Fund of Funds = Den of Thieves

2/22/2009: Up and Down the Street

As we've remarked from time to time, when some well-meaning high official (who typically gets his high from an intoxicating sense of self-importance) proudly announced a big new measure to rescue the financial system or the economy as a whole from the morass they had sunk into, the principal effect has been to thicken the gloom enveloping the citizenry, reflected in the dismal reaction of the stock market.

When in December of 2007, the first measure to help troubled banks was unveiled -- the Term Auction Facility, or TAF, for short -- the Dow stood a bit shy of 13,500. Since then, we've had the proverbial steady stream of supposed remedies flowing out of Washington, each and every one designed to get the banks, other ailing sectors and the economy out of intensive care, so far, alas, without resounding success. That effort continues, and now encompasses two administrations; the Dow is around 7,300, or roughly 45% lower than when the TAF began.

With the much-heralded stimulus package signed into law, maybe it's time to try a different tack, like holding the hoopla and hurrahs until there's some slight evidence of progress. At the very least, it'd be a welcome -- to use one of President Barack Obama's cherished words -- change, and by not kiting expectations and courting the inevitable disappointment, it might even help.

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2/20/2009: In the bubble era people spent too much money they didn't have on too many things they really didn't need. Then came the credit crunch. Now, they hallucinate that if they spend even more money they don't have, on things they hardly even want, they will get what they really need - jobs, growth and inflation. Even respected economists say they believe in miracles. Resources have been made "idle" by the depression, they claim, like strong backs in an unemployment line. Government spending is just putting them to work. By this reasoning, things that were too expensive even in the boom years miraculously become cheap at any price. And things that weren't worth spending money on in the fat years become miraculously indispensable in the lean ones. It is like a man who didn't care for caviar when he had a good job; now that he is unemployed, he must have it every night. They are only taking up 'idle resources' that would otherwise go to waste, explain the miracle workers. In their minds, an umbrella is useless unless it is actually raining. -- Bill Bonner from the Daily Reckoning www.DailyReckoning.com

2/18/2009: State Tax Increases Hammer the Poor by Richard Rider

“It’s only pennies per day.” Such is the mantra for all tax raising efforts. But is the current batch of state tax increases in the proposed Democrat/Arnold budget really just chump change? And how are the lower income folks going to be affected? You decide.

Go to the Sacramento Bee's online state tax increase calculator: http://tinyurl.com/av457j

The Howard Jarvis Taxpayers Association thinks the sales tax estimate formula is a little low, but confirms that the rest of the calculations closely align with the Jarvis analysis.

On that calculator webpage, you can make sample inputs, and it lists out the extra taxes you'll pay. Most people will enter their own situation, but won’t try other “what if” scenarios. It’s worth experimenting.

The interesting part is to see how well the Democrats are taking care of their lower income core constituency. Think the cumulative tax increase is pennies per day? Guess again.

Try this example of a struggling young working family: $35,000 total salary, $15,000 worth of cars, use 30 gallons of gas a week and have two kids at home. This is a family living paycheck-to-paycheck, getting by as best they can.

Total tax increase? A crushing $831 a year. That's well over a week's gross wages of $673.

Now consider this example: A couple with a combined $100,000 salary, $35,000 worth of cars, use 30 gallons a week and no kids. Total tax increase? $820.

As it turns out, the Democrats have put together one of the most regressive tax packages we’ve seen in California. While there is some case to be made that people with school age children should pay more, that’s not what the Democrats profess. Indeed, the slogan of the Big Spenders is “It’s for the children.”

Bottom line: The top priority of the Democrat Party is the government labor unions -- NOT the poor, the working class, young families, and certainly not the kids. The state budget package includes no significant cuts in public employee salaries or benefits, while the poor and the working class will get hammered.

Boy, there are going to be a lot of surprised and enraged Democrats when they find how they got snookered in this package. Or not. Most will never figure it out.

I guess that, from the Democrat Party’s standpoint, California’s public education system works! For such proponents of tax increases, an undereducated electorate is a gullible electorate.

Sadly, the mainstream media has been equally gullible. To our knowledge, not one California daily newspaper has presented the grossly regressive nature of these tax increases (surely some paper did, but we can’t find it with Google). Perhaps this press release will change that media omission.

2/17/2009; The Madoff Bill by Dennis Prager

Almost everything about 'stimulus' legislation is dishonest

I write this column without any illusion that it will reverse America's current movement toward socialism. Rather I am writing it primarily so that future generations will not be able to say that the radical and destructive nature of the Obama/Democratic Party's so-called stimulus plan was unknown at the time. I am writing this so that my children will know that their father vigorously opposed it and why.

How radical – in fact, revolutionary – is the $789 billion stimulus plan? It is, in the words of House Appropriations Committee Chairman David Obey, D-Wis., "the largest change in domestic policy since the 1930s."

It is, as Robert Rector, identified by the Times of London as "one of the architects of Clinton's 1996 reform bill," "a welfare spendathon that would amount to the largest one-year increase in government handouts in American history."

It is the reason the Obama-supporting Newsweek headlined on its cover page, "We are all socialists now."

It is why, in the words of the Times of London, "Republicans are not alone in fearing that Obama's hastily concocted package is the first step towards the creation of a quasi-socialist welfare state."

President Obama and the Democrats have put America into nearly $1 trillion dollars more debt by using the cover of America's current economic crisis to spend hundreds of billions of dollars on welfare programs, green projects, and on schools.

In a nutshell, the stimulus plan is not a stimulus plan. It is the largest spending program in U.S. history. In the words of the Austin (Texas) American-Statesman editorial that supports the bill, "The essence of the bill is to spend money. …"

Almost everything about it is dishonest.

Its name is dishonest. It is a spending bill, not a stimulus bill.

Its announced aim is dishonest. It purports to stimulate the economy. But its real aim is to push America toward becoming a Western European socialist welfare state.

The way it was enacted – the speed, the lack of transparency – was dishonest. As the Wall Street Journal wrote, "Democrats rushed the bill to the floor before Members could even read it, much less have time to broadcast the details so the public could offer its verdict."

Even the spending is dishonest. The bulk of the spending will take place over years, not now, which is the whole point of a stimulus.

For these reasons, the bill could be renamed the Madoff Bill. Not because there are any parallels between characters of its authors and the character of Bernard Madoff. There aren't. But there are parallels between the methods. Madoff took people's money, promised to give them benefits, while in fact squandering their money – to the tune of tens of billions of dollars. So, too, the president and the Democrats are taking Americans' money, squandering most of it – to the tune of hundreds of billions of dollars, while promising to give them a benefit, a stimulus, when in fact they are spending the money. As Harvard economist Robert Barro told the Atlantic, "It's wasting a tremendous amount of money … I don't think it will expand the economy. … I think it's garbage."

Even its defenders, now that the bill is passed, do not defend it as a stimulus bill. Typical was New York Times columnist Frank Rich, who devoted his essay to the stimulus plan but only attacked Republicans. He did not devote one of his 1,500 words to defending the bill as a stimulus package.

Even Speaker of the House Nancy Pelosi, D-Calif., described the bill with words having nothing to do with stimulus: "By investing in new jobs, in science and innovation, in energy, in education ... we are investing in the American people, which is the best guarantee of the success of our nation."

No one should be surprised. Americans voted for a man who said time and time again that he wanted to "transform" America. He and his party are trying to do precisely that.

2/17/2009: The Great Obama Lie: “Where's the Shared Sacrifice?” By Wayne Allyn Root, 2008 Libertarian Vice Presidential candidate

Obama and his Democratic cohorts incessantly lecture the American people about “shared sacrifice” in these times of economic crisis. Obama just last week set limits on executive pay at companies that have taken government loans. The Democratic Congress (led by Senator Chris Dodd) then one-upped Obama by setting strict limits on executive bonuses as well. The Democratic cabal of Obama/Reid/Pelosi describe raising taxes on the wealthy as “fair” on news programs virtually every hour of every day. Every mention out of the mouths of liberal Democratic politicians is about the sacrifice that should be made by CEO's, executives, and high-income taxpayers. I agree- everyone should sacrifice. But shouldn't “everyone” include government and Obama's supporters too?

I will agree with President Obama on one topic. I agree that executives from companies that take taxpayer money must play by a new set of rules. Once you accept money from the government, strings are attached. Uncle Sam is calling the shots. And government has a right and responsibility to protect taxpayers (from excessive compensation). CEO's and other executives of private companies have every right- with Board of Directors and shareholder approval- to take any compensation packages and golden parachutes they deem acceptable. But they don't have a right to award obscene compensation packages when they are living off loans from taxpayers. I do not feel sorry for these CEO's or executives- they brought this all upon themselves. The lesson for corporations is simple: NEVER again accept money from government.

But the real question is why should CEO's and high-income taxpayers be the only ones asked to sacrifice? If we are in a once-in-a-lifetime crisis, doesn't everyone have to sacrifice- even Obama's voters and contributors? When Obama gives “tax cuts” to the 40% of Americans who don't pay taxes in the first place, exactly how are they sacrificing? When Obama talks about sacrifice, how come he never mentions rank and file autoworkers? You mean blue-collar union members who get paid $160,000 per year in salary, pension and health benefits to drill rivets into fenders, shouldn't be asked to sacrifice? You mean their obscene compensation packages aren't part of the problem? If you do the math, it isn't the CEO making $5 million per year that is bankrupting auto companies. It is bloated union contracts awarding hundreds of thousands of autoworkers the obscene amount of $160,000 each that is bankrupting the “Big 3” automakers. Why isn't Obama asking the auto unions to sacrifice? Could it be because they bribed him (legally) with multi-million dollar contributions and millions of man-hours campaigning for him (manning phone banks, going door to door, licking envelopes, etc)? Could this whole idea of sacrifice be a cynical political ploy?

If it isn't all about politics, how do you explain that Obama has not asked teachers to sacrifice a thing? Or college professors. Or federal government employees. Or state and local government employees. Or union members. As the old lady in the Burger King commercials might have said, “Obama, where's the shared sacrifice?” Because I don't see any sacrifice coming from Obama's side of the table. While 50 states are in recession, guess whose economy is still booming? The District of Columbia. The hiring and spending of government goes on unabated during this unprecedented economic crisis. So where's the sacrifice in D.C?

I certainly don't see the sacrifice coming from Senators and Congresspersons. Have they agreed to cut their salaries until this economic crisis is over? Last I checked, many of Obama's cabinet appointees have admitted they don't even pay their fair share of taxes. His Treasury Secretary Tim Geithner- tax cheat. His Health & Human Services appointee Tom Daschle- tax cheat. Nancy Killefer, his choice for Chief Performance Officer- tax cheat. His Labor Secretary Hilda Solis- her husband appears to be a tax cheat. Don't forget the Democratic Congressman in charge of tax policy Charles Rangel- tax cheat. It's pretty easy to spread the wealth around, when you don't pay any taxes yourself. It's pretty easy to point fingers and rail about sacrifice, when you don't think those same rules apply to you.

When Obama uses the economic stimulus money to hire 600,000 new federal employees, where's the sacrifice for those 600,000 new Democratic voters? When Obama hires 100,000 new teachers, where's the sacrifice for those 100,000 new Democratic voters? Not only are none of those people being asked to sacrifice today, they are now set to receive government salaries, cost of living increases, obscene pensions, and health care benefits for LIFE. We (the taxpayers) are on the hook for these new government employees for the next 50 or more years- no matter how bad the economy is. And unlike the private sector, they have a guaranteed job for life; generous paid holidays throughout the year; and the right to retire at age 45 or 50 (with almost full pay for LIFE). Where's the sacrifice of this privileged government class?

