The company’s short lifespan and quixotic management have already generated plenty of skepticism about the pricing of the shares, which value the company at more than $100 billion—or roughly the size of Morocco. 

Now its basic business model is under attack.

GM’s news raises two glaring issues confronting would-be investors. 

First, the auto maker reports that its $10 million of paid Facebook ads haven’t generated sales.

Second, the company says it will continue to have a presence on Facebook—by hosting pages which are free. 

That its advertising has been ineffective is alarming; that the country’s third-largest advertiser (or anyone else) can copper its bets free of charge highlights the great continuing unknown about the Internet – can companies reliably make money from all the brilliant innovations that have become so central to our lives?

Here’s a secret from someone who used to do this for a living: no one can possibly know what this company is worth. The entire social media space is evolving, advertising is in the midst of a gigantic upheaval,  new companies are born every day that are targeting the Facebook audience and the fidelity of the company’s users is a complete unknown.   Throw in a couple of economic variables such as the outlook for the recovery and for corporate profits and you have the kind of uncertainty soup that often spills into IPO valuations. 

In short, Facebook may well turn out to be a terrific investment, but I wouldn’t bet the ranch.

A heads-up in this department presented itself recently when I was reading through some magazines published in the early days of the financial crisis. 

In October 2007, Forbes reviewed stock picks from money manager John Maloney. His best idea? AIG, then selling at $68 per share. The “value-oriented” one-time banker thought the stock was cheap at 11 times earnings, though he worried about a possible “worst nightmare scenario for AIG – meltdowns in its real estate investments and lending.” That risk he deemed tolerable, since it “would shave just 13 cents off its expected 2007 earnings of $7 per share.”

OK, hindsight is 50-50 and I don’t mean to pick on Mr. Maloney. In 2007, few saw the extent of the financial calamity about to change the world, and financial writing from that time teems with disastrous projections. Not only, of course, about finance.

In that same issue of Forbes, there is also a piece about Richard Rosenblatt, who had recently sold MySpace to News Corp. for $580 million. That purchase – thought brilliant at the time—turned out to be a dud, thanks to the ascent of rival Facebook. After ad sales plummeted, News Corp dumped MySpace last year for roughly $35 million. 

In 2007, Rosenblatt was in the midst of putting together a new company – DemandMedia – which went public in January, 2011 at $17 and which is now selling at $8.

The trail of Internet tears is strewn with meteoric successes and dismal failures; the only thing that seems to change is the price tag. 

In Facebook’s case, investors are paying for the astounding 500 million+ people who log onto the site every day, and for the extraordinary global reach (80% of its users are outside the U.S. and Canada.) They are not paying for the $3.7 billion in revenues the company reported for last year.  

A CNBC/AP poll just out shows that half the country considers Facebook a passing fad, and that the offering price is too high. People under 35 are more optimistic: 59% think the stock offering is a good bet. Alarmingly, though, more than half think the site’s appeal will fade.  

Those conflicting views highlight the real impact of the Facebook offering. Forget what the deal means to investors. Think about what it means to our graduates just entering the work force.

Young people today want to be Mark Zuckerberg. They want the overnight riches and success of Instagram – a company established only two years ago and sold to Facebook for a cool billion dollars. Students in our most prestigious business schools are flocking to tech start-ups,  often willing to work for no pay – just to have a shot at participating in the next insta-win.

Is this a good thing? Yes and no. 

Kids today hate the idea of climbing the corporate ladder; they don’t like hierarchy and cannot imagine “working their way to the top.” They want to start at the top. That impatience will feed the entrepreneurship that has kept the U.S. at the forefront of technology and innovation –  so vital to our country’s growth. It’s that energy that brought us Google and Microsoft, and that brings us Facebook. 

That’s a great thing.

Should we be concerned that we have spawned a generation of risk-takers? Does it matter that there will be inevitable disappointments?

I haven’t a clue. Those are unknowns – just like the outlook for Facebook’s IPO.

When President Obama nixed the Keystone Pipeline,  Canada’s Prime Minister Stephen Harper moved aggressively on the alternative Northern Gateway Pipeline. The project would involve billions of dollars to construct two pipelines to British Columbia and a new port to service Asia-bound supertankers. It would also create thousands of jobs. Harper’s aggressive push for jobs and Obama’s cave to environmentalists perfectly describes the chasm between Canadian policies and ours.  Guess which are working better?

Leaders of the developed world are being bounced left and right.  Though circumstances and details differ, the message is clear: People are tired of worrying about the economy, their jobs and their future.  They hold the folks in charge accountable and will not reelect a leader who has failed to ease their concerns.

RELATED: Jobs: Still Obama’s Biggest Election Hurdle

Mr. Obama is just such a leader. He has shown neither a clear understanding about what might help job creation nor has he made this overarching concern his highest priority. 
Recent polls show the president is in trouble; he needs a plan. My advice: Take a hard look at Canada to study up on what our northern neighbor is doing right.

Canada may be as bland as butter tart, but the country’s economy has been anything but. From 2001 through 2010, it grew faster than any other G-7 country and, alone in that group, it quickly recouped the employment and production losses suffered during the recession.  Unemployment today is just over 7 percent – lower than in most developed countries. Though the government’s popularity has sagged with budget cuts of late, Prime Minister Harper continues to enjoy high approval ratings.

Canada’s growth was not built on financial wizardry—the country boasts some of the soundest banks on earth. (A recent report has accused the government of providing local banks with a “secret”  bailout; there was apparently some temporary extension of liquidity at the height of the panic to keep credit flowing, but since then the loans from the government have been repaid.) Nor did it stem from reckless government spending. Chastened by a fiscal crisis in the 1990s, the country cut spending and posted 11 consecutive budget surpluses pre-recession. Consequently, Canada was able to enact a sizeable stimulus program without upending its fiscal stability. That’s how it’s supposed to work.

