014, p. 11.


Interest Rates
Interest Rates (Photo credit: 401(K) 2013)
If you had told any financial observer in 2008 that the Federal Reserve would expand its balance sheet fivefold in five years, you’d have encountered astonished disbelief, followed by the assertion that if ever such a thing unfolded a Weimar Republic-like hyperinflation would ensue. After all, in the inflation-beset 1970s and early 1980s, when the Consumer Price Index was roaring ahead at a 13% annual clip and interest rates were headed for the moon— short-term rates peaked at 21.5% and long-term Treasurys at 15.75%—the monetary base (currency plus bank reserves on deposit at the Fed) had increased 225% from 1970 to 1981, a 12-year period.
Contrast that to the 400% surge in the monetary base since 2008. While there are valid arguments that Washington has been changing the CPI to understate the rise in the cost of everyday products and services, there’s no gainsaying the fact that we are, thankfully, nowhere near the horrors of the 1970s.
What gives?
What gives is that we focused too much on the bloat of the monetary base and not nearly enough on the unprecedented suppression of both short- and long-term interest rates. Never before had our central bank knocked down the overnight cost of money to near 0%. And never before had it attempted to beat the longer-term cost of money to a fraction of its real price. (In the early 1960s the original Operation Twist–named after the dance made famous by Chubby Checker–was mercifully short-lived. It had been undertaken in a misbegotten effort to strengthen the dollar.)
Only a handful of economists, most notably FORBES columnist David Malpass, have pointed out that this monetary version of price controls is a form of credit allocation. The federal government easily got all the cash it wanted at ultracheap rates, i.e., deficits without tears. Big companies had no trouble accessing credit and putting their balance sheets in pristine order. But credit to small and new businesses dried up, a drought magnified enormously by bank regulators who told their charges to reduce risk and to document six ways to Sunday any loans to a nonbig borrower. Remember, small and new businesses are the source of most new jobs. Through its quantitative easings the Fed effectively sucked up much of the financial market’s short-term credit that normally would have gone to these businesses.
Malpass observes: “The U.S. private sector has been facing one of the tightest money/regulatory policies in history.”
The fact that the Fed has started to taper, albeit at a tepid pace, is good news. It will mean the beginning of rebuilding our warped credit markets.
There are two other, very obvious factors that explain why there has been no explosion in higher consumer prices. One is higher taxes and an ever more convoluted and corrupt tax code; the other is the chaotic uncertainty that ObamaCare has visited on business and the American people.
The suppression of interest rates has been mimicked by other countries, with equally distressing results. These have been magnified by even stupider regulations and higher levels of taxation than those we suffer.
(Make no mistake, the Fed’s undermining of the dollar since the early part of the last decade has wrought immense havoc. For instance, without a weak dollar there would never have been a housing bubble.)
Of course, since virtually no central banker today–not to mention political leaders or economists–understands monetary policy, an inflation disaster could still eventually unfold. For now, though, credit suppression of a kind we’ve never seen before and growth-crushing levels of taxation and regulation will keep us from enjoying vigorous, sustainable growth.
So don’t get too giddy over our “improving” economy. We’re not suffering pneumonia, but we’re still being worn down by a persistent flu.

Sunday, December 15, 2013

Here Come the Obamacare Taxes

Editorial from Las Vegas Review Journal:

