If stupidity got us into this mess, then why can't it get us out?" –Will Rogers

Alexander Hamilton started the U.S. Treasury with nothing, and that was the closest the country ever came to breaking even. –Will Rogers

5/31/2008: Environmentalists Pick Up Where Communists Left Off By Charles Krauthammer

WASHINGTON -- I'm not a global warming believer. I'm not a global warming denier. I'm a global warming agnostic who believes instinctively that it can't be very good to pump lots of CO2 into the atmosphere, but is equally convinced that those who presume to know exactly where that leads are talking through their hats.

Predictions of catastrophe depend on models. Models depend on assumptions about complex planetary systems -- from ocean currents to cloud formation -- that no one fully understands. Which is why the models are inherently flawed and forever changing. The doomsday scenarios posit a cascade of events, each with a certain probability. The multiple improbability of their simultaneous occurrence renders all such predictions entirely speculative.

Yet on the basis of this speculation, environmental activists, attended by compliant scientists and opportunistic politicians, are advocating radical economic and social regulation. "The largest threat to freedom, democracy, the market economy and prosperity," warns Czech President Vaclav Klaus, "is no longer socialism. It is, instead, the ambitious, arrogant, unscrupulous ideology of environmentalism."

If you doubt the arrogance, you haven't seen that Newsweek cover story that declared the global warming debate over. Consider: If Newton's laws of motion could, after 200 years of unfailing experimental and experiential confirmation, be overthrown, it requires religious fervor to believe that global warming -- infinitely more untested, complex and speculative -- is a closed issue.

But declaring it closed has its rewards. It not only dismisses skeptics as the running dogs of reaction, i.e., of Exxon, Cheney and now Klaus. By fiat, it also hugely re-empowers the intellectual left.

For a century, an ambitious, arrogant, unscrupulous knowledge class -- social planners, scientists, intellectuals, experts and their left-wing political allies -- arrogated to themselves the right to rule either in the name of the oppressed working class (communism) or, in its more benign form, by virtue of their superior expertise in achieving the highest social progress by means of state planning (socialism).

Two decades ago, however, socialism and communism died rudely, then were buried forever by the empirical demonstration of the superiority of market capitalism everywhere from Thatcher's England to Deng's China, where just the partial abolition of socialism lifted more people out of poverty more rapidly than ever in human history.

Just as the ash heap of history beckoned, the intellectual left was handed the ultimate salvation: environmentalism. Now the experts will regulate your life not in the name of the proletariat or Fabian socialism but -- even better -- in the name of Earth itself.

Environmentalists are Gaia's priests, instructing us in her proper service and casting out those who refuse to genuflect. (See Newsweek above.) And having proclaimed the ultimate commandment -- carbon chastity -- they are preparing the supporting canonical legislation that will tell you how much you can travel, what kind of light you will read by, and at what temperature you may set your bedroom thermostat.

Just Monday, a British parliamentary committee proposed that every citizen be required to carry a carbon card that must be presented, under penalty of law, when buying gasoline, taking an airplane or using electricity. The card contains your yearly carbon ration to be drawn down with every purchase, every trip, every swipe.

There's no greater social power than the power to ration. And, other than rationing food, there is no greater instrument of social control than rationing energy, the currency of just about everything one does and uses in an advanced society.

So what does the global warming agnostic propose as an alternative? First, more research -- untainted and reliable -- to determine (a) whether the carbon footprint of man is or is not lost among the massive natural forces (from sunspot activity to ocean currents) that affect climate, and (b) if the human effect is indeed significant, whether the planetary climate system has the homeostatic mechanisms (like the feedback loops in the human body, for example) with which to compensate.

Second, reduce our carbon footprint in the interim by doing the doable, rather than the economically ruinous and socially destructive. The most obvious step is a major move to nuclear power, which to the atmosphere is the cleanest of the clean.

But your would-be masters have foreseen this contingency. The Church of the Environment promulgates secondary dogmas as well. One of these is a strict nuclear taboo.

Rather convenient, is it not? Take this major coal-substituting fix off the table and we will be rationing all the more. Guess who does the rationing?

5/31/2008: The Government's Scapegoats By Robert Murphy

With food and energy prices soaring, housing prices collapsing, and the economy sinking into what could be a deep recession, the government has been searching around for villains. The latest scapegoats are speculators, OPEC, and of course, the big bad oil companies. As usual, our government ignores its own role in our current economic mess. To add insult to injury, most of the politicians’ proposed “solutions” would only make things worse.

Whenever there are large moves in prices, people naturally become suspicious of the mysterious speculators. These shadowy figures lurk behind every financial market, and apparently have the power to move prices up or down at will, earning fat profits for themselves. (If this were true, why do the speculators only appear at certain times? Why not make guaranteed money constantly?) The politicians promise to crack down on this antisocial behavior, and let prices return to the levels set by supply and demand.

There are two problems with this view. First, the huge run-up in oil prices over the last few years is due to the “fundamentals”: Demand is soaring among developing countries, while global output has been flat since 2005. Second, even if it were true that speculators were manipulating prices, that would be a good thing. Speculators buy low and sell high. When they buy at the low prices, the speculators push prices up. And then when they unload at the high prices, they push those prices back down. Over the entire cycle, the speculators actually dampen the price volatility, making it easier for producers and consumers to plan for the future. Punishing speculators in the oil market will only make oil price swings more exaggerated.

The next government scapegoats are the countries forming OPEC. It is true, fans of the free market should have little respect for a cartel among governments that ignores market signals. Despite the skyrocketing price for oil on the world market, OPEC has been cutting output, with its 2007 output down over 1% from the prior year.

The obvious response of the rest of the world should be to increase their own output and take market share from OPEC producers. Yet rather than this sensible strategy, the U.S. government instead continues with its prohibitions on ANWR and offshore drilling, and chooses to threaten OPEC countries with antitrust lawsuits and other punishments, such as a held-up arms deal with Saudi Arabia. The Congress doesn’t seem to see the irony involved when it accuses other governments of restricting oil output and thereby harming consumers.

Finally we come to the easiest scapegoat, domestic oil companies. Politicians have been threatening to impose a windfall profits tax, and Maxine Waters infamously suggested outright nationalization at a recent hearing. As with speculators, the theory here is that oil companies can set whatever price they want, and the hapless motorist has no choice but to pony up at the pump. Only by taking away those excess profits can justice be restored, say our politicians and pundits.

Even on its face, this strategy is absurd. If the oil companies really can decide, “Well, we’d like to make $45 billion in profits this year, so let’s set the price of a barrel at $130,” then the last thing the government should do is tax away a large percentage of those profits. Why wouldn’t the fat cat companies respond by jacking up prices even more to recover their profit objective?

In reality, the price of oil is set on the world market. Even though U.S. oil companies are huge, they can’t unilaterally set prices. If the federal government slaps on a windfall profits tax, it will only apply to domestic producers. Their after-tax returns will drop, and they will cut back on investment in future output. With reduced supplies, the world oil price will go up, not down. What’s even crazier, Americans would become more reliant on foreign oil producers, as these state-run companies would have a competitive advantage once U.S.-based firms are slapped with a new tax.

Americans are understandably upset over a faltering economy and in particular over record-breaking gasoline prices. The only solution is to find ways to bring down the price of crude oil. There are definitely steps the federal government can take, such as opening up domestic sources for development. Unfortunately, virtually every proposal put forth in recent months would make our energy situation worse. Picking scapegoats might sell at the ballot box, but it won’t bring relief to consumers.

5/31/2008: Polar Bears Endangered - By Greenie Bureaucrats By Humberto Fontova

There's roughly twice as many polar bears in the world today as thirty years ago. But on May 14th U.S. Interior Secretary Dirk Kempthorne, invoking the U.S. Endangered Species Act, proclaimed polar bears as a “threatened species.” In 1972 the creatures had already lost value in the U.S. when the Marine Mammal Protection Act prohibited their hunting in Alaska. (And no, it's not the hunting ban that caused their increased numbers; they proliferated equally in Canada which continued the polar bear season.)

After 1972 U.S. hunters started hunting polar bears in Canada. But Kempthorne's recent proclamation means that U.S. hunters will be barred by law from bringing their trophy bear skins into the U.S. So again Polar Bears have lost value.

Lately hunters (primarily from the U.S.) have been paying $30,000 for the chance of whacking a polar bear during a grueling hunt in the Canadian arctic on dog-sleds and in sub-zero weather. If successful, then the hunter's taxidermist landed another $5,000 or so for converting the beast's epidermis into an infuriatingly politically-incorrect rug for the hunter to display to his politically-correct guests at dinner parties. Generally speaking, the most spirited reactions from guests came after uncorking the eight bottle of wine.

Most of these guests were usually his wife's friends from the local Art Council and Kayak Club and spittle sometimes landed on his valuable rug of thick white fur, but without lasting damage. The often lipstick-smeared sprayings quickly evaporated and whatever effort was involved in wiping them up was well worth the spectacle of pulsating veins on pretty crimson-hued foreheads with earrings jangling below from the bobbing motions, along with the slender, perfumed (but always white-knuckled) fists constantly thrust to within millimeters of his nose.

“Ah, but they look so sexy that way!” the hunter would always remark to his glowering wife as she frantically motioned the guests into another room. “Like a woman in a Tango!” the smirking hunter persisted. “In the words of legendary poet, Jorge Luis Borges: “The tango shows that a fight may be a celebration! "

Alas, the hunter's philosophical reflections were always lost on his guests-- not to mention his wife.

At any rate, most of the $30,000 spent by the hunter for his foolproof conversation piece went to Canada's Inuit (Eskimo) communities whose members had served as his guide, cooks, outfitters, etc, during the hunt. The Eskimos also got the polar bear meat, which has been a historic staple in their diet.

"It's Inuit food,” says Canadian Inuit Jayko Alooloo in an interview with Canada's CTV, “like cows for you southern people.''

A loo loo also regards the newly-designated status of polar bears as “endangered” as a complete crock.