As 600,000 Americans per month lose their jobs in the private sector, why isn't government laying off hundreds of thousands of employees? Why are state and local employees in my home state of Nevada facing no layoffs and getting their annual pay RAISES, while small businesspersons like me are laying off workers; taking huge pay cuts; putting our own personal money into our business in a desperate attempt to survive; or going out of business. Where's the “shared sacrifice?”

Why should Obama ask business owners to sacrifice so that government employees can get pay raises in the worst economy of our lifetimes? Why should businesses sacrifice and lay off employees, while government continues hiring like everything is fine? Why are government union employees getting awarded with privileges that no one in the private sector could hope for? No one I know in business gets guaranteed jobs for life; or guaranteed cost of living and “step up” pay increases; or bloated pensions of almost their full last year's salary; or gets to retire at age 45 or 50 after only 20 years of work; or gets health care paid for by taxpayers for LIFE. I know no one getting any of those things in the private sector. I have no pension of any kind. Who created this privileged class? Why don't government employees have to sacrifice like the rest of us?

I have no trouble with Obama asking me to pay higher taxes, or asking CEO's to limit their pay, as long as he agrees to massive layoffs and pay cuts for government employees. As long as he agrees to cut government spending dramatically, as opposed to increasing it while I'm busy cutting spending and sacrificing. As long as he demands that auto unions re-structure union contracts agreed to in more prosperous times, that now threaten to bankrupt their employers. If Obama is going to ask for sacrifice, then we all have to be rowing in the same boat, in the same direction. But some of us cannot be benefiting, while others sacrifice.

From my side of the street- as the taxpayer that is being asked to pay for all this government theft and waste, I just don't see any “fairness” in President Obama's message of sacrifice. I see a cynical political ploy to punish private sector taxpayers who traditionally don't vote Democrat; and reward those who live off government jobs and handouts- and who just happen to vote Democrat. I see a cynical political ploy to rob Peter to pay Paul- so that the private sector that supports conservative candidates and causes is weakened… and Obama's Democratic supporters are flush with cash to contribute to future Democratic campaigns.

When Obama blames CEO's of failed banks and Wall Street companies and wants to hold them responsible, I agree. But who holds failed government employees responsible? Government agencies waste and spend and lose billions- just like Wall Street did in the Fall of 2007. Isn't the U.S. Postal Service failing? Isn't it losing billions of dollars per year? Isn't the public school system failing badly? Is Obama holding those government employees responsible or accountable? The big difference is that government has been losing money every year since inception, while Wall Street and banks just had one bad year. The other difference of course is that no matter how much money government loses, they just ask taxpayers for more. Obama asking the CEO's of private industry to be responsible and accountable is the very definition of audacity.

This Obama economic stimulus bill has nothing remotely to do with “shared sacrifice.” It's a massive vote-buying-scheme. It's about expanding the size of government and the privileged government employee class. It's about expanding the size of the Democratic Party. It's about making more people dependent on welfare and government handouts. It's about forcing one group- the people who didn't vote for Obama- to do all the sacrificing. I don't mind sacrificing. To the contrary, I'll do anything to save this great country. We are facing a once-in-a-lifetime economic tsunami that demands sacrifice from everyone. But with all due respect Mr. President, “everyone” includes government, government employees, Washington D.C. bureaucrats, politicians on both sides of the aisle, and your supporters. So next time you lecture us on “shared sacrifice,” try to share some of it.

Wayne Allyn Root was the 2008 Libertarian Vice Presidential candidate. His new book will be released by John Wiley & Sons this Spring entitled, “The Conscience of a Libertarian: Empowering the Citizen Revolution with God, Guns, Gambling & Tax Cuts.” The book is available for pre-sale at Amazon.com. Wayne also happens to be Barack Obama's college classmate (Columbia University Class of '83). For more of Wayne's views, commentaries, or to watch his many media interviews, please visit his web site at: www.ROOTforAmerica.com

2/16/2009: AN EDIFICE OF PURE ECONOMIC CRAPOLA by The Mogambo Guru

Benn Steil, who is on the Council of Foreign Relations and an editor of an economics journal, is writing in the Financial Times , see, and his essay has the catchy headline “Keynes and the Triumph of Hope over Economics”, which is so terrifically profound and funny at the same time that I laughed out loud, which was unfortunate, as I had just taken a big bite of a yummy chilidog and it sprayed all over the place as a result of my mighty guffaw.

This messy kind of accident has happened to me before, and which is why I now cleverly use somebody else’s desk and computer whenever I eat something while “working” or downloading porn on the computer.

Anyway, I instantly liked the guy! He seems to be, like I always am, bewailing the fact that we economists are getting a really bad rap because of all the idiots in the world who also call themselves “economists”, with the important distinction between us and them that that they have taken over the schools, the governments and the media to spread their stinking, lunatic, neo-Keynesian econometric bastard offspring “theory of economics”, full of one ridiculous assumption after another, upon which they built an enormous, glittering edifice of Pure Economic Crapola (PEC).

Like what? Well, like “the consumption function” which is at the root of the whole theory, which is that when you get a dollar of income, you spend some and you save some.

I know what you are thinking; you are thinking, “These guys get paid for knowing THAT? Hahaha!”

Well, there is more, as the mysterious, necromantic arts of economics comes in to determine, as a constant – with an astonishing precision out to three decimal places! – exactly HOW much you spend and how much you save of each dollar! Hahaha!

And then they say, “That’s not complicated enough! Let’s adjust it for, ummm, the ‘wealth effect’, which is the phenomenon that when you make a lot of money or you have a lot of money, you spend a little more and save a little less!”

If it stopped there, it would be mildly interesting and make for good fodder for a barroom argument with other drunken sots, but these moronic Modern Economist Establishment weenies thought that they had finally found a computer program, full of equations and countless variables, that could reliably guide monetary policy to maintain the value of the dollar and prevent the business cycle while creating excess money and credit to maintain a boom of governmental deficit-spending and rampant indebtedness! Hahahaha! Morons!

And yet, trust me when I tell you that it will get you nowhere to stand outside the Federal Reserve Building in Washington, D.C. and helpfully yell out, “Hey! In case you ain’t heard, you Fed guys and all your stupid incestuous friends are morons if you think that your stupid econometric equations can possibly, possibly, possibly work, which can be easily proved if you just get up off of your fat, worthless butts and look at the ruinous, Depression-like conditions you produced! The purchasing power of the dollar is now crapola, while the top two industries in America are government spending and trading financial securities back and forth between ourselves!”

If you have any time left before the security guards arrive and make you go away, try telling them, “Now the sheer suffocating size and expense of the federal, state and local governments in America are truly gargantuan, thanks to your stupid incompetence and sheer stupidity in actually believing such a ridiculous theory of benign consequences from such enormous expansion of money and credit!!!”

The three exclamation points are an indication that your voice should be at maximum volume at this point for optimal impact, as I can hear police sirens approaching.

Mr. Steil is not amused at our antics, and continues, “on the other hand, we call for trillion dollar stimulus plan on the basis of little more than citing John Maynard Keynes” which “gives us special license to talk economics without knowing any.” Hahaha! Exactly right! Well put!

And like the guy who wears a T-shirt that proudly proclaims “I am not a gynecologist, but I’ll take a look” the results of having economic poseurs and idiots at the Federal Reserve inflict their idiotic econometric theories upon us have been Disastrously and Ruinously Bad (DARB).

Which brings up, as you knew it would, a Powerful Mogambo Suggestion (PMS) to buy gold, silver and oil to protect yourself from insane monetary policies of the Federal Reserve and the insane fiscal policies of Congress, and maybe make a pile of devalued dollars in the process, too!

Whee! This investing stuff is easy!

Until next time,

The Mogambo Guru for The Daily Reckoning

Editor’s Note: Richard Daughty is general partner and COO for Smith Consultant Group, serving the financial and medical communities, and the editor of The Mogambo Guru economic newsletter – an avocational exercise to heap disrespect on those who desperately deserve it.

The Mogambo Guru is quoted frequently in Barron’s, The Daily Reckoning and other fine publications. Click here to visit the Mogambo Archive Page.

2/13/2009: The Greatest Economic Stimulus Plan Ever! By Wayne Allen Root

Part I

Now that Barack Obama is in the Oval Office, it would seem like an ideal time to talk about the greatest challenge facing his new administration - the triple whammy of economic meltdown, credit crisis, and a crisis of consumer confidence. All of them have combined to create the "Perfect Storm" - what appears, to a small businessman like me, to be The Great Depression, Part II.

Obama believes that the way to get out of an economic toxic disaster caused by too much government spending and debt is to spend more and go further into debt. Interesting logic.

I, on the other hand, have an economic stimulus plan that is unlike any ever offered before. Instead of raising taxes on the successful Americans who create virtually all of the jobs, I want to give taxpayers a one-year "Income Tax Vacation." Yes, I want to suspend income taxes for 2009 and tell the IRS to take the year off. I can hear the liberal tax and spenders screaming right now.

But before I get into the details of my stimulus plan, let me explain where the liberal tax and spenders have gone wrong in their thinking.

Liberal tax and spenders complain that we cannot possibly allow the Bush tax cuts to become permanent. Why? Because the federal government cannot afford it. The cost? About $400 billion per year. Until recently, that sounded like a lot of money. But now we all realize that $400 billion is chump change.

How is it possible that we could afford to spend $80 billion on a bailout for one company (AIG), almost $50 billion (and counting) on a bailout for the failed Big Three automakers, $7 trillion in total bailouts - but $400 billion in tax cuts is unaffordable?

How is it possible that our new president could give away almost one trillion dollars in an economic stimulus package without hesitation, but $400 billion in tax cuts for millions of hardworking Americans is unimaginable?

When Obama campaigned for president, his position was that extending Bush's tax cuts would be unaffordable and irresponsible. Yet, it turns out that when Obama wants to spend a cool trillion dollars on his pet project, it's available, reasonable, and necessary.

They say that a tax cut is a "giveaway to the rich," and that it's "unfair" and "greedy."

Really? How can it be a giveaway when it's our money in the first place? The real giveaway is Obama offering a "tax cut" to the 40 percent of Americans who paid no taxes last year. The real giveaway is the millions of people (virtually all Obama supporters) who are on welfare, Medicaid, food stamps, aid to families with dependent children, housing assistance, free school breakfasts and lunches ... the list goes on and on.

And as for the "G word" - you mean it's greedy to want to keep more of your own money, but it's not greedy to ask government to give you someone else's money?

Obama calls tax-cut "spending," claiming that tax cuts add to the budget deficit.

Wrong! Letting people keep more of their own money does not increase government spending. It isn't the government's money in the first place. It belongs to the taxpayers, so it shouldn't even be in the budget.

If someone steals your car, then has a change of heart and gives back your four tires, would that be a "giveaway"? Would you thank them for being so generous and "fair"? Would you say they increased the spending in their personal budget by giving you the four tires that they just stole from you? I think not.

When President Obama spends a trillion dollars on building infrastructure-or when he spends a trillion dollars giving away money to people who don't pay taxes-the liberal tax and spenders don't consider that to be "government spending." Why not? Doesn't it add to the budget deficit? But letting taxpayers like you and me keep more of our own money - which isn't spending at all - that is blamed for busting the budget?

Now, into this miasma of misguided thinking enters Barack Obama with his first big act as president - an almost trillion-dollar stimulus plan (which I predict he'll expand dramatically after only a few months in office).