EDITORIAL: Here come the Obamacare taxes

LAS VEGAS REVIEW-JOURNAL December 12, 2013 - 4:22pm
First came the compliance burdens. Then came the expensive website woes, millions of policy cancellations and skyrocketing premiums. But if you thought Obamacare couldn’t be less popular, guess again. Here come the taxes.
As reported Sunday by the Review-Journal’s Jennifer Robison, there are a slew of new taxes to help pay for the boondoggle that is the Affordable Care Act, and the Internal Revenue Service will be reaching deep into wallets to collect that money starting next year. Those with high incomes face the biggest increases, but people at all income levels ultimately will feel the costs of the health care law — beyond higher deductibles and out-of-pocket expenses.
Single filers earning more than $200,000 and joint filers who earn more than $250,000 will see a 0.9 percent Medicare surtax on top of the existing 1.45 percent Medicare payroll tax, as well as a 3.8 percent Medicare tax on unearned income (investment dividends, rental income, interest and capital gains on property). And as Ms. Robison reported, that’s on top of the 2013 increases in the capital gains tax and the highest income tax bracket, meaning high earners are seeing a substantial tax jump in just two years’ time.
For the majority of taxpayers, whose income doesn’t meet that $200,000/$250,000 threshold, there are new limits on medical expense deductions and on flexiblespending accounts that are used to pay for everything from prescriptions to braces or even tuition for special-needs children.
Then, of course, there’s the dreaded individual mandate, which hits taxpayers who don’t obtain expensive Obamacare-compliant health coverage. For 2014, the penalty is $95 per person ($285 family maximum) or 1 percent of taxable income, whichever is greater. If your taxable income is $60,000, that’s a $600 tax. For the tax year 2016, those penalties rise to $695 per person ($2,085 family maximum) or 2.5 percent of taxable income, or a $1,500 tax on that $60,000 income.
How many families can afford that kind of tax hit?
Yes, there are some credits, particularly for small businesses. But as Bill McCarthy, a partner in the local accounting firm McCarthy Kaster CPAs, told Ms. Robison, figuring out the existing credit often chews up much of the savings because of record-keeping requirements and paperwork. “You might save $2,000, but the cost to calculate that is $1,000,” Mr. McCarthy said. That credit grows in 2014, but it’s unclear how many small companies might bother taking it — the Obama administration’s projections on everything from enrollment to pricing have been far off the mark.
Don’t forget the delayed employer mandate, which takes effect Jan. 1, 2015. Businesses that have at least 50 full-time equivalent employees and don’t offer Obamacare-compliant coverage will be taxed between $2,000 and $3,000 per worker.
One employer tax was not delayed to 2015: an annual reissuance fee of $63 per per insured person, a levy intended to bail out insurance companies for covering pre-existing conditions. So businesses are taxed if they offer medical benefits and taxed if they don’t. The reissuance tax is so bad the Obama administration wants to exempt unions as a political favor.
With each passing day, more Americans are realizing the Affordable Care Act isn’t affordable at all. It makes people and businesses pay more for worse coverage with less choice and it hits them with higher tax bills, all to subsidize insurance for a select few. As Washington Examiner columnist Byron York wrote this week, the Obama administration’s new promotional push to prop up this failing law doesn’t mention what was supposed to be the primary goal: helping Americans buy affordable health insurance.
Remember President Barack Obama’s promise that the law would reduce average annual family health insurance premiums by $2,500?
Despite the law’s myriad other failings — it has actually increased the number of uninsured — its resulting lack of affordability is enough to justify full repeal. This is not a healthy economy. There are not enough jobs. Obamacare and its tax and regulatory burdens are hurting, not helping.

Two Ironies



Two Ironies to share:
 
Irony 1. 
 
We are told NOT to judge ALL Muslims by the actions of a few lunatics." 
BUT, on the other hand. "We are also encouraged TO judge ALL Gun Owners by the
actions of a few lunatics." 
How is that supposed to work??? 
 
 
Irony 2. 
 
The Food Stamp Program, administered by the U.S. Department of Agriculture,
is proud to be distributing this year the greatest amount of free Meals and
Food Stamps ever, to 47.5 million people (most recent figures available
April 2013). 
 
Meanwhile, the National Park Service, administered by the U.S. Dept. of the
Interior, asks us "Please Do Not Feed the Animals." Their stated reason for
the policy is because "The animals will grow dependent on handouts and will
not learn to take care of themselves." 
 
 
Thus ends today's two lessons in irony. 

Monday, October 14, 2013

A ‘Wonderland’ moment for the court



The following George Will column appears in today’s Washington Post. Will applies a wonderful analogy.  See if you can understand the twisted logic of the petitioners.