“They're actually increasing every year.” he says. But what does he know? He only lives amongst them? Whereas, from his Washington D.C. Office, U.S. Interior Secretary Dirk Kempthorne relied on computer weather model to predict that in 50 years, due to Global Warming's effect on arctic ice fields, polar bears will decrease in numbers. My own weatherman's computer model's rarely get it right for the next four days. Kempthorne's nails it for the next fifty years!

Recreational hunters (again, overwhelmingly from the U.S) pumped $3 million a year into Eskimo communities for polar bear hunts. These Inuit communities get a quota of bear tags (licenses) from the Canadian government to use as they see fit. They can hunt the bears themselves for the meat, and for the roughly $1000 per hide if they sell it. Or they can sell the tag to a recreational hunter for $30,000 –serve as his guide, (i.e. experience most of their culture's traditional and integral parts of the hunt) and still keep the meat. Only a Federal bureaucrat would miss the implications here.

In fact, these hunts being such an integral part of their culture, a few Inuits elect to retain the tags for themselves to do the killing. The new ruling means that now they'll probably keep all. A recreational hunt lasts a few days and—like all hunting--does not always climax with kill. But the tag is considered used once it's sold to a recreational hunter, kill or no kill. On the other hand, Inuit hunters always kill a bear because they have months to fill that tag. So now that U.S. Recreational hunters are barred by U.S. Federal law from bringing home their conversation-piece rug, the Inuits have no choice but to keep their tags, assuring that more Polar Bears bears will be killed.

5/30/2008: A new hit for Math geeks: "I Will Derive" a parody of "I Will Survive"

5/30/2008: "Adding additional oil supply is important but it is not the cause of this recent escalation in oil prices. The Federal Reserve has caused the value of the dollar to drop. As soon as the Fed sets interest rates above the overall inflation rate, including the cost of energy and food, I predict the price of oil will plummet. Those who have gambled on continuing increases in energy prices will be squeezed out, and the energy market will return to some level of normalcy." -- Robert B. Linn, responding to "Blame Congress for High Oil Prices."

5/30/2008: The 'Diversity' Threat to California Charity By HEATHER R. HIGGINS

A bill purporting to encourage diversity among nonprofits has passed the California Assembly and faces a key vote in the state senate in early June. While little attention has been paid to this bill, it poses an enormous threat to private philanthropy in this country.

The Foundation Diversity and Transparency Act requires California foundations with $250 million in assets to report the composition by ethnicity and gender orientation of their boards and staffs, the boards and staffs of the charities they support, and the degree to which they are run by or support certain minorities. [Read More]

5/29/2008: "Cap and trade brings us back to the Beatles's prescient 'The Tax Man,' an impost on the very substance we exhale. It will never go away. What happens if global warming is seen to increase? A demand for even more control. What happens if it abates? A declaration that the new tax system must endure because it has saved the country. Heads you pay, tails you pay more." -- Ross Reeves, responding to "Climate Reality Bites."

5/29/2008: Blame Congress for High Oil Prices By MACKUBIN THOMAS OWENS

Gasoline prices are through the roof and Americans are angry. Someone must be to blame and the obvious villain is "Big Oil" with its alleged ability to gouge consumers and achieve unconscionable, "windfall" profits. Congress is in a vile mood, and has dragged oil industry executives before its committees for show trials, issuing predictable threats of punishment, e.g. a "windfall profits tax."

But if there is a villain in all of this, it is Congress itself. That venerable body has made it impossible for U.S. producers of crude oil to tap significant domestic reserves of oil and gas, and it has foreclosed economically viable alternative sources of energy in favor of unfeasible alternatives such as wind and solar. In addition, Congress has slapped substantial taxes on gasoline. Indeed, as oil industry executives reiterated in their appearance before the Senate Judiciary Committee on May 21, 15% of the cost of gasoline at the pump goes for taxes, while only 4% represents oil company profits. [Read More]

5/29/2008: Obama's Revisionist History By KARL ROVE

This week's minor controversy about Barack Obama's claim that an uncle liberated Auschwitz was quickly put to rest by his campaign. They conceded that it was a great uncle whose unit liberated Buchenwald, 500 miles away.

But other, much more troubling, episodes have provided a revealing glimpse into a candidate who instinctively resorts to parsing, evasions and misdirection. The saga over Rev. Jeremiah Wright is Exhibit A. In just 62 days, Americans were treated to eight different explanations. [Read More]

5/27/2008: Gross: U.S. Inflation Figures Wrong

Americans are fooling themselves if they think U.S. inflation is under control, the manager of the world's largest bond fund said last week. Bill Gross, chief investment officer of Pacific Investment Management Co (PIMCO) said in his June investment outlook that he has been arguing for some time that inflation statistics "were not reflecting reality at the checkout counter." He said statistical practices in calculating price growth had favored lower U.S. inflation over the last 25 years and called for change. "Today's world, including its inflation rate, is changing. Being fooled some of the time is no sin, but being fooled all of the time is intolerable," Gross said. "Join me in lobbying for change in U.S. leadership, the attitude of its citizenry, and (to the point of this Outlook) the market's assumption of low relative U.S. inflation in comparison to our global competitors."

The comments from Gross come a day after the Federal Reserve slashed its 2008 U.S. economic growth forecast but also signaled that mounting concerns over inflation would make further interest rate cuts unlikely. Gross said that developing economies such as Brazil, Russia, India and China were obvious choices for investment dollars.

© 2008 Reuters. All rights reserved.

5/27/2008: We Don't Need Your Money

The National Math and Science Initiative (NMSI) was started by Bill Gates, Michael Dell and other technology titans concerned about the declining performance of American students in math and science. The public-private partnership funds efforts to increase the number of students taking advanced placement courses in those subjects. But thanks to the Washington Education Association, a teachers union, the initiative's recent efforts in Washington state have been torpedoed.

Earlier this month NMSI announced that a $13.2 million grant slated for Washington state was being scrapped. Why? The contract ran afoul of the union's collective bargaining agreement. NMSI wanted to compensate teachers directly and include extra pay based on how well students performed on AP exams. But under the teacher contracts, the union is the exclusive agent for negotiating teacher pay and union officials refused to compromise. They were willing to turn away free money for their teacher members rather than abide this kind of merit pay.

State Representative Bill Fromhold, who was helping to administer the grant, told the Seattle Times, "We worked hard to try to find middle ground." But in the end, he said, "we got caught in the middle of the grant requirements and collective bargaining laws in the state of Washington that have to be followed."

Other heavily unionized states, such as Massachusetts and Connecticut, were able to reach agreements and will receive the math and science money notwithstanding similar bargaining agreements. And while the Washington union is spurning millions of dollars in grant money, it's also suing the state for the alleged inadequate funding of public schools. Hmmm. Could it be that union chiefs care more about protecting their monopoly than what students are learning?

5/27/2008: The Lucrative Stink Troubling Farmers By JOSEPH SCHUMAN from THE WALL STREET JOURNAL ONLINE

The use of food crops for biofuel at a time of fiscal and ecological petroleum worries isn't the only contentious nexus between surging food and oil prices. Fertilizer is also kicking up a big stink.

Demand for sulfur, long an ugly yellow waste product of petroleum refining, is surging as well, because it's needed to make sulfuric acid, which in turn is essential to the production of fertilizer, as the Times of London reports. The likes of Royal Dutch Shell, Chevron, Saudi Aramco and Abu Dhabi national oil producer Adnoc are expected to get windfall profits from the sulfur market, which has seen prices rise to $500 a ton from $50 a ton a year ago, the Times adds. And it isn't hard to see where the demand is coming from. In the U.S., fertilizer use has pushed prices for the plant nutrient up 65% in the past year -- faster than the 43% increase in farmers' fuel prices and a 30% increase in prices for seeds, as The Wall Street Journal points out. Sulfur is a key but secondary fertilizer ingredient, behind the nitrogen and potassium usually contributed through potash, and the phosphorus that comes in the form of phosphate. And the Journal reports farmers believe the small group of U.S., Canadian and Russian companies that dominate markets for potash and phosphate have too much market power. In some countries, these producers enjoy unusual protection from antitrust rules.

Whatever the cause, "those skyrocketing costs are making it harder for farmers to expand their harvests in response to the global food crisis that has sparked rioting, rationing and export controls in many countries," the Journal notes. The resulting tight food supply in some regions is now atop the global policy agenda, and will be the subject of a high-level United Nations meeting set for Rome next week. But there remains little international consensus on what to do about the problem. Last week, the European Commission suggested the bloc give its unspent agricultural aid to the developing world. But EU member-state farm ministers yesterday objected. The ministers agreed the developing world could sure use the hundreds of millions of unused euros to buy seeds and fertilizers, as the Financial Times reports. But many -- and approval of all 27 member states and the European parliament would be needed to enact the plan -- felt European agricultural policy wasn't the solution.

5/27/2008: Mascot Politics By Thomas Sowell

Years ago, when Jack Greenberg left the NAACP Legal Defense Fund to become a professor at Columbia University, he announced that he was going to make it a point to hire a black secretary at Columbia. This would of course make whomever he hired be seen as a token black, rather than as someone selected on the basis of competence.

This reminded me of the first time I went to Milton Friedman's office when I was a graduate student at the University of Chicago back in 1960, and I noticed that he had a black secretary. This was four years before the Civil Rights Act of 1964, and there was no such thing as affirmative action. It so happened that Milton Friedman had another black secretary decades later, at the Hoover Institution-- and she was respected as one of the best secretaries around.

When I mentioned to someone at the Hoover Institution that I was having a hard time finding a secretary who could handle a tough job in my absence, I was told that I needed someone like Milton Friedman's secretary-- and that there were not many like her. At no time in all these years did I hear Milton Friedman say, either publicly or privately, that he had a black secretary.

William F. Buckley's wife once mentioned in passing, at dinner in her home, that she had been involved for years in working with a school in Harlem. But I never heard her or Bill Buckley ever say that publicly.

Nor do conservatives who were in the civil rights marches in the South, back when that was dangerous, make that a big deal.

For people on the left, however, blacks are trophies or mascots, and must therefore be put on display. Nowhere is that more true than in politics.

The problem with being a mascot is that you are a symbol of someone else's significance or virtue. The actual well-being of a mascot is not the point.

