Dale F. Ogden’s Blog on
“Small Government is Beautiful”
“I cannot undertake to lay my finger on that article of the Constitution which granted a right to Congress of expending, on objects of benevolence, the money of their constituents...” --James Madison
Any alleged “right” of one man, which necessitates the violation of the rights of another, is not and cannot be a right. — Ayn Rand
“Dependence begets subservience and venality, suffocates the germ of virtue, and prepares fit tools for the designs of ambition.” --Thomas Jefferson, Notes on Virginia, Query 19, 1781
“The whole aim of practical politics is to keep the populace alarmed, and hence clamorous to be led to safety, by menacing it with an endless series of hobgoblins, all of them imaginary.” – H.L. Mencken
Experience should teach us to be most on our guard to protect liberty when the government’s purposes are beneficent. Men born to freedom are naturally alert to repel invasion of their liberty by evil-minded rulers. The greatest dangers to liberty lurk in insidious encroachment by men of zeal, well-meaning, but without understanding. — Judge Louis D. Brandeis
“Truth does not become more true if the whole world were to accept it; nor does it become less true if the whole world were to reject it.” — Maimonides
“If you put the Federal Government in charge of the Sahara Desert, in five years there would be a shortage of sand.” — Milton Friedman
11/30/2009: Letters: A Grim Outlook on Benefit Taxes
Regarding your Nov. 16 editorial “A Tax a Day”:
Medicare and Social Security have been evolving from insurance plans into income redistribution plans for a few decades. Sen. Harry Reid’s latest proposal to help pay for health-care reform by assessing a Medicare payroll tax surcharge of 1% (employee and employer tax combined) on income over $200,000 is more of a change in magnitude than in substance. When the Medicare tax was expanded to include all wages and salaries after 1993, payments into Medicare were completely decoupled from expected benefits. Someone who earns 10 times the income of another worker has, since 1993, paid 10 times as much into Medicare, but certainly won’t receive 10 times more in benefits. If Sen. Reid adds a progressive feature to the payroll tax, the higher-income earner may be paying 12 or 13 times as much as a lower-income worker; again, a change in magnitude, not substance.
Medicare and Social Security both are on trend lines that result in bankruptcy. The near-term Democratic response will be to further decouple contributions from benefits by adding tax surcharges, uncapping the income subject to taxation and widening the definition of income beyond wages and salaries. Those populist measures are, as the Journal’s editors indicate, harmful to the economy, particularly in a recession; they can be disincentives to work hard, invest and take risk.
They also are likely to make the day of fiscal reckoning much worse. Consider what’s happened since the inception of Medicare in 1966—the total Medicare tax was 0.35%, the Social Security tax was 5.8% and both were assessed on a maximum income of just $6,600. In 2009, the Medicare tax is 2.9% (employee and employer) on all income and the Social Security tax is 12.4% on the first $106,800 of wages.
For high-income workers (earning the equivalent of $500,000 in today’s dollars) the combined Medicare and Social Security tax has been growing at about 6% per year for 33 years. Another 50 years of such growth in entitlement taxes versus, say, 3% per year growth in income, means that two-thirds of a high-income earner’s pay will go toward Medicare and Social Security. Assuming federal and state tax rates stay “reasonable” at 45% or so of income, the rich will have to borrow money in order to meet their total tax burden. Well before that happens, of course, benefits will be eliminated for the affluent and the entitlement programs (including the new health-care reform, if passed) will become de facto welfare plans; for anyone still paying income taxes, that conversion should be welcomed, as it will relieve pressure somewhat for future daily tax increases.
Perry Scott, Winston-Salem, N.C.
Printed in The Wall Street Journal, page A18
11/30/2009: The Arabs Have Stopped Applauding Obama by Fouad Ajami
‘He talks too much,” a Saudi academic in Jeddah, who had once been smitten with Barack Obama, recently observed to me of America’s 44th president. He has wearied of Mr. Obama and now does not bother with the Obama oratory.
He is hardly alone, this academic. In the endless chatter of this region, and in the commentaries offered by the press, the theme is one of disappointment. In the Arab-Islamic world, Barack Obama has come down to earth.
He has not made the world anew, history did not bend to his will, the Indians and Pakistanis have been told that the matter of Kashmir is theirs to resolve, the Israeli-Palestinian conflict is the same intractable clash of two irreconcilable nationalisms, and the theocrats in Iran have not “unclenched their fist,” nor have they abandoned their nuclear quest.
There is little Mr. Obama can do about this disenchantment. He can’t journey to Turkey to tell its Islamist leaders and political class that a decade of anti-American scapegoating is all forgiven and was the product of American policies—he has already done that. He can’t journey to Cairo to tell the fabled “Arab street” that the Iraq war was a wasted war of choice, and that America earned the malice that came its way from Arab lands—he has already done that as well. He can’t tell Muslims that America is not at war with Islam—he, like his predecessor, has said that time and again.
It was the norm for American liberalism during the Bush years to brandish the Pew Global Attitudes survey that told of America’s decline in the eyes of foreign nations. Foreigners were saying what the liberals wanted said.
Now those surveys of 2009 bring findings from the world of Islam that confirm that the animus toward America has not been radically changed by the ascendancy of Mr. Obama. In the Palestinian territories, 15% have a favorable view of the U.S. while 82% have an unfavorable view. The Obama speech in Ankara didn’t seem to help in Turkey, where the favorables are 14% and those unreconciled, 69%. In Egypt, a country that’s reaped nearly 40 years of American aid, things stayed roughly the same: 27% have a favorable view of the U.S. while 70% do not. In Pakistan, a place of great consequence for American power, our standing has deteriorated: The unfavorables rose from 63% in 2008 to 68% this year.
Mr. Obama’s election has not drained the swamps of anti-Americanism. That anti-Americanism is endemic to this region, an alibi and a scapegoat for nations, and their rulers, unwilling to break out of the grip of political autocracy and economic failure. It predated the presidency of George W. Bush and rages on during the Obama presidency.
We had once taken to the foreign world that quintessential American difference—the belief in liberty, a needed innocence to play off against the settled and complacent ways of older nations. The Obama approach is different.
Steeped in an overarching idea of American guilt, Mr. Obama and his lieutenants offered nothing less than a doctrine, and a policy, of American penance. No one told Mr. Obama that the Islamic world, where American power is engaged and so dangerously exposed, it is considered bad form, nay a great moral lapse, to speak ill of one’s own tribe when in the midst, and in the lands, of others.
The crowd may have applauded the cavalier way the new steward of American power referred to his predecessor, but in the privacy of their own language they doubtless wondered about his character and his fidelity. “My brother and I against my cousin, my cousin and I against the stranger,” goes one of the Arab world’s most honored maxims. The stranger who came into their midst and spoke badly of his own was destined to become an object of suspicion.
Mr. Obama could not make up his mind: He was at one with “the people” and with the rulers who held them in subjugation. The people of Iran who took to the streets this past summer were betrayed by this hapless diplomacy—Mr. Obama was out to “engage” the terrible rulers that millions of Iranians were determined to be rid of.
On Nov. 4, on the 30th anniversary of the seizure of the American embassy in Tehran, the embattled reformers, again in the streets, posed an embarrassing dilemma for American diplomacy: “Obama, Obama, you are either with us or with them,” they chanted. By not responding to these cries and continuing to “engage” Tehran’s murderous regime, his choice was made clear. It wasn’t one of American diplomacy’s finest moments.
Mr. Obama has himself to blame for the disarray of his foreign policy. American arms had won a decent outcome in Iraq, but Mr. Obama would not claim it—it was his predecessor’s war. Vigilance had kept the American homeland safe from terrorist attacks for seven long years under his predecessors, but he could never grant Bush policies the honor and credit they deserved. He had declared Afghanistan a war of necessity, but he seems to have his eye on the road out even as he is set to announce a troop increase in an address to be delivered tomorrow.
He was quick to assert, in the course of his exuberant campaign for president last year, that his diplomacy in South Asia would start with the standoff in Kashmir. In truth India had no interest in an international adjudication of Kashmir. What was settled during the partition in 1947 was there to stay. In recent days, Mr. Obama walked away from earlier ambitions. “Obviously, there are historic conflicts between India and Pakistan,” he said. “It’s not the place of the United States to try to, from the outside, resolve those conflicts.”
Nor was he swayed by the fate of so many “peace plans” that have been floated over so many decades to resolve the fight between Arab and Jew over the land between the River Jordan and the Mediterranean. Where George W. Bush offered the Palestinians the gift of clarity—statehood but only after the renunciation of terror and the break with maximalism—Mr. Obama signaled a return to the dead ways of the past: a peace process where America itself is broker and arbiter.
The Obama diplomacy had made a settlement freeze its starting point, when this was precisely the wrong place to begin. Israel has given up settlements before at the altar of peace—recall the historical accommodation with Egypt a quarter century ago. The right course would have set the question of settlements aside as it took up the broader challenge of radicalism in the region—the menace and swagger of Iran, the arsenal of Hamas and Hezbollah, the refusal of the Arab order of power to embrace in broad daylight the cause of peace with Israel.
The laws of gravity, the weight of history and of precedent, have caught up with the Obama presidency. We are beyond stirring speeches. The novelty of the Obama approach, and the Obama persona, has worn off. There is a whole American diplomatic tradition to draw upon—engagements made, wisdom acquired in the course of decades, and, yes, accounts to be settled with rogues and tyrannies. They might yet help this administration find its way out of a labyrinth of its own making.
—Mr. Ajami, a professor at Johns Hopkins School of Advanced International Studies and a senior fellow at Stanford University’s Hoover Institution, is the author of “The Foreigner’s Gift” (Free Press, 2007).Printed in The Wall Street Journal, page A19
Copyright 2009 Dow Jones & Company, Inc. All Rights Reserved
11/27/20096: A vote for Jerry Brown appears to be a vote for the corrupt ACORN. I hope that I am wrong but he may be counting on them to help him get elected with lots and lots of illegal votes. Anyway, let’s see if Governor Moonbeam can walk the walk...