We should not be surprised by this public display.  After all, Washington is devaluating the dollar and saying that ‘it means just what I choose it to mean — neither more nor less. ”  The $17 trillion of debt is not really owed.  People’s living standards have not really declined to 1989 levels.  The cost of health insurance to everybody will decline.

Fifty-one percent of Americans support this fantasy and the other 49% believe that restoring Republicans to control will change this “through the looking glass” Washington.


A ‘Wonderland’ moment for the court
By George F. Will, Published: October 11

“ ‘When I use a word,’ Humpty Dumpty said in rather a scornful tone, ‘it means just what I choose it to mean — neither more nor less.’ ”

— Lewis Carroll,

“Through the Looking Glass”

The marble friezes above the Supreme Court chamber depict 18 great lawgivers, including Moses, Solomon, King John and William Blackstone. Come Tuesday, as the bemused — or so one hopes — justices listen to oral arguments in a case from Michigan, they might wonder why Lewis Carroll is not included. He would have relished the Alice-in-Wonderland argument the justices will hear, which is as follows.

Although the U.S. Constitution’s 14th Amendment says “No state shall . . . deny to any person within its jurisdiction the equal protection of the laws,” the following provision of Michigan’s Constitution violates the equal-protection guarantee: No public university, college or school district may “discriminate against, or grant preferential treatment to, any individual or group on the basis of race, sex, color, ethnicity, or national origin in the operation of public employment, public education, or public contracting.”

Yes, in Tuesday’s Through-the-Looking- Glass moment, the court will be urged to declare that Michigan’s ban on unequal treatment violates the U.S. Constitution’s equal-protection clause. The U.S. Court of Appeals for the 6th Circuit — divided 8 to 7, with five dissents — has said just that, citing what is called the political-restructuring doctrine.

The argument is that when, in 2006, Michigan voters put in the state’s Constitution the ban against racial preferences in higher education, this complicated the task of those Michiganders who want to institute racial preferences. Instead of just lobbying the admissions officials of the state’s educational institutions, they must first mount a statewide campaign to amend Michigan’s Constitution. The Supreme Court, however, has hitherto applied the political-restructuring doctrine only against laws that change a political process in ways that diminish protection against unequal treatment, not to prevent laws granting preferential treatment.

Could there be a “political-restructuring” objection to the First Amendment? Because it proscribes “establishment of religion,” people who favor an established church cannot simply lobby Congress to create this, they first must undertake the burdensome task of amending the Constitution. So, is the First Amendment a constitutionally dubious restructuring of the nation’s political process?

Michigan, arguing for the compatibility of its constitutional amendment with the U.S. Constitution’s 14th Amendment, notes that in a 2003 case coming from the University of Michigan Law School, the court held that race-conscious admissions policies are presumed to be unconstitutional except in some narrow circumstances. Racial preferences, if carefully tailored as one component in the “individualized, holistic review of each applicant’s file” and “limited in time,” are permitted for the purpose of promoting academic “diversity.” They are not, however, required , and states are not forbidden to decide that banning preferences is proper policy.

Michigan Attorney General Bill Schuette correctly argues that the voters who passed the amendment in 80 of the state’s 83 counties were not “restructuring” the political process, they were using the process to give constitutional dignity to the valid ideal of a colorblind society.

Opponents of Michigan’s amendment can hardly argue that it was an act of racial animus. They would have to persuade the court to speculate about voters’ motivations. Furthermore, they would have to persuade the court to disallow the possibility that voters were aware of the abundant social-science evidence that questions the supposed benefits of preferences for those who are stigmatized by receiving them.

And opponents of Michigan’s amendment would have to persuade the court that it is both impossible and impermissible for a majority-white electorate to believe, without malice, that colorblind policies are best for the entire polity. Persuading the court of this would be difficult, given that the court has held that a “core purpose of the 14th Amendment was to do away with all governmentally imposed discrimination based on race.”