Liberals all across the country have not hesitated to destroy black neighborhoods in the name of "urban renewal," often replacing working-class neighborhoods with upscale homes and pricey businesses-- neither of which the former residents can afford.

In academia, lower admissions standards for black students is about having them as a visible presence, even if mismatching them with the particular college or university produces high dropout rates.

The black students who don't make it are replaced by others, and when many of them don't make it, there are still more others.

The point is to have black faces on campus, as mascots symbolizing what great people there are running the college or university.

Many, if not most, of the black students who do not make it at big-name, high-pressure institutions are perfectly qualified to succeed at the normal range of colleges and universities.

Most white students would also punch out if admitted to schools for which they don't have the same qualifications as the other students. But nobody needs white mascots.

Various empirical studies have indicated that blacks succeed best at institutions where there is little or no difference between their qualifications and the qualifications of the other students around them.

This is not rocket science but it is amazing how much effort and cleverness have gone into denying the obvious.

A study by Professor Richard Sander of the UCLA law school suggests that there may be fewer black lawyers as a result of "affirmative action" admissions to law schools that are a mismatch for the individuals admitted.

Leaping to the defense of black criminals is another common practice among liberals who need black mascots. Most of the crimes committed by black criminals are committed against other blacks. But, again, the actual well-being of mascots is not the point.

Politicians who use blacks as mascots do not hesitate to throw blacks to the wolves for the benefit of the teachers' unions, the green zealots whose restrictions make housing unaffordable, or people who keep low-price stores like Wal-Mart out of their cities.

Using human beings as mascots is not idealism. It is self-aggrandizement that is ugly in both its concept and its consequences.

5/26/2008: From the Daily Reckoning [free subscription]: “When the price of oil was $25 and gold was $300, it was easy to know what to do with your money,” lamented MoneyWeek editor Merryn Somerset Webb last week. “Now, it’s not so easy.”

A friend in Paris echoed her sentiment on the weekend: “I just don’t know what to do...I’ve got all my money in cash, because I can’t decide...and the dollar is falling. This is terrible. What should I do?”

We gave our friend the same answer [Warren] Buffett gave El Pais. We don’t know. It is not given to man to know his fate. We don’t know what will happen. Still, you need to make decisions. So, here we offer a very little, very modest bit of advice. It is worth every penny you pay for your Daily Reckoning subscription:

First, pay attention to your business...or your earnings. This is where you get your money. Make sure you understand what you’re doing. Then, make sure your costs are lower than your income.

If you have a house, make sure it is a place to live, not a speculation.

When you invest, there too make sure you’re really investing – not speculating. Buffett told El Pais what he always tells investors: never invest in anything you don’t understand. If you don’t understand it – that is, how the underlying business works and how you will make money from it – it’s not an investment. It’s just a speculation.

Right now, we are putting cash into three things:

1) Gold...for all the reasons you have read about in these Daily Reckonings. Is gold going up? We don’t know...we think there is a fair chance of it. But we don’t care; the gold (we hope) is for the next generation.

2) Swiss francs...because it is not the dollar

3) Emerging markets...because they are going up; it’s a trend we think will continue as the world economy regresses to the mean. We suggest an ETF of major developing markets...recognizing that some will probably fail and others will continue to grow.

What about oil? What about commodities? We don’t know enough about them to speculate. But from what we see, they look toppy.

5/26/2008: [You can always count on government to do the wrong thing. Just as the idiots on the Federal Reserve Board believe the solutions to our economic problems require the creation of more money, the European Monetary Authorities will compound their problem by doing more of what created the problem to begin with]

The Daily Reckoning PRESENTS: Consumers are suffering because the stupid European governments boosted spending for a decade or more, the money financed by debt, and it is all of this spending that has made the purchasing power of the euro to fall. How do we fix this? The Mogambo has an answer. Read on...

INFLATIONARY TORTILLAS by The Mogambo Guru

The biggest laugh I had all week was from Bloomberg.com reporting that “European consumers are ‘suffering as surging food and energy prices erode the value of their wages’, finance officials said” which is not itself funny, but the article immediately goes on that this is “urging governments to boost spending to help the poorest deal with the fastest inflation in 16 years.” Hahahaha!

Consumers are suffering because the stupid European governments boosted spending for a decade or more, the money financed by debt, and it is all of this spending that has made the purchasing power of the euro to fall. And now the governments are going to boost spending some more Hahaha!

But it’s okay, these guys are saying, because it’s “to help the poorest deal with the fastest inflation in 16 years.” Hahahaha! Idiots! As Strother Martin said of Butch Cassidy and the Sundance Kid in the movie of the same name as they went down the mountain to La Paz, “Idiots! I’ve got idiots on my team!”

For example, Jean-Claude Juncker of Luxembourg is quoted as saying, “The least well off in our societies are very seriously exposed to a loss of purchasing power due to the increase of oil prices, of commodity prices and food prices”, which is true.

Then, bizarrely, he says that this inflation-from-too-much-spending makes it imperative that “It’s up to public budgets to react to this loss in purchasing power by helping out the least well off”! Hahahaha!

And how does he suggest we do that? Naturally, anybody with an ounce of brains or education knows that the first thing you do is stop creating more money and credit, which is what causes a “loss in purchasing power” in the first damned place.

Naturally, I figure that since the solution is so simple that it was time to go out for something tasty to eat and something wet to drink, and then maybe take in a couple of XXX-rated movies, but I was wrong, as here comes European Central Bank President Jean-Claude Trichet saying that inflation will remain “high’’ for quite some time to come, and European Union Monetary Affairs Commissioner Joaquin Almunia saying “We need to do more,’’ because “Inflation is a socially negative tax on the poorest’’ people, which it is, and that is why it is so imperative to stop creating more money and credit nowm not create more, you idiots!

Participating in this Gang of Morons Idiocy (GOMI) is U.K. Chancellor of the Exchequer Alistair Darling, who “cut the tax bills of Britain’s poorest families by 2.7 billion pounds ($5.25 billion) in a bid to cushion the blow from higher prices”, which is a nice thing to do, especially if you don’t want to overlook the fact that they were taxing Britain’s poorest families to start with, which tells you all you need to know about the good intentions of the British government.

But the horror is that they are NOT proposing to stop creating more money and credit! They were proposing to create MORE money and credit, making everything worse, as we learn to our horror when Darling said he will “raise government borrowing to finance the decision as slower economic growth curbs tax revenue.”

John Stepek, writing in the Money Morning newsletter from MoneyWeek.com, writes “Gordon Brown’s response to the end of his economic ‘miracle’ is to rattle off yet another succession of bills. You’d think he’d realise that the British consumer is sick of bills by now. But no. The man once laughably described as the Iron Chancellor has thrown off all pretence of fiscal competence and is now flinging money he doesn’t have at problems he can’t solve.”

And speaking of inflationary things that people can’t solve, Christopher Laird of PrudentSquirrel.com writes that “There is a report that 25% of the world wheat crop is at serious risk of a new virulent wheat rust that chokes the wheat before it comes to head. The US has its own concerns over a wheat rust spreading through the Mid West. So, what are the chances of a record grain harvest in 08?”

Naturally, I have no idea about the chances of anything since I figure that neither my marriage nor my career will last until the weekend, and so Mr. Laird gives us a hint. “Just to give an idea of the concern about food,” he writes, “China just spent a $400 a ton premium on fertilizer that used to cost $170 a ton Jan 08. It was a huge order. Reason? They are afraid that if they don’t have great harvests this year, tens of millions may starve in 09.”

And in case you don’t care about Europeans but are concerned about the other hemisphere because that is where you live, SteveQuayle.com posted a news.bbc.so.uk story that “The price of tortillas, a staple food in Mexico, are set to rise 18% in the next few weeks, an industry group says”.

This is bad news because “Thousands of people protested against tortilla price rises in Mexico last year” when tortilla prices rose “by more than 10%.”

So, Mexicans rioted at 10% inflation, and now everyone is wondering what they will do about 18% inflation in tortillas? Hahahaha! Welcome to inflationary hell! Ugh.

The Mogambo Sez: Ahh, commodities! Verily I say unto thee; thy gold, thy silver and thy oil sustain me when all others wouldst betray me, as they now betray all those who were tempted by the charms and promises of “invest in the stock market, invest in the bond market, invest in the housing market, and invest in a larger government for the long-term!”

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.

5/25/2008: Bob Barr, former Georgia Congressman (and former Republican), wins Libertarian Nomination for President of the United States on the 6th Ballot!

5/25/2008: A thief stuck a pistol in a man's ribs and said, "Give me your money."

The gentleman, shocked by the sudden attack, said "You cannot do this, I'm a United States congressman!"

The thief said, "In that case, give me my money!"

5/25/2008: State’s payroll soars under Schwarzenegger Six-figure earners more than double. Erin McCormick, SF Chronicle [Could this be part of the reason we are in fiscal meltdown? What do you think?]

The state of California’s payroll is skyrocketing, even as its budget deficit has grown to billions of dollars in recent months.In Gov. Arnold Schwarzenegger’s first four years, the total bill for state workers’ salaries jumped by 37 percent, compared with a 5 percent increase in the preceding four years under then-Gov. Gray Davis, a Chronicle analysis of state payroll records shows.

5/25/2008: "Let's not mistake racial fear of Obama for personal popularity for Hillary. Most of the blue-collar working class whites who backed Hillary Clinton, particularly the men, can't stand her." – Columnist Dick Morris

5/25/2008: "I'm not sure that I have ever been so relieved to see a headline. 'Court Rules Removal of Children From FLDS Compound was Illegal.'  Halleluiah. A court finally got one right.   The mass abduction of hundreds of children who lived at the 'Yearning for Zion' ranch in Eldorado, Texas was just the beginning of predictably disgraceful behavior by the state's Child Protective Services agency. CPS is an agency that frequently runs amok in many states, an out-of-control organization that regularly tramples on the rights of adults accused of abusing children. The horror stories of parents humiliated by the storm trooper tactics of this bunch of state bureaucrats are lengthy." – Columnist Mike Gallagher

5/25/2008: [from the Daily Reckoning] Capitalism had already pronounced its verdict on corn-based fuel: it was a bad idea. Later, environmentalists came to the same conclusion; it actually caused more damage than petroleum. But the U.S. Congress, in its majestic wisdom, saw something in ethanol that capitalists and environmentalists had missed – campaign contributions and votes!