He wants to build infrastructure with a large portion of it - highways, bridges, and schools. With the rest, he will send government checks to millions of Americans who've never paid taxes, and millions more (including government workers) who have steady jobs.

So why give them a check? The people who need the money are small-business owners who are struggling because consumers have stopped buying. Unfortunately, they made too much money last year, so Obama has disqualified them.

Oh, and just for good measure, Obama will spend a bunch of "leftover" money on creating 600,000 government jobs that will bankrupt taxpayers not just today, but for decades to come. Those 600,000 new government employees will be getting bloated salaries, pensions, and health benefits for the next fifty years.

This is Obama's version of Economics 101: Massive Spending + Massive Debt = Economic Recovery. Good luck to all of us. We'll need it. Because it's not going to work.

In Part II of this article, I'll tell you what will.

2/14/2009: The Greatest Economic Stimulus Plan Ever! By Wayne Allen Root

Part II

As I pointed out in Part I of this article, Obama's solution for the current economic tsunami is more government spending in the form of bailouts, a massive trillion-dollar economic stimulus package, and "tax cuts" offered to people who never paid taxes in the first place.

What is interesting about this is that it proves we have once again elected a president who is either ignorant of, or oblivious to, the United States Constitution. Nothing in the Constitution authorizes this kind of government intervention in the economy. Which means that Obama's entire economic game plan is not only unworkable, it's unconstitutional.

Now, as promised, let me give you my version of an economic stimulus plan that makes sense.

* For openers, I propose giving American taxpayers a one-year Income Tax Vacation.

Of course, Obama and his tax-and-spend friends will howl that we can't afford it. But keep in mind that individuals in the United States of America pay a total of about $1.3 trillion in income taxes every year. So, as expensive as my idea may sound, it wouldn't cost much more than Obama's $1 trillion economic stimulus plan.

It's also only a tiny fraction of the $7 trillion the federal government has given away in bailout monies to fat-cat corporations and bankers. And it's far less than the $2 trillion or so that the Federal Reserve has printed up to try to put "liquidity" into the banking system.

Obama wants to take our money away from us, in the form of taxes, and then give it to those he deems worthy (e.g., voters who did not pay taxes) in the form of government checks, so they're awed by the power and generosity of the government. My plan simply allows the taxpayers to keep all of their own money - for one year - without getting government (or government checks) involved.

With my plan, most of the savings would go to the top 20 percent of earners - the people who own almost all of the businesses in America. They'd pump that money back into their businesses and start new ones - which would translate into millions of new jobs. Obama and his liberal friends wouldn't like that, because it makes too much sense.

Another thing Obama and his friends wouldn't like about my Income Tax Vacation is that it would set a precedent. They'd be afraid that if we paid no income taxes for a year, we might start to like it. We might notice how being able to keep that extra money improves our quality of life. We might start to notice that the federal government can survive without it, and maybe we'd demand that income taxes never be reinstated.

My plan, unlike President Obama's, rewards and incentivizes the American citizens who create most of the jobs, who buy the luxury goods, and who invest in the things that make our economy go and grow: stocks, bonds, real estate, investment property, small business. My plan puts money into their hands - our hands - the hands of people who know what to do with it in order to make more money. Now that's economic stimulus.

The one-year Income Tax Vacation is the cornerstone of my economic stimulus plan. But that's not the only idea I have to motivate and stimulate the producers and earners and taxpayers and small-business owners ... and actually make money for the government.

* I propose phasing out capital-gains taxes on individual investments over a five-year period.

It would work like this: Buy a piece of America (stocks, bonds, real estate, a small business, etc.), hold that investment for five years, and pay ZERO capital gains taxes on it. In the first year, capital gains earned on your investment would be subject to a 15 percent tax rate. In the second year, the rate would be 10 percent. In the third year, the rate would be 7.5 percent. In the fourth year, it would be 5 percent. And after five years, any profits earned on that investment are yours to keep - tax free.

* I propose the elimination of all capital-gains taxes on investments, dividends, and interest for Americans age fifty-five and older.

The idea is to allow Americans who are entering their retirement years (after a lifetime of hard work) to retire on half the amount of savings they now require, because they would pay no taxes on their assets. With this kind of a reward, think of the trillions of dollars that older Americans would spend on investing in America - knowing that the big payoff (in the form of an inheritance) will be enjoyed by their children and grandchildren.

* I propose a business income-tax cut.

Corporate income tax rates in America are the second-highest in the industrialized world. To remain competitive and encourage big business not to move jobs offshore, we must cut that rate to 20 percent (or lower). Perhaps more important, to encourage the formation and success of small businesses - the economic engine of America - we should lower their rate to 10 percent.

* I propose cutting capital-gains taxes on the profits from the sale of any American's principle residence to ZERO.

To liberal tax and spenders who scoff at this, it was your hero, Bill Clinton, back in the 1990s, who cut the capital-gains tax on the sale of a principle residence to zero on the first $500,000 of profit. But I'm taking Clinton's idea a step further: Under my plan, any American who invests (and risks) his or her hard-earned money in a principle residence and holds it for a minimum of two years would get to keep any and all profits. Pass this law and just watch the housing market - perhaps the most important business in America - explode.

* To encourage the creation of millions of jobs, I propose a $7,500 tax credit for employers.

This credit would goes directly to any employer who hires a full-time employee during the next three years, and it would increase to $10,000 if the person hired was out of work at the time.

* At the end of the one-year Income Tax Vacation that is the basis of my economic stimulus plan, I propose that we institute a national Reverse Flat Tax.

It's certainly in the government's best interest to motivate us to work hard ... to build more businesses ... to hire more employees ... to make and invest more money. But our tax system has the opposite effect. It punishes success, creativity, ingenuity, and productivity.

My proposed Reverse Flat Tax would solve that problem by having just two rates: 15 percent on all income up to $500,000 per year, and 10 percent on all income above $500,000. In other words, the more money you make, the more you get to keep. How's that for incentive?

And it's "fair." It treats every American same way. No one can complain. There are no losers with my plan. There are only winners ... and even bigger winners who take advantage of the opportunity to do better.

For those who argue that my Reverse Flat Tax will not generate enough revenues to cover the government's expenses, they're right. But that's the point. We have to cut government spending dramatically so we can afford to let the American people keep more of their own money. In my new book, The Conscience of a Libertarian: Empowering the Citizen Revolution With God, Guns, Gambling & Tax Cuts, I explain exactly how that can be done.

That's it - my Economic Stimulus Plan to get America moving and growing again.

Does it cost trillions of dollars? Sure it does. So do all of Obama's plans. So do all of Congress's plans. But my plan puts the money directly into the hands of the taxpayers instead of diverting it through the middleman we call "government." Mine is based on incentivizing all Americans to invest and build. Mine is based on running the federal government (for the first time) like a business.

Modesty aside, mine is THE GREATEST ECONOMIC STIMULUS PLAN EVER!

Wayne Allyn Root was the 2008 Libertarian Vice Presidential candidate. His new book, to be released by John Wiley & Sons in May, is entitled The Conscience of a Libertarian: Empowering the Citizen Revolution With God, Guns, Gambling & Tax Cuts. He also happens to have been Barack Obama's college classmate (Columbia University Class of '83). For more of his views and commentaries, and to watch his many media interviews, please visit his website at: www.ROOTforAmerica.com

2/14/2009: Lake Peigneur (disappearing lake) History Channel footage [Cool!]

2/11/2009: Goodbye, America! It Was Fun While It Lasted by Ann Coulter

It's bad enough when illiterate jurors issue damages awards in the billions of dollars because they don't grasp the difference between a million and a billion. Now it turns out the Democrats don't know the difference between a million and a trillion.

Why not make the "stimulus bill" a kazillion dollars?

All Americans who work for a living, or who plan to work for a living sometime in the next century, are about to be stuck with a trillion-dollar bill to fund yet more oppressive government bureaucracies. Or as I call it, a trillion dollars and change.

The stimulus bill isn't as bad as we had expected -- it's much worse. Instead of merely creating useless, make-work jobs digging ditches -- or "shovel-ready," in the Democrats' felicitous phrase -- the "stimulus" bill will create an endless army of government bureaucrats aggressively intervening in our lives. Instead of digging ditches, American taxpayers will be digging our own graves.

There are hundreds of examples in the 800-page "stimulus" bill, but here are just two.

First, the welfare bureaucrats are coming back.

For half a century, the welfare establishment had the bright idea to pay women to have children out of wedlock. Following the iron laws of economics -- subsidize something, you get more of it; tax it, you get less of it -- the number of children being born out of wedlock skyrocketed.

The 1996 Welfare Reform bill marked the first time any government entitlement had ever been rolled back. Despite liberal howling and foot-stomping, not subsidizing illegitimacy led, like night into day, to less illegitimacy.

Welfare recipients got jobs, as the hard-core unemployables were coaxed away from their TV sets and into the workforce. For the first time in decades, the ever-increasing illegitimacy rate stopped spiraling upward.

As proof that that welfare reform was a smashing success, a few years later, Bill Clinton started claiming full credit for the bill.

Well, that's over. The stimulus bill goes a long way toward repealing the work requirement of the 1996 Republican Welfare Reform bill and rewards states that increase their welfare caseloads by paying unwed mothers to sit home doing nothing.

Second, bureaucrats at Health and Human Services will electronically collect every citizen's complete medical records and determine appropriate medical care.

Judging by the care that the State Department took with private visa records last year, that the Ohio government took with Joe the Plumber's government records, that the Pentagon took with Linda Tripp's employment records in 1998, and that the FBI took with thousands of top secret "raw" background files in President Clinton's first term, the bright side is: We'll finally be able to find out if Bill Clinton has syphilis -- all thanks to the stimulus bill!

HHS bureaucrats will soon be empowered to overrule your doctor. Doctors who don't comply with the government's treatment protocols will be fined. That's right: Instead of your treatment being determined by your doctor, it will be settled on by some narcoleptic half-wit in Washington who couldn't get a job in the private sector.

And a brand-new set of bureaucrats in the newly created office of "National Coordinator of Health Information Technology" will be empowered to cut off treatments that merely prolong life. Sorry, Mom and Pop, Big Brother said it's time to go.

At every other workplace in the nation -- even Wal-Mart! -- workers are being laid off. But no one at any of the bloated government bureaucracies ever need fear receiving a pink slip. All 64,750 employees at the department of Health and Human Services are apparently absolutely crucial to the smooth functioning of the department.

With the stimulus bill, liberals plan to move unfirable government workers into every activity in America, where they will superintend all aspects of our lives.

Also, thanks to the stimulus bill, the private sector will gradually shrivel and die. According to the Congressional Budget Office, the cost of servicing the bill's nearly trillion-dollar debt will shrink the economy within a decade.

Robert Kennedy famously said: "There are those who look at things the way they are and ask, 'Why?' I dream of things that never were and ask, 'Why not?'"

The new liberal version is: There are those who look at things and ask, "Why on earth should the government be paying for that?" I dream of things that never were funded by the government and ask, "Why not?"

2/9/2009: Hillary's Incredible Shrinking Role By Dick Morris\

[Just as I predicted; Hillary is on her way out and no longer a threat in the Senate]

Secretary of State Hillary Rodham Clinton is finding that her job description is dissolving under her feet, leaving her with only a vestige of the power she must have thought she acquired when she signed on to be President Obama's chief Cabinet officer.

Since her designation:

ï Vice President Biden has moved vigorously to stake out foreign policy as his turf. His visit to Afghanistan, right before the Inauguration, could not but send a signal to Hillary that he would conduct foreign policy in the new administration, leaving Hillary in the role of backup.