...and while we’re talking about candidates for governor, Meg Whitman is a fraud. She backed Barbara Boxer, generally recognized at the least intelligent (i.e., “dumbest”) member of the United States Senate. That makes Meg Whitman more of a RINO that Arnold Schwarzenegger.
11/26/2009: Happy Thanksgiving
11/24/2009: The Rasmussen Reports daily Presidential Tracking Poll for Tuesday shows that 27% of the nation’s voters Strongly Approve of the way that Barack Obama is performing his role as President. Forty-two percent (42%) Strongly Disapprove giving Obama a Presidential Approval Index rating of –15. This is the lowest Approval Index rating yet measured for President Obama...
Fifty-two percent (52%) of Democrats Strongly Approve while 68% of Republicans Strongly Disapprove. Among those not affiliated with either major political party, just 16% Strongly Approve and 51% Strongly Disapprove...
Support for the health care plan proposed by the President and Congressional Democrats has fallen to a new low of 38%. Sixty percent (60%) of voters believe passage of the bill will lead to higher health care costs...
11/24/2009: Carbon Deal Thought Safe Despite Embarrassing Emails
“Revelation of a series of embarrassing e-mails by climate scientists provides fodder for critics, but experts believe the issue will not hurt the U.S. climate bill’s chance for passage or efforts to forge a global climate change deal.” (Reuters, Tuesday)
So it was never about science. [It’s always about money and power; someone should sue Al Gore and his ilk into poverty.]
FEE Timely Classic
“Global Warming Hot Problem or Hot Air?” (April 1998) by Jonathan H. Adler
Global Warming With the Lid Off
‘The two MMs have been after the CRU station data for years. If they ever hear there is a Freedom of Information Act now in the U.K., I think I’ll delete the file rather than send to anyone. . . . We also have a data protection act, which I will hide behind.”
So apparently wrote Phil Jones, director of the University of East Anglia’s Climate Research Unit (CRU) and one of the world’s leading climate scientists, in a 2005 email to “Mike.” Judging by the email thread, this refers to Michael Mann, director of the Pennsylvania State University’s Earth System Science Center. We found this nugget among the more than 3,000 emails and documents released last week after CRU’s servers were hacked and messages among some of the world’s most influential climatologists were published on the Internet.
The “two MMs” are almost certainly Stephen McIntyre and Ross McKitrick, two Canadians who have devoted years to seeking the raw data and codes used in climate graphs and models, then fact-checking the published conclusions—a painstaking task that strikes us as a public and scientific service. Mr. Jones did not return requests for comment and the university said it could not confirm that all the emails were authentic, though it acknowledged its servers were hacked.
Yet even a partial review of the emails is highly illuminating. In them, scientists appear to urge each other to present a “unified” view on the theory of man-made climate change while discussing the importance of the “common cause”; to advise each other on how to smooth over data so as not to compromise the favored hypothesis; to discuss ways to keep opposing views out of leading journals; and to give tips on how to “hide the decline” of temperature in certain inconvenient data.
Some of those mentioned in the emails have responded to our requests for comment by saying they must first chat with their lawyers. Others have offered legal threats and personal invective. Still others have said nothing at all. Those who have responded have insisted that the emails reveal nothing more than trivial data discrepancies and procedural debates.
Yet all of these nonresponses manage to underscore what may be the most revealing truth: That these scientists feel the public doesn’t have a right to know the basis for their climate-change predictions, even as their governments prepare staggeringly expensive legislation in response to them.
Consider the following note that appears to have been sent by Mr. Jones to Mr. Mann in May 2008: “Mike, Can you delete any emails you may have had with Keith re AR4? Keith will do likewise. . . . Can you also email Gene and get him to do the same?” AR4 is shorthand for the U.N.’s Intergovernmental Panel of Climate Change’s (IPCC) Fourth Assessment Report, presented in 2007 as the consensus view on how bad man-made climate change has supposedly become.
In another email that seems to have been sent in September 2007 to Eugene Wahl of the National Oceanic and Atmospheric Administration’s Paleoclimatology Program and to Caspar Ammann of the National Center for Atmospheric Research’s Climate and Global Dynamics Division, Mr. Jones writes: “[T]ry and change the Received date! Don’t give those skeptics something to amuse themselves with.”
When deleting, doctoring or withholding information didn’t work, Mr. Jones suggested an alternative in an August 2008 email to Gavin Schmidt of NASA’s Goddard Institute for Space Studies, copied to Mr. Mann. “The FOI [Freedom of Information] line we’re all using is this,” he wrote. “IPCC is exempt from any countries FOI—the skeptics have been told this. Even though we . . . possibly hold relevant info the IPCC is not part of our remit (mission statement, aims etc) therefore we don’t have an obligation to pass it on.”
It also seems Mr. Mann and his friends weren’t averse to blacklisting scientists who disputed some of their contentions, or journals that published their work. “I think we have to stop considering ‘Climate Research’ as a legitimate peer-reviewed journal,” goes one email, apparently written by Mr. Mann to several recipients in March 2003. “Perhaps we should encourage our colleagues in the climate research community to no longer submit to, or cite papers in, this journal.”
Mr. Mann’s main beef was that the journal had published several articles challenging aspects of the anthropogenic theory of global warming.
For the record, when we’ve asked Mr. Mann in the past about the charge that he and his colleagues suppress opposing views, he has said he “won’t dignify that question with a response.” Regarding our most recent queries about the hacked emails, he says he “did not manipulate any data in any conceivable way,” but he otherwise refuses to answer specific questions. For the record, too, our purpose isn’t to gainsay the probity of Mr. Mann’s work, much less his right to remain silent.
However, we do now have hundreds of emails that give every appearance of testifying to concerted and coordinated efforts by leading climatologists to fit the data to their conclusions while attempting to silence and discredit their critics. In the department of inconvenient truths, this one surely deserves a closer look by the media, the U.S. Congress and other investigative bodies.
Read a Selection of the Emails
A Minority View: Voluntarism or Self-Interest?
How many things in our lives would we like to depend upon the generosity and selflessness of our fellow man, and do you think we would like the outcome? You say, “Williams, are you now putting down generosity and selflessness?” No, I’m not. Let me ask the question in a more direct way. Say you want a nice three-bedroom house. Which human motivation do you think would get you the house sooner: the generosity of builders or the builders’ desire to earn some money? What about a nice car? Which motivation of auto companies and their workers do you trust will get you a car sooner: the generosity of owners and workers, or owner desire for profits and worker desire for wages? As for me, I put my faith in people’s self-interest as the most reliable way to get them to do what I want and believe most other people share my faith. What would your prediction be about the supply of housing, cars and most other things if Congress enacted a law mandating that a house or car could only be donated, not sold? If you said there would be a shortage of houses and cars, go to the head of the class.
Bone marrow transplantation is a relatively new medical procedure that is used to treat diseases once thought incurable such as leukemia, aplastic anemia, Hodgkin’s disease, immune deficiency disorders and some solid tumors such as breast and ovarian cancer. Every year, at least 1,000 Americans die and others suffer because they cannot find a matching bone marrow donor. The reason why there is a shortage of donors is the National Organ Transplant Act (NOTA), enacted by Congress in 1984. NOTA makes it illegal to give anything of value in exchange for bone marrow and that includes, for example, giving a college student a scholarship or a new homeowner a mortgage payment. Everyone involved in such a transaction -- doctors, nurses, donors and patients -- risks up to five years in a federal penitentiary.
There might be light at the end of the tunnel because the Washington-based Institute for Justice (ij.org), one of my very favorite liberty-oriented organizations, has brought suit against this inhumane practice of the U.S. Congress. The suit, Flynn v. Holder, was filed in the Los Angeles Division of the U.S. District Court for the Central District of California on Oct. 26, 2009. Doreen Flynn, the plaintiff, is the mother of five children, three of whom have Fanconi anemia, a serious genetic disorder affecting the blood whose sufferers often need a bone marrow transplant during their teen years.
The Institute for Justice is not challenging Congress’ ban on compensation for solid organs such as hearts, kidneys and livers. Instead, the lawsuit challenges only the provision of National Organ Transplant Act that bans compensation for bone marrow. The premise of the Institute for Justice’s legal challenge is that there is a fundamental biological distinction between renewable marrow cells and nonrenewable solid organs. In the case of bone marrow, the donor’s bone marrow is completely replenished in a few weeks. That’s less time than it takes for the human body to fully replenish a pint of donated blood that is often sold to blood banks.
Just about everyone would agree that there would be massive shortages and discontent if there were a congressional mandate that we must depend on our fellow man’s generosity for our home, our car, our food and thousands of other items that we use. Why then must a person depend on his fellow man’s generosity for an item like bone marrow that might mean the difference between life and death? There is no rhyme or reason for the congressional prohibition of bone marrow other than arbitrary unconstitutional abuse of power that far too many Americans tolerate and would like to see extended to other areas of our lives.
11/24/2009: Solving Whose Problem? by Thomas Sowell
No one will really understand politics until they understand that politicians are not trying to solve our problems. They are trying to solve their own problems-- of which getting elected and re-elected are number one and number two. Whatever is number three is far behind.
Many of the things the government does that may seem stupid are not stupid at all, from the standpoint of the elected officials or bureaucrats who do these things.
The current economic downturn that has cost millions of people their jobs began with successive administrations of both parties pushing banks and other lenders to make mortgage loans to people whose incomes, credit history and inability or unwillingness to make a substantial down payment on a house made them bad risks.
Was that stupid? Not at all. The money that was being put at risk was not the politicians’ money, and in most cases was not even the government’s money. Moreover, the jobs that are being lost by the millions are not the politicians’ jobs-- and jobs in the government’s bureaucracies are increasing.
No one pushed these reckless mortgage lending policies more than Congressman Barney Frank, who brushed aside warnings about risk, and said in 2003 that he wanted to “roll the dice” even more in the housing markets. But it would very rash to bet against Congressman Frank’s getting re-elected in 2010.