And so it came to be that a large portion of the U.S. corn crop is diverted into fuel tanks. And so it comes to be that a large number of the world’s people – including Americans themselves – find their food much more expensive than it used to be.

Did anyone...anywhere...mention that capitalism could be relied upon to sort out the agricultural sector? Did anyone recall that a free market – with prices set by willing producers and consumers – works more efficiently than one that is rigged by lawmakers? Did anyone even notice that the farming industry has been corrupted by government money...or ask where the money would come from to corrupt it even more? Apparently not. Apparently, Americans don’t think they can trust free enterprise to feed them. They think every bid needs to be checked with a bureaucrat and every ask should be cleared by a Senate committee.

5/24/2008: 2 MICHELLES, 2 AMERICAS & SHAME vs. PRIDE By Michelle Malkin, Columnist

Like Michelle Obama, I am a "woman of color." Like Michelle Obama, I am a working mother of two young children. Like Michelle Obama, I am a member of the 13th generation of Americans born since the founding of our great nation.

Unlike Michelle Obama, I can't keep track of the number of times I've been proud - really proud - of my country since I was born and privileged to live in it. At a recent speech in Milwaukee on behalf of her husband's Democratic presidential campaign, Mrs. Obama remarked, "For the first time in my adult lifetime, I am really proud of my country, and not just because Barack has done well, but because I think people are hungry for change."

Mrs. Obama's statement was met with warm applause from other Barack supporters who have also apparently been devoid of pride in their country during their adult lifetimes. Or maybe it was just a Pavlovian response to the word "change." What a sad, empty, narcissistic, ungrateful, unthinking lot!

I'm just seven years younger than Mrs. Obama. We've grown up and lived in the same era. And yet, her self-absorbed attitude is completely foreign to me. What planet is she living on? Since when was now the only time the American people have ever been "hungry for change"?

Michelle, ma belle, Barack is not the center of the universe. Newsflash: The Obamas did not invent "change" any more than Hillary invented "leadership" or John McCain invented "straight talk." We were both adults when the Berlin Wall fell, Michelle. That was earth-shattering change.

We've lived through two decades' worth of peaceful, if contentious, election cycles under the rule of law, which have brought about "change" and upheaval, both good and bad. We were adults through several launches of the space shuttle, in case you were snoozing.

And as adults, we've witnessed and benefited from dizzyingly rapid advances in technology, communications, science, and medicine pioneered by American entrepreneurs who yearned to change the world and succeeded. You want "change"? Go ask the patients whose lives have been improved and extended by American pharmaceutical companies that have flourished under the best economic system in the world.

If American ingenuity, a robust constitutional republic, and the fall of communism don't do it for you, hon, then how about American heroism and sacrifice? How about every Memorial Day? Every Veterans Day? Every Independence Day? Every Medal of Honor ceremony? Has she never attended a welcome-home ceremony for the troops? For me, there's the thrill of the Blue Angels roaring over cloudless skies. And the somber awe felt amid the hallowed waters that surround the sunken U.S.S. Arizona at the Pearl Harbor memorial.

Every naturalization ceremony I've attended, where hundreds of new Americans raised their hands to swear an oath of allegiance to this land of liberty, has been a moment of pride for me. So have the awesome displays of American compassion at home and around the world. When millions of Americans rallied to help victims of the 2004 tsunami in Southeast Asia - including members of the U.S.S. Abraham Lincoln Carrier Strike Group that sped from Hong Kong to assist survivors - my heart filled with pride. It did again when the citizens of Houston opened their arms to Hurricane Katrina victims and folks across the country rushed to their churches and offices of the Salvation Army and Red Cross to volunteer.

How about American resilience? Does that not make you proud, Michelle? Only a heart of stone could be unmoved by the strength, valor, and determination displayed in New York , Washington , D.C., and Shanksville , Pa. , on September 11, 2001.

I believe it was Michael Kinsley who quipped that a gaffe is when a politician tells the truth. In this case, it's what happens when an elite Democratic politician's wife says what a significant portion of the party's base really believes to be the truth: America is more a source of shame than pride.

Michelle Obama has achieved enormous professional success, political influence, and personal acclaim in America . Ivy League educated, she's been lauded by Essence magazine as one of the 25 World's Most Inspiring Women; by Vanity Fair as one of the ten World's Best-Dressed Women; and named one of "The Harvard 100" most influential alumni. She has had an amazingly blessed life. But, you wouldn't know it from her campaign rhetoric and her griping about her and her husband's student loans.

For years, we've heard liberals get offended at any challenge to their patriotism. And so they are again aggrieved and rising to explain away Mrs. Obama's remarks.

Lady Michelle and her defenders protest too much!

(Michelle Malkin is a newspaper columnist.)

5/24/2008: 'Nothing but Misogynists' By DONALD J. BOUDREAUX [if H. Rodham Clinton is correct, that she has only lost because the primary voters -- Democrats -- are misogynists, and that she is more likely than B. Hussein Obama to defeat McCain in the fall, then the logical conclusion is that Republicans are more open-minded than Democrats: "Who knew?"]

Hillary Clinton is now complaining that her candidacy has been harmed by sexism. Interviewed earlier this week by the Washington Post, Sen. Clinton said the polls show that "more people would be reluctant to vote for a woman [than] to vote for an African American." This gender bias, she grumbled, "rarely gets reported on."

So a woman who holds degrees from Wellesley and Yale – who has earned millions in the private sector, won two terms in the U.S. Senate, and gathered many more votes than John Edwards, Bill Richardson and several other middle-aged white guys in their respective bids for the 2008 Democratic nomination – feels cheated because she's a woman.

Seems doubtful. But hey, I'm a guy and perhaps hopelessly insensitive. So let's give her the benefit of the doubt and assume that her campaign has indeed suffered because of sexism.

This fact (if it be a fact) reveals a hitherto unknown, ugly truth about the Democratic Party. The alleged bastion of modern liberalism, toleration and diversity is full of (to use Mrs. Clinton's own phrase) "people who are nothing but misogynists." Large numbers of Democratic voters are sexists. Who knew?

But here's another revelation. If Mrs. Clinton is correct that she is more likely than Barack Obama to defeat John McCain in November, that implies Republicans and independents are less sexist than Democrats.

It must be so. If American voters of all parties are as sexist as the Democrats, Mr. Obama would have a better chance than Mrs. Clinton of defeating Mr. McCain. The same misogyny that thwarted her in the Democratic primaries would thwart her in the general election. Only if registered Republicans and independents are more open-minded than registered Democrats – only if people who lean GOP or who have no party affiliation are more willing than Democrats to overlook a candidate's sex and vote on the issues – could Mrs. Clinton be a stronger candidate.

I am neither a Democrat nor a Republican. But if I ever become convinced that Mrs. Clinton is correct that sexism played a role in her disappointing showing in the Democratic primaries – and that she truly is her party's strongest candidate to take on John McCain – I might finally join a party: the GOP. At least it's not infested with sexists.

Mr. Boudreaux is chairman of the economics department at George Mason University.

5/23/2008: Put a Shyster in Your Tank

Growing global demand and a weak dollar have given us $4-a-gallon gasoline. The way to lower prices would seem obvious: pump more oil domestically and strengthen the dollar. That's too obvious for Congress, apparently, which instead wants to solve the problem through litigation:

The House of Representatives overwhelmingly approved legislation on Tuesday allowing the Justice Department to sue OPEC members for limiting oil supplies and working together to set crude prices, but the White House threatened to veto the measure. The bill would subject OPEC oil producers, including Saudi Arabia, Iran and Venezuela, to the same antitrust laws that U.S. companies must follow.

The measure passed in a 324-84 vote, a big enough margin to override a presidential veto.

This idiocy is bipartisan, with a majority of Republicans joining all but two Democrats in supporting the bill. If this bill becomes law and the Justice Department goes ahead with it, remember when you're paying $6 a gallon that a good chuck of that is going to lawyers' fees.

5/23/2008: Sex and the Sissy by Peggy Noonan, Wall Street Journal

For Hillary, whining is the next best thing to winning.

Golda Meir, Indira Gandhi, and "Iron Lady" Thatcher...Great women, all different, but great in terms of size, of impact on the world and of struggles overcome. Struggle was not something they read about in a book. They did not use guilt to win election -- it comes up zero if you Google "Thatcher" and "You're just picking on me because I'm a woman." Instead they used the appeals men used: stronger leadership, better ideas, a superior philosophy.

Hillary Clinton complained again this week that sexism has been a major dynamic in her unsuccessful bid for political dominance. She is quoted by the Washington Post's Lois Romano decrying the "sexist" treatment she received during the campaign, and the "incredible vitriol that has been engendered" by those who are "nothing but misogynists." The New York Times reported she told sympathetic bloggers in a conference call that she is saddened by the "mean-spiritedness and terrible insults" that have been thrown "at you, for supporting me, and at women in general."

[read the whole essay]

5/23/2008: This all seems quite simple to me: In the private market, you make an investment or engage in research and when you find a solution, you start making money. In government, you start making money immediately and, if you fail, you get more money. If you're inefficient, you get more money. In the private market, positive outcomes are rewarded; in government, negative outcomes are rewarded.

"Research and development (R&D) activities undertaken by the business sector seem to have high social returns, while no clear-cut relationship could be established between (government funded) non-business-oriented R&D activities and growth." -- from a study by the Organization for Economic Cooperation and Development.

A 1995 analysis done by American University economist Walter Parker also finds that government funding crowds out private research. "Once private research is explicitly controlled for, the direct effect of public research is weakly negative, as might be the case if public research has crowding-out effects which adversely affect private output growth," concludes Parker. Weakly negative? Government funding may retard technological progress? Is it possible that the funding for NASA has crowded out private space transport research and development?