ï Richard Holbrooke, the former Balkan negotiator and U.N. ambassador, has been named special envoy to Afghanistan and Pakistan. He insisted on direct access to the president, a privilege he was denied during much of the Clinton years.

ï Former Sen. George Mitchell (D-Maine), negotiator of the Irish Peace Accords, was appointed to be the administration's point man on Arab-Israeli negotiations.

ï Samantha Powers, Obama's former campaign aide, who once called Hillary a "monster," has been appointed to the National Security Council (NSC) as director of "multilateral affairs."

ï Gen. James L. Jones, Obama's new national security adviser, has announced an expansion of the membership and role of the NSC. He pledges to eliminate "back channels" to the president and wants to grow the NSC's role to accommodate the "dramatically different" challenges of the current world situation.

ï Susan Rice, Obama's new United Nations ambassador, insisted upon and got Cabinet rank for her portfolio, and she will presumably also have the same kind of access to Obama that she had as his chief foreign policy adviser during the campaign.

So where does all this leave Secretary of State Clinton?

While sympathy for Mrs. Clinton is outside the normal fare of these columns, one cannot help but feel that she is surrounded by people who are, at best, strangers and, at worst, enemies. The competition that has historically occupied secretaries of State and national security advisers seems poised to ratchet up to a new level in the current administration.

Hillary's essential problem is that she is an outsider in the current mix. She was the adversary in the campaign, and Rice and Powers -- at the very least -- know it well, having helped to run the campaign that dethroned her. Can they -- and she -- be devoid of bitterness or at least of normal human trepidation? Not very likely.

The fact is that the power of the secretary of State is not statutory, nor does it flow from the prestige of the post's occupant. Former Gen. Al Haig, once supreme commander of NATO and chief of staff to President Nixon, found that out when he was undercut as secretary by the White House troika of Mike Deaver, James Baker and Ed Meese. Bill Rogers, Eisenhower's attorney general and Nixon's California confidant, found himself on the outs from the moment he became secretary of State, with Henry Kissinger soaking up all the power through his direct access to Nixon as national security adviser.

The power of the secretary of State flows directly from the president. But Hillary does not have the inside track with Obama. Rice and Powers, close advisers in the campaign, and Gen. Jones -- whose office is in the White House -- all may have superior access. Holbrooke and Mitchell will have more immediate information about the world's trouble spots.

So what is Hillary's mandate? Of what is she secretary of State? If you take the Middle East, Afghanistan and Pakistan out of the equation, what is left? One would have to assume that the old North Korea hands in the government would monopolize that theater of action. What, precisely, is it that Hillary is to do? The question lingers.

And for this she gave up a Senate seat?

Go to www.DickMorris.com to read all of Dick's columns!

2/9/2009: How Government Created the Financial Crisis by John Taylor

Research shows the failure to rescue Lehman did not trigger the fall panic.

Many are calling for a 9/11-type commission to investigate the financial crisis. Any such investigation should not rule out government itself as a major culprit. My research shows that government actions and interventions -- not any inherent failure or instability of the private economy -- caused, prolonged and dramatically worsened the crisis.

The classic explanation of financial crises is that they are caused by excesses -- frequently monetary excesses -- which lead to a boom and an inevitable bust. This crisis was no different: A housing boom followed by a bust led to defaults, the implosion of mortgages and mortgage-related securities at financial institutions, and resulting financial turmoil.

Monetary excesses were the main cause of the boom. The Fed held its target interest rate, especially in 2003-2005, well below known monetary guidelines that say what good policy should be based on historical experience. Keeping interest rates on the track that worked well in the past two decades, rather than keeping rates so low, would have prevented the boom and the bust. Researchers at the Organization for Economic Cooperation and Development have provided corroborating evidence from other countries: The greater the degree of monetary excess in a country, the larger was the housing boom.

The effects of the boom and bust were amplified by several complicating factors including the use of subprime and adjustable-rate mortgages, which led to excessive risk taking. There is also evidence the excessive risk taking was encouraged by the excessively low interest rates. Delinquency rates and foreclosure rates are inversely related to housing price inflation. These rates declined rapidly during the years housing prices rose rapidly, likely throwing mortgage underwriting programs off track and misleading many people.

Adjustable-rate, subprime and other mortgages were packed into mortgage-backed securities of great complexity. Rating agencies underestimated the risk of these securities, either because of a lack of competition, poor accountability, or most likely the inherent difficulty in assessing risk due to the complexity.

Other government actions were at play: The government-sponsored enterprises Fannie Mae and Freddie Mac were encouraged to expand and buy mortgage-backed securities, including those formed with the risky subprime mortgages.

Government action also helped prolong the crisis. Consider that the financial crisis became acute on Aug. 9 and 10, 2007, when money-market interest rates rose dramatically. Interest rate spreads, such as the difference between three-month and overnight interbank loans, jumped to unprecedented levels.

Diagnosing the reason for this sudden increase was essential for determining what type of policy response was appropriate. If liquidity was the problem, then providing more liquidity by making borrowing easier at the Federal Reserve discount window, or opening new windows or facilities, would be appropriate. But if counterparty risk was behind the sudden rise in money-market interest rates, then a direct focus on the quality and transparency of the bank's balance sheets would be appropriate.

Early on, policy makers misdiagnosed the crisis as one of liquidity, and prescribed the wrong treatment.

To provide more liquidity, the Fed created the Term Auction Facility (TAF) in December 2007. Its main aim was to reduce interest rate spreads in the money markets and increase the flow of credit. But the TAF did not seem to make much difference. If the reason for the spread was counterparty risk as distinct from liquidity, this is not surprising.

Another early policy response was the Economic Stimulus Act of 2008, passed in February. The major part of this package was to send cash totaling over $100 billion to individuals and families so they would have more to spend and thus jump-start consumption and the economy. But people spent little if anything of the temporary rebate (as predicted by Milton Friedman's permanent income theory, which holds that temporary as distinct from permanent increases in income do not lead to significant increases in consumption). Consumption was not jump-started.

A third policy response was the very sharp reduction in the target federal-funds rate to 2% in April 2008 from 5.25% in August 2007. This was sharper than monetary guidelines such as my own Taylor Rule would prescribe. The most noticeable effect of this rate cut was a sharp depreciation of the dollar and a large increase in oil prices. After the start of the crisis, oil prices doubled to over $140 in July 2008, before plummeting back down as expectations of world economic growth declined. But by then the damage of the high oil prices had been done.

After a year of such mistaken prescriptions, the crisis suddenly worsened in September and October 2008. We experienced a serious credit crunch, seriously weakening an economy already suffering from the lingering impact of the oil price hike and housing bust.

Many have argued that the reason for this bad turn was the government's decision not to prevent the bankruptcy of Lehman Brothers over the weekend of Sept. 13 and 14. A study of this event suggests that the answer is more complicated and lay elsewhere.

While interest rate spreads increased slightly on Monday, Sept. 15, they stayed in the range observed during the previous year, and remained in that range through the rest of the week. On Friday, Sept. 19, the Treasury announced a rescue package, though not its size or the details. Over the weekend the package was put together, and on Tuesday, Sept. 23, Fed Chairman Ben Bernanke and Treasury Secretary Henry Paulson testified before the Senate Banking Committee. They introduced the Troubled Asset Relief Program (TARP), saying that it would be $700 billion in size. A short draft of legislation was provided, with no mention of oversight and few restrictions on the use of the funds.

The two men were questioned intensely and the reaction was quite negative, judging by the large volume of critical mail received by many members of Congress. It was following this testimony that one really begins to see the crisis deepening and interest rate spreads widening.

The realization by the public that the government's intervention plan had not been fully thought through, and the official story that the economy was tanking, likely led to the panic seen in the next few weeks. And this was likely amplified by the ad hoc decisions to support some financial institutions and not others and unclear, seemingly fear-based explanations of programs to address the crisis. What was the rationale for intervening with Bear Stearns, then not with Lehman, and then again with AIG? What would guide the operations of the TARP?

It did not have to be this way. To prevent misguided actions in the future, it is urgent that we return to sound principles of monetary policy, basing government interventions on clearly stated diagnoses and predictable frameworks for government actions.

Massive responses with little explanation will probably make things worse. That is the lesson from this crisis so far.

Mr. Taylor, a professor of economics at Stanford and a senior fellow at the Hoover Institution, is the author of "Getting Off Track: How Government Actions and Interventions Caused, Prolonged and Worsened the Financial Crisis," published later this month by Hoover Press. He first proposed the Taylor Rule (a monetary-policy rule that stipulates how much the central bank should change the nominal interest rate in response to divergences of actual GDP from potential GDP and of actual inflation rates from target inflation rates) in 1993.

2/9/2009: The Culprit Is All of Us By SCOTT S. POWELL

The government's meddling got us into this mess.

Contrary to a view popularized during the 2008 presidential election season, the current economic crisis was not the result of deregulation.

The Bush administration made many mistakes, but deregulation was not one of them.

Not only was there no major deregulation passed during the past eight years, but the Bush administration and a Republican Congress approved the most sweeping financial-market regulation in decades.

The bipartisan Sarbanes-Oxley Act was enacted in 2002 to prevent corporate fraud and restore investor confidence after the collapse of Enron and WorldCom. It failed to prevent the accounting fraud and influence-peddling scandals at Fannie Mae and Freddie Mac. And even after those scandals were widely understood, regulators sent Fannie and Freddie back into the market to continue buying subprime loans, lending and borrowing with implied taxpayer backing.

Across the government, the Bush administration supported new regulations that added almost 1,000 pages a year to the Federal Register, nearly a record. If this is insufficient regulation, it's hard to imagine a scope that would be effective.

We are in this mess largely because critical thought and moral judgment have been subordinated to the politicization of our economy, resulting in regulatory gaps and excessive controls of the wrong kind.

Government regulations should be limited to those that increase and protect transparency and competition, protect public and private property, promote individual responsibility and enforce equal opportunity under the law. Even if the right laws and regulations could be found, they would prove insufficient to protect freedom and prosperity.

The Foundation of Economics

In his farewell address, George Washington said that religion and morality are essential to sustain democracy in America. He might well have added that virtue is just as indispensable to its economy. When the captains of banking and finance and their congressional overseers fail in moral judgment, the results are disastrous for everyone. As we are now witnessing in the real-estate, stock- and bond-market dislocations, once trust is lost, markets freeze and long-standing relationships break down, resulting in illiquidity, irrational pricing and severe losses.

Today's problems have their roots in programs and financial instruments that shifted the locus of moral responsibility away from private individuals and institutions to wider circles that were understood to end with a government guarantee. Heads of the top banks and financial institutions could approve substandard home-mortgage underwriting -- prone to increased default -- because those loans could be securitized by Wall Street and sold off to investors or to government-sponsored enterprises (GSEs), with no likely recourse to the financial institution of origin.

Our present crisis began in the 1970s, during the Carter administration, with passage of the Community Reinvestment Act to stem bank redlining and liberalize lending in order to extend home ownership in lower-income communities. Then in the 1990s, the Department of Housing and Urban Development took a fateful step by getting the GSEs to accept subprime mortgages. With Fannie and Freddie easing credit requirements on loans they would purchase from lenders, banks could greatly increase lending to borrowers unqualified for conventional loans. In the name of extending affordable housing, this broadened the acceptability of risky loans throughout the financial system.