After the cascade of economic disasters that began in the housing markets in 2006 and spread into the financial markets in Wall Street and even overseas, people in the private sector pulled back. Banks stopped making so many risky loans. Home buyers began buying homes they could afford, instead of going out on a limb with “creative”-- and risky-- financing schemes to buy homes that were beyond their means.
But politicians went directly in the opposite direction. In the name of “rescuing” the housing market, Congress passed laws enabling the Federal Housing Administration to insure more and bigger risky loans-- loans where there is less than a 4 percent down payment.
A recent news story told of three young men who chipped in a total of $33,000 to buy a home in San Francisco that cost nearly a million dollars. Why would a bank lend that kind of money to them on such a small down payment? Because the loan was insured by the Federal Housing Administration.
The bank wasn’t taking any risk. If the three guys defaulted, the bank could always collect the money from the Federal Housing Administration. The only risk was to the taxpayers.
Does the Federal Housing Administration have unlimited money to bail out bad loans? Actually there have been so many defaults that the FHA’s own reserves have dropped below where they are supposed to be. But not to worry. There will always be taxpayers, not to mention future generations to pay off the national debt.
Very few people are likely to connect the dots back to those members of Congress who voted for bigger mortgage guarantees and bailouts by the FHA. So the Congressmen’s and the bureaucrats’ jobs are safe, even if millions of other people’s jobs are not.
Congressman Barney Frank is not about to cut back on risky mortgage loan guarantees by the FHA. He recently announced that he plans to introduce legislation to raise the limit on FHA loan guarantees even more.
Congressman Frank will make himself popular with people who get those loans and with banks that make these high-risk loans where they can pocket the profits and pass the risk on to the FHA.
So long as the taxpayers don’t understand that all this political generosity and compassion are at their expense, Barney Frank is an odds-on favorite to get re-elected. The man is not stupid.
What is stupid is believing that politicians are trying to solve our problems, instead of theirs.
As for the FHA running low on money, that is not about to stop the gravy train, certainly not with an election coming up in 2010.
The Federal Deposit Insurance Corporation is also running low on money. But that is not going to stop them from insuring bank accounts up to a quarter of a million dollars. It would be stupid for them to stop with an election coming up in 2010.
Would Obama Be President If He Made These
Five Campaign Promises?
Calling a politician dishonest is like calling a burglar dishonest. The difference is that burglars take less of your money, don’t get invited on the Sunday morning shows, and are more dangerous -- unless you happen to be a woman near a male member of the Kennedy family.
Even amongst politicians, Barack Obama is such a liar that he makes Bill Clinton look like honest Abe Lincoln by comparison. During the campaign, Barack Obama promised everything to everybody and when people inquired too closely, his supporters screamed that you had to be a racist for doubting him.
Well now, Barack Obama is President of the United States and he can no longer hide behind “hope” and “change” while he votes “present” on the tough issues. Now, people can actually judge Barack Obama based on what he’s doing instead of just projecting their hopes and dreams on a man with no record of leadership and a gift for soaring oratory.
Quite frankly, 2008 was a dream scenario for Barack. The sitting Republican President had a 25% approval rating, the GOP ran an old, uninspiring candidate who was disliked by much of the base, and there was a botched response to a last minute financial crisis that slammed the door shut on the GOP’s last hopes of winning.
Still, with all those advantages, could Barack Obama have become President had he told the American people what he actually intended to do in his first year as President instead of essentially saying, “Imagine what you want a politician to be. Ok, got it? Great, that’s what I’m going to do!”
Would Obama have been elected if he had told Americans the truth?
1) My fellow Americans, I pledge to push a wildly unpopular health care plan that will lead to higher premiums, higher taxes, huge cuts to Medicare, exploding deficits, rationing, taxpayer-funded abortions, a single payer system and poor medical care! ...
2) Under my administration, we’ll send Khalid Sheikh Mohammed to New York to be tried for reasons no one seems to be able to explain. Back in 2006 Barack Obama said a “military tribunal was a perfectly fine way of handling such dangerous individuals as Khalid Shaikh Mohammed.” ...
3) If you make me the next President of the United States, I will completely abandon bipartisanship and run the most partisan administration in American history! I make no bones about the fact that I’m no big fan of bipartisanship. However, Barack Obama made it one of the central themes of his campaign...
4) Under my administration, taxpayers will throw away tens of billions of dollars to prop up General Motors and Chrysler in order to give payback to the unions that help get me elected...
5) If you elect me as President, I will put this nation over a trillion dollars in debt for a stimulus bill that will be doomed to failure before it’s even passed! There’s so little evidence that the stimulus bill has helped the economy that even Saturday Night Live has started making fun of the idea in skits. Of course, the whole idea never made any sense in the first place, since it was enacted in the first half of 2009 despite the fact that the “Congressional Budget Office estimated that the recession would end in the ‘second half of 2009”‘ even if Obama did nothing.” So, even if the recession is over, as many economists are speculating -- it means nothing because it would have happened anyway. It’s like we spent a trillion dollars to guarantee that it would get cold during the winter.
Could Barack Obama have told the American people the truth and still been elected, even under the most favorable circumstances to liberals since Richard Nixon was impeached? There’s about as much chance of that as there is that Al Gore will give up living in a big mansion and move to a Unabomber style shack in order to “save the earth.”
The Orphan Of The American Political
Were one to design a political philosophy calculated to appeal to large numbers of “conservatives” and “liberals,” it might look very much like contemporary libertarianism: tolerant and supportive of individual rights in matters ranging from sexual orientation to religion, and committed to the rule of law and free market capitalism.
For a host of reasons, however, libertarianism in the US today is politically parentless, and largely unrepresented in most of our major cultural and educational institutions, a socio-political orphan. It’s an odd state of affairs, and unfortunate as well.
In part, the underachievement of libertarianism is explained by the existence of the Libertarian Party and the philosophy’s concomitant lack of standing in either the Democratic or the Republican Party. But it’s also a consequence of libertarianism’s embrace by some as a kind of religion--thereby yielding fanatical and anarchist schemes like abolishing the state, legalizing drugs, selling the sidewalks, whatever.
Still, it’s one thing to be burdened by (what shall we call them?) exuberant fans, and something else again to be ignored as a political philosophy altogether. To understand why you have to look at the roles played by others, starting with the parties of the right.
To neoconservatives, for instance, libertarianism is a direct threat to their “nation building” agenda (from the beginning many libertarians and libertarian think tanks, like the Cato Institute, were opposed to the Iraqi adventure), made all the worse by their appeal to many of the same people that the neocons attempt to cultivate and corral.
The so-called social and religious conservatives--represented by people like Mike Huckabee--represent another barrier. Particularly within the GOP, religious conservatives (not to mention religious populists) constitute a bloc that is hostile to the individualistic and freedom loving stance most libertarians espouse re social issues.
So-called K Street Republicans, and many big business groups, are also dismissive of libertarianism, preferring instead a political environment conducive to legislative and regulatory deal making, the sort of value-free mindset that arguably led so many to blindly follow George Bush and John McCain right into a ditch.
The right’s hostility, of course, isn’t the only, or even the controlling, reason for libertarianism’s lack of political clout. The fundamental disinterest of their sometime allies on the left, like the ACLU, is a bigger factor, and one that explains its total lack of influence within the Democratic party.
Because of the hold “economic progressives “ (such as the education lobby, public employee unions, faculty lounge Marxists, and trial lawyers) have over US liberalism and the Democratic party, libertarians and their ideas are countenanced only insofar as they are useful--usually in promotion of some social issue on which liberals and libertarians agree.
If, however, the pollsters and a growing number of economists are right, this may change. According to the folks at the Pew and Gallup organizations, Democrats and liberals are at risk of major losses in next year’s congressional elections. This, because of the public’s unhappiness with the state of the economy, and their lack of confidence in the plans proffered by the administration, and the majority party in Congress, to deal with it.
At the same time a number of economists in and out of government are suggesting that, far from being solved, the nation’s economic problems are at risk of worsening. If these economists and pollsters are right, and the Democrats take a terrible drubbing next year, it may occur to many liberals to reassess their hoary economic nostrums, and to link arms with the libertarians on economic issues, not necessarily because of what’s in their hearts as because of what’s in their heads.
If so, it won’t be a minute too soon. Because the plain truth is that the lubricant necessary to maintain, in a country as large and fractious as the US, both our social services and our civil rights is money, and lots of it. And the only way that money can be produced in sufficient quantities is by the application of those pro-business and pro-growth economic policies that are at the very heart of libertarianism.
G.O.P. Considers ‘Purity’ Resolution for Candidates
The battle among Republicans over what the party should stand for — and how much it should accommodate dissenting views on important issues — is probably going to move from the states to the Republican National Committee when it holds its winter meeting this January in Honolulu.
Republican leaders are circulating a resolution listing 10 positions Republican candidates should support to demonstrate that they “espouse conservative principles and public policies” that are in opposition to “Obama’s socialist agenda.” According to the resolution, any Republican candidate who broke with the party on three or more of these issues– in votes cast, public statements made or answering a questionnaire – would be penalized by being denied party funds or the party endorsement.
The proposed resolution was signed by 10 Republican national committee members and was distributed on Monday morning. They are asking for the resolution to be debated when Republicans gather for their winter meeting.
The resolution invokes Ronald Reagan, and noted that Mr. Reagan had said the Republican Party should be devoted to conservative principles but also be open to diverse views. President Reagan believed, the resolution notes, “that someone who agreed with him 8 out of 10 times was his friend, not his opponent.”
Hence the provision calling for cutting off Republicans who agree with the party on seven of 10 items. The resolution demands that Republicans support “smaller government, smaller national deficits and lower taxes,” denial of government funding for abortion, and “victory in Iraq and Afghanistan.” It calls on candidates to oppose amnesty for illegal immigrants and repealing of the Defense of Marriage Act.