5/23/2008: The Failure of Centralized Scientific Planning A review of Sex, Science and Profits: How People Evolved to Make Money [from the Reason Foundation]

5/23/2008: Economic Stimulus Payment by Dave Barry: This year, taxpayers will receive an Economic Stimulus Payment. This is a very exciting new program that I will explain using the Q and A format:

Q. What is an Economic Stimulus Payment?
A. It is money that the federal government will send to taxpayers.

Q. Where will the government get this money?
A. From taxpayers.

Q. So the government is giving me back my own money?
A. Only a smidgen.

Q. What is the purpose of this payment?
A. The plan is that you will use the money to purchase a high-definition TV set, thus stimulating the economy.

Q. But isn't that stimulating the economy of China?
A. Shut up.

5/23/2008: 31,000 Scientists Shatter the Myth of a “Scientific Consensus” on Global Warming

Al Gore is a fraud! (no surprise there)

We urge the United States government to reject the global warming agreement that was written in Kyoto, Japan in December 1997, and any other similar proposals. The proposed limits on greenhouse gases would harm the environment, hinder the advance of science and technology, and damage the health and welfare of mankind.

There is no convincing scientific evidence that human release of carbon dioxide, methane, or other greenhouse gases is causing, or will in the foreseeable future cause, catastrophic heating of the Earth’s atmosphere and disruption of the Earth’s climate. Moreover, there is substantial evidence that increases in atmospheric carbon dioxide produce many beneficial effects upon the natural plant and animal environments of the Earth.

[Read the whole story]

5/20/2008: "It is fascinating that the proposals laid out to address the global warming theory have the potential to create more actual hardship and 'crisis' than any real climate change at this point. The issue effectively provides politicians, which evidently includes John McCain, with cover regarding anything they might wish to propose, as long as it is done in the name of global warming... So, instead of fear of global warming we should actually be fearful of what politicians will attempt to do in its name." -- Alice Felt, responding to "Warming to John McCain"

5/20/2008: The Democrats' Dangerous Trade Games By C. FRED BERGSTEN, Wall Street Journal, May 20, 2008; Page A23

President Bush and the Democratic Congress are locked in fierce conflict over approval of U.S. free trade agreements with Colombia, Panama and South Korea. Presumptive presidential candidates Barack Obama and John McCain hold sharply different views on the merits of free trade and globalization. Whether we're prepared for it or not, a major national debate on these issues is looming for the fall campaign and beyond.

Meanwhile, our venerable House of Representatives, in the context of the Colombia agreement, has recklessly changed the rules for congressional action on trade legislation. By rejecting long-settled procedures that prevented congressional sidetracking of trade deals negotiated by presidents, the House has hamstrung U.S. trade policy and created the gravest threat to the global trading system in decades.

By effectively killing "fast track" procedures that guarantee a yes-or-no vote on trade agreements within 90 days, lawmakers in Washington, led by House Speaker Nancy Pelosi, have destroyed the credibility of the U.S. as a reliable negotiating partner.

Our unique constitutional system – under which Congress is responsible for "foreign commerce" but the president has authority to negotiate with other governments – has required the creation of special procedures to mesh with the parliamentary systems of other countries where executive and legislative branches almost always work together. Without arrangements that assure reasonably prompt congressional action on agreements negotiated by the president, other countries legitimately fear that Congress will simply let deals languish, or insist on further concessions.

The House was in fact doing both with respect to the pending agreements with Colombia and Korea, before the Bush administration forced the issue by submitting implementing legislation on the former. Facing such circumstances, other countries will not take on the domestic battles surrounding their own liberalization, and thus will not engage seriously with the U.S. in either multilateral or bilateral talks.

This is not theory but history. One of President John F. Kennedy's crowning achievements, the Kennedy Round of trade negotiations of the 1960s, was shorn of two of its major components by congressional refusal to even vote on them. That action unbalanced the agreement so severely that a furious European Community, our main trading partner then and now, made clear that it would never again negotiate with the U.S. without firm assurance against the recurrence of such an outcome. The other major trading nations took similar positions.

The result was the "fast track" process, embodied in trade legislation in 1974 and renamed Trade Promotion Authority in 2002. Under those rules, devised largely by Democratic legislators, Congress agreed to vote on trade agreements submitted by the president within a fixed period of time and without amending their terms, provided that Congress authorized the talks in advance and that administration trade officials consulted closely with the Hill throughout the process. This approach has enabled the U.S., under presidents and congressional majorities of both parties, to participate effectively in international trade negotiations.

The House action abruptly and unilaterally terminates this highly successful system. The immediate effect is to scuttle the pending free trade agreements with Panama and Korea, as well as Colombia, and to end any remaining prospect for an early conclusion of the Doha Round in the World Trade Organization.

The much more profound impact, however, is to remove the U.S. from any significant international trade negotiations for the foreseeable future. Current and former chief trade officials of three of the world's largest trading entities have told me that, since the House action, the U.S. has lost all credibility. In other words, the "time out" proposed for trade policy by one of the major presidential candidates – a central goal of the opponents of globalization – has already been called.

The U.S. will suffer severe economic and foreign policy costs if the House action is permitted to stand. Careful studies at our Peterson Institute for International Economics show that the U.S. economy is $1 trillion per year richer as a result of the trade liberalization of the past 60 years, and that we would gain another $500 billion per year if the world could move to totally free trade.

The European Union, and the large and dynamic economies of Asia, will now strike trade compacts among themselves that discriminate against the U.S. rather than do deals with us. Examples will likely include EU-India and EU-Korea, and eventually an Asia-wide trade area. We will lose billions of dollars worth of exports and the associated high-paying jobs – just at a time when improvements in our trade balance, fortified by continuing growth abroad and a highly competitive dollar, are cushioning our slowdown. The multilateral trade system, including the highly effective dispute settlement mechanism in the World Trade Organization, will erode further and weaken our ability to tear down barriers in China, India and other large emerging markets.

Most profound of all will be the impact on U.S. foreign policy. Any new administration, whether Democratic or Republican, will seek to reverse the perception of unilateralism inherited from its predecessor. But effective withdrawal from the international trading system moves us in the opposite direction. The next president will be very badly served by inheriting such a mess on trade.

It would help if Congress and the present administration could pick up the pieces and pass the Colombia agreement, and the pending Korea and Panama agreements as well. But the fundamental problem of U.S. international credibility on trade will remain until a foolproof Trade Promotion Authority, or some equivalent successor, is renewed in perpetuity.

This can probably be done only as part of a "grand bargain" that recognizes the costs as well as the huge benefits of liberalization, and thus includes a substantial expansion of governmental assistance to workers dislocated by trade.

In the absence of such a renewed foundation for an open and active U.S. trade policy, both our economy and our foreign policy will suffer severely.

Mr. Bergsten is the director of the Peterson Institute for International Economics.

5/20/2008: You Can't Soak the Rich By DAVID RANSON, Wall Street Journal, May 20, 2008; Page A23

Kurt Hauser is a San Francisco investment economist who, 15 years ago, published fresh and eye-opening data about the federal tax system. His findings imply that there are draconian constraints on the ability of tax-rate increases to generate fresh revenues. I think his discovery deserves to be called Hauser's Law, because it is as central to the economics of taxation as Boyle's Law is to the physics of gases. Yet economists and policy makers are barely aware of it.

Like science, economics advances as verifiable patterns are recognized and codified. But economics is in a far earlier stage of evolution than physics. Unfortunately, it is often poisoned by political wishful thinking, just as medieval science was poisoned by religious doctrine. Taxation is an important example.

The interactions among the myriad participants in a tax system are as impossible to unravel as are those of the molecules in a gas, and the effects of tax policies are speculative and highly contentious. Will increasing tax rates on the rich increase revenues, as Barack Obama hopes, or hold back the economy, as John McCain fears? Or both?

Mr. Hauser uncovered the means to answer these questions definitively. On this page in 1993, he stated that "No matter what the tax rates have been, in postwar America tax revenues have remained at about 19.5% of GDP." What a pity that his discovery has not been more widely disseminated.

The chart nearby, updating the evidence to 2007, confirms Hauser's Law. The federal tax "yield" (revenues divided by GDP) has remained close to 19.5%, even as the top tax bracket was brought down from 91% to the present 35%. This is what scientists call an "independence theorem," and it cuts the Gordian Knot of tax policy debate.

The data show that the tax yield has been independent of marginal tax rates over this period, but tax revenue is directly proportional to GDP. So if we want to increase tax revenue, we need to increase GDP.

What happens if we instead raise tax rates? Economists of all persuasions accept that a tax rate hike will reduce GDP, in which case Hauser's Law says it will also lower tax revenue. That's a highly inconvenient truth for redistributive tax policy, and it flies in the face of deeply felt beliefs about social justice. It would surely be unpopular today with those presidential candidates who plan to raise tax rates on the rich – if they knew about it.

Although Hauser's Law sounds like a restatement of the Laffer Curve (and Mr. Hauser did cite Arthur Laffer in his original article), it has independent validity. Because Mr. Laffer's curve is a theoretical insight, theoreticians find it easy to quibble with. Test cases, where the economy responds to a tax change, always lend themselves to many alternative explanations. Conventional economists, despite immense publicity, have yet to swallow the Laffer Curve. When it is mentioned at all by critics, it is often as an object of scorn.

Because Mr. Hauser's horizontal straight line is a simple fact, it is ultimately far more compelling. It also presents a major opportunity. It seems likely that the tax system could maintain a 19.5% yield with a top bracket even lower than 35%.

What makes Hauser's Law work? For supply-siders there is no mystery. As Mr. Hauser said: "Raising taxes encourages taxpayers to shift, hide and underreport income. . . . Higher taxes reduce the incentives to work, produce, invest and save, thereby dampening overall economic activity and job creation."

Putting it a different way, capital migrates away from regimes in which it is treated harshly, and toward regimes in which it is free to be invested profitably and safely. In this regard, the capital controlled by our richest citizens is especially tax-intolerant.

The economics of taxation will be moribund until economists accept and explain Hauser's Law. For progress to be made, they will have to face up to it, reconcile it with other facts, and incorporate it within the body of accepted knowledge. And if this requires overturning existing doctrine, then so be it.

Presidential candidates, instead of disputing how much more tax to impose on whom, would be better advised to come up with plans for increasing GDP while ridding the tax system of its wearying complexity. That would be a formula for success.

Mr. Ranson is head of research at H.C. Wainwright & Co. Economics Inc.