Source: Government of Nova Scotia

Canada’s net debt to GDP in 2008 was the lowest in the G-7 at 22.6 percent; the U.S. figure for that year was 53.7 percent. Thanks to its stimulus effort, Canada’s debt rose but is estimated to peak at 37.5 percent in 2014, and then decline. By contrast, U.S. debt to GDP in 2014 is projected by the IMF to be 88 percent and rising for the foreseeable future. That’s why Republicans in Congress are so cranky. 

 Some may dismiss the Canadian experience as pertinent only to a small country. But Canada is the tenth largest economy in the world –  bigger than India or South Korea. No, the Canadian lesson is applicable to the U.S. and it is also simple. Some years ago, Canada set out to attract businesses large and small and it has succeeded. 

It starts with taxes. In the past several years, Canada’s federal corporate tax rate was cut five times; the most recent reduction was in January of this year, when it dropped to 15.0 percent. Together with a provincial tax of 10 percent, the combined corporate tax for Canadian companies is the lowest among the G-7 nations. In the past decade, most developed countries have engaged in a race to the (tax) bottom, with the average OECD rate tumbling six percentage points. Over that period, the U.S. rate barely moved – from 39.3 percent to 39.2 percent. It is true that not all American companies pay taxes at levels that high; but the high rate and complexity of our code is widely viewed as uncompetitive.  Also damaging our position, the U.S. is the only OECD country to tax profits earned abroad. 

In addition, Canada boasts the lowest tax rate on new business investments in the G-7; the lowest overall business costs, according to accounting giant KPMG; a tariff-free zone for machinery imports; R&D tax credits; low import tariffs; excellent infrastructure and superb educational opportunities. The upshot of all these efforts? A doubling of foreign direct investment in Canada over the past decade, an inflow more than twice that moving to the U.S. 

It is notable that corporate tax revenues increased during this period, despite the rate reductions. Though there was a recession-induced hit in 2008, revenues quickly rebounded to levels above those taken in under the more onerous tax regime.

U.S. business leaders would be the first to say it’s not all about taxes. In its Global Competitiveness Report, the World Economic Forum (WEF) rates Canada’s education among the top ten countries in the world and its infrastructure fifteenth. Canada’s government has aggressively sought free trade agreements, concluding eight in the past few years.

The United States, ranked fifth, still outperforms twelfth-place Canada in the overall WEF listings of global competitiveness. As recently as 2005, however, our nation led the world; its score drop in the most recent edition was the largest of any of the 113 countries studied. Canada’s score increased modestly.

A panel of international business leaders at the Milken Global Institute Conference on the West Coast recently concluded: “No one has won the next ten years yet.” All countries face challenges – even China.  The United States needs to join the race, embracing the private sector and rebuilding our country’s finances – just like Canada. Unfortunately,  President Obama’s attentions are on a different race. Even worse, he still doesn’t get it that these two competitions are inextricably linked.

Hispanics gave Obama two-thirds of their vote in 2008 and in a recent NBC/WSJ polls favored the president over Romney by a whopping 47 points. 

However, if team Romney smartens up, the GOP hopeful could siphon off enough of the Latino vote to give him the win. Like everything else these days, it all depends on jobs.

Americans rate jobs their number one priority, and Latinos are no exception. For Hispanics, education comes next. Immigration – the issue of contention between Romney and Latinos—ranks only sixth, after education, health care, taxes and the federal budget deficit.  

Romney can chip away at Obama’s formidable Hispanic following by focusing on jobs. He can remind voters that instead of drilling down on programs to boost employment early in his term, the president ensnared himself – and the country—in the messy and divisive fight over health care, wasting precious time and gumming up the recovery. 

As important, business managers across the country complain that the White House has enacted one speed bump after another which has curtailed America’s economic expansion. 

Decisions like the president’s move to reject the Keystone Pipeline may make headlines, but the damage done to businesses by the emboldened EPA, the changes in labor rules, a hyperactive Justice Department, the uncertainty created by the health care free-for-all, the slew of new regulations and agencies governing credit and lending – have all slowed hiring. 

President Obama has vowed to clear some of the regulatory thicket, but in this sphere he thinks small. His agency heads, unhappily, set the bar higher with each passing day.

These issues resonate with the Hispanic community, which is generating new small businesses at twice the nation’s rate overall and today accounts for roughly 3 million small firms.

They also resonate with Latinos out of work.  The nation overall is still suffering intolerably high unemployment nearly three years after the recession officially ended – a modern-day record.  Hispanic joblessness at 10.3% is painfully above the nation’s average of 8.2%. For young Hispanics – aged 16-19 – some 27% are without jobs.

Here’s another reason that Hispanics should reconsider their support for the president; according to the Department of Labor, Latinos are more likely to work in the private sector and less likely than blacks or white Americans to be employed by the government. Where has Mr. Obama funneled most of the stimulus money? To public employees.

Romney will not likely win over a majority of Hispanics, but he has a shot at narrowing the gap.However, his campaign needs to get smarter – much smarter, critics say – about courting Latinos. There is still no Spanish language Romney website and no Spanish-speaking spokesperson. Also, he has done little to court the Hispanic media. All of this has to change – overnight. Romney must channel his inner Ricky Martin and woo Latino voters.

Romney can begin by attacking President Obama for taking Hispanics for granted, promising much but delivering nothing.  

In 2008, candidate Obama vowed to tackle immigration reform in his first year in office – but never even tried to engage the country in this important debate. For his first two years in office Mr. Obama had a solid Democrat majority in Congress; he did not spend that clout on Hispanics.

Instead, he has increased deportations and recently gave his approval (before backing down) to a controversial ruling that Catholic institutions would have to provide medical insurance covering services forbidden by the church. This offended many of the roughly two-thirds of Hispanics who identify themselves as Catholic.