No Surprise

The risk lurking in the GSE portfolios was acknowledged in the Bush administration's first fiscal-year budget, released in April 2001. It stated that Fannie and Freddie were "a potential problem" because "financial trouble of a large GSE could cause strong repercussions in the financial markets, affecting federally insured entities and economic activity." Fed Chairman Alan Greenspan issued repeated warnings that the GSEs "placed the total financial system of the future at substantial risk." Such warnings went unheeded even after accounting scandals rocked Fannie and Freddie.

The collapse and government seizure of Fannie and Freddie in September 2008 ended the experiment in partial socialization of the U.S. housing sector. Before we try complete concentration of federal financial power, we should understand that power and political corruption abrogated moral judgment on every level.

The poor and middle class were encouraged to live beyond their means and buy houses they couldn't afford; speculators were lured into excessive risk-taking; banks were rewarded for lowering their loan standards; and Wall Street found new windfall profits from securitizing and reselling bad loans in bulk. With the support of regulators, credit-rating agencies provided cover for the whole charade.

Spreading Failure

There is plenty of blame to go around on both sides of the political aisle. But the lesson should be clear that socializing failed businesses -- whether in housing, health care or in Detroit -- is not a long-term solution. Expanding government's intrusion into the private sector doesn't come without great risk. The renewing and self-correcting nature of the private sector is largely lost in the public sector, where accountability is impaired by obfuscation of responsibility, and where special interests benefit even when the public good is ill-served.

George Washington also warned against excessive partisanship, which distracts public councils and enfeebles public administration. Rather than blaming the party in power or the party formerly in power, the nation should stop living in denial of the mistakes of both parties.

Spreading failure across the entire economy risks turning a recession into a depression. Regulatory reform now must foster responsible behavior and financial accountability. Far better for our citizenry and businesses to have a strength and resourcefulness that comes from creativity, honesty and self-reliance than to have a growing dependence on a profligate government.

SCOTT S. POWELL is a senior VP at ELP Capital, which manages a commercial real-estate debt-based hedge fund; a visiting fellow at the Hoover Institution; and a Commerce Bridge board member.

2/9/2009: Protectionist Threat Rising By JIM MCTAGUE

A "Buy American" provision may do more harm than good.

PRESIDENT BARACK OBAMA MIGHT BE GREETED BY SHOES and boos this month on his first trip to Canada, which is in stark contrast to the fawning adulation he received in Germany a few months back, while running for high office.

The economic stimulus bill that he embraces, warts and all, contains a "Buy American" provision endorsed by labor and steel interests, a trade bugaboo that has strained relations between Canada and the U.S. since 1978, when Democrats slipped a similar measure into a highway bill. The rest of the world is worried about U.S. protectionism, but Canada has the most to lose; it is our largest trading partner, our biggest foreign source of steel and a big supplier of gas and oil.

The Buy American provision is intended to create jobs here, but it could cost taxpayers a heap of money. It generally mandates that supplies and equipment used in tax-financed infrastructure projects contain at least 50% American content, and that project managers buy goods and services from Americans as long as their bids are less than 25% higher than those from foreign rivals. In other words, taxpayers could pay a 25% surcharge.

Buy American provisions in the past pretty much were limited to steel used in the construction of highways and bridges. What is troubling this go-around is the broadening of the provision, while the world is on the verge of a depression and it is becoming difficult to distinguish the business pages from the obituary columns.

Our parents, grandparents, and even some historians say that protectionism exacerbated the Great Depression. Congress, eager to please its favored constituencies to the jeopardy of the greater good, seems ignorant of this. Proponents of the measure argue that it is right to use American iron and steel in the rebuilding of our crumbling infrastructure. The jingoism resonates because it feels better to blame economic woes of our own making on some alien force. Canada, China: They are all the same.

However, protectionism invites retaliation and could cost more jobs than it could create. The angst north of our border is spread across the front pages of newspapers. In a letter to Senate leaders, Canadian Ambassador Michael Wilson frets: "We are your largest single customer. If either of our governments were to introduce new barriers or preferences at this time, we would load increased costs and burdens onto businesses, cause delay, disrupt and distort the way businesses have organized themselves in our two countries, and decrease North American competitiveness, thereby killing jobs rather than creating them."

Even if the Buy American provision disappears from the stimulus bill -- Senators were having second thoughts -- the global-trade community will continue to be jittery. This is just an opening salvo. Congress wants the administration to be much tougher than George Bush was on trade disputes.

Democrat Max Baucus of Montana and Republican Olympia Snowe of Maine have co-sponsored a Senate bill limiting the U.S. Trade Representative's ability to deny petitions seeking remedies for trade problems. Democrats believe that Bush played patsy in return for international trade accords.

The velvet gloves are coming off, even if this might not be an opportune time to pick a fight.

2/6/2009: The Unkempt Results of Post-9/11 Airport Security Rules

A humorous review of the "illusion of safety" airport security brings—along with the lack of personal hygiene products

“‘Curiouser and curiouser!’ cried Alice (she was so much surprised, that for the moment she quite forgot how to speak good English). ‘Now I’m opening out like the largest telescope that ever was! Good-by, feet!... Oh, my poor little feet, I wonder who will put on your shoes and stockings for you now, dears?’” The smart money says that it won’t be the folks from the Transportation Security Administration, who make two million travelers take their shoes off every day at airports in the U.S.

Lewis Carroll’s Alice would have had trouble distinguishing reality from Wonderland had she been with me on the Sunday after Thanksgiving as I watched a TSA officer confiscate my father’s aftershave at the airport in Burlington, Vt. It was a 3.25-ounce bottle, clearly in violation of the currently permissible three-ounce limit for liquids. Also clear was the bottle, which was obviously only about a quarter full. So even the members of some isolated human populations that have never developed sophisticated systems for counting could have determined that the total amount of liquid in the vessel was far less than the arbitrarily standardized three ounces. But the TSA guy took the aftershave, citing his responsibility to go by the volume listed on the label. (By the way, the three-ounce rule is expected to be phased out late in 2009. Why not tomorrow? Because of the 300-day-rules-change rule, which I just made up.)

Feeling curiouser, I did a gedankenexperiment: What if the bottle had been completely empty—would he have taken it then? No, I decided. When empty, the bottle becomes just some plastic in a rather mundane topological configuration. Not to mention that if you really banned everything with the potential to hold more than three ounces of liquid, you couldn’t let me have my shoes back. You also couldn’t allow me to bring my hands onboard. I kept these thoughts to myself, of course, because I wanted to fly home, not spend the rest of the day locked in a security office explaining what a gedankenexperiment was.

I first commented on what I used to call “the illusion of security” in this space in July 2003, after attending a conference on freedom and privacy. We heard the story of an airline pilot who had his nail clippers snatched away by the TSA just before boarding his plane. He then walked into a cockpit equipped with an ax. (Which is a horrible tool for cutting your nails, although, I have to admit, my dad might try. A former U.S. Marine and builder, he does his manicuring with a foot-long metal carpenter’s file and some 80-grit sandpaper. And you wonder how I got to be this way.)

It used to be that you could bring shaving cream with you when boarding a plane, but they would take away your razor. Now you can carry on a razor, and they take away your shaving cream. (They did indeed seize my dad’s shaving cream at the airport in Fort Lauderdale the Monday before Thanksgiving.)

Although the mostest curiouser thing has to be when hundreds of people docilely snake through security lines amid announcements that the “threat of a terrorist attack is high.” Compared to what? The day before, perhaps, when the real threat posed by terrorists to your life was much, much smaller than your chances of dying in the bathtub. And today the threat is only much smaller than your chances of dying in the bathtub. Here’s how you know that the terrorist threat isn’t really high: the airport is still open, and your flight hasn’t been canceled.

A much better term than “illusion of security” can be found in an article by Jeffrey Goldberg in the November 2008 issue of the Atlantic: “security theater” (www.theatlantic.com/doc/200811/airport-security). Goldberg holds that TSA agents and passengers go through performances designed to make everybody feel better, but with little effect. He talks about how he has been able to carry knives and box cutters onto planes—he even got past security with a device on his torso called a Beerbelly, a bladder that holds up to 80 ounces of liquid you can drink from through a tube.

Goldberg didn’t fill the thing up, but he did exceed the three-ounce limit by just 21 ounces. He believes that our current airport procedures may succeed in catching dumb terrorists. But the time, energy and money would be better spent on gathering intelligence if we want to catch the smart ones. And keep my dad clean-shaven.

Note: This article was originally printed with the title, "Not a Close Shave".

By Steve Mirsky

2/6/2009: Putting Government First By Chris Reed

The idea that Democrats care more about the poor and the needy is an enduring American political stereotype -- and one of the party's most potent vote-getting tools. It's highly questionable whether Democrats' emphasis on government paternalism and a generous welfare state actually helps the downtrodden more than Republicans' recipe of economic growth and low taxes. But at least on a rhetorical basis, Democrats certainly do talk the most about the hurting.

This is why we saw Barack Obama, Hillary Clinton, and John Edwards jousting over which Democratic presidential candidate had the best anti-poverty program, with Obama touting his plans for "an all-encompassing, all-hands-on-deck anti-poverty effort." On the brink of Obama's presidency, there is every reason to assume his intentions to broadly expand the scope, power and spending of the federal government will include plenty of goodies for poor and working-class Americans.

But in California, when it comes to the politics of compassion, the Democrats who dominate the politics of the nation's largest state have been exposed as utter frauds -- machine politicians beholden to public employee unions who barely bother to pose as protectors of the poor.

There have always been signs that this pose was a ruse. Even as the state went on a spending binge from 2002 to 2007, funding for social services and welfare programs barely kept up with inflation. This history of indifference prompted liberal groups to do end runs around the legislature twice since 1998, using initiatives to pass cigarette and income tax hikes to fund programs for children and the mentally ill, respectively.

But now the state's budget crisis has made Democrats' true priorities crystal-clear. The crisis has been exaggerated by Republican Gov. Arnold Schwarzenegger to try to soften up voters for tax hikes; the oft-heard estimate of a $42 billion deficit is based on the Sacramento fantasy that a reduction in future projected spending increases is a real-world, hard-dollar spending cut. But there is no question that the state spends an average of about $1.5 billion more a month than it takes in -- and that bankruptcy looms unless this imbalance is resolved.

Toward this end, Democratic leaders of the California Senate and Assembly agreed in closed-door negotiations with Schwarzenegger to cuts in virtually every social services, health and welfare program in the state. This was the governor's price for going along with proposed increases in sales, gas and income taxes; a sharp reduction in the dependent children income tax credit; and a new levy on oil production.

But the cooperation ended when Schwarzenegger took his everyone-must-share-the-pain thesis to its logical conclusion. To ease the state's cash crunch, he announced plans to have state employees take off two unpaid furlough days a month beginning Feb. 1.

Leading Democratic officeholders -- and several likely 2010 gubernatorial candidates, including Attorney General Jerry Brown -- immediately engaged in an impromptu contest to determine who could denounce the proposal with the most vigor. Treasurer Bill Lockyer was typical, expressing outrage that the governor would "impose such a hardship on the backs of our employees." Lockyer and other Democrats elected to statewide office said they would refuse to enforce the furlough plan with their own staffs.

Medical checkups for poor kids can be halved. Help for the developmentally disabled can be reduced. Job training for inner-city youths can be suspended. But when it comes to cutting pay or benefits for a highly compensated state work force, Democratic officeholders not only draw the line; they express horror at the very thought.

Their reductive priorities were on display yet again on last Friday. That's when state Controller John Chiang offered his alternative to Schwarzenegger's plan to fight the cash crunch: Beginning Feb. 1, he said he would withhold $3.7 billion in payments owed to Californians.