5/19/2008: Big Government Responsible for Housing Bubble

The House passed two bills attempting to rehabilitate the housing and mortgage market this week. There doesn't seem to be any shortage of criticism and blame for the bad decisions, and rightly so. Lenders and banks do share much of the blame for the overheated market. Lending standards were relaxed, or even abandoned altogether, creating an exaggerated pool of homebuyers that led to ballooning home prices that many, especially real estate investors, expected to continue forever. Now that the bubble has burst, the losses are staggering.

However, many in Washington fail to realize it was government intervention that brought on the current economic malaise in the first place. The Federal Reserve’s artificially low interest rates created the loose, easy credit that ignited a voracious appetite in the banks for borrowers. People made these lending and buying decisions based on market conditions that were wildly manipulated by government. But part of sound financial management should be recognizing untenable or falsified economic conditions and adjusting risk accordingly. Many banks failed to do that and are now looking to taxpayers to pick up the pieces. This is wrong-headed and unfair, but Congress is attempting to do it anyway.

These housing bills address the crisis in exactly the wrong way, by seeking to hide the problem with more disastrous government bail-outs and interventions. One measure, HR 5830, the Federal Housing Administration (FHA) Housing Stabilization and Homeowner Retention Act, would allow the FHA to guarantee as much as $300 billion worth of refinanced home loans for those facing threat of foreclosure. HR 5818, the Neighborhood Stabilization Act, would provide $15 billion in loans and grants to localities to purchase and renovate foreclosed homes with the object of then selling or renting out those homes. Thankfully, President Bush has vowed to veto both of these bills. It is neither morally right nor fiscally wise to socialize private losses in this way.

The solution is for government to stop micromanaging the economy and let the market adjust, as painful as that will be for some. We should not force taxpayers, including renters and more frugal homeowners, to switch places with the speculators and take on those same risks that bankrupted them. It is a terrible idea to spread the financial crisis any wider or deeper than it already is, and to prolong the agony years into the future. Socializing the losses now will only create more unintended consequences that will give new excuses for further government interventions in the future. This is how government grows - by claiming to correct the mistakes it earlier created, all the while constantly shaking down the taxpayer. The market needs a chance to correct itself, and Congress needs to avoid making the situation worse by pretending to ride to the rescue.

5/12/2008: The Revolution Will Not Be Nominated By NICHOLAS WAPSHOTT

LAST TUESDAY EVENING, POLITICAL REPORTERS WERE SO ABSORBED BY THE INCREASINGLY SNIPPY STANDOFF BETWEEN SENATORS CLINTON AND OBAMA THAT THEY mostly forgot that North Carolina and Indiana were also holding Republican primaries.

Governors Huckabee and Romney have long since conceded victory to the senator of Arizona, making their trivial tallies on Tuesday totally otiose, but few noticed that a full 8% of Republicans hauled themselves to the polls to vote for the Libertarian maverick Ron Paul.

In another little-noted footnote to this most extraordinary of primary seasons, Mr. Paul, the Pittsburgh-born Texan fundamental-conservative pro-life constructionist Libertarian obstetrician, has yet to formally acknowledge Senator McCain’s triumph and withdraw from the race.

Like the legendary Japanese lieutenant Hiroo Onoda, who continued fighting World War II from the jungles of Lubang 27 years after his emperor had surrendered, Paul battles on. As he told CNN on March 10, “McCain has the nominal number ... If you’re in a campaign for only gaining power, that is one thing; if you’re in a campaign to influence ideas and the future of the country, it’s never over. ... The true revolution is ongoing.”

“The Revolution: A Manifesto” (Grand Central Publishing, 192 pages, $21) is the title of Mr. Paul’s new book, which even before it was published topped the best-seller charts, boosted by a tribe of devoted followers he estimates to be 350,000 strong. There is nothing much new about the ideas he articulates for those who have followed his 30-odd years as an elected representative or the 20-odd books he has authored.

In the Republican debates Mr. Paul reveled in his role as gadfly and interloping outsider, tweaking the noses of the mainstream Republicans for their political posturing and their wicked Washington ways. But, as his book shows, he is himself something of a conformist, gaily ticking the conventional checklist of traditional conservative principles.

As a rare survivor of a stream of thinking he sources to the “old Right,” or “original Right,” he deifies the Constitution, detests income tax, loves free trade, scorns foreign aid, abominates interpretative judges, abhors abortion, execrates eminent domain, supports gun rights, thinks government is too big, derides health insurance as much as universal health care, dislikes regulation of the free market, rues the day the dollar fell off the gold and silver standard, and deplores the existence of the Federal Reserve.

But he insists he is no mere contrarian and complains that, despite having voted against legislation more often than the rest of Congress put together, his nickname on Capitol Hill, “Dr. No,” is a misnomer.

Where he finds himself almost alone on the right is on America’s role in the world. He hankers after the liberties Americans enjoyed when the republic was in its infancy and Washington was little more than a Southern swamp with great expectations.

Though at pains to point out he is no isolationist, he believes America has no place interfering in the fate of other countries and that Woodrow Wilson, Franklin Roosevelt, and Harry Truman besmirched the intentions of the Founding Fathers and set us on a ruinous path leading today to our permanently billeting troops in 130 countries. Yet he supports American military action in Afghanistan because it attempts to seek out and punish those who attacked us.

Mr. Paul reserves his ultimate disdain for neoconservatives, who, he argues, duped us into invading Iraq. While he doesn’t adopt the Reverend Jeremiah Wright’s colorful phrase and theatrical gestures to say of the September 11, 2001, attacks on America, “the chickens are coming home to roost,” Mr. Paul believes American interference abroad has antagonized foreigners who have, understandably, retaliated. As he blandly puts it, “actions cause reactions, and ... Americans will need to prepare themselves for these reactions if their government is going to continue to intervene around the world.” Above all, he argues, the Bush administrationhas undermined and dispensed with hallowed civil liberties guaranteed by the Constitution and made America a nation of torturers, a practice he deplores under any circumstances.

“Once home to distinguished intellectuals and men of letters,” the conservative movement, he writes, “now tolerates and even encourages antiintellectualism and jingoism that would have embarrassed earlier generations of conservative thinkers.”

As much as Mr. Paul’s “The Revolution” makes uncomfortable reading for many Republicans, for his New Model Army of young libertarians, it is an indispensable guide to the thinking of an honorable American rebel who believes that those who preside over our fates on Capitol Hill have routinely and without a second thought betrayed the word and the spirit of the American Revolution.

Mr. Paul is a prophet without honor in his own country. He has been marginalized, ridiculed, and ignored by mainstream Republicans and was supported by just 0.5% of American voters when he stood for the presidency in the Libertarian Party interest in 1988. But perhaps if he had enjoyed the good looks and persuasive charm of his hero Ronald Reagan, whose presidential bid he championed in Texas in 1976, American conservatism might have turned out very differently indeed.

If Mr. McCain loses in November, the conservative movement must mount a thorough reappraisal of its thinking if it is to recover the White House.

Washington Republicans are likely to try to retool Newt Gingrich’s unproven Contract With America, but they would be rash to dampen the enthusiasm of the young libertarians Mr. Paul has inspired and the potent ideas he has unleashed.

5/19/2008: Cut the "Can't Cut" Crap

Honest people with income and bills know that it’s possible to cut spending.

We don’t always do it when we should. Sometimes we’re undisciplined. But we suffer costs for that lack of discipline. We suffer them directly—as individuals and as families.

In the world of government expenditure, however, it’s always other people’s money being spent or misspent. And the people willing to pick our pockets don’t suffer any direct costs from squandering the funds.

From this lack of incentive or scruple they derive a theory — that there’s no way to cut government spending. They’d prefer not to, it’s a bother. So it’s mission impossible.

California lawmakers love this theory. Seems tax revenues are declining of late. Something about a weak economy. State Senator Denise Ducheny advises voters that the state’s budget deficit has now climbed to $14 billion. Assembly Speaker Fabian Nunez says: “The problem is so severe that we don’t have a choice but to raise taxes.”

Right. No choice but to weaken the economy even further. Make it even harder for people to pay their bills.

We’re hearing similar assertions in response to any tax-cut proposals being made in the presidential campaign. Impossible to shave more than a buck or two from federal spending. So how can we cut taxes? What a quandary.

According to my own theory, it’s easy to cut government spending. Use scissors.

This is Common Sense. I’m Paul Jacob.

5/11/2008: Fatherly Advice on Mother's Day: An Essay: Don't Let the LP be Hijacked (by Paul Blumstein)

A hundred years ago, the Democratic Party was very close to libertarian principles. It stood for the Bill of Rights and the tolerance needed to let people live their own lives as they saw fit. Something changed. The Socialists hijacked the Democratic Party and now they want you to live your lives as they see fit.

A few decades ago, the Republican Party had libertarian principles as demonstrated by Robert Taft and Barry Goldwater. Something changed. They were hijacked by the neocons. Now they spend more than the Democrats ever did and try to remake countries in the image that they see fit.

Very shortly, the Libertarian Party will be holding their convention in Denver. A plethora of people will be running for President. We have become a magnet for those who cannot run on the two major parties simply because we have ballot access and we have a lower cost of entry.

A few short years ago, Ann Coulter did not like the Republican running for Rep in her district in CT. To try to defeat him without putting the Democrat in office, she went to the LP and told them she was running as the LP candidate. The CT LP was initially delighted that a celebrity would run until they realized that she had no intention of changing her principles. Luckily, cooler heads prevailed and she was denied the candidacy.

I am hoping that cooler heads will prevail in Denver. Are we not the party of principle? Then, let's keep our principles by not voting for any candidate who has not shown those principles over time. Despite the temptation to do otherwise. If we do not, we will still be called the Libertarian Party, but we will really be the unprincipled party without any hope of being a real Libertarian Party ever again. "They" will have won, and we will have been neutralized.

The future of the LP is in your hands. If you agree with what I just said, please pass this on to as many Libertarians as you can.

5/18/2008: Been out of town for a few days, but this sums it up pretty well...