As for education reform – deservedly the second most important issue for Latinos – Mr. Obama started strong but has consistently caved before pressure from the teachers’ unions.

That President Obama has slighted the Hispanic community has not gone unnoticed.  

Mr. Obama’s approval rating has slipped – by 9 percentage points in 2011 compared to 2010 these are year-end figures; for young people, the drop was twenty points from the year before. There is opportunity for the Romney camp.

For sure, Romney hurt himself during primary season with tough rhetoric about immigration, carving out harsh positions on border control, and opposing the popular Dream Act championed by President Obama. 

More recently Kris Kobach, the author of those positions, has been given a less prominent position in the GOP campaign. 

Meanwhile, Romney is campaigning with Marco Rubio, a prominent Hispanic of Cuban descent, who has a more nuanced and generous approach to the immigration issue. 

Without jeopardizing his conservative bona fides, Romney can maintain a firm stance on border security while espousing, for instance, Rubio’s version of the DREAM Act. This alternative proposal, which Rubio expects to flesh out in coming weeks, would grant young illegal immigrants a visa-based approach to staying in the U.S. if they serve in the military or go to college and provide Romney some wiggle room.

It is worth noting that Latinos themselves are not unified on how to enforce immigration laws. As an example, in a survey last month by Quinnipiac, year, 47% of Hispanics approved of the Arizona law being reviewed by the Supreme Court, while 49% disapproved – a surprisingly close outcome. Surveys have shown an increasing  number of Hispanics viewing illegal immigration as a negative for their community. 

The is no doubt that the 2012 presidential election will be a tight race. 

Given the president’s dismal record on jobs, Romney should view every group in play, including Hispanics. 

As for Hispanics, they should get busy reviewing President Obama’s broken promises.

Paul Krugman vaulted over the line recently, issuing an ad hominem attack on Fed Chair Ben Bernanke for not doing enough to boost the economy. Krugman’s anxiety that the stuttering recovery will bounce President Obama from the White House seems to have loosened his already-fragile grip on reality. His conclusion – that “right-wing bullying” is holding Bernanke back – seems especially nonsensical, even for the truculent Mr. Krugman.
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Dallas Fed President Richard Fisher’s response? “No one bullies Ben Bernanke.” Fisher was not the only speaker at the Milken Institute Global Conference taking place in Los Angeles who would challenge Mr. Krugman’s highly partisan worldview.

Real estate powerhouse Barry Sternlicht said Ben Bernanke is doubling as Barack Obama’s campaign chairman, doing his best to guarantee the president’s reelection. The CEO of Starwood Capital Group called the Fed Chairman’s easy money policy a “put” under the stock market and observed that “Obama’s fortunes rise and fall” with the S&P 500. 

RELATED: Fed Faces New Challenge from the Left

For the distraught Krugman, Bernanke’s best is evidently not good enough. Krugman accuses his former colleague of passivity, writing in The New York Times Magazine that Bernanke is failing American workers. Given the Fed’s aggressive quantitative easing (which, according Richard Fisher of the Dallas Fed, has expanded the central bank’s balance sheet by a factor of 3), as well as our near-zero interest rates, it is a controversial stance.

Krugman rests his case on the earlier writings of the Fed Chair, in which Bernanke criticized the Japanese central bank for its unrewarding caution. In his days as a Princeton academic, the future banker wrote that the authorities should have pushed harder to levitate that economy out of its prolonged slump. Krugman wonders: Where did Bernanke the activist go?

Specifically, Bernanke once advocated that Japan’s bank could “take a larger role in financial markets.” Krugman suggests that the Fed could travel this road as well. Having driven down short-term rates, the bank could step harder on longer-term rates. Krugman considers insufficient “Operation Twist,” in which the Fed bought $2 trillion in long-term bonds and mortgage-backed securities for just that purpose. On the contrary, many analysts think another round of quantitative easing might spark a weakening U.S. dollar and consequent jump in commodities prices.

Krugman dismisses this risk, noting that markets have all but ignored Fed machinations up until now. He’s right – but not because quantitative easing has no consequences. Rather, the U.S. dollar and the demand for U.S. Treasuries have been propped up by Europe’s economic turmoil. Money from around the globe has flowed into the U.S. due in part to worries about rival “safe havens,” cushioning the impact that QE might otherwise have had on our markets.

RELATED: The Fed’s IOUs Can Cripple the Economy in 2013

Willem Buiter, Citigroup’s Chief Economist, says the U.S. is lucky to still have a reserve currency, but that this “temporary privilege is eroding fast.” He points out that our country’s fiscal position is “worse than that of Europe as a whole” and says that the “U.S. will not be in a position of defying the law of gravity forever.” He foresees an inevitable re-pricing of U.S. risk, and long rates moving significantly higher in the next year or two.

Like Buiter, Barry Sternlicht sees the U.S. living on borrowed time. He is especially concerned that the U.S. is financing long-term obligations – Medicare, Social Security and the like – with short-term borrowings. He describes our monetary policy as “financial suicide”; he says the Fed’s loose money approach makes the “Greenspan housing bubble look like a warm-up act.”

In contrast, Krugman wants the Fed to reboot U.S. growth by raising our inflation target. He thinks higher inflation expectations would convince companies and investors that holding cash is a bad idea. Bernanke has tip-toed into this sphere, broadcasting that rates will stay low through 2013 and into 2014. Krugman says this isn’t enough; he wants Bernanke to raise the inflation target (now at 2 percent) for the next ten years.

Fisher disagrees, and voted against guaranteeing low rates through 2014. A known inflation hawk, he argues that monetary policy alone cannot boost the economy. He likens easy credit to putting fuel in the tank. What counts, he says, is who has their foot on the accelerator.