Headlines focused on the fact that this meant nearly $2 billion in state income tax refunds were being kept for now by the state. A look at the fine print, however, showed Chiang also intends to withhold $188 million in funds for the two main state programs helping blind people and ailing seniors.

What was that again about Democrats being the best friend of the disadvantaged?

What was that again about heartless Republicans?

In crisis, a crude political Darwinism now rules in California. This survival-of-the-fittest scrum has made more obvious than ever that Democrats in the state legislature aren't just allies of public employee unions. Instead, these lawmakers are best described as wholly owned union subsidiaries – people who see state government as a jobs program, not a means to provide services to the downtrodden or anyone else.

The poor and needy? They're helpful political props to be used and discarded as needed -- no more and no less.

Chris Reed is an editorial writer for the San Diego Union-Tribune.

The Amazing Story Behind the Global Warming Scam

By John Coleman

The key players are now all in place in Washington and in state governments across America to officially label carbon dioxide as a pollutant and enact laws that tax we citizens for our carbon footprints. Only two details stand in the way, the faltering economic times and a dramatic turn toward a colder climate. The last two bitter winters have lead to a rise in public awareness that CO2 is not a pollutant and is not a significant greenhouse gas that is triggering runaway global warming.

How did we ever get to this point where bad science is driving big government we have to struggle so to stop it?

The story begins with an Oceanographer named Roger Revelle. He served with the Navy in World War II. After the war he became the Director of the Scripps Oceanographic Institute in La Jolla in San Diego, California. Revelle saw the opportunity to obtain major funding from the Navy for doing measurements and research on the ocean around the Pacific Atolls where the US military was conducting atomic bomb tests. He greatly expanded the Institute's areas of interest and among others hired Hans Suess, a noted Chemist from the University of Chicago, who was very interested in the traces of carbon in the environment from the burning of fossil fuels. Revelle tagged on to Suess studies and co-authored a paper with him in 1957. The paper raises the possibility that the carbon dioxide might be creating a greenhouse effect and causing atmospheric warming. It seems to be a plea for funding for more studies. Funding, frankly, is where Revelle's mind was most of the time.

Next, Revelle hired a Geochemist named David Keeling to devise a way to measure the atmospheric content of Carbon dioxide. In 1960 Keeling published his first paper showing the increase in carbon dioxide in the atmosphere and linking the increase to the burning of fossil fuels.

These two research papers became the bedrock of the science of global warming, even though they offered no proof that carbon dioxide was in fact a greenhouse gas. In addition, they failed to explain how this trace gas, only a tiny fraction of the atmosphere, could have any significant impact on temperatures.

Now let me take you back to the 1950's when this was going on. Our cities were entrapped in a pall of pollution from the crude internal combustion engines that powered cars and trucks back then and from the uncontrolled emissions from power plants and factories. Cars, factories, and power plants were filling the air with all sorts of pollutants. There was a valid and serious concern about the health consequences of this pollution and a strong environmental movement was developing to demand action. Government accepted this challenge and new environmental standards were set. Scientists and engineers came to the rescue. New reformulated fuels were developed for cars, as were new high tech, computer controlled engines and catalytic converters. By the mid seventies cars were no longer big time polluters, emitting only some carbon dioxide and water vapor from their tail pipes. Likewise, new fuel processing and smoke stack scrubbers were added to industrial and power plants and their emissions were greatly reduced, as well.

But an environmental movement had been established and its funding and very existence depended on having a continuing crisis issue. So the research papers from Scripps came at just the right moment. And, with them came the birth of an issue; man-made global warming from the carbon dioxide from the burning of fossil fuels.

Revelle and Keeling used this new alarmism to keep their funding growing. Other researchers with environmental motivations and a hunger for funding saw this developing and climbed aboard as well. The research grants began to flow and alarming hypotheses began to show up everywhere.

The Keeling curve showed a steady rise in CO2 in atmosphere during the period since oil and coal were discovered and used by man. As of today, carbon dioxide has increased from 215 to 385 parts per million. But, despite the increases, it is still only a trace gas in the atmosphere. While the increase is real, the percentage of the atmosphere that is CO2 remains tiny, about .41 hundredths of one percent.

Several hypotheses emerged in the 70's and 80's about how this tiny atmospheric component of CO2 might cause a significant warming. But they remained unproven. Years have passed and the scientists kept reaching out for evidence of the warming and proof of their theories. And, the money and environmental claims kept on building up.

Back in the 1960's, this global warming research came to the attention of a Canadian born United Nation's bureaucrat named Maurice Strong. He was looking for issues he could use to fulfill his dream of one-world government. Strong organized a World Earth Day event in Stockholm, Sweden in 1970. From this he developed a committee of scientists, environmentalists and political operatives from the UN to continue a series of meeting.

Strong developed the concept that the UN could demand payments from the advanced nations for the climatic damage from their burning of fossil fuels to benefit the underdeveloped nations, a sort of CO2 tax that would be the funding for his one-world government. But, he needed more scientific evidence to support his primary thesis. So Strong championed the establishment of the United Nation's Intergovernmental Panel on Climate Change. This was not a pure climate study scientific organization, as we have been lead to believe. It was an organization of one-world government UN bureaucrats, environmental activists, and environmentalist scientists who craved the UN funding so they could produce the science they needed to stop the burning of fossil fuels. Over the last 25 years, they have been very effective. Hundreds of scientific papers, four major international meetings and reams of news stories about climatic Armageddon later, the UN IPCC has made its points to the satisfaction of most and even shared a Nobel Peace Prize with Al Gore.

At the same time that Maurice Strong was busy at the UN, things were getting a bit out of hand for the man who is now called the grandfather of global warming, Roger Revelle. He had been very politically active in the late 1950's as he worked to have the University of California locate a San Diego campus adjacent to Scripps Institute in La Jolla. He won that major war, but lost an all important battle afterward when he was passed over in the selection of the first Chancellor of the new campus.

He left Scripps finally in 1963 and moved to Harvard University to establish a Center for Population Studies. It was there that Revelle inspired one of his students to become a major global warming activist. This student would say later, "It felt like such a privilege to be able to hear about the readouts from some of those measurements in a group of no more than a dozen undergraduates. Here was this teacher presenting something not years old but fresh out of the lab, with profound implications for our future!" The student described him as "a wonderful, visionary professor" who was "one of the first people in the academic community to sound the alarm on global warming," That student was Al Gore. He thought of Dr. Revelle as his mentor and referred to him frequently, relaying his experiences as a student in his book Earth in the Balance, published in 1992.

So there it is, Roger Revelle was indeed the grandfather of global warming. His work had laid the foundation for the UN IPCC, provided the anti-fossil fuel ammunition to the environmental movement, and sent Al Gore on his road to his books, his movie, his Nobel Peace Prize, and a hundred million dollars from the carbon credits business.

What happened next is amazing. The global warming frenzy was becoming the cause célèbre of the media. After all the media is mostly liberal, loves Al Gore, loves to warn us of impending disasters and tell us "the sky is falling, the sky is falling". The politicians and the environmentalists loved it, too.

But the tide was turning with Roger Revelle. He was forced out at Harvard at 65 and returned to California and a semi retirement position at UCSD. There he had time to rethink Carbon Dioxide and the greenhouse effect. The man who had inspired Al Gore and given the UN the basic research it needed to launch its Intergovernmental Panel on Climate Change was having second thoughts. In 1988, he wrote two cautionary letters to members of Congress. He wrote, "My own personal belief is that we should wait another 10 or 20 years to really be convinced that the greenhouse effect is going to be important for human beings, in both positive and negative ways." He added, "we should be careful not to arouse too much alarm until the rate and amount of warming becomes clearer."

And in 1991 Revelle teamed up with Chauncey Starr, founding director of the Electric Power Research Institute and Fred Singer, the first director of the U.S. Weather Satellite Service, to write an article for Cosmos magazine. They urged more research and begged scientists and governments not to move too fast to curb greenhouse CO2 emissions because the true impact of carbon dioxide was not at all certain and curbing the use of fossil fuels could have a huge negative impact on the economy and jobs and our standard of living. I have discussed this collaboration with Dr. Singer. He assures me that Revelle was considerably more certain than he was at the time that carbon dioxide was not a problem.

Did Roger Revelle attend the Summer enclave at the Bohemian Grove in Northern California in the Summer of 1990 while working on that article? Did he deliver a lakeside speech there to the assembled movers and shakers from Washington and Wall Street in which he apologized for sending the UN IPCC and Al Gore onto this wild goose chase about global warming? Did he say that the key scientific conjecture of his lifetime had turned out wrong? The answer to those questions is, "I think so, but I do not know it for certain". I have not managed to get it confirmed as of this moment. It's a little like Las Vegas; what is said at the Bohemian Grove stays at the Bohemian Grove. There are no transcripts or recordings and people who attend are encouraged not to talk. Yet, the topic is so important, that some people have shared with me on an informal basis.

Roger Revelle died of a heart attack three months after the Cosmos story was printed. Oh, how I wish he were still alive today. He might be able to stop this scientific silliness and end the global warming scam.

Al Gore has dismissed Roger Revelle's Mea culpa as the actions of a senile old man. And the next year, while running for Vice President, he said the science behind global warming is settled and there will be no more debate. From 1992 until today, he and his cohorts have refused to debate global warming and when ask about we skeptics they simply insult us and call us names.

So today we have the acceptance of carbon dioxide as the culprit of global warming. It is concluded that when we burn fossil fuels we are leaving a dastardly carbon footprint which we must pay Al Gore or the environmentalists to offset. Our governments on all levels are considering taxing the use of fossil fuels. The Federal Environmental Protection Agency is on the verge of naming CO2 as a pollutant and strictly regulating its use to protect our climate. The new President and the US congress are on board. Many state governments are moving on the same course.

We are already suffering from this CO2 silliness in many ways. Our energy policy has been strictly hobbled by no drilling and no new refineries for decades. We pay for the shortage this has created every time we buy gas. On top of that the whole thing about corn based ethanol costs us millions of tax dollars in subsidies. That also has driven up food prices. And, all of this is a long way from over.

And, I am totally convinced there is no scientific basis for any of it.

Global Warming. It is the hoax. It is bad science. It is a highjacking of public policy. It is no joke. It is the greatest scam in history.

2/5/2009: Stimulous 53 second video

Are you an economy with performance issues? If you find it hard to achieve and maintain growth, maybe Stimulis is right for you. Take Stimulis once every election cycle or whenever you're in need of economic enhancement.

2/5/2009: WORSE THAN DOING NOTHING: "If the government borrows the money for the stimulus, then it will either have to print money later or raise taxes to pay it back. If the government raises taxes to pay for the stimulus, it will, in effect, be robbing Peter to pay Paul. If the government prints the money, it will increase inflation, which will decrease the value of the dollar. That would, in effect, rob Paul to pay Paul back with devalued currency. Taking money out of the private economy -- either through taxes or inflation -- and spending it in a way that doesn't offset the loss of money with real economic gains is worse than doing nothing." - Former House Majority Leader Dick Armey

2/5/2009: REEFER MADNESS: "(S)moking pot didn't prevent Barack Obama from becoming president. And obviously, recreational marijuana use hasn't harmed Mr. Phelps, whose prodigious performances have garnered 14 gold medals, the most in Olympic history. If he can smoke pot and perform at such a superhuman level, then perhaps we should reconsider the effects of -- and punishments for -- use of the substance." - Columnist Stanton Peele

2/5/2009: from the Daily Reckoning www.DailyReckoning.com

Today we turn our attention to the world’s most privileged outcasts.