If racial preferences are, as proponents of them invariably insist, created for “diversity” that benefits everyone, then Michigan’s amendment banning preferences cannot constitute an invidious restructuring of the political process for the detriment of a minority. Hence opponents of Michigan’s amendment are simultaneously arguing contradictory propositions: Racial preferences serve everyone by producing diversity in academia, but banning preferences is unconstitutional because they primarily benefit a minority.

“ ‘Curiouser and curiouser!’ cried Alice,” in Lewis Carroll’s “Alice’s Adventures in Wonderland.” And so might the court’s justices cry, come Tuesday.

Thursday, August 29, 2013

The American Income Crisis: The FED Could Stop It



David Malpass wrote in the September 2, 2013 issue of Forbes                      

President Obama has an opportunity to transform the country’s economic course when he chooses a Federal Reserve chairman to replace Ben Bernanke. While the rich have seen big increases in their share of income, the nation’s inflation-adjusted median income–the middle of the middle class–has been declining sharply.

This is harmful and largely the fault of expansionary government. The solution is for the President to downsize, with a new direction for the Fed as a timely starting point.

In his July 24 speech in Galesburg, Ill., President Obama said he’d like to stop the slide in middle-class living standards: “The average American earns less than he or she did in 1999 … reversing these trends has to be Washington‘s highest priority.”

IRS Security Breach; China's Sex Scandal Steve Forbes Steve Forbes Forbes Staff
There's An Economic Boom Lurking Once President Obama's 2nd Term Ends Peter Ferrara Peter Ferrara Contributor
Barack Obama Has Been Talking About Helping The Middle Class Since 2008 Robert Lenzner Robert Lenzner Forbes Staff

The President is right about that. The record is terrible, and the trends need to be reversed. From 1999 through 2007 the real median household income fell 1%. It fell another 4% during the 2008-09 recession. And then, incredibly, the real median income fell again during the recovery, dropping an estimated 5% in 2010-13.

Rationalizing this as the “new normal” diminishes the past achievements of our economic system. Normal policy increases jobs, growth and real incomes, but we’ve gone backward. Unemployment was still over 7% in July–14% if workers who are underemployed or too discouraged to job-hunt are counted.

The poor performance is the result of policies that seem designed to make the rich richer and leave the middle class stagnant and more dependent on government. While massive growth in government spending is presented to the public as income redistribution, the reality is even worse. Much of the spending ends up in the greater Washington area, which has one of the highest and fastest-growing median incomes in the nation.

The Fed manages what has become the biggest transfer program to the rich, channeling cheap credit to the government and big business. It comes at the expense of small businesses, where most of the entry-level jobs are created. Black teen unemployment stood at 41.6% in July, a stark challenge for the Fed, which has a mandate to achieve maximum employment.

Once a champion of market prices, the Fed is setting short-term interest rates artificially low. This distorts the economy and markets, keeps the dollar weak and increases commodity prices. That benefits the rich, who own and trade commodities, but hammers average Americans, who need low prices and can’t hedge against asset price inflation. The Fed’s policy of lowering long-term interest rates helps the rich even more–they do most of the long-term borrowing, using their high incomes and valuable assets as collateral. The burden falls on the retirement funds and savings accounts of the middle class.

As the President considers candidates for the Federal Reserve, at stake is the current policy of transferring income and wealth from the middle class to the rich. The theory is that a bigger government and an interventionist Fed are somehow reducing the maldistribution of income–”making the rich pay their fair share.” This ignores history, recent performance and the reality of the global economy: The income and wealth of the rich will move toward lower tax rates and strong and stable currencies, burdening the middle class with their government’s debt.

It’s Wall Street that’s cheering the loudest for Bernanke’s successor to keep the status quo–massive bond buying, promises of low future interest rates, high commodity prices and currency volatility to boost trading profits. The risk from an immodest Fed is that it will remain the center of attention, dominating finance and markets. The Fed and its chairman aren’t supposed to be that consequential. Their duty is to keep the dollar and prices relatively stable, facilitating maximum employment.

The President has an opportunity to guide the U.S. economy in a better direction by downsizing the Fed in order to create more growth and jobs and raise the median income.