President Obama has been in office for less than two months and already many with applause-weary hands are scratching their heads. “Change” is what the then-Senator Obama promised. Changing of the guards over the checkbook is the only change we can see. With an economy already in sacrificial posture, the country now finds itself confronted with numerous obstacles of costly change ranging from energy policies – to healthcare - to higher taxes. As many commentators have pointed out, the administrations’ proposed $3.6 trillion budget is saturated with an estimated 9,000 pork barrel projects that are disguised as job producers. The Wall Street Journal points out “The budget more than doubles the national debt held by the public, adding more to the debt than all previous presidents – from George Washington to George W. Bush – combined.”

Experience has shown that governing by way of subsidies and mandates is a losing proposition due to its enticement for capital to chase the “flavor-of-the-day” government handout and dissuade the free market economy from working efficiently. Government handouts are not the answer to long-term prosperity. The private sector must be allowed to carry the day, but it is increasingly difficult when operating within the reins of obstructive government interventionism. In our opinion, President Obama is offering the country a faster way to the poor house and is quickly ushering in a social welfare state.

Bubble-wrapped bureaucrats, intent on treating the symptoms of a problem and not its cause, appear clueless and detached from Main Street as they embark on ever-higher spending. The political puppets in Washington are apparently still huddled around their Keynesian cliff-notes. The government’s answer to everything has been to inflate. Since its inception, in December 1913, the Federal Reserve has wrought the near destruction of the U.S. dollar through loose monetary policy. Since 1913, the U.S. dollar has lost more than 95% of its purchasing power. It is becoming readily apparent that the U.S. has no intention of ever paying back the mounting debt. It is becoming simply too big. The administration may hope to inflate its way out of our financial situation, but in turn it may be unwittingly chiseling away at capitalism. Many in Washington appear to be unaware that taxation and confiscation places an unmanageable burden on the private sector. It may be wise at this time for those in Washington to reread the economic wisdoms of Adam Smith. Inflation encourages speculation and mal-investment and discourages savings and investment by depreciating the purchasing power of current dollars.

From where we stand, we see the only changes are Mr. Obama’s plans for a further redistribution of wealth and power from private to public. In the meantime, it is spend, spend, spend, and hope, hope, hope. After all, we own the printing press and our self-serving bureaucrats in Washington show no tendency to seeing it idle. The silver lining in all this spending may be that we avoid another depression and instead, as Japan did, muddle through years of stagflation.

With the steady headwinds of uncertainty now facing Main Street as well as Wall Street, prudence is more important than ever. Companies are in containment mode and focusing on improving the health of their balance sheets. Opportunities to expand market share lay ahead for those companies with sufficient cash flow and manageable debt. The search for flush corporate balance sheets has never been more prudent.