“Once envied, Wall Street bankers are now mocked,” says a headline at the International Herald Tribune .

So many people are getting on the bankers’ case; we’re beginning to feel sorry for them. After all, what did they do wrong?

Well...they floated the whole world economy on a sea of debt... even making loans to people they knew were going to sink.

And they took bonuses on profits they hadn’t actually earned.

And they paid themselves the cash that their banks now desperately need.

And, they created trillion-dollar debt torpedoes – which are now exploding all over the planet, leading to $32 trillion in losses...so far.

And they set the stage for a cycle of mass unemployment, strikes, depression, protectionism, riots, revolutions, poverty and probably even starvation.

And, oh yes, they blew up their own banks too.

But aside from that, they are pretty decent fellows, no?

Bush Hatred and Obama Euphoria Are Two Sides of the Same Coin
By PETER BERKOWITZ

Now that George W. Bush has left the harsh glare of the White House and Barack Obama has settled into the highest office in the land, it might be reasonable to suppose that Bush hatred and Obama euphoria will begin to subside. Unfortunately, there is good reason to doubt that the common sources that have nourished these dangerous political passions will soon lose their potency.

At first glance, Bush hatred and Obama euphoria could not be more different. Hatred of Mr. Bush went well beyond the partisan broadsides typical of democratic politics. For years it disfigured its victims with open, indeed proud, loathing for the very manner in which Mr. Bush walked and talked. It compelled them to denounce the president and his policies as not merely foolish or wrong or contrary to the national interest, but as anathema to everything that made America great.

In contrast, the euphoria surrounding Mr. Obama's run for president conferred upon the candidate immunity from criticism despite his newness to national politics and lack of executive experience, and regardless of how empty his calls for change. At the same time, it inspired those in its grips, repeatedly bringing them tears of joy throughout the long election season. With Mr. Obama's victory in November and his inauguration last week, it suffused them with a sense that not only had the promise of America at last been redeemed but that the world could now be transfigured.

In fact, Bush hatred and Obama euphoria -- which tend to reveal more about those who feel them than the men at which they are directed -- are opposite sides of the same coin. Both represent the triumph of passion over reason. Both are intolerant of dissent. Those wallowing in Bush hatred and those reveling in Obama euphoria frequently regard those who do not share their passion as contemptible and beyond the reach of civilized discussion. Bush hatred and Obama euphoria typically coexist in the same soul. And it is disproportionately members of the intellectual and political class in whose souls they flourish.

To be sure, democratic debate has always been a messy affair in which passion threatens to overwhelm reason. So long as citizens remain free and endowed with a diversity of interests and talents, it will remain so.

In October 1787, amid economic crisis and widespread fears about the new nation's ability to defend itself, Alexander Hamilton, in the first installment of what was to become the Federalist Papers, surveyed the formidable obstacles to giving the newly crafted Constitution a fair hearing. Some would oppose it, Hamilton observed, out of fear that ratification would diminish their wealth and power. Others would reject it because they hoped to profit from the political disarray that would ensue. The opposition of still others was rooted in "the honest errors of minds led astray by preconceived jealousies and fears."

Indeed, the best of men, Hamilton acknowledged, were themselves all-too-vulnerable to forming ill-considered political opinions: "So numerous indeed and so powerful are the causes, which serve to give a false bias to the judgment, that we upon many occasions, see wise and good men on the wrong as well as on the right side of questions, of the first magnitude to society."

In surveying the impediments to bringing reason to bear in politics, it was not Hamilton's aim to encourage despair over democracy's prospects but to refine political expectations. "This circumstance, if duly attended to," he counseled, "would furnish a lesson of moderation to those, who are ever so much persuaded of their being in the right, in any controversy."

As Hamilton would have supposed, the susceptibility of political judgment to corruption by interest and ambition is as operative in our time as it was in his. What has changed is that those who, by virtue of their education and professional training, would have once been the first to grasp Hamilton's lesson of moderation are today the leading fomenters of immoderation.

Bush hatred and Obama euphoria are particularly toxic because they thrive in and have been promoted by the news media, whose professional responsibility, it has long been thought, is to gather the facts and analyze their significance, and by the academy, whose scholarly training, it is commonly assumed, reflects an aptitude for and dedication to systematic study and impartial inquiry.

From the avalanche of vehement and ignorant attacks on Bush v. Gore and the oft-made and oft-refuted allegation that the Bush administration lied about WMD in Iraq, to the remarkable lack of interest in Mr. Obama's career in Illinois politics and the determined indifference to his wrongness about the surge, wide swaths of the media and the academy have concentrated on stoking passions rather than appealing to reason.

Some will speculate that the outbreak of hatred and euphoria in our politics is the result of the transformation of left-liberalism into a religion, its promulgation as dogma by our universities, and students' absorption of their professors' lesson of immoderation. This is unfair to religion.

At least it's unfair to those forms of biblical faith that teach that God's ways are hidden and mysterious, that all human beings are both deserving of respect and inherently flawed, and that it is idolatry to invest things of this world -- certainly the goods that can be achieved through politics -- with absolute value. Through these teachings, biblical faith encourages skepticism about grand claims to moral and political authority and an appreciation of the limits of one's knowledge, both of which well serve liberal democracy.

In contrast, by assembling and maintaining faculties that think alike about politics and think alike that the university curriculum must instill correct political opinions, our universities cultivate intellectual conformity and discourage the exercise of reason in public life. It is not that our universities invest the fundamental principles of liberalism with religious meaning -- after all the Declaration of Independence identifies a religious root of our freedom and equality. Rather, they infuse a certain progressive interpretation of our freedom and equality with sacred significance, zealously requiring not only outward obedience to its policy dictates but inner persuasion of the heart and mind. This transforms dissenters into apostates or heretics, and leaders into redeemers.

Consequently, though Bush hatred may weaken as the 43rd president minds his business back home in Texas, and while Obama euphoria may fade as the 44th president is compelled to immerse himself in the daunting ambiguities of power, our universities will continue to educate students to believe that hatred and euphoria reflect political wisdom. Urgent though the problem is, not even the efficient and responsible spending of a $1 trillion stimulus package would begin to address it.

Mr. Berkowitz is a senior fellow at Stanford University's Hoover Institution.

An over-optimistic stimulus plan by Jeff Jacoby
The Boston Globe, January 28, 2009

[“...mountains of academic studies show how government expansions reduce economic growth.”]

First of two columns

Ronald Reagan loved to tell the story of the unfailingly cheerful little boy who wakes up on Christmas morning to find, instead of presents, an immense pile of manure. Undaunted, he grabs a shovel and starts digging. “With all this manure,” he says excitedly, “there must be a pony in here someplace!”

Is there a pony somewhere in the $825 billion “stimulus” plan that Democratic leaders in the House of Representatives hope to bring to a vote today? Last week, the Congressional Budget Office started digging into this immense pile of -- uh, deficit spending, and what it found would discourage even a Reagan-caliber optimist.

According to the CBO, less than half of the $355 billion the bill allocates to infrastructure and other “discretionary” projects would actually be spent by the end of 2010; of that, a mere $26 billion would be spent in the current fiscal year. “The rest would come in future years,” the Washington Post reported, “long after the CBO and other economists predict the recession will have ended.” (After Congressional Democrats expressed displeasure with the CBO’s findings, the report was mysterious yanked off the internet. A new version appeared yesterday with -- presto! -- numbers more to the Democrats’ liking.)

Wasn’t the whole point of turbocharging this stimulus bill -- recall that President Obama had originally hoped it would be ready for his signature on Inauguration Day -- that there is no time to waste in pumping these funds into the economy? “If we do not act boldly and swiftly,” the president warned in his weekly address on Saturday, “a bad situation could become dramatically worse.”

Yet of the $30 billion the House bill allots for highway projects, less than $4 billion would be spent before 2011, according to the CBO’s original calculcations. Of $18.5 billion earmarked for renewable energy, less than $3 billion would make it through the pipeline within two years. Of $14 billion for school construction, only half would be used by the end of next year. The administration claims that vast fiscal intervention is urgently required to “save or create” as many as 4 million jobs by the end of next year. Even if you buy the Keynesian argument that mammoth deficit spending will jump-start economic growth, it’s tough to see how it does so by the end of next year if most of the outlays only occur thereafter.

In truth there are compelling reasons not to buy the whole spending-equals-stimulus line of reasoning. Echoing Richard Nixon, Time magazine recently proclaimed that “we all really do seem to be Keynesians now” and that “just about every expert agrees that pumping $1 trillion into a moribund economy” is the way to “rev up” aggregate demand and stimulate economic activity. Time clearly didn’t check with George Mason University economist Russell Roberts, who wrote on Monday: “As far as I know, no prominent market-oriented economist has come out in favor of a trillion-dollar increase in government spending as a way to improve the economy.”

One such prominent market-oriented economist, Nobel laureate Gary Becker, wrote last week that some of the spending projects in the Democratic stimulus plan “may be very worthwhile . . . but however merited, it is difficult to believe that they would provide much of a stimulus to the economy.” Budget analyst Brian Riedl of the Heritage Foundation points out that “mountains of academic studies show how government expansions reduce economic growth.” A 1997 study in Public Finance Review, for example, concluded that “higher total government expenditure, no matter how financed, is associated with a lower growth rate.” In the Journal of Macroeconomics, another study found that “a 1% increase in government size decreases the rate of economic growth by 0.143%.”

Real-world evidence of the inefficacy of pump-priming abounds. For starters, there was last year’s massive increase in federal spending, including $105 billion in tax rebates and more than $300 billion in “emergency” spending, not to mention passage of the $700 billion financial-sector bailout. None of it revived the economy. In the 1990s, Japan tried without success to deficit-spend its way out of recession, enacting 10 “stimulus” bills in eight years and spending trillions of yen on public infrastructure. Yet unemployment grew worse, the economy remained anemic, and Japan was left with the largest national debt in the industrialized world: 170 percent of GDP.

Will we follow Japan’s lead? US government spending is at record-busting levels, budget deficits have never been greater, and the national debt is closing in on a once-unimaginable $11 trillion. We are in over our collective head in debt, and our economy is reeling. Borrowing even more heavily will not make things better.

Next: A new New Deal?

Money for nothing won't grow the economy by Jeff Jacoby
The Boston Globe, February 1, 2009

["Economic growth results from creating new wealth, not redistributing existing wealth."]

Second of two columns

RESPONDING TO my recent column about the bloated “stimulus” package making its way through Congress, one reader argued that what matters most right now is getting money into people’s hands.

“In the face of rapidly rising unemployment and idle productive capacity, any kind of federal spending will have a stimulus in the short run,” he wrote. “Digging holes and filling them in would help to create jobs and consumer demand because those wielding the shovels would earn a paycheck that they could spend.”

More than 70 years ago, John Maynard Keynes argued much the same thing -- that government spending on anything -- “pyramid-building, earthquakes, even wars” -- was bound to generate a beneficial stimulus. The important thing was to pump money into the economy. Why, the government could spur economic growth, Keynes famously wrote, even if all it did was “fill old bottles with banknotes, bury them at suitable depths in disused coal mines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez-faire to dig the notes up again.”