The development is going to put pressure on Michael Steele, the party chairman, as he tries to maintain a balance between those in his party who have been saying the road to victory is to include divergent views, and those who say the party needs to embrace conservative principles that have been at its core.
Mr. Steele managed, at his party’s last meeting, to steer clear of potentially contentious resolutions, including one that equated Democrats with socialists.
Gail Gitcho, a spokeswoman for the committee, said it was not clear what Mr. Steele would do.
“The deadline for submitting resolutions for the R.N.C. Winter Meeting is more than 30 days away,” she said. “At this point, we do not what resolutions will be submitted nor what the final language of any resolution ultimately submitted may be.”
Here is the resolution’s list [and my comments]:
(1) We support smaller government, smaller national debt, lower deficits and lower taxes by opposing bills like Obama’s “stimulus” bill [Where were the Republicans with their “conservative” principles when the Bushes were in office?];
(2) We support market-based health care reform and oppose Obama-style government run health care [Again, where were the Republicans with their “conservative” principles when the Prescription benefit was passed?];
(3) We support market-based energy reforms by opposing cap and trade legislation [How about just getting out of the way and letting markets work?];
(4) We support workers’ right to secret ballot by opposing card check [How about “Right to Work” laws instead of forced unionization? Unions should be voluntary associations; no one should ever be forced to join a union.];
(5) We support legal immigration and assimilation into American society by opposing amnesty for illegal immigrants [Me too, so how about eliminating all the welfare giveaway programs (which are funded by theft) and let anyone who wants to work come to the United States?];
(6) We support victory in Iraq and Afghanistan by supporting military-recommended troop surges [There will never be “victory” in Afghanistan; there is no country over which to be victorious. And I’m not convinced we have achieved “victory” in Iraq; wait another ten years and see what happens];
(7) We support containment of Iran and North Korea, particularly effective action to eliminate their nuclear weapons threat [I doubt we can ever eliminate their nuclear weapons, but we can defend ourselves. National defense is one of the few legitimate purposes of government; what a novel idea.];
(8) We support retention of the Defense of Marriage Act [Just get government out of everyone’s personal lives, including marriage; do not give special privileges or penalize married people. Live and let live.];
(9) We support protecting the lives of vulnerable persons by opposing health care rationing and denial of health care and government funding of abortion [Get government out of health care and health care financing; then rationing will not be an issue. And, as far as abortion, people can disagree: first trimester abortion should be a decision between a mother and her conscience; third trimester abortion effectively is infanticide and should be illegal; I’m open to second trimester abortions so let the states decide]; and
(10) We support the right to keep and bear arms by opposing government restrictions on gun ownership [including licenses and punitive taxes on ammunition].
11/23/2009: Why is the Stock Market Rallying; is it just like 1982? They recommend: buy gold; it’s the best refuge against a profligate government. If you’re a little gutsier, then maybe you might want to short some of the stocks with high P/E’s. You might also consider shorting treasury bonds; how can interest rates go any lower?
11/22/2009: Sometimes all we need is a graph (or two) to make us happy. Why has it taken people so long to see him for the two-bit Chicago con man that he is?
11/19/2009: from the Daily Reckoning
The Lloyd’s Prayer
Our Chairman, who art at Goldman
Poor Goldman Sachs. Everyone is on its case. Criticizing. Carping. Jealous. Envious.
So, today we rise in defense of the Wall Street giant. Yes, the Goldmen may be shysters. But they are honest shysters...
We pick up sword and shield, ready to fight for Goldman, after reading The Financial Times. The FT has devoted a whole page to Goldman bashing. It’s time someone stood up to say a kind word for the firm.
Besides, Lloyd Blankfein said he was sorry. That’s right. He announced that the firm regretted its role in the world financial crisis. And if that weren’t enough, he pledged half a billion dollars to helping small business through tough times.
In his apology, Blankfein mentioned that he thought Goldman was doing “God’s work.” That is what prompted humorists to make up the “Lloyd’s Prayer,” we have republished above. On the surface of it, it does seem absurd. If any group of people ever worshipped Mammon, it is the bunch that works at Goldman. Money is what makes that mare run; no one doubts it.
In 2008, the average compensation of the average Goldman employee averaged $364,000 - or more than 6 times the earnings of the average American who was not employed by Goldman. Naturally, the widespread publication of this fact caused a surge of envy. Now comes news that the average Goldman man expects to make about twice as much this year - or about $765,000. As you can imagine, this did nothing to soothe the jealous spirits. Instead, it inflamed them.
And now, everyone has Goldman in his sights. Newspaper editorials kvetch and moan. Union-organized yahoos demonstrate in front of Goldman’s offices. Cartoons make fun of Blankfein. Commentators say the Goldman crew is greedy. The Rolling Stone magazine described Goldman as a “vampire squid.” Saturday Night Live mocked the company. Stand up comics stock up on Goldman jokes. Even priests criticize the firm’s claim to be doing ‘God’s work.’
The regulators cannot be far behind. It is illegal to trade on “inside information.” So, when a company targets the shares of a rival, and passes its buy orders through a Wall Street firm, the traders are forbidden from trading the shares on their own account. They cannot profit from ‘front running’ shares, based information not yet available to the public.
Goldman clearly profits from front running. But it does it by aggregating information from clients rather than using the inside information from a single client. This gives them a “market color,” rather than precise trading targets. In other words, if you have a client who sets out to acquire Acme Cement Company, you can’t buy up the shares yourself in anticipation of the rise in the share prices. That information is “protected, inside information.” But suppose you have two clients, each of whom targets a cement firm? You quickly get a “market color,” don’t you? You put two and two together. If they’re both after cement makers, probably, the whole cement sector will go up. You buy cement makers, though not those that your clients are buying.
This aggregated inside information gives Goldman a big advantage. So do its close contacts with the feds. Goldman has its former operatives in key posts throughout the government. It knows what the government is doing; it has a fair idea of what the government will do next. In trading US government securities, the biggest business in the financial world, this “insider” knowledge is no doubt a handy thing to have. It doesn’t hurt either that the Fed is making money available to Goldman at practically no cost. Nor, that the Fed is buying its mortgage backed securities - perhaps even ones that would be hard to unload on the private market.
These contacts and sources of ‘insider’ information are what George Soros has called the “hidden gifts” that Goldman enjoys...and that contribute mightily to its success.
But so what? As far as we know, Goldman holds no gun to any counterparty’s head. Nor does it lie...unless you call saying things that aren’t true “lying.” Goldman merely says the same falsehoods as the rest of the financial industry...the things people want to hear...which almost everyone believes anyway. And is there anything wrong with taking money from the US government? Doesn’t every retiree do so? Doesn’t every larcenous Congressman and every conniving contractor and every shiftless welfare addict aim to do the same thing? Isn’t the whole idea of government to take from someone and give to someone else? Then, why not to those who are most able to claim it? The swift...the strong...the smart...the Goldmans!
No, dear reader, we cannot criticize Goldman. Instead, we admire it. Goldman took advantage of the financial boom by selling debt and derivatives all over the world. Now, it takes advantage of the ‘recovery,’ by trading on its client information. And who can blame it for wanting to do business with the richest and dumbest client of all, the US government?
In God’s plan, at least as we see it, the lowly are raised up. The rich...the proud...and the foolish are brought down. God deals with the meek on his own. Goldman helps him bring the boom down on the others.
From Best of the Web from the Wall Street Journal Online
It has been 6½ years since the U.S. Supreme Court, in Grutter v. Bollinger, upheld the legality of racial discrimination in university admissions for the purpose of realizing “the educational benefits that flow from a diverse student body.” Longstanding precedent requires the court to apply “strict scrutiny” to any claim justifying discrimination on the basis of race. Writing for a 5-4 majority, Justice Sandra Day O’Connor asserted that the court’s “deference” to the “expertise” of the defendant in this case was sufficiently strict to meet this test.
But there is reason to doubt whether “diversity,” as practiced by American higher education today, has any educational benefits at all--never mind whether those benefits are sufficient to justify discrimination. Whatever its benefits in theory, diversity in practice is often anti-intellectual, replacing reasoned debate with ritualized expressions of phony emotion.
A kerfuffle at New York University is a case in point. Last week, as we noted, Tunku Varadarajan of Forbes.com wrote a column meditating on the Fort Hood massacre, which, he noted, appears to have been a religiously motivated “act of messianic violence.” (Disclosure: Varadarajan is a friend and former colleague of this columnist.)
In addition to his work in journalism, Varadarajan teaches at NYU’s Stern School of Business, and his column set off predictable complaints from Muslim students and alumni. One alum, Haroon Moghul, wrote an essay at ReligionDispatches.org in which he accused Varadarajan of “hate-mongering.” He wrote that Varadarajan’s column had caused him “pain” and “feelings of marginalization,” and the headline and sub-headline described him as “shocked” by Varadarajan’s writing.
Eventually the university president, John Sexton, was compelled to respond. While he correctly noted that it would be wrong for the university “to punish faculty officially for expressing such ideas,” he also issued a declaration of disapproval:
A journalist and NYU clinical faculty member has written a piece for Forbes that many Muslims find offensive. I understand how they feel--I found it offensive, too. I am teaching Muslim students now, and I have taught them in the past; the portrayal of Muslims in the Forbes piece bears no resemblance to my experience; I disagree with the Forbes piece and think it is wrong.
I say all this because as president I have not foresworn the rights I have as a member of the NYU faculty to challenge an idea that I believe is erroneous.
Yesterday Rabbi Yehuda Sarna of NYU’s Bronfman Center for Jewish Student Life sent an “URGENT Letter” to his email list:
I am writing to urge you to join me today in “A Campaign Against Hate” celebrating diversity at NYU, commemorating the victims of the massacre at Fort Hood and responding to a recent article in Forbes Magazine entitled “Going Muslim”. The event, dubbed “Harmonyu,” is being spearheaded by the Islamic Center at NYU.
In my opinion, the article, written by an NYU professor, does not deal sensitively enough with the role and place of Muslims in America.
