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Business Observer Thursday, Nov. 12, 2009 12 years ago

Election time: Crist changes his tune; don't buy the pitch

Don't buy it. Please don't buy it.

Don't buy it. Please don't buy it.

Florida Gov. Charlie Crist is advertising on the radio that he's a real conservative.

It's false advertising.

With a much more-principled conservative Marco Rubio gaining more and more traction in the Republican Party's U.S. Senate race in Florida, Crist apparently has decided it's time to swing into election mode, and that means he must portray himself as a principled fiscal conservative.

Whatever it takes.

In two radio ads you may have heard, Crist says such things as:

“Enough is enough. That's my message to President Obama ... ”

“Less taxes, less spending, more freedom. That's my commitment to you every day I go to work ...”

Or ...

“Washington is out of control. Yet the president has the same tired answer for every problem: to spend more of your money.

“I'm Charlie Crist. I'm running for the U.S. Senate because Washington needs a dose of Florida common sense ... Here in Florida, I've slashed government by 10%. That's $7 billion. And we passed the biggest tax cuts in Florida history ...

“Last fall, the conservative Cato Institute graded all 50 governors with a fiscal report card. I'm proud to say I was ranked No. 1 in America ...

“We can't spend our way into prosperity and tax our way into growth. Let's cut the size of federal government and return your family's money so you can decide how best to spend it.”

If only he really believed this.

Those statements are from the governor who hugged the biggest-spending president of all time in a Fort Myers appearance when the president and Congress were in the process of adopting its $700 billion bailout packages. (Funny how Crist dissed President Obama's recent visit to Arcadia.)

Those statements were from the governor who, despite what he says now, stood before Florida reporters last winter and said he told liberal extraordinaire U.S. Rep. Debbie Wasserman Schultz, D-Broward-Dade, that he would support her and her Democratic colleagues on the stimulus plan because, and we quote:

“There's a crisis.”

Those statements are from the governor who proposed borrowing $1 billion so the state could buy 180,000 acres from U.S. Sugar Corp. in the midst of a recession.

Those statements are from the governor who supports a national catastrophe insurance fund. Never mind the national flood insurance program has been a fiscal disaster and that the governor's insurance policies are driving the biggest and most financially sound insurers out of the state. Oh, and should we mention how Crist has been the biggest promoter of the state owning the largest insurance company in Florida and that he has endorsed exposing Floridians to $20 billion in taxes when the big hurricane hits?

And what's this: While he supports national catastrophe insurance and the state-owned insurance company, he's now opposing nationalized health care?

Surprise, surprise.

There's more. This is the governor, who in his inaugural address to the Legislature in 2007, said (without one fact to back it up): “I am persuaded that global climate change is one of the most important issues that we will face this century.” And then he proceeded to propose spending almost $70 million of taxpayer money on subsidies “to foster the development and use of alternative energy sources.”

That, by the way, was from the same address where, in a span of less than 15 minutes, Crist proposed new state spending programs totaling $691 million.

When, the political watchdog arm of the St. Petersburg Times, applied its Truth-o-Meter to Crist's radio claim — that “Here in Florida, I've slashed government by 10%. That's $7 billion” — said:

“Crist has defended the budget-cut claim by saying that in other states, taxes were increased to cover shortfalls. While Crist didn't push for tax increases to make up the entire shortfall, he did approve fee and tax increases this year — on everything from fishing licenses to initial vehicle registrations to cigarettes — that total $2.2 billion.

“So while it is true that state government has shrunk by 10% since Crist's election, it had little to do with him and a lot to do with the shrinking economy. For those reasons, we give Crist's statement a Barely True.”

And about that No. 1 ranking from the Cato Institute. Cato said Crist has been the most fiscally conservative of all 50 governors. Let's put that in context.

Cato credits Crist for property tax cuts, including Amendment 1, the doubling of the state's homestead property-tax exemption to $50,000 and the rolling back of local property-tax rates.

Yes, Crist endorsed the tax cuts. But truth is, Florida voters approved the Amendment 1 tax cut, and the Legislature initiated the rollback.

Surely Floridians know by now that Crist is not really a principled fiscal conservative. He says and does whatever he must to get elected. Don't buy it.

We hate to douse your optimism, but even though we all may be feeling more confident going into 2010 and even though the official word is the recovery has begun and the recession is over, if you're a realist, you know there's no way 2010 can produce a full-scale economic recovery in Florida or the United States.

Be prepared to continue to operate your business in recession mode — continue to hold tight on expenses, watch your cash flow.

“We're in for some rather rough going,” says Kevin Hennesey, a hedge fund manager for West Palm Beach-based Alpha Income Management Fund.

Hennesey was among a quartet of speakers this week at a luncheon sponsored by Habif, Arogeti & Wynne, LLP, an Atlanta-based accounting and financial services firm that recently opened an office in Sarasota.

While others addressed estate planning and investment strategy, Hennesey talked about the prospects for the U.S. economy.

His assessment: “We're going to need a Jimmy Carter president.”

Don't choke. Here's what he means: “We need a president to hire a Paul Volcker. We're going to need the political will of a guy like that.” Someone who will raise interest rates and tame inflation, in spite of the economic pain it will inflict.

Hennesey's right. There's no other way out.

Here's what we're facing: The national debt continues to rise (currently $11.9 trillion), and Congress and the Obama administration show no signs of slowing their deficit spending ($1.8 trillion and growing). To fund and service this debt, the Federal Reserve must continue to print money and sell bonds to the Chinese, continuing the debt spiral. This is inflation, causing the value of your dollars to have less and less purchasing power. What's more, at some point, Congress will have to raise taxes. It's inevitable. And that's exactly what Obama and Congress want to do.

Interest rates have to go up. At the moment, however, Federal Reserve Chairman Ben Bernanke and Treasury Secretary Tim Geitner are holding off as long as they can. They want at least two quarters of solid recovery data.

While most of us are trying to get through day by day, Charles Krusen, president of Krusen Capital Management in New York and another of the speakers at the HA&W luncheon, echoed Henessey as he looked ahead. He sees inflation-induced prices gaining momentum, rising at an annual rate of 8% to 10% by 2013.

“Higher taxes, higher interest rates and a lower standard of living,” Krusen predicts.

Sorry for the downer. But better to be prepared.

Paul Volcker II where are you? MW

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