5/14/2008: "The war against illegal plunder has been fought since the beginning of the world. But how is... legal plunder to be identified? Quite simply. See if the law takes from some persons what belongs to them, and gives it to other persons to whom it does not belong. See if the law benefits one citizen at the expense of another by doing what the citizen himself cannot do without committing a crime. Then abolish this law without delay ... If such a law is not abolished immediately it will spread, multiply and develop into a system." -- Frederic Bastiat

5/13/2008: The following is the 2007 winning entry from an annual contest at Texas A&M University calling for the most appropriate definition of a contemporary term. This year's term was Political Correctness. The winner wrote:

"Political Correctness is a doctrine, fostered by a delusional, illogical minority, and rabidly promoted by an unscrupulous mainstream media, which holds forth the proposition that it is entirely possible to pick up a turd by the clean end."

5/9/2008: Feed a Subsidy, Starve a . . .

NBC News recently reported what Rush Limbaugh and many others have been saying for some time now: The push for biofuels — in particular, ethanol — is a major factor in higher food prices. These high prices hurt not only Americans, but consumers worldwide. This year roughly one-forth of the U.S. corn crop will go to make biofuels. Next year? As much as one-third will go for fuel, not food. The impact is huge. Corn, in part because of other government subsidy and regulation, has become an ever-bigger part of the food supply. When prices go up, it’s trouble — especially for the poor.

But it’s worse than that. Ethanol is a big scam. Tough talk? No, just the facts, ma’am. Ethanol has been sold as a way to energy independence, as environmentally friendly, and as good for our economy. Three strikes. Ethanol doesn’t have much effect on foreign oil because it initially substitutes for more expensive domestic oil. Moreover, most environmentalists now insist that producing ethanol is worse, not better for the environment. And ethanol is not good for the economy. If it provided real economic benefits, its use wouldn’t have to be mandated, nor its production subsidized to the tune of $1 a gallon. Soaking the taxpayers to wreck the environment and to increase hunger — with no gain in energy independence — well that just doesn’t make any sense. This is Common sense. I’m Paul Jacob.

5/8/2008: Subprime Mortgage Crisis -- Explained in layman's terms

5/6/2008: Unfortunately, there is never a recession in Government

"Federal, state and local governments are hiring new workers at the fastest pace in six years, helping offset job losses in the private sector. Governments added 76,800 jobs in the first three months of 2008, the Bureau of Labor Statistics reports. That's the biggest jump in first-quarter hiring since a boom in 2002 that followed the 9/11 terrorist attacks. By contrast, private companies collectively shed 286,000 workers in the first three months of 2008."

5/6/2008: The Clintons "...have become a bit of an embarrassment ."

"(O)ver the course of Bill Clinton's (bungled, distasteful) presidency and Hillary Clinton's (bungled, distasteful) campaign for the presidency, the couple have separately and together become incarnations of the most unattractive attributes of their generation's elite -- blind ambition cloaked in do-good self-righteousness, a sense of entitlement, high-handed snobbiness, hedonism, narcissism. As a poster couple for people of a certain age and demographic, they have become a bit of an embarrassment." -- Novelist Kurt Andersen in the current issue of New York magazine (Hat tip to Political Diary)

5/6/2008: Child "Protective" Services OUT OF CONTROL

"Christopher Ratte, professor in the department of classics at the University of Michigan, was recently turned into a jailbird and had his son taken away from him, all in the name of protecting the child from the father. He had taken his 7-year-old son to a baseball game in Detroit and ordered him lemonade. What was served up was a 'Mike's Hard Lemonade,' which his son prepared to drink. Suddenly security arrived.

"'You know this is an alcoholic beverage?' the security guard asked. 'You have got to be kidding,' responded the professor. And before the professor could examine the bottle, the guard snatched it away, and the boy was taken to the hospital where no traces of alcohol were found in him. The boy was then promptly put in foster care. It was two days before the mother, a professor of architecture, was allowed to take him home, and a full week before the father was allowed to come back into the home again.

"The case provides a remarkable look at the workings of bureaucracy. The Detroit Free Press interviewed all the people involved. It turns out that no one was happy about what happened, but the gears of the bureaucracy ground away, ruining peoples' lives for no good reason.

"The cop on duty thought it was a mistake, but his supervisor was insisting that he act. When Child Protective Services came to take the child away into their cruel foster care, the police objected. But CPS was just doing its duty. It had no choice but to take the child since the police had requested a court order - also triggered by events - to remove the child.

"Observers who know the system say that the only surprising aspect to this case is that child was returned so quickly. Had the couple been poor, uneducated, and unconnected, the case might still be tied up in the courts.

"The lesson many people draw from this is that social workers are being given too much authority, that governments need to be reformed so that they do not take extreme measures too hastily, that cops need to use good sense before busting up families, etc. The problem is that all of these reforms ultimately depend on the state to use its discretionary power judiciously."

- Columnist Lew Rockwell

5/6/2008: A Religion of Peace

A few weeks ago, one of the nation's most senior religious authorities directed that two reporters for a mainstream Saudi newspaper be executed for publishing stories suggesting that religions other than Islam are worthy of respect. . . .

So far, the two reporters, Abdullah bin Bejad al-Otaibi and Yousef Aba al-Khail, have not been put under the sword. They are still working at their newspaper, Al Riyadh. But they are reported to be terrified, and they have called on the government for protection. It has not responded, and the other Saudi papers have barely even mentioned the controversy. . . .

Abdul-Rahman al-Barrak, a 75-year-old sheikh, issued the fatwa calling for the journalists' death. In Saudi Arabia, he is a leading authority on Wahhabism, the country's fundamentalist form of Sunni Islam.

"It's disgraceful that articles containing this kind of apostasy should be published in some papers in Saudi Arabia," he wrote last month. If the reporters do not repent, they "should be killed," he wrote.

Barrak is not just some cranky old miscreant. He is a member of the Saudi legislature, appointed by the king. Barrak spent a long career in senior positions at a respected government-funded university.

Soon after, 20 other senior Saudi clerics stood up to enthusiastically endorse Barrak's fatwa.

5/6/2008: Senior Army strategist: Carter has violated two federal statutes in Hamas meeting

Pentagon advisor Bob Maginnis says former U.S. President Jimmy Carter is violating two federal laws in his meeting with a terrorist Hamas leader in Damascus, Syria.

Lt. Col. Maginnis (USA-Ret.) recently wrote a column in Human Events called "Hamas' Useful Idiot." The column's title refers to Jimmy Carter, who -- despite requests from the U.S. State Department not to do so -- is meeting with a Hamas leader.

Maginnis says there is a good reason why a rendezvous with this terrorist was not a good idea. The retired defense expert points out that Khaled Meshaal has aligned himself with Muqtada al-Sadr in Iraq, and that Meshaal "calls on Sadr and others to basically kill as many Americans as they can."

Maginnis also believes that Carter has violated several federal statutes in meeting with this terrorist leader. "The Logan Act, which is 200 years old, as well as the USA Patriot Act of 2001 ... is very clear that if you provide advice to a terrorist organization, you could actually earn life imprisonment," he details.

Carter's plan to showcase his opposition to the government, Maginnis continues, makes him just one among a number of prominent Democrats who have violated the law by meeting with the avowed enemies of the United States. The other Democrats he refers to include Speaker of the House Nancy Pelosi (D-California), actress Jane Fonda, and civil rights leader Jesse Jackson.

[Isn't it time to enforce our laws, revoke some passports, and keep these morons from causing harm?]

5/6/2008: Massachusetts Miracle
Wall Street Journal, May 6, 2008; Page A22

Remarkable news from Massachusetts, of all places. Car insurance premiums are going down. For three decades a Bay State regulator has set the price of car insurance, leading to an annual tussle between insurers and consumer groups over the size of the increase. This led to some of the highest insurance rates in the country.

Because there was no price competition, some of the biggest insurers wouldn't do business in the state. During this exercise in central planning, the number of insurers dropped to 18 last year, from more than 70 three decades ago. But as of April 1, the state government decided to try a little experiment in the free market. We do mean little – proposed premiums must still be filed with the regulator, who can approve them or not. And many factors used to set rates in other states – such as credit history – are barred.

Even so, this modest experiment in price competition is already working to reduce costs for consumers. Progressive, the third-largest insurer in the country, entered the market May 1 with rates that are on average 18% below the old price-controlled rates. Overall, premiums in the state are due to fall nearly 8% this year as insurers adjust to a world in which they need to compete to attract customers instead of bargaining with their regulator for price hikes. Imagine: When you remove price controls, supply increases and prices fall.

Massachusetts calls this new regime "managed competition" and the early returns already suggest that it beats central planning by a mile. A little less management and a little more competition would produce even more dramatic results. But this is still Massachusetts we're talking about.

5/4/2008: Government is like a baby. An alimentary canal with a big appetite at one end and no sense of responsibility at the other. -- Ronald Reagan

Folk who don't know why America is the Land of Promise should be here during an election campaign. -- Milton Berle

Giving money and power to government is like giving whiskey and car keys to teenage boys. -- P. J. ORourke

The taxpayers are sending congressmen on expensive trips abroad. It might be worth it except they keep coming back! -- Will Rogers

Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidise it. -- Ronald Reagan

Britain has invented a new missile. It's called the civil servant - it doesn't work and it can't be fired. -- Walter Walker

The difference between golf and government is that in golf you can't improve your lie. -- George Deukmejian

5/4/2008: Phony Teacher Layoffs Being Rescinded

It was mostly a publicity stunt. Sending the potential layoff notices to thousands of teachers was meant to scare families into begging for tax hikes—it did not work. As long as LAUSD spends $630 million on building two high schools, losing $400 million in computers, they hire TWO Superintendents, it is obvious that schools have more than enough money. The failed schools will not get better by throwing money at them like balls in a batting cage. Now, those layoff notices are being rescinded, with more to come. Those running the schools seem more like two bit scam artists, sending those notices was not honest—and they knew it. Shame on us if we give in to the emotional blackmail of those who fail our children.