How’s that for diversity? NYU’s Jews and Muslims are ganging up on a Hindu and accusing him of promoting “hate”--an inflammatory charge anywhere, but especially on a university campus. Yet it’s clear that Rabbi Sarna knows the charge is unjustified, since his actual criticism of Varadarajan’s work--it “does not deal sensitively enough”--is so tepid.
Likewise, President Sexton’s claim to have been offended by Varadarajan’s article has no credibility. There’s no doubt he was inconvenienced by it, and we expect he’s none too happy with Varadarajan for that. But his statement “I found it offensive, too” is a ritualized expression of empathy, not to be mistaken for the real thing. And if you read the entire letter, you will find that in spite of Sexton’s statement that he has “not foresworn” his right “to challenge an idea that I believe is erroneous,” he offers no substantive argument to rebut Varadarajan’s column.
This is how “diversity” works in practice: Intellectual contention is drowned out in a sea of emotion, much of it phony. Members of designated victim groups respond to a serious argument with “pain” and “shock” and accusations of “hate,” and university administrators make a show of pretending to care.
At some campuses, administrators and faculty members actually do practice censorship. NYU, at least in this instance, is not the worst offender in this respect. But this sort of emotional frenzy is nonetheless inimical to the spirit of rational inquiry that universities are supposed to encourage. Every incident of this sort makes it clearer how the University of Michigan played Justice O’Connor and her colleagues for fools.
Worse Than Nixon
[This idiot is (or claims to be...who knows?) a lawyer and says something so stupid that it could make it impossible for that Islamic slime-bucket, Khalid Sheikh Mohammed, to get a fair trial. An unbiased judge could use the tainting of the jury pool by Obama and Eric Holder as a reason to dismiss the case.]
“Americans who are troubled by the decision to send alleged Sept. 11 mastermind Khalid Sheikh Mohammed to New York for trial will feel better about it when he’s put to death, President Barack Obama said Tuesday,” Politico reports:
During a round of network television interviews conducted during Obama’s visit to China, the president was asked about those who find it offensive that Mohammed will receive all the rights normally accorded to U.S. citizens when they are charged with a crime.
“I don’t think it will be offensive at all when he’s convicted and when the death penalty is applied to him,” Obama told NBC’s Chuck Todd.
Compare that with the following report, from Time magazine’s Aug. 17, 1970, issue:
It was in Denver’s Federal Building that President Nixon committed the startling gaffe of prejudging the case of Charles Manson. While complaining that the press had made Manson a glamorous hero, Nixon said: “Here was a man who was guilty, directly or indirectly, of eight murders without reason.” For a lawyer who occasionally delivers homilies on legal propriety, this was a serious breach.
Attorney General John Mitchell, who was standing at Nixon’s side, instantly recognized Nixon’s error. “This has got to be clarified,” he told Presidential Aide John Ehrlichman immediately afterward. Unhappily, what ensued was a series of errors compounded by instant communications. Startled reporters dashed to the press room, and within minutes, the bulletins were moving across the land. The statement was filmed and broadcast later on network television, with a clarification appended.
But the damage was already done. It was not until half an hour after Nixon spoke that Press Secretary Ron Ziegler reappeared before the newsmen. After some minutes of verbal fencing, Ziegler agreed that Nixon’s words about Manson should be retracted. When Ziegler told Nixon what had happened, the President was surprised: “I said ‘charged,’ “ he replied. During the 3½-hour flight back to Washington, Mitchell persuaded Nixon to put out a statement backing Ziegler up. It read in part: “The last thing I would do is prejudice the legal rights of any person in any circumstances. I do not know and did not intend to speculate as to whether or not the Tate defendants are guilty, in fact, or not.”
Obama issued a Nixonian “clarification,” as the Politico report notes:
When Todd asked Obama if he was interfering in the trial process by declaring that Mohammed will be executed, Obama, a former constitutional law professor, insisted that he wasn’t trying to dictate the result.
“What I said was, people will not be offended if that’s the outcome. I’m not pre-judging, I’m not going to be in that courtroom, that’s the job of prosecutors, the judge and the jury,” Obama said. “What I’m absolutely clear about is that I have complete confidence in the American people and our legal traditions and the prosecutors, the tough prosecutors from New York who specialize in terrorism.”
But Obama’s statement is considerably worse than Nixon’s. Whereas Nixon merely opined that Manson was guilty, Obama prejudged the outcome of the trial and sentencing. Manson and his co-defendants were tried in state court, a venue where the president has no authority. By contrast, the prosecutors who will handle cases of KSM et al. ultimately answer to Obama.
Worse still, Obama was defending his own politically charged decision to try the defendants as civilians by offering the reassurance that the outcome is preordained. The president’s claim amounts to an assertion that the U.S. District Court for the Southern District of New York is a kangaroo tribunal. If this is how the Obama administration views due process, heaven help any American who is charged with a federal crime.
Look for the Union Label
[Unions once had a legitimate purpose...and they still might, but unions are allowed to engage in too many coercive activities that would be illegal for business. Further, public employee unions are behind most of the problems in states like New York and California while teacher unions cause harm to education. Abolishing those unions would go a long way to solving the fiscal crises in those states.]
Here’s an inspiring story from the Morning Call of Allentown, Pa.:
In pursuit of an Eagle Scout badge, Kevin Anderson, 17, has toiled for more than 200 hours over several weeks to clear a walking path in an east Allentown park.
Little did the do-gooder know that his altruistic act would put him in the cross hairs of the city’s largest municipal union.
Nick Balzano, president of the local Service Employees International Union, told Allentown City Council Tuesday that the union is considering filing a grievance against the city for allowing Anderson to clear a 1,000-foot walking and biking path at Kimmets Lock Park.
“We’ll be looking into the Cub Scout or Boy Scout who did the trails,” Balzano told the council.
Balzano said Saturday he isn’t targeting Boy Scouts. But given the city’s decision in July to lay off 39 SEIU members, Balzano said “there’s to be no volunteers.” No one except union members may pick up a hoe or shovel, plant a flower or clear a walking path.
Maybe if the SEIU joins forces with the gay-rights extremists, they can finally defeat the scourge of scouting.
11/18/2009: Daily Presidential Tracking Poll:
The Rasmussen Reports daily Presidential Tracking Poll for Wednesday shows that 26% of the nation’s voters Strongly Approve of the way that Barack Obama is performing his role as President. Forty percent (40%) Strongly Disapprove giving Obama a Presidential Approval Index rating of –14. That matches the lowest Approval Index rating yet recorded for this President...
11/18/2009: Worse Than Taxes by John Stossel
Bill O’Reilly is mad at me because I’m not mad enough about taxes.
Last week on “The O’Reilly Factor”, we talked about California’s and New York’s enormous budget deficits and planned tax increases. Those states would have big surpluses had they just grown their governments in pace with inflation. But of course they didn’t. Now the politicians act like their current deficits are something imposed on them by the recession.
But that’s nonsense. They created the problem with their reckless spending.
Let’s look at the particulars. Had the government of New York state grown at the rate of population and inflation over the past 10 years, it would have a $14 billion surplus today. Instead, spending grew at twice the rate of inflation (http://tinyurl.com/yguvfpm). So New York has a $3 billion deficit.
To dent California’s deficit, bureaucrats will withhold an extra 10 percent from every taxpayer -- at least from those who don’t flee the state. New York planned to raise the price of new license plates, but then backed off. The visible tax was unpopular. But the hidden taxes grow.
Hidden taxes are more pernicious because they disguise what we pay for government. We blame merchants, not our legislators, for the high price of gasoline, liquor, cigarettes and phone calls, but the money goes to the political thieves.
New York imposes a gas tax of 61 cents a gallon -- almost a quarter of the cost of the gas. New York City taxes cigarettes at $4.25 a pack. Washington state collects $26 per gallon of hard liquor. Illinois politicians take a sneaky cut when you buy junk food: They add 6.25 percent to the cost of soda and candy.
My phone bill lists seven different taxes -- unintelligible stuff like a “Public Safety Commission Surcharge” and an “MCTD tax.” The payroll tax is one of the biggest hidden taxes. You assume that you know what you pay because it’s listed on your paycheck, but that’s actually only half of it. Employers must pay an equal amount -- money that otherwise would have been part your salary.
O’Reilly was most indignant about the visible taxes. “You, Stossel, are going to be paying 45 percent of your money to the government!” he said. I replied that I already pay more than that, since I live in New York City.
But I apparently was not indignant enough, because later in his show he told comedian Dennis Miller, “Stossel doesn’t get it.”
O’Reilly is right about my not being furious. It’s not that taxes don’t anger me. They do. But I’m more angry about the arrogance of the ruling class. It reminds me of Walter Williams’ riff: “Politicians are worse than thieves. At least when thieves take your money, they don’t expect you to thank them for it.”
Taxes, even counting hidden taxes, are not the real measure of what the thieves take. The true burden of government, the late Milton Friedman said, is the spending level. Taxation is just one way government gets money. The other ways -- borrowing and inflation -- are equally burdens on the people. (State governments can’t inflate, but they sure can borrow.)
O’Reilly told me that America is ready for a tax revolt. I hope he’s right. But I don’t think it will happen until more people see the ruling elite for what it is: a gang of arrogant bullies that has the audacity to believe that they know how to direct our lives better than we do.
That’s why, bad as the taxes are, I’m more upset about ObamaCare, Medicare, the “stimulus,” the auto bailout, the bank bailouts, the Fannie/Freddie bailouts, the trillions in guarantees, and on and on.
The politicians’ spending schemes represent presumptuous interference in our lives. They are an assault on our autonomy.
11/17/2009: Five Terrible Cruelties of Liberalism by John Hawkins
Liberalism is an extraordinarily deceptive, ruinous and cruel ideology. That’s because liberalism comes, arms wide open, whispering sweet words of compassion and pity, even as it forcefully slams down a boot upon the neck of people it’s “helping.”