Keynes died in 1946, but the Keynesian fallacy -- that money for nothing (increased spending without increased productivity) can boost the economy -- lives on, seemingly impervious to the evidence disproving it. To be sure, many economists dismiss it -- several hundred of them, including Nobel laureates Edward Prescott, Vernon Smith, and James Buchanan, issued a public statement last week calling it “a triumph of hope over experience to believe that more government spending will help the US today.” But experience didn’t dissuade 244 House Democrats from passing President Obama’s massive spending bill, just as it didn’t dissuade President Bush from signing last year’s expensive “stimulus” legislation.

Here is a question for Washington’s Keynesians: If uninhibited deficit spending is the key to economic growth, how could the Bush administration’s galloping budget increases and unbroken string of deficits have left the economy in recession? Indeed, if Keynes was right, why didn’t the enormous growth of government outlays stop the Great Depression in its tracks? Federal spending exploded under Herbert Hoover -- in the space of a single year (1930-31), the government’s share of GNP ballooned from 16.4 percent to 21.5 percent -- and exploded even more under Franklin Roosevelt, during whose first two terms the federal budget more than doubled. Where was the “stimulus” such furious expenditure should have produced?

Incredibly, the lesson Obama has drawn from history is that past administrations didn’t spend enough. In his meeting with House Republicans last week, he argued that FDR should have thrown open the sluices even wider. “The real problem was that Roosevelt slowed down on public spending in the first two years,” the president said, according to one congressman who was in the room. “If he’d just kept on spending that money, we’d have gotten out of the Depression quicker.”

There may be no reasoning on this subject with Obama, who has already raised the possibility of “trillion-dollar deficits for years to come.” But reality is not optional: You do not become more prosperous by writing yourself a check. Economic growth results from creating new wealth, not redistributing existing wealth. The federal government cannot conjure prosperity out of thin air. Any money it spends -- whether on highways or Pell grants, Medicaid or tax rebates, arts subsidies or mass transit -- it must first tax or borrow from somewhere else. A trillion dollars pumpedinto the economy tomorrow is a trillion dollars siphoned out of the economy today -- and therefore a trillion dollars no longer available to the private sector for investment or consumption. Enlarging Washington’s spending power will not enlarge the economy. Only work, investment, and production can beget economic growth.

Six years into FDR’s presidency, his Treasury secretary (and close friend)Henry Morgenthau Jr. ruefully acknowledged that the New Deal had proved an economic disaster.

"We have tried spending money; we are spending more than we have ever spent before and it does not work," he told senior congressional Democrats. "I want to see this country prosperous. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises. . . . After eight years of this administration we have just as much unemployment as when we started . . . and an enormous debt to boot!"

A new New Deal will not work any better than the old one did. Recessions hurt, but recessions compounded with colossal government growth hurt worse. So much worse, sometimes, that they turn into depressions.

52% OF THE VOTERS WANT ICE CREAM!

From a school teacher in the Nashville, Tennessee area, 2009 Jan 26
{as found on Unfiltered News}

The most eye-opening civics lesson I ever had was while teaching third grade this year. The presidential election was heating up and some of the children showed an interest. I decided we would have an election for a class president. We would choose our nominees. They would make a campaign speech and the class would vote.

To simplify the process, candidates were nominated by other class members. We discussed what kinds of characteristics these students should have. We got many nominations and from those, Jamie and Olivia were picked to run for the top spot.

The class had done a great job in their selections. Both candidates were good kids. I thought Jamie might have an advantage because he got lots of parental support. I had never seen Olivia's mother.

The day arrived when they were to make their speeches Jamie went first. He had specific ideas about how to make our class a better place. He ended by promising to do his very best. Everyone applauded. He sat down and Olivia came to the podium. Her speech was concise. She said, "If you will vote for me, I will give you ice cream." She sat down.

The class went wild. "Yes! Yes! We want ice cream." She surely could say more. She did not have to.

A discussion followed. How did she plan to pay for the ice cream? She wasn't sure. Would her parents buy it or would the class pay for it? She didn't know. The class really didn't care. All they were thinking about was ice cream. Jamie was forgotten. Olivia won by a landslide.

Every time Barack Obama opened his mouth he offered ice cream, and fifty-two percent of the people reacted like nine year olds. They want ice cream. The other forty-eight percent of us know we're going to have to feed the cow and clean up the mess.

2/1/2009: This Week's Thoughts for Chief Philosophical Officers:

"Power tends to corrupt, and absolute power corrupts absolutely." Lord Acton

"The effect of power and publicity on all men is the aggravation of self, a sort of humor that ends by killing the victim's sympathies." Henry Brooks Adams (who also wrote, "A friend in power is a friend lost")

"Power intoxicates men. When a man is intoxicated by alcohol, he can recover, but when intoxicated by power, he seldom recovers." James F. Byrnes

"The real cause, the effective one, that makes men lose power is that they have become unworthy to exercise it." Alexis de Tocqueville

"The most dangerous thing about power is to employ it where it is not applicable." David Halberstam

"I have never been able to conceive how a rational being could propose happiness to himself from the exercise of power over others." Thomas Jefferson

"Nearly all men can stand adversity, but if you want to test a man's character, give him power." Abraham Lincoln, widely attributed, but apocryphal

After this quotation appeared in a 1974 issue of "Forbes," and then a 1975 issue of "Reader's Digest," it became widely- attributed. I've now seen it in scores of reputable books and quotation anthologies. My best guess, though, is that Lincoln never said it. The precise source of the confusion seems to be an observation made about Lincoln in an 1885 book by Allen Thorndike Rice, titled "Reminiscences of Abraham Lincoln by Distinguished Men of His Time." Here's what the celebrated orator Robert G. Ingersoll wrote in that book: "Nothing discloses real character like the use of power. It is easy for the weak to be gentle. Most people can bear adversity. But if you wish to know what a man really is, give him power. This is the supreme test. It is the glory of Lincoln that, having almost absolute power, he never abused it, except upon the side of mercy."

"Those who have more power are liable to sin more; no theorem in geometry is more certain than this." Gottfried Wilhelm von Leibniz\

"It is easier to develop great power than it is to know how to use it wisely." Walter Lippman\

"Power does not corrupt men; fools, however, if they get into a position of power, corrupt power." George Bernard Shaw\

"Material power that is not counterbalanced by adequate spiritual power, that is, by love and wisdom, is a curse." Arnold J. Toynbee

2/1/2009: Elvis Has Left the Mountain by Thomas L. Friedman

In its own unpredictable way, the Davos World Economic Forum usually serves as a crude barometer of the latest mood or mania on the world stage. This year did not disappoint. What has struck me is the quiet urgency that infused so many panel discussions and private conversations here between investors, politicians and social activists. To put it crudely: everyone is looking for the guy — the guy who can tell you exactly what ails the world’s financial system, exactly how we get out of this mess and exactly what you should be doing to protect your savings.

But here’s what’s really scary: the guy isn’t here. He’s left the building. Elvis has left the mountain. Get used to it.

What do I mean? First, if it is not apparent to you yet, it will be soon: there is no magic bullet for this economic crisis, no magic bailout package, no magic stimulus. We have woven such a tangled financial mess with subprime mortgages wrapped in complex bonds and derivatives, pumped up with leverage, and then globalized to the far corners of the earth that, much as we want to think this will soon be over, that is highly unlikely.

We are going to have to learn to live with a lot more uncertainty for a lot longer than our generation has ever experienced. We keep pouring money into the dark banking hole of this crisis, desperately hoping that we will hear it hit bottom and start to pile up. But so far, as hard as we listen, we can’t hear a thing. And so we keep pouring ...

A broker friend told me it reminded him of when he was a teenager and his doctor first diagnosed him as unable to digest wheat products. He said to the doctor, “Well, just give me a pill.” And the doctor told him: there is no pill. “You mean I’m just going to have to live with this?” he asked. That’s us. There is no pill — not for this mess.

The fact that there is no single pill doesn’t mean there’s nothing to be done. We need a stimulus big enough to create more jobs. We need to remove toxic assets from bank balance sheets. We need the Treasury to close the insolvent banks, merge the weak ones and strengthen the healthy few. And we need to do each one right. But even then, the turnaround will be neither quick nor painless. Indeed, the whispers here were that what has been an exclusively economic crisis up to now may soon morph into a domino of political crises — as happened in Iceland, where the bankruptcy of the banks toppled the government on Monday.

(Davos humor: What is the capital of Iceland? Answer: $25.)

Second, we’re going to have to get used to a loss of trust. All those rock-solid people and institutions that we trusted with our money, our pensions and our kids’ piggybank savings — like Citigroup, Merrill Lynch, Bank of America — do not seem trustworthy anymore. Never before in my adult life have I looked around at every bank in my town and said, “I’m not sure I wouldn’t prefer to put my paycheck in a mattress.”

The Bernard Madoff scandal, of course, has only reinforced that loss of trust. His degree of betrayal — his alleged willingness to embezzle the life savings of people whom he had known his whole life — is so coldhearted that it charts new territory in human behavior. He’s on his way to becoming an adjective. Money managers are already being asked prove to prospective new clients that their internal safeguards are “Madoff proof.”

I’ve written a lot about the Indian outsourcing community, so I knew B. Ramalinga Raju, the Satyam chairman accused of embezzling $1 billion from his own company. What’s really sad is that I didn’t get to know him through his business but through an interest in his family’s charitable work. They created India’s first 911 emergency system in their home state and call centers in Indian villages, so young people there could get service jobs. Was all that a fake, too? Or was he just an embezzler with a good heart? Don’t know. When you can’t even trust a person’s charitable work, you’ve hit a new low.

“We’re all going to have to learn to live with a lower level of trust in our lives,” an African banker friend said to me here. But the mind recoils at that, which may explain why so many people I talked to here are hoping that President Obama will turn out to be the guy.

Like Harry Truman, Obama is definitely present at the creation of something. He is arriving on the scene “not after a war but after the same kind of shattering of institutions that a war does,” said Peter Schwartz, chairman of the Global Business Network. “His job is to restore confidence to these institutions that have been at the foundation of our economy.”

That may be President Obama’s most important bailout task: to educate the country that there is no easy escape here, except taking our medicine, getting our fundamentals right again and working our way out of this, brick by brick, by getting back to making money — what was that old Smith Barney ad? — “the old-fashioned way” — by earning it.

2/1/2009: Obama Plan Has Already Boosted IRS Tax Collections by Scott Ott

In office less than two weeks, President Barack Obama has already increased tax receipts at the U.S. Treasury with an innovative plan to get tax-dodgers to pay up, in full, immediately.

“The president’s plan is simple but ingenious,” said White House spokesman Robert Gibbs, “He targets wealthy individuals who filed inaccurate tax forms, cheating the government out of tens of thousands of dollars. Then he just nominates them for cabinet positions. They suddenly see the error of their ways, and they cut checks for the full amount owed, plus interest.”

In the month of January alone, Mr. Obama has forced Timothy Geithner, former president of the Federal Reserve Bank of New York, to cough up $43,000 he owed the IRS, and former Sen. Tom Daschle to pay off his $128,000 tax obligation. Mr. Geithner will put his tax-paying experience to good use, overseeing the IRS as Secretary of the Treasury. Mr. Daschle hopes his recently-good behavior will garner Senate confirmation as the next Secretary of the Health and Human Services.

“With the IRS underfunded as it is,” said Mr. Gibbs, “this collection method is much more efficient than dispatching field agents. Arresting these men, or compelling them to pay penalties would take years, and make them feel bad about themselves. The president’s method not only gets more money to the government to help our economy, but provides a self-esteem boost by giving these wealthy men important-sounding titles.”

The Obama administration will reportedly expand the program by creating hundreds, perhaps thousands, of additional cabinet posts, available to any rich person willing to “fess up and settle up” with the IRS.