Fisher notes that the system is awash in liquidity; there is $1.7 trillion in excess bank reserves, more than $2 trillion on corporate balance sheets, and another $2 trillion in non-depository institutions. He argues that this money is not being put to work because of failures in fiscal policy. Businesses, he says, face too much uncertainty over taxes and regulations, making them reluctant to invest. In a panel on job creation, Javier Palomarez, president of the Hispanic Chamber of Commerce ,and Rafael Pastor, head of Vistage International, agreed that the Obama government was hurting, not helping.

Krugman’s frustration is understandable. Many Americans are still without jobs, and income growth is tepid. However, driving the nation full tilt towards the next financial cliff is not the answer. Leadership and pro-business measures such as those adopted in Canada and Germany in recent years – an approach consistently undervalued by the Obama White House – would better help us get back on the speedway.

Fortunately, the Fed is in the hands of a sober driver, who appears immune to right-wing bullying. Let us hope he will resist Krugman’s left-wing bullying as well.

Of all the whoppers President Obama has told the American people,  perhaps none may   unravel faster than this claim: “If you like your health care plan, you can keep your health care plan.” Already – during this election year – Obamacare was set to whack seniors enrolled in Medicare Advantage (MA), belying this preposterous promise.

Lucky for them, the White House realized that campaign season was no time to pull the rug out from under 12 million Americans depending on the popular program, especially for a president desperate for the senior vote. President Obama is on thin ice. His unpopular health care program is under attack from GOP rivals who claim the signature accomplishment distracted from job creation and economic recovery. Its constitutionality is being reviewed by a skeptical Supreme Court and its credibility continues to be hammered by ever-worsening cost figures. This was no time to clobber Medicare beneficiaries.

RELATED: The Plot to Keep Health Care Prices from Consumers  

Unfortunately, the other great claim of the Obamacare debate –  that we could hand out free health care to 31 million uninsured Americans without deepening our budget deficit – would be upheld almost exclusively by cutting Medicare, and cutting $145 billion from Medicare Advantage in particular. This program, which offers private insurance plans, was enacted in 2003 and costs the government more than traditional Medicare. According to the GAO, in 2011 about one quarter of all Medicare beneficiaries were enrolled in Medicare Advantage, which accounted for some 25 percent of all spending. Obamacare mandated significant cuts to MA, to be phased in over 9 years, reducing the attractiveness of the program and pushing beneficiaries into Medicare instead. The government projected that MA enrollment would be cut in half by the moves. So much for getting to keep the program you like.

Confronting a possible political firestorm, the White House cooked up a clever way to push the MA cuts into the future, leaving existing beneficiaries unscathed and blissfully unaware of the potholes ahead. The administration devised a demonstration project that would extend bonus payments to highly rated plans, postponing proposed reductions.

Welcome to the Medicare Advantage Quality Bonus Payment Demonstration – just what the doctor ordered.  The White House enacted this “demonstration” project to purportedly research whether rewarding excellent plans with bonus payments would raise overall quality. But instead of giving out bonuses to only the best performers, it turns out most of the incremental money was funneled to average performing plans, entirely undermining the rationale for the demonstration. 

Unhappily for President Obama, the General Accountability Office has revealed the scheme. In a report to the Senate, the GAO reports that the administration’s efforts to delay dinging MA by enacting the (bogus) “demonstration” program will cost taxpayers $8.35 billion over ten years. More importantly, it would offset “more than one-third of the reductions in MA payments projected to occur.” The study reports that “the largest annual offset will occur in 2012 – 71 percent…” What a shocker – the Band-Aid sticks through election year, and then gets ripped off. In harsh words, the GAO recommends canceling the demo. 

To put into perspective the scale of this sleight-of-hand, the GAO noted that the Bonus Payment Demonstration “dwarfs all other Medicare demonstrations…conducted since 1995 in its estimated budgetary impact…” In fact, the GAO notes, the cost of the demo is “at least seven times larger than that of any other Medicare demonstration conducted since 1995 and is greater than the combined budgetary impact of all those demonstrations.” That’s a pretty big Band-Aid.
 
An incumbent has to run on his accomplishments. Unfortunately for President Obama, that means campaigning on Obamacare. Revelations that the White House is scurrying to cover up the negative repercussions from the massive health care overhaul should alarm voters. What else is in that bill? Nancy Pelosi was wrong when she said, “We have to pass the bill to know what is in it.” We passed it and we still don’t know what’s in it.

Of all the whoppers President Obama has told the American people, perhaps none may   unravel faster than this claim: “If you like your health care plan, you can keep your health care plan.” Already – during this election year – Obamacare was set to whack seniors enrolled in Medicare Advantage (MA), belying this preposterous promise.

Lucky for them, the White House realized that campaign season was no time to pull the rug out from under 12 million Americans depending on the popular program, especially for a president desperate for the senior vote. President Obama is on thin ice. His unpopular health care program is under attack from GOP rivals who claim the signature accomplishment distracted from job creation and economic recovery. Its constitutionality is being reviewed by a skeptical Supreme Court and its credibility continues to be hammered by ever-worsening cost figures. This was no time to clobber Medicare beneficiaries.

RELATED: The Plot to Keep Health Care Prices from Consumers

Unfortunately, the other great claim of the Obamacare debate – that we could hand out free health care to 31 million uninsured Americans without deepening our budget deficit – would be upheld almost exclusively by cutting Medicare, and cutting $145 billion from Medicare Advantage in particular. This program, which offers private insurance plans, was enacted in 2003 and costs the government more than traditional Medicare. According to the GAO, in 2011 about one quarter of all Medicare beneficiaries were enrolled in Medicare Advantage, which accounted for some 25 percent of all spending. Obamacare mandated significant cuts to MA, to be phased in over 9 years, reducing the attractiveness of the program and pushing beneficiaries into Medicare instead. The government projected that MA enrollment would be cut in half by the moves. So much for getting to keep the program you like.