5/4/2008: LAUSD Pays $400 Million and $230 Million to Build Two High Schools

First LAUSD pays $400 million for a high school in East Los Angeles built on top of a cancer causing methane field. Now they have built an Arts High School in downtown L.A., for $230 million. Would you send your child to a school in downtown L.A? It is at least one hour, one way from West Los Angeles. This is a farce. Putting a school in a high crime area that is a slum. Yeah sure, serious students will attend? No wonder LAUSD is the model of a failed district.. Looks to me like LAUSD has too much money. They already have two Superintendents, one for the hack political Mayor and the other for the School Board. Want to see waste in action, go to the failed LAUSD. This is embarrassing for real educators.

5/3/2008: Not by Bread Alone Editorial Commentary By THOMAS G. DONLAN

FROM THE REPEAL OF THE BRITISH CORN LAWS TO THE END of collectivization in China and the former Soviet Union, the key to feeding a nation's people has been to let the market do it -- ably assisted by continuing progress in agricultural technology.

But countries from the Philippines to Haiti are forcing their farmers out of world markets so as to lower domestic prices. Then, the same governments that closed markets in order to control prices vainly demand that farmers plant and harvest more food, despite lower profit opportunities. Some also foreclose their farmers from using genetically modified seeds. Nearly all have reduced local investment in agricultural productivity, following the example set by wealthy governments and charities.

High prices for the world's food commodities have also frightened the countries that produce surpluses, some of them new to the market economy: Kazakhstan, which had been one of the largest wheat exporters, is now one of the largest hoarders; Russia has levied a 40% export tax on wheat; Ukraine imposed a wheat-export quota and Vietnam has banned rice exports.

Some countries have never caught on to market reality, despite decades of experience: Argentina imposed a 44% export tax on soybeans to keep local feed prices down. Others are taking leave of their senses: Singapore, which became wealthy through trade, is bidding up the price of rice to fill supposedly strategic stockpiles; the Philippines, short of rice, cuts off trade; and Thailand, a producer of rice surpluses, builds stockpiles to hold down domestic prices.

Swaddled Markets

The biggest and most sophisticated market economies, the United States and the European Union, wrap their farmers in so many subsidies and protections that prices mean almost nothing. Despite the rising world prices of grain, European production is falling, with exports falling faster. U.S. production of grain is rising, but much of the new production is going to motor fuels -- ethanol made from corn is blended with gasoline and soybeans are being converted to biodiesel. Even so, there's a record amount of American food grain available for export, but not enough to replace supplies taken off the market by other exporters.

Bushels of statistics show rapid rises in prices. The International Monetary Fund's world food index has doubled since the end of 2005. Wheat led the way, with a 170% increase, but corn and soybeans weren't far behind.

Looking at prices from the producers' point of view, the current bull market in food prices is a rebound from a 25-year bear-market glut, when supplies outpaced the ability of people to pay for them.

The IMF index and most food prices still are considerably lower than they were at the beginning of the 1980s, after adjusting for inflation -- what we ought to call the declining value of the dollar.

The world, with 2 billion more people, is wealthier and better able to feed itself than it was in 1980, even though nearly 1 billion people still live on less than a dollar a day.

The largest factor increasing food prices is the rising wealth and rising living standards in poor countries, especially the two big ones, China and India.

Too High or Too Low?

Around the world, food producers and their suppliers face the same type of discouraging experiences as oil producers. What is the point of assembling large tracts of land, investing in heavy equipment, irrigation, fertilizer, highly productive seed and other inputs if the outputs must be sold into price-controlled markets?

Some people cannot believe that markets work dispassionately; if the market price is not to their liking, there is a sinister force at work. Thus we hear that speculation has driven up the prices of food, summed up with the rhetorical question "Is it right for Wall Street to drive up commodities prices and take food out of people's mouths?"

On the contrary: If there is a conspiracy, it is an inept conspiracy of legislators and bureaucrats. Is it right for Capitol Hill and Brussels to restrict production of food and subsidize domestic farm income?

The U.S. Congress is approaching a legislative climax that will produce a new farm bill, setting policies for the next five years. And while much has changed on the nation's farms and in world markets, nothing has changed in Washington.

Lawmakers are united on subsidizing farmers. They are adding in a provision for "permanent disaster relief" to go with subsidized crop insurance and the special relief measures they vote for whenever something goes wrong somewhere in farmland. The new disaster fund would protect farmers who take chances with the climate -- growing thirsty corn in frequently dry North Dakota and Montana, for example. Surprise: The chief sponsors of this permanent disaster are Democratic Senators Kent Conrad of North Dakota and Max Baucus of Montana.

Congressional agriculturalists are plowing U.S. farmers for votes. Indeed, legislators worldwide seem more resistant to subsidizing food charity for the poorest people of the world, or financing investment to lift them out of poverty, than they are to farming farmers for votes.

Nincompoop Politics

In a better world, the World Trade Organization would have broken down some barriers to production and to satisfaction of demand, but international economic diplomacy grows ever more tedious, interminable and indecisive. The Doha Round has been pronounced dead more times than Count Dracula, but the diplomats keep meeting and keep promising progress that never comes.

In the absence of an efficient market, French farmers are paid to reduce their productivity and avoid biotech crops because it's cheaper than buying their surplus production. Argentinian farmers are taxed to the hilt. U.S. corn farmers are mandated and subsidized to make fuel and soda-pop sweetener. Farmers in Mexico are imprisoned on tiny plots that can't support a family. Chinese farmers "own" their land, but don't have the right to sell it. The most productive farmers in Zimbabwe are overrun by squatters lacking tools, seed or skill. Farmers in much of Africa haven't been able to make a living because their markets were overrun with donated food. And on, and on, and on.

What these people need is a free market in food.

5/3/2008: Hillary backs the filly, who comes in 2nd and has to be euthanized. You couldn't make this up! Maybe after Hillary comes in 2nd, she'll break both ankles and...

Big Brown backed up his trainer's boasts with an explosive finishing kick and won the Kentucky Derby on Saturday - a day marred by the fatal breakdown of the filly Eight Belles. The cheers for the winner's decisive victory were cut short when Eight Belles, the runner-up, was euthanized on the track minutes after the race when she collapsed with two broken front ankles.

Hillary Clinton last week put her money on Eight Belles, the first filly to run in the Derby in nine years, to win the race: "I hope that everybody will go to the derby on Saturday and place just a little money on the filly for me," Sen. Clinton told supporters in Jeffersonville, Ind., ABC News reports. "I won't be able to be there this year - my daughter is going to be there and so she has strict instructions to bet on Eight Belles."

5/3/2008: Windfall Profits for Dummies
May 3, 2008; Page A10

This is one strange debate the candidates are having on energy policy. With gas prices close to $4 a gallon, Hillary Clinton and John McCain say they'll bring relief with a moratorium on the 18.4-cent federal gas tax. Barack Obama opposes that but prefers a 1970s-style windfall profits tax (as does Mrs. Clinton).

Mr. Obama is right to oppose the gas-tax gimmick, but his idea is even worse. Neither proposal addresses the problem of energy supply, especially the lack of domestic oil and gas thanks to decades of Congressional restrictions on U.S. production [empasis added]. Mr. Obama [liberal moron] supports most of those "no drilling" rules, but that hasn't stopped him from denouncing high gas prices on the campaign trail. He is running TV ads in North Carolina that show him walking through a gas station and declaring that he'll slap a tax on the $40 billion in "excess profits" of Exxon Mobil.

The idea is catching on. Last week Pennsylvania Congressman Paul Kanjorski introduced a windfall profits tax as part of what he called the "Consumer Reasonable Energy Price Protection Act of 2008." So now we have Congress threatening to help itself to business profits [more money to waste] even though Washington already takes 35% right off the top with the corporate income tax.

You may also be wondering how a higher tax on energy will lower gas prices. Normally, when you tax something, you get less of it, but Mr. Obama seems to think he can repeal the laws of economics [empasis added]. We tried this windfall profits scheme in 1980. It backfired. The Congressional Research Service found in a 1990 analysis that the tax reduced domestic oil production by 3% to 6% and increased oil imports from OPEC by 8% to 16%. Mr. Obama nonetheless pledges to lessen our dependence on foreign oil, which he says "costs America $800 million a day." Someone should tell him that oil imports would soar if his tax plan becomes law. The biggest beneficiaries would be OPEC oil ministers.

There's another policy contradiction here. Exxon is now under attack for buying back $2 billion of its own stock rather than adding to the more than $21 billion it is likely to invest in energy research and exploration this year. But hold on. If oil companies believe their earnings from exploring for new oil will be expropriated by government – and an excise tax on profits is pure expropriation – they will surely invest less, not more. A profits tax is a sure formula to keep the future price of gas higher.

Exxon's profits are soaring with the recent oil price spike, but the energy industry's earnings aren't as outsized as the politicians seem to think. Thomson Financial calculates that profits from the oil and natural gas industry over the past year were 8.3% of investment, while the all-industry average is 7.8%. And this was a boom year for oil. An analysis by the Cato Institute's Jerry Taylor finds that between 1970 and 2003 (which includes peak and valley years for earnings) the oil and gas business was "less profitable than the rest of the U.S. economy." These are hardly robber barons.

This tiff over gas and oil taxes only highlights the intellectual policy confusion [i.e., stupidity] – or perhaps we should say cynicism – of our politicians. They want lower prices but don't want more production to increase supply. They want oil "independence" but they've declared off limits most of the big sources of domestic oil that could replace foreign imports [empasis added]. They want Americans to use less oil to reduce greenhouse gases but they protest higher oil prices that reduce demand. They want more oil company investment but they want to confiscate the profits from that investment. And these folks [lying, thieving, morons...all three of them] want to be President?

Late this week, a group of Senate Republicans led by Pete Domenici of New Mexico introduced the "American Energy Production Act of 2008" to expand oil production off the U.S. coasts and in Alaska. It has the potential to increase domestic production enough to keep America running for five years with no foreign imports. With the world price of oil at $116 a barrel, if not now, when? No word yet if Senators Clinton and Obama will take time off from denouncing oil profits to vote for that.

5/1/2008: The Census Follies...a lesson in how modern BIG government doesn't work

5/1/2008: Blame Congress for Inflation The Federal Reserve probably should not even exist, but since it does, it should focus solely on one goal: price stability (that was its original purpose). The law, written by the idiots in Congress, says it can't.

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