11/17/2009: Bowing to “World Opinion” by Thomas Sowell
...”As a private citizen, Barack Obama has a right to make as big a jackass of himself as he wants to. But, as President of the United States, his actions not only denigrate a nation that other nations rely on for survival, but raise questions about how reliable our judgment and resolve are— which in turn raises questions about whether those nations will consider themselves better off to make the best deal they can with our enemies.”
11/13/2009: California, Michigan Face Doomsday Budget
Finance directors for California and Michigan outlined dire fiscal scenarios for both states that could span far beyond the recession and into the next decade.
Short-term budget gaps have battered states as revenue plummeted during the recession. Aided by about $250 billion in funds from the stimulus package (which is being distributed through the end of next year), states managed to close the gaps this year. But both finance directors, speaking at a Pew Center on the States event, were pessimistic about their states’ futures even beyond fiscal 2011.
“We’re facing a cliff in 2011 when stimulus dollars run out,” said Mitchell E. Bean, the director of the Michigan House Fiscal Agency. “There is not an end in sight, even in recovery.”
Filling the most recent holes led states, notably California, to consider drastic options. As of July 2009, California’s budget shortfall was 49.3% of its general funds.
“I looked as hard as I could at how states could declare bankruptcy,” said Michael C. Genest, the director of the California Department of Finance who is stepping down at the end of the year. “I literally looked at the federal constitution to see if there was a way for states to return to territory status.”
There was none, so the legislature cut back sharply on education and health care to fill the gap. Mr. Genest already predicts the 2011 shortfall will outpace the projected $7 billion gap. It’s a smaller deficit than this year, but the choices will be more difficult.
“All the options have been taken away or used up,” Mr. Genest said. And with rising costs there’s no end in sight for the state’s budget woes. Mr. Genest estimated that, eventually, 40% of the state’s budget would go to the state Medicaid program, 40% to education, 10% to debt service and 6% to retiree medical services and pension — leaving little left for anything else.
Mr. Bean described a similarly depressing scenario for Michigan, which could end the recession with 25% fewer jobs than in June 2000 and a total of 1 million job losses. He noted that strict term limits often lead to political gridlock that prevents large scale reforms, such as overhauling the tax code so it is broad based with lower tax rates. In the meantime, a $2.8 billion budget gap last year led the state to make its own set of cuts and Mr. Bean said lawmakers will likely have to trim the budget at least 12.5% this year.
“Citizens don’t quite understand yet the implications of some of the cuts that we’ve made,” Mr. Bean said. “A lot of it has fallen on local governments. I am very concerned that we’re going to have a lot of insolvencies in local governments.”
Additional stimulus money wouldn’t fix the long-term problems, the two men agreed. “Unfortunately I think we’re going to have to hit the wall before we have any real reform,” Mr. Bean said, which means more localities filing for bankruptcy and maybe even some schools.
But don’t expect the states to turn down any extra funds. “I think if you ask a heroin addict if he wants some free heroin he’s always going to say yes,” Mr. Genest said.
11/14/2009: The Passing-on-Costs Myth by Robert Ringer
Any civilized person dislikes the thought of minorities being oppressed, and I would argue that the most oppressed minority in the U.S. is the small businessperson. But he is not without his supporters. By and large, his employees think highly of him. Why not? After all, he gives them the opportunity to earn a living.
So, who is it that doesn’t like small business owners? The government! Why? Because small businesspeople are stubbornly independent. They don’t need or want government help. They make their own way in the world. Profitability is the name of the game for them, but it’s not an easy task.
In a truly free society, it would be difficult enough for a small business to make a profit. A small-business owner is like an orchestra conductor. He has to be on top of every aspect of his enterprise. He has to make sure that every employee is doing his job correctly.
And when he goes broke - as millions of small businesspeople have done - he often feels like all he has to show for his work is that he gave his employees a good lifestyle for an extended period of time. They go on to the next job, and he goes on to face his creditors.
Ironically, the small businessperson’s biggest threat is also his biggest employee - the government. I say biggest employee, because the government is supposed to work for him. It says so in that antiquated little piece of work called the Constitution. But those who hold the reins of power don’t much care about the Constitution.
As a result, the government taxes the small businessperson at every turn, regulates him to death, and harasses him in an almost sadistic fashion. Rather than being his humble servant, the government has transformed itself into the natural predator of the small businessperson.
Without government, it is breathtaking to imagine what the average small businessperson could accomplish. In a true laissez-faire economy - which, by the way, has never existed on this planet - the small businessperson would be able to create wealth on a scale that is impossible for a socialist thinker to comprehend.
Now, along comes government’s next big roadblock for small business - government-run healthcare. In one form or another, sooner or later, a bill will be passed - over the objections of a majority of American serfs. And when it passes, the one thing of which we can be certain is that it will mean higher taxes for everyone - particularly small businesspeople.
Having said this, I thought it would be a good time to disrobe an economic myth that even most libertarians and conservatives buy into. For as long as I can remember, conventional wisdom has insisted that companies don’t pay taxes, only consumers do. The idea is that any increase in a company’s taxes are merely passed along to its customers.
While this is true, to a great extent, in some industries (utilities being the most obvious example), it is not true in most. A government-enforced monopoly like a gas or electric company can, for the most part, pass along higher taxes to its customers. Even with utilities, however, there is, at least in theory, some degree of choice.
But in most industries, especially those that sell discretionary products and services, customers always have a choice. Whether it’s parallel competition (alternatives to a product or service), dollar competition (people making decisions to purchase some products and do without others), or invisible competition (entrepreneurs always being ready to enter into an overpriced industry and compete at lower prices), companies can’t treat their customers as though they are cows waiting to be milked at the whim of corporate executives.
Which brings me back to taxes. No matter what kind of healthcare bill finally emerges from the Criminal Crowd in Washington, you can bet the farm that small businesses will get hit the hardest. Small businesspeople stand for everything that politicians hate. Small businesses provide jobs. Small businesses produce products and services that people are willing to purchase, without the threat of government coercion. Small businesses create wealth and thereby grow the economy.
All of the above conflict with the current administration’s desire to collapse the economy and get as many people as possible on the dole (the Cloward-Piven Strategy). That’s why the government’s omnibenevolence never finds its way to small business. Small business is the enemy, because it eliminates the need for people to look to the government for benefits.
Healthcare legislation - in whatever grotesque form it ends up taking - will surely increase operating costs for small businesses across the board, starting with taxes and/or fines. And, as I said, a business cannot automatically pass along an increase in expenses to its customers. This is even more true in a bad economy, when people are not willing, or able, to pay higher prices.
Instead, they will find alternatives - often government-subsidized alternatives - or do without. Either way, the higher cost of doing business will cause small businesses to lay off employees, which will increase unemployment, increase jobless benefits, and further depress the economy.
And, of course, many small businesses will shut their doors - either through voluntarily or involuntary liquidation. Some of the more fortunate ones will go the Atlas Shrugged route and simply stop producing and walk away. Any way you slice it, the biggest cost of government-run healthcare to all of us will be the devastation that it will do to the engine of our economy - America’s 27 million small businesses.
But it’s okay, because Baltimore-bred, airhead Nancy - with her glued-on, toothy smile - has already congratulated herself and her Congressional partners in crime for “delivering affordable healthcare to every American.” Doesn’t her upbeat nature make you feel warm and fuzzy all over? Arrgh!
Now let’s sit back, reminisce about the golden days of Western civilization, and see what kind of Trojan horse the Senate Mob comes up with. Perhaps they’ll pleasantly surprise us, but don’t hold your breath.
Copyright 2009 Tortoise Press, Inc. All Rights Reserved.
An Obituary You Really Must Read (Oldie)
An Obituary printed in the London Times - Interesting and sadly rather true.
Today we mourn the passing of a beloved old friend, Common Sense, who has been with us for many years. No one knows for sure how old he was, since his birth records were long ago lost in bureaucratic red tape.
He will be remembered as having cultivated such valuable lessons as:
Knowing when to come in out of the rain;
Why the early bird gets the worm;
Life isn’t always fair; and
maybe it was my fault.
Common Sense lived by simple, sound financial policies (don’t spend more than you can earn) and reliable strategies (adults, not children, are in charge).
His health began to deteriorate rapidly when well-intentioned but overbearing regulations were set in place. Reports of a 6-year-old boy charged with sexual harassment for kissing a classmate; teens suspended from school for using mouthwash after lunch; and a teacher fired for reprimanding an unruly student, only worsened his condition.
Common Sense lost ground when parents attacked teachers for doing the job that they themselves had failed to do in disciplining their unruly children. It declined even further when schools were required to get parental consent to administer sun lotion or an aspirin to a student; but could not inform parents when a student became pregnant and wanted to have an abortion.
Common Sense lost the will to live as the churches became businesses; and criminals received better treatment than their victims. Common Sense took a beating when you couldn’t defend yourself from a burglar in your own home and the burglar could sue you for assault.
Common Sense finally gave up the will to live, after a woman failed to realize that a steaming cup of coffee was hot. She spilled a little in her lap, and was promptly awarded a huge settlement. Common Sense was preceded in death, by his parents, Truth and Trust, by his wife, Discretion, by his daughter, Responsibility, and by his son, Reason.
He is survived by his 4 stepbrothers; I Know My Rights, I Want It Now, Someone Else Is To Blame, and I’m A Victim
Not many attended his funeral because so few realized he was gone. If you still remember him, pass this on. If not, join the majority and do nothing
11/11/2009: Pfizer and Kelo’s Ghost Town
The Supreme Court’s 2005 decision in Kelo v. City of New London stands as one of the worst in recent years, handing local governments carte blanche to seize private property in the name of economic development. Now, four years after that decision gave Susette Kelo’s land to private developers for a project including a hotel and offices intended to enhance Pfizer Inc.’s nearby corporate facility, the pharmaceutical giant has announced it will close its research and development headquarters in New London, Connecticut.
The aftermath of Kelo is the latest example of the futility of using eminent domain as corporate welfare. While Ms. Kelo and her neighbors lost their homes, the city and the state spent some $78 million to bulldoze private property for high-end condos and other “desirable” elements. Instead, the wrecked and condemned neighborhood still stands vacant, without any of the touted tax benefits or job creation.