Confronting a possible political firestorm, the White House cooked up a clever way to push the MA cuts into the future, leaving existing beneficiaries unscathed and blissfully unaware of the potholes ahead. The administration devised a demonstration project that would extend bonus payments to highly rated plans, postponing proposed reductions.

Welcome to the Medicare Advantage Quality Bonus Payment Demonstration – just what the doctor ordered. The White House enacted this “demonstration” project to purportedly research whether rewarding excellent plans with bonus payments would raise overall quality. But instead of giving out bonuses to only the best performers, it turns out most of the incremental money was funneled to average performing plans, entirely undermining the rationale for the demonstration.

Unhappily for President Obama, the General Accountability Office has revealed the scheme. In a report to the Senate, the GAO reports that the administration’s efforts to delay dinging MA by enacting the (bogus) “demonstration” program will cost taxpayers $8.35 billion over ten years. More importantly, it would offset “more than one-third of the reductions in MA payments projected to occur.” The study reports that “the largest annual offset will occur in 2012 – 71 percent…” What a shocker – the Band-Aid sticks through election year, and then gets ripped off. In harsh words, the GAO recommends canceling the demo.

To put into perspective the scale of this sleight-of-hand, the GAO noted that the Bonus Payment Demonstration “dwarfs all other Medicare demonstrations…conducted since 1995 in its estimated budgetary impact…” In fact, the GAO notes, the cost of the demo is “at least seven times larger than that of any other Medicare demonstration conducted since 1995 and is greater than the combined budgetary impact of all those demonstrations.” That’s a pretty big Band-Aid.
An incumbent has to run on his accomplishments. Unfortunately for President Obama, that means campaigning on Obamacare. Revelations that the White House is scurrying to cover up the negative repercussions from the massive health care overhaul should alarm voters. What else is in that bill? Nancy Pelosi was wrong when she said, “We have to pass the bill to know what is in it.” We passed it and we still don’t know what’s in it.

 Sir: President Barack Obama has found at least one theme to fuel his re-election effort. The president has been honing this disapointing message for months, crystallizing his fact-limited appeal to an argument with  only a few facets, namely demonization of the financially sucessful in hopes of stoking class envy. In other words, Mr. Obama will mine votes by drilling into one of our basest emotions. This is fragile ice indeed on which to wage a national campaign, one in which independent voters will decide the victor, but a stategy apparently dictated by a tacit undertsanding that his record of substantive achievement is as thin as the re-election strategy is base.

Independents such as me - liberal on many social issues, moderate on fiscal and monetary matters and hard right on defence and national security - are hardly likely to be persuaded by arguments as crass as they are transparent. We do not classify as public enemies people who stay in school, keep their noses to the grindstone while delaying instant gratification, play by the rules in the workplace and reap the financial rewards for doing so. Nor do we support verbal attacks on opposition lawmakers who offer concrete proposals to our problems; honest debate is preferable to name-calling.

A negative campaign by the incumbent is an admission that there is little positive in the first-term record. Informed voters will have no difficulty recognizing the truth.

Paul Bloustein, Cincinnati Ohio

Mr. Bloustein- I could not have said it better. let us hope that independents of your stripe - informed voters - are as clear-sighted as you are! 

What lessons can Scott Walker (and Mitt Romney and President Obama) learn from Chris Christie?  Mainly this: Collaboration is valuable, and it really is important to “reach across the aisle.” There was a reason Obama campaigned on a promise to seek bipartisan accord; it polls well. Unhappily, from his first day in office, the thrill of victory overwhelmed our bumptious president. “We won” replaced “we can.”

In a campaign season where long-time Senator Richard Lugar is being punished for working with Democrats, how can we argue that bipartisanship succeeds? Consider the disparate fates of Governors Chris Christie and Scott Walker. Despite pushing through similar agendas, the former is a rising star while the latter finds his head on the chopping block. While Scott’s misadventures may also reflect bad timing, it is clear that voters resent his “my way or the highway” approach. Facing an election on June 5,  the governor risks being only the third in our history to be recalled.

RELATED: Stimulus Fraud and Weak Jobs Pose Threat to Obama  

Elected governor of New Jersey three years ago, Christie faced a Democratic legislature and had to negotiate with his opponents. In his first State of the State address, Christie went to great lengths to praise his political opponents for their cooperation. Touting a nine percent drop in state spending, a much-improved balanced budget, lower taxes (for the first time in a decade), an improving jobs picture,  reductions in crippling public employee benefits programs and the beginnings of education reform, Christie thanked the legislature: We haven’t always agreed, and we haven’t always gotten what we wanted, but we have achieved compromise, and the people of New Jersey are better off as a result.” New Jerseyians appear to agree.

When Walker became governor in 2010 as part of the resurgent GOP,  he took office with a Republican majority in both houses of Wisconsin’s legislature. As a result, he blasted through both a tight budget and a provocative change in union rules that brought the state to a standstill. 

In a New Yorker piece describing the public outcry over Scott’s reform measures, William Finnegan says pointedly, “Scott Walker did not meet with opponents… .Walker never negotiated, and his budget-repair bill was passed with all its essentials intact.” High-handedness appears to be Walker’s major misstep. He failed to convince his political opponents or explain to Wisconsin voters why his measures made sense. 

“Christie is building a record as a pragmatic centrist, a guy who gets things done by finding common ground with Democrats,” wrote Tom Moran in New Jersey’s Star Ledger. In this hotly partisan age, how does Christie get away with it?

It appears that voters desire more than ideological fealty; they demand action and solutions.   If Christie can team with Democrats to rein in New Jersey property taxes – which had risen 70 percent in the ten years before he took office – bully  for him. If he can collaboratively close a prospective $11 billion budget hole, so much the better.

In fairness, Walker’s misadventures can also be laid to bad timing. Christie took office in November 2009, a year before Walker and before the financial crisis so drastically walloped state and local employees. Though the recession began in 2007, and   supposedly ended in mid-2009, the scope of government budget destruction took some time to emerge. Moreover, stimulus spending helped postpone the day of reckoning.

In 2009, a quarter of a million state and local government workers lost their jobs. The downtrend continued in 2010, alarming union leaders who had seen their fortunes wane in the private sector and had come to look upon ever-expanding public budgets as their most dependable future. The Bureau of Labor Statistics reports that “public-sector workers had a union membership rate (37.0 percent) more than five times higher than that of private-sector workers (6.9 percent).” Local government workers had an even higher rate of union membership, at 43 percent.

Labor leaders may have dismissed Indiana Governor Mitch Daniels’ move to curtail collective bargaining rights on his first day of office in 2005 as a one-off; but inroads by Republicans in the 2010 elections raised red flags. Ohio’s John Kasich,  South Carolina’s Nikki Haley, Florida’s Rick Scott – in response to red ink, newly elected GOP governors targeted public service unions across the land.  

Union leaders needed to take a stand, and they chose Wisconsin.  It was a sound choice. Wisconsin historically had been a union-friendly state, having been the first to draft legislation such as worker’s compensation and unemployment insurance. In 2011, 13.3 percent of Wisconsin’s work force belonged to unions, ranking 18th in the country.  Committing enormous resources to the struggle, union brass protested the assault on public workers’ rights and forced the recall election.  Whether they will succeed remains to be seen.

Whatever the outcome, the message is clear. Political leaders, no matter how solid their majority or convincing their election results,  succeed best when they win over both their opponents and the electorate to their agenda. It’s not easy. President Obama’s first three years is proof enough. He has failed to work with Republicans on major issues such as budget reform or immigration, and has consequently made little progress. He has blamed the GOP for intransigence, but his job is to lead, and that he has not done. As a consequence, Mr. Obama faces his own possible recall this coming November.

Rick Santorum’s exit from the GOP race could not come at a better time. With several important primary battles looming, frontrunner Mitt Romney was struggling to close the door on his rivals, and especially on Santorum. That meant heavy spending, especially in delegate-rich Pennsylvania, where the former senator was a serious competitor. With Santorum gone and Newt Gingrich disappearing faster than a Snow cone on a July afternoon, Romney looks set to emerge an easy victor.

Consequently, donors who had maxed out on Romney’s primary race will soon be free to give again to the former governor’s campaign. Despite incessant hang-wringing from The New York Times on the power of billionaire-funded Super Pacs, the truth is that President Obama has assembled a formidable war chest (partly from Super Pacs), and Romney has to push to catch up.

The website OpenSecrets’ most recent tally puts Obama’s cash on hand at nearly $85 million, while Romney’s bank account stood at $7 million. Already the candidate’s fund-raising team has sent out appeals. Rebuilding his coffers is essential; only then will Romney be set to launch a more focused and sustained effort to beat President Obama.

Certainly, the battle will not be easy. Unseating an incumbent is always difficult, but there are reasons why Republicans should be optimistic. Though most polling has President Obama well in the lead today, his popularity seems to falter when the economic news sours, as is now the case.  After a few months of progress, the recovery seems to be stalling again.
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Small business and consumer optimism is fading, the stock market has hit a speed bump and job growth has wilted. It is the perfect moment for Romney to reassert his advantage. Polling consistently has shown that, in managing the economy, voters favor the former Massachusetts Governor over President Obama. That advantage doesn’t count for much when the economy is humming. When it falters, Romney can assume the driver’s seat.

At the same time, President Obama has chosen to focus his guns recently on raising taxes on the wealthy. Though most Americans think the rich should pay more in taxes, they don’t view this as the most important issue of the day, nor much of a platform for rebooting job growth. Also, many are aware that Obama’s argument that our tax system is regressive – causing high earners to pay less that middle income folks—is bogus.

Those in the top one percent paid 37 percent of federal income taxes in 2009; also, middle class earners pay on average 15 percent of their total income to the federal government while the super-rich (the top one tenth of one percent) pay 26 percent. It is also clear that imposing the so-called Buffett rule would do little to fill our nation’s budget hole, since it is projected to raise no more than $5 billion a year. That is no match for a trillion-dollar deficit.

This is a weak campaign theme. Ordinary Americans are not looking over the hedge and wondering what their neighbors are paying in taxes. They are concerned about whether they will hold their jobs, if the prices of gasoline and food will make it tougher to stay afloat, whether their home will continue to lose value. They are also worried about our nation’s finances, and well aware that President Obama has completely whiffed on righting our badly listing fiscal ship. These are the issues that Romney can talk about.

The Obama administration has eschewed working with the business community to get our economy moving again. Instead, they have relied on stimulus spending and easy money policy. The former led us down the road of ballooning budget deficits, while the latter has been blamed (by Brazil’s Rousseff, among others) for the rising cost of commodities. Should inflation tick up in coming months this charge could become incendiary.

While the White House has championed numerous efforts to reduce mortgage payments, none has been well orchestrated or effective. On the jobs front, President Obama has offered up speeches touting a fanciful new era of “green” investment, which has to date yielded little but skepticism.

Romney has a shot. With Mr. Santorum out of the running, he now has to fine tune his message and attack the weak underbelly of Obamanomics.  He needs to convince Americans that he has a plan, and that the plan might work. He also could position himself as the person who might bring our sadly divided country together; but wait, didn’t we just elect someone to do just that?