That’s especially galling because the five Supreme Court Justices cited the development plan as a major factor in rationalizing their Kelo decision. Justice Anthony Kennedy called the plan “comprehensive,” while Justice John Paul Stevens insisted that “The city has carefully formulated a development plan that it believes will provide appreciable benefits to the community, including, but not limited to, new jobs and increased tax revenue.” So much for that.
Kelo’s silver lining has been that it transformed eminent domain from an arcane government power into a major concern of voters who suddenly wonder if their own homes are at risk. According to the Institute for Justice, which represented Susette Kelo, 43 states have since passed laws that place limits and safeguards on eminent domain, giving property owners greater security in their homes. State courts have also held local development projects to a higher standard than what prevailed against the condemned neighborhood in New London.
If there is a lesson from Connecticut’s misfortune, it is that economic development that relies on the strong arm of government will never be the kind to create sustainable growth.
Printed in The Wall Street Journal, page A20
Senior Health-Care Solution
So, you’re a senior citizen and the government says no healthcare for you. What do you do?
Our plan gives anyone 65 years or older a gun and 4 bullets. You are allowed to shoot two senators and two representatives. Of course, this means you will be sent to prison. There you will get three meals a day, a roof over your head, and all the healthcare you need (the courts have mandated it)! New teeth? No problem. Need glasses? Great. New hip, knees, kidney, lungs, heart? All covered.
And who will be paying for all of this? The same government that just told you that you are too old for healthcare. Plus, because you are a prisoner, you don’t have to pay any income taxes.
What a country!
“Health Insurance” is Really a Statist System of Cost-Shifting”
Forty million Americans are said to have no health insurance. Those who do have health insurance are frustrated by having to pay ever-increasing premiums for steadily diminishing medical services. Conventional wisdom tells us that we are facing a “health insurance crisis.”
It is important to recognize that what we call “health insurance” has little to do with health and nothing to do with insurance. We do not face a “health insurance crisis.” We face the consequences of a set of economic and social problems rooted in a futile effort to make the distribution of health care—unlike the distribution of virtually every other good and service in our society—egalitarian.
The typical contractor of homeowner’s insurance is the homeowner. He buys insurance to protect himself from costly loss caused by events outside his control, such as fire, not to defray the recurring expense of maintaining it. The ideal outcome for both the buyer and the seller of home and automobile insurance is for the policyholder to never make use of his policy.
The typical contractor of health insurance is not the insured person but his employer. Neither party is free to negotiate the terms of the policy. The employee cannot bargain for a lower premium in exchange for a high deductible or for choosing to be not covered for alcoholism or schizophrenia. The employer is not free to decline coverage for state-mandated medical services. In New York State, for example, the Women’s Wellness Act mandates group health-insurance plans to cover contraceptives including abortifacients, and the Infertility Coverage Act mandates that they cover infertility treatments, including selective fetal reduction (abortion of multiple fetuses conceived by artificial means).
The economic survival of an insurance company depends in large part on collecting more in premiums than it pays out in claims. To bring about that outcome the insurer employs certain methods, some complicated, some very simple. Although embarrassingly obvious, some of these simple measures need to be mentioned because they are absent from what we mislabel “health insurance.” For example, a person cannot buy a policy to protect himself from a loss caused by his own actions, such as burning down his own home. But so-called health insurance protects the individual from the medical consequences of his own actions, for example, injuring himself by smashing his car while drunk. Not surprisingly, all the participants in the complex scheme we call “health insurance” are unhappy with the result.
In the case of genuine insurance, there is a direct relationship between the dollar value of the protection purchased and its cost to the insured. The premium for a life-insurance policy with a face value of $100,000 is less than for a policy for a multiple of that amount. In health insurance no such relationship exists between premium paid and compensation received. Moreover, the health-insurance company, acting on its own behalf, can write a contract with a “cap” on claims, that is, for the maximum amount it will pay the insured, regardless of the health-care cost he incurs. The insured person, who typically does not act on his own behalf but is “provided” insurance as an important part of his job benefit, has no reciprocal options.
The sole rational purpose of true insurance is to protect the insured from an unanticipated economic loss so large as to jeopardize his economic well-being. No one sells or buys insurance to cover the cost of maintaining his property. Home insurance does not pay for plumbing repairs; automobile insurance does not pay for replacing worn-out windshield wipers. Yet people demand precisely this kind of reimbursement from so-called health insurance.
“Health Insurance”: The Illusion of Equality
If health insurance is not insurance, what is it? It is a modern version of the illusion that all men are equal—or, when ill, ought to be treated as if they were equal. When religion was the dominant ideology, death was (supposed to be) the great equalizer: once they departed the living, prince and pauper were equal. Today, when medicine is the dominant ideology, health care is (supposed to be) the great equalizer: everyone’s life is “infinitely precious” and hence deserves the same protection from disease. Of course, prince and pauper did not receive the same burial services, and rich and poor do not receive the same medical services. But people prefer the illusion of equality to the recognition of inequality.
Actually, the ruled have always longed for “universal health care,” and the rulers have always supplied them with a policy that the masses accepted as such a service. In the Middle Ages, universal health care was called Catholicism. In the twentieth century, it was called Communism. In the 21st century, it is called Universal Health Insurance. What we choose to call “health insurance” is, in fact, a system of cost-shifting masquerading as a system of insurance. We treat a public, statist political system of health care as if it were a system of private health insurance purchased for the purpose of obtaining private medical care.
Everyone knows but no one admits that health insurance is not really insurance. In fact, Americans now view their health insurance as an open-ended entitlement for reimbursement for virtually any expense that may be categorized as “health care,” such as the cost of birth-control pills or Viagra. The cost of these services is covered on the same basis as the cost of medical catastrophes, such as treatment for the consequences of a brain tumor. Such distorted incentives produce the perverted outcomes with which we are all too familiar.
From a public-health point of view, the state of our health is partly, and often largely, in our own hands and is our own responsibility, even if we have a chronic illness, such as arthritis or diabetes. It is an immoral and impractical endeavor to try to reject that responsibility and place the burden for the consequences on others.
If a nation values anything more than freedom, it will lose its freedom; and the irony of it is that, if it is comfort or money it values more, it will lose that too. — William Somerset Maugham 
It is our true policy to steer clear of permanent alliances with any portion of the foreign world.... Harmony, liberal intercourse with all nations are recommended by policy, humanity, and interest. But even our commercial policy should hold an equal and impartial hand, neither seeking nor granting exclusive favors or preferences. — George Washington, Farewell Address [September 26, 1796]
11/11/2009: A Minority View: Constitutional Contempt by Walter E. Williams
At Speaker Nancy Pelosi’s Oct. 29th press conference, a CNS News reporter asked, “Madam Speaker, where specifically does the Constitution grant Congress the authority to enact an individual health insurance mandate?” Speaker Pelosi responded, “Are you serious? Are you serious?” The reporter said, “Yes, yes, I am.” Not responding further, Pelosi shook her head and took a question from another reporter. Later on, Pelosi’s press spokesman Nadeam Elshami told CNSNews.com about its question regarding constitutional authority mandating that individual Americans buy health insurance. “You can put this on the record. That is not a serious question. That is not a serious question.”
Suppose Congress was debating a mandate outlawing tea-party-type protests and other large gatherings criticizing Congress. A news reporter asks Nancy Pelosi where specifically does the Constitution grant Congress the authority to outlaw peaceable assembly. How would you feel if she answered, “Are you serious? Are you serious?” and ignored the question. And what if, later on, someone from her office sent you a press release, as was sent to CNS News, saying that Congress has “broad power to regulate activities that have an effect on interstate commerce,” pointing out that demonstrations cause traffic jams and therefore interferes with interstate commerce?
Speaker Pelosi’s constitutional contempt, perhaps ignorance, is representative of the majority of members of both the House and the Senate. Their comfort in that ignorance and constitutional contempt, and how readily they articulate it, should be worrisome for every single American. It’s not a matter of whether you are for or against Congress’ health care proposals. It’s not a matter of whether you’re liberal or conservative, black or white, male or female, Democrat or Republican or member of any other group. It’s a matter of whether we are going to remain a relatively free people or permit the insidious encroachment on our liberties to continue.
Where in the U.S. Constitution does it authorize Congress to force Americans to buy health insurance? If Congress gets away with forcing us to buy health insurance, down the line, what else will they force us to buy; or do you naively think they will stop with health insurance? We shouldn’t think that the cure to Congress’ unconstitutional heavy-handedness will end if we only elect Republicans. Republicans have demonstrated nearly as much constitutional contempt as have Democrats. The major difference is the significant escalation of that contempt under today’s Democratically controlled Congress and White House with the massive increase in spending, their proposed legislation and the appointment of tyrannical czars to control our lives. It’s a safe bet that if and when Republicans take over the Congress and White House, they will not give up the massive increase in control over our lives won by the Democrats.
In each new session of Congress since 1995, John Shadegg, R-Ariz.,) has introduced the Enumerated Powers Act, a measure “To require Congress to specify the source of authority under the United States Constitution for the enactment of laws, and for other purposes.” The highest number of co-sponsors it has ever had in the House of Representatives is 54 and it has never had co-sponsors in the Senate until this year, when 22 senators signed up. The fact that less than 15 percent of the Congress supports such a measure demonstrates the kind of contempt our elected representatives have for the rules of the game -- our Constitution.
If you asked the questions: Which way is our nation heading, tiny steps at a time? Are we headed toward more liberty, or are we headed toward greater government control over our lives? I think the answer is unambiguously the latter -- more government control over our lives. Are there any signs on the horizon that the direction is going to change? If we don’t see any, we should not be surprised. After all, mankind’s standard fare throughout his history, and in most places today, is arbitrary control and abuse by government.
Pfizer abandons site of infamous Kelo eminent domain taking
The private homes that New London, Conn., took away from Suzette Kelo and her neighbors have been torn down. Their former site is a wasteland of fields of weeds, a monument to the power of eminent domain.