The good news is that our budget deficit narrowed last month in spite of growing outlays. Modestly higher income from households and substantial increases in corporate results led to higher taxes. This is of course the formula Republicans have proposed – stimulating higher tax revenues through growth rather than rate increases, and meanwhile reining in outlays. By contrast, President Obama pins his hopes on higher taxes. It is a real divide, and should be at the heart of the upcoming campaign. Instead of gimmicks and gotchas, wouldn’t it be refreshing to have Obama and Romney really discuss policiy- articulate what cuts they would be willing to make in discretionary income, how they might actually change Medicare and Social Security so that future generations can also bank on these programs? Don’t hold your breath.

Our economy has been slow to regain its footing. One of the immoveable obstacles to a speedier bounce back is the high level of consumer debt in the U.S. Nearly every time that Americans go on a spending spree, we suffer a deceleration some months later. The reason? Consumers are still tapped out. Though household debt has been dropping, it is still too high – and certainly too high if income growth fails to accelerate. 

Before the recession, Americans were confident. Our long-term prospects seemed bright. They cashed in on that confidence by taking ever-greater amounts of equity out of their homes, knowing the values would only increase. They got clobbered. The recovery has been tamed by the loss of the one-time spending power supplied through the massive borrowing on home values that was unleashed by the housing boom. 

Today, consumers have not lost their appetite for spending, and occasionally credit card debt jumps – in response to holiday spending or a mild spring that encourages a visit to the department stores. But, they soon repent, flattening growth. It makes sense. 

What does this have to do with the Buffett tax? President Obama has fastened onto the low tax rate paid by some of our wealthiest citizens as a means to pummel the GOP, and especially Mitt Romney, whose 2010 tax rate was only 14%. Obama couches his proposal to raise taxes on people like Buffett and Romney as a matter of fairness. He fails to mention that those folks pay a lower rate because much of their income derives from investments – dividends and interest. The preferential treatment for such income was meant to generate savings and capital accumulation – creating funds available for investment throughout our economy. 

Americans do not save enough. Most are retiring with inadequate funds, especially given our pleasantly extended longevity. Encouraging savings is the right thing to do. Fiscal prudence is not just a matter for the federal government – it is also essential for households to be wary of excess debt, and to save for their future. This was the theme of a recent IMF study cited in the FT editorial. That review concerned the EU – but it is also relevant for the U.S. 

Most sane people see the need for tax reform. Our code is absurdly complex, and many of its loopholes are out of date. Obama’s plan to layer on another gimmicky “fix”, however, is not the answer. I think we should eliminate the so-called “carried interest” loophole that favors hedge fund and private equity types. That we haven’t speaks volumes about the influence these folks have in Washington. Many in the industry privately confess they see no especial rationale for this give-away to some of our wealthiest citizens. Eliminating that break makes sense; stifling savings and investment does not.

The story was updated at 11:30 a.m. Wednesday.

Does Fed Chair Ben Bernanke know what he’s doing? We better hope so. Every tweet and cluck from the Open Market Committee has the power to move markets, as we saw again yesterday. Traders dumped stocks after reading the minutes from the central bank’s March 13 meeting; the report hinted at a slightly better job market and doused hopes for another round of quantitative easing. (And today, stocks opened sharply lower, after investors fully digested the Fed’s latest release.)

No wonder all eyes are on the Fed. With fiscal policy frozen, monetary stimulus is the only game in town. Not only is the Fed rolling the dice that near-zero interest rates will promote growth and not light the inflation fuse, the central bank is playing with ever-bigger chips.
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The recent release of the Fed funds flow data confirmed just how big those chips are. Treasury securities outstanding at the end of 2011 totaled $10.2 trillion, up from $9.2 trillion a year earlier, a rise of a little more than one trillion dollars that helped finance our deficit. Who picked up all those low-interest securities? Foreigners bought a mere $287 billion, while the Fed picked up most of the slack, buying $642 billion as part of its quantitative easing program.

The household sector was a net seller of Treasuries, as were state and local governments and commercial banks. The only other buyers of size were private pension funds ($81 billion), money market mutual funds ($108 billion), which presumably scurried to reduce exposure to the EU crisis and (surprisingly) securities firms ($93 billion).

While upset that our country is racking up trillion-dollar deficits year after year, Americans may be especially alarmed that last year those excesses were not financed by countries like China and Saudi Arabia, as most had thought, but rather by our very own Federal Reserve. It’s a program Bernie Madoff would be proud of.

While the Fed’s easy money policies have been helpful in restoring liquidity and providing some boost to growth, the unprecedented expansion of the Fed’s balance sheet carries a big price tag. Lawrence Goodman, President of the Center for Financial Stability, said in a recent phone conversation, “The Fed’s purchases of Treasury obligations create distortions. Their action pushes interest rates down, penalizing savers and favoring debtors.”

Among other outcomes, Goodman says the Fed’s quantitative easing has increased the volatility of commodities and securities markets and encouraged savers to reach for riskier investments that offer higher yield. This, of course, directly contravenes the Obama administration’s repeated assertions that it would dampen the high-roller nature of financial markets.

The Fed cannot continue to be the buyer of first resort. In a recent presentation in Washington, Goodman argued, “the refunding of U.S. Treasury debt presents an equal challenge to the oft-discussed budget deficits,” raising concerns about a possible disruption to credit markets, and to U.S. growth.

In Goodman’s view, it is “the repayment of principal [that] often triggers a crisis rather than simply the size of the debt or deficit.” He points to the huge spike in U.S. debt maturities due in the coming year, which exceeds 18 percent of GDP – an unprecedented amount of over $2.5 trillion. By comparison, between 1973 and 2007 maturing debt averaged a little under 10 percent.  As Fed Chair Ben Bernanke speaks on the value of near-zero interest rates, he must cross his fingers behind his back knowing that it wouldn’t take much – an unexpected blip in inflation, another rumored debt downgrade, a prolonged battle over tax policy – to set interest rates soaring. There is a limit to how much control the Fed can exert, and surely we are fast approaching that point.

We’ve seen this script before. In May 1994 the Fed began to gradually move rates higher, but the marketplace jumped ahead, sending the ten-year to 7.7 percent at year-end from 5.8 percent, clobbering the bond market.

To date, the Fed has shown no inclination to reverse course. The recent announcement from the Fed’s Open Market Committee suggested that the current environment is “likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.” The brief also reminded us that the Fed has a dual mandate, requiring it to “foster maximum employment and price stability.”

The Fed’s dual (and sometimes contradictory) mandate is visibly at issue today. Bernanke recently spoke at length on “Recent Developments in the Labor Market,” expressing uncertainty about 1) why employment was rising faster than GDP, 2) whether such gains would continue 3) whether perhaps GDP growth has been understated of late 4) whether job losses have been cyclical or structural, 5) whether recent declines in unemployment overstate the improvement in the jobs market 6) whether the gains in 2011 were simply a reversal of outsized-losses in 2009, and 7) what the heck’s coming next.

That speech returns us to our question, does Mr. Bernanke know what he’s doing? Unwittingly, Mr. Bernanke gave us a very good primer in why the Fed should perhaps not be in the position of trying to “control” the economy, and why its guidance in the past has sometimes proved disastrous.

President Obama’s most recent assault on our energy companies was more political playacting by a nervous White House. Speaking just minutes before the Senate defeated S 2204, a bill that would strip five of our largest oil companies of certain tax breaks, the president pitched the vote as yet another “us versus them” moment, of which this administration has authored quite a few.

The choice for the Democrat-led Senate, according to Mr. Obama, was between pandering to the oil giants and helping out ordinary Americans who are struggling to pay $4 a gallon for gasoline. The implication was clear: oil companies are ripping off consumers, making a fortune, and certainly don’t need any extra tax advantages. What wasn’t so clear was how raising taxes on oil companies will relieve the pain at the pump. Hint: it won’t.

President Obama has been hop-scotching around the country trying to convince Americans that his energy policies make sense. Polling indicates that voters are skeptical. They see dollars wasted on failed “new tech’ ventures like Solyndra and the Chevy Volt. 

They see electricity prices soaring in states requiring ever-greater consumption of alternative fuels. They see resources sidelined because of the decision to block the Keystone pipeline.  They see the president ignoring a sea change in our fossil fuel future, and they see a stop-start approach to long-term investing in nuclear power and offshore oil. Mainly, they see $4 per gallon gasoline.

They also see nothing especially helpful in taking away $2 billion in annual tax breaks from our five largest oil companies and sprinkling those dollars around more questionable “green projects.” The president pitched his argument in terms of the massive $80 billion in profits raked in by our three largest oil firms last year; the numbers are indeed impressive. But even the fellow shining shoes for a living understands that profits in the abstract don’t mean much.

Profits relate to revenues, and taxes relate to profits. According to American Petroleum Institute, the oil industry “pays more in taxes than any other industry.” More to the point, they also report that oil companies’ effective tax rate is considerably higher than the average of the other S&P Industrials – “41 percent versus 26 percent.” 

President Obama argued for the elimination of taxpayer “subsidies” doled out to oil and gas producers, but the tax items in S 2204 are not subsidies. They are deductions similar to those granted all manufacturers in the United States. The bill would eliminate the foreign tax credit, the tax deduction for income attributable to oil, natural gas or related products, the deduction of intangible drilling and development costs, the percentage depletion allowance for oil and gas wells and the deduction for qualified tertiary injectant expenses.

These deductions cover costs incurred in searching for and producing oil and gas. They are akin to cost-recovery tax breaks given to other industries. For instance, the depletion allowance is analogous to the depreciation deduction taken by manufacturers on plant and equipment investment. The foreign tax credit allows all companies and individuals to avoid double taxation on income earned overseas. These tax deductions are not huge lollipops distributed to spoiled oil producers; they are, instead, used to calibrate actual profits.

Obama is correct in asserting that the five largest oil companies are doing well. In fact, adding $2 billion annually to their tax bill is not a crushing blow. Our political leaders need to make far more sweeping changes to our tax policies – changes which would simplify our baroque revenue structures and eliminate many of the schemes that exist only to funnel money into one pet cause or another. For some industries (ethanol producers come to mind) a tax overhaul would mean higher taxes.

However, this proposal does not fall under the heading of either meaningful tax reform or serious energy policy. There is no real justification for penalizing our largest companies. If these tax breaks do not serve any purpose, why should they exist for the rest of the industry? Also, if we as a nation would like to see more money invested in energy production, why would we raise taxes on the very entities engaged in that pursuit? It makes no sense.

Consider what S 2204 would do with the money wrested from Big Oil – proposals that didn’t figure prominently in Mr. Obama’s Rose Garden address. For starters, the act would have extended tax credits for energy efficiency – in appliances, for instance. (One has to wonder, shouldn’t more energy-efficient irons or hair dryers be able to compete on their own merits at this point?)

The law would also continue tax credits for investment in alternative fuel refueling, for biodiesel (such as cooking oil) used as fuel, cellulosic biofuels (like wood chips), wind energy, refined coal production and an increased credit for Indian coal facilities, and grants made through the Stimulus Act under the general heading of renewable energy resources. Oh—and there’s a credit for expensing mine safety equipment. Talk about a grab-bag of political favoritism!

President Obama is not the only Oval Office occupant who has whiffed on energy policy, he is simply the most recent. His is a more dangerous path, however. With the United States standing on the threshold of great new oil and gas generation, promising significant attendant jobs and wealth creation, Obama is, to use his own term, “doubling down” on algae and switchgrass. Is it just coincidence that he chose to use a gambling term? Or could it be, with one third of the $8.3 billion in clean-energy loans made by Obama’s Energy Department on an internal “watch list” that he needs plenty of cash in reserve for future bail-outs?