But now Pfizer, the drug company whose neighboring research facility had been the original cause of the homes’ seizure, has just announced that it is closing up shop in New London.
To lure those jobs to New London a decade ago, the local government promised to demolish the older residential neighborhood adjacent to the land Pfizer was buying for next-to-nothing. Suzette Kelo fought the taking to the Supreme Court, and lost. Five justices found this redevelopment met the constitutional hurdle of “public use.”
The Hartford Courant reports:
Pfizer Inc. will shut down its massive New London research and development headquarters and transfer most of the 1,400 people working there to Groton, the pharmaceutical giant said Monday....
Pfizer is now deciding what to do with its giant New London offices, and will consider selling it, leasing it and other options, a company spokeswoman said.
Scott Bullock, Kelo’s co-counsel in the case, told me: “This shows the folly of these redevelopment projects that use massive taxpayer subsidies and other forms of corporate welfare and abuse eminent domain.”
December 2009: Liberty Magazine (pages 18 & 20): “Hollow man” — It may seem premature to write off the Obama presidency as a failed experiment in messianic politics, i.e., the politics of deliverance and hope; but I do not think so. The flaws of Mr. Obama, and of his administration, are too deep and structural to be salvaged by any desperate, last-minute remedies. The fissures in the woodwork are too deep to be glossed over with varnish and furniture polish. And if things look bad now, they can only get worse in the months to come.
President Obama is glib, even eloquent, to a fault — that is his saving grace and his special curse. Americans felt so embittered and let down with such inarticulate Republican dolts and mediocrities as the Bushes that Obama’s soaring rhetoric seemed to promise a new day in presidential politics. Who was not moved by the announcement in his inaugural address of the death of Washington’s favorite pastime, petty political bickering and partisanship? It was one of those singular moments in history when the will to do good was high. Never has the mood for meaningful change been so puissant. Even the eyes of stalwart unbelievers on the right misted over with the afflatus and the exaltation of noble aspirations.
Yet, what was Obama’s first piece of legislation but the now infamous stimulus bill?
The stimulus package was by any measure a steaming pile of liberal special-interest philanthropy, a spoils-system largesse that would have made Andrew Jackson blush, and one that was doubly irresponsible in this hour of economic crisis. It was a reversal so cool, casual, and blasé, so destructive and so encompassing, that it raised political cynicism to a historic level. What an unmitigated fraud! What a blatant, bald-faced deception! What an unimaginative, slimy-green, mildewed piece of liberal policy-making! Call it the audacity of political manipulation.
Psychologists doing research on the subject of leadership have found that the people who aspire to positions of power the most aggressively are frequently those least qualified temperamentally and intellectually to wield it. (No surprise — history has been telling us this for centuries.) And so it is with Obama. Those around him, and even his bitterest adversaries, tell us that he is a very intelligent man. But the facts seem to indicate that he is rather stupid, at least with regard to his duties as the leader of the world’s leading republic and superpower. His early opponents complained correctly that he lacked seasoning and policy experience, that his intellectual accomplishments were essentially academic, and that his personality tended to be narcissistic. And now the crows have come home to roost.
On his July 28 broadcast, Fox News commentator Glenn Beck called President Obama a racist with a deep-seated hatred of white people. In response, Geico pulled its sponsorship of Beck’s show, leading several other advertisers to defect as well. For what it’s worth, President Obama is not a racist. Racism implies some firmly held beliefs, however noxious and misguided. Obama has no convictions at all. He believes in nothing but himself. He is a narcissist and an opportunist who dreamed of being president. To achieve this he campaigned as a centrist and after he was elected emerged, willy-nilly, as a leftist. He is neither a good man nor a bad man. He is a cipher, a man devoid of principle. There is something wanting in Obama — that essential, indispensable component of humanity that separates men of honor from ordinary mortals. Who would have guessed that beneath all his oratory he was hollow to the core?
For those mystified by how Obama could sit in the congregation of Reverend Jeremiah Wright and listen to his lunatic race-baiting and other filthy claptrap for 20 years, the answer is now at hand. They need wonder no longer.
— William B. Fankboner
Obamacare Endorsements: What the Bribe Was
As the suicidal Democratic congressmen proceed to rubber-stamp the Obama healthcare reform despite the drubbing their party took in the ‘09 elections, the president trotted out the endorsements of the AMA and the AARP to stimulate support. But these – and the other endorsements – his package has received are all bought and paid for.
Here are the deals:
— The American Medical Association (AMA) was facing a 21 percent cut in physicians’ reimbursements under the current law. Obama promised to kill the cut if they backed his bill. The cuts are the fruit of a law requiring annual 5 percent to 6 percent reductions in doctor reimbursements for treating Medicare patients. Bravely, each year Congress has rolled the cuts over, suspending them but not repealing them. So each year, the accumulated cuts threaten doctors. By now, they have risen to 21 percent. With this blackmail leverage, Obama compelled the AMA to support his bill...or else!
— The AARP got a financial windfall in return for its support of the healthcare bill. Over the past decade, the AARP has morphed from an advocacy group to an insurance company (through its subsidiary company). It is one of the main suppliers of Medi-gap insurance, a high-cost, privately purchased coverage that picks up where Medicare leaves off. But President Bush-43 passed the Medicare Advantage program, which offered a subsidized, lower-cost alternative to Medi-gap. Under Medicare Advantage, the elderly get all the extra coverage they need plus coordinated, well-managed care, usually by the same physician. So more than 10 million seniors went with Medicare Advantage, cutting into AARP Medi-gap revenues.
— The drug industry backed ObamaCare and, in return, got a 10-year limit of $80 billion on cuts in prescription drug costs. (A drop in the bucket of their almost $3 trillion projected cost over the next decade.) They also got administration assurances that it will continue to bar lower-cost Canadian drugs from coming into the U.S. All it had to do was put its formidable advertising budget at the disposal of the administration.
— Insurance companies got access to 40 million potential new customers. But when the Senate Finance Committee lowered the fine that would be imposed on those who don’t buy insurance from $3,500 to $1,500, the insurance companies jumped ship and now oppose the bill, albeit for the worst of motives.
The only industry that refused to knuckle under was the medical device makers. They stood for principle and wouldn’t go along with Obama’s blackmail. So the Senate Finance Committee retaliated by imposing a tax on medical devices such as automated wheelchairs, pacemakers, arterial stents, prosthetic limbs, artificial knees and hips and other necessary accoutrements of healthcare.
So these endorsements are not freely given, but bought and paid for by an administration that is intent on passing its program at any cost.
© 2009 Dick Morris & Eileen McGann
Mises’s ideas on business cycles were spelled out in his 1912 tome “Theorie des Geldes und der Umlaufsmittel” (“The Theory of Money and Credit”). Not surprisingly few people noticed, as it was published only in German and wasn’t exactly a beach read at that.
Taking his cue from David Hume and David Ricardo, Mises explained how the banking system was endowed with the singular ability to expand credit and with it the money supply, and how this was magnified by government intervention. Left alone, interest rates would adjust such that only the amount of credit would be used as is voluntarily supplied and demanded. But when credit is force-fed beyond that (call it a credit gavage), grotesque things start to happen.
Government-imposed expansion of bank credit distorts our “time preferences,” or our desire for saving versus consumption. Government-imposed interest rates artificially below rates demanded by savers leads to increased borrowing and capital investment beyond what savers will provide. This causes temporarily higher employment, wages and consumption.
Ordinarily, any random spikes in credit would be quickly absorbed by the system—the pricing errors corrected, the half-baked investments liquidated, like a supple tree yielding to the wind and then returning. But when the government holds rates artificially low in order to feed ever higher capital investment in otherwise unsound, unsustainable businesses, it creates the conditions for a crash. Everyone looks smart for a while, but eventually the whole monstrosity collapses under its own weight through a credit contraction or, worse, a banking collapse.
The system is dramatically susceptible to errors, both on the policy side and on the entrepreneurial side. Government expansion of credit takes a system otherwise capable of adjustment and resilience and transforms it into one with tremendous cyclical volatility.
“Theorie des Geldes” did not become the playbook for policy makers. The 1920s were marked by the brave new era of the Federal Reserve system promoting inflationary credit expansion and with it permanent prosperity. The nerve of this Doubting-Thomas, permabear, crazy Kraut! Sadly, poor Ludwig was very nearly alone in warning of the collapse to come from this credit expansion. In mid-1929, he stubbornly turned down a lucrative job offer from the Viennese bank Kreditanstalt, much to the annoyance of his fiancée, proclaiming “A great crash is coming, and I don’t want my name in any way connected with it.”
We all know what happened next. Pretty much right out of Mises’s script, overleveraged banks (including Kreditanstalt) collapsed, businesses collapsed, employment collapsed. The brittle tree snapped. Following Mises’s logic, was this a failure of capitalism, or a failure of hubris?
Mises’s solution follows logically from his warnings. You can’t fix what’s broken by breaking it yet again. Stop the credit gavage. Stop inflating. Don’t encourage consumption, but rather encourage saving and the repayment of debt. Let all the lame businesses fail—no bailouts. (You see where I’m going with this.) The distortions must be removed or else the precipice from which the system will inevitably fall will simply grow higher and higher.
Mises started getting some much-deserved respect once “Theorie des Geldes” was finally published in English in 1934. It is unfortunate that it required such a disaster for people to take heed of what was the one predictive, scholarly explanation of what was happening.
But then, just Mises’s bad luck, along came John Maynard Keynes’s tome “The General Theory of Employment, Interest and Money” in 1936. Keynes was dapper, fresh and sophisticated. He even wrote in English! And the guy had chutzpah, fearlessly fighting the battle against unemployment by running the currency printing press and draining the government’s coffers.
He was the anti-Mises. So what if Keynes had lost his shirt in the stock-market crash. His book was peppered with fancy math (even Greek letters) and that meant rigor, modernity. To add insult to injury, Mises wasn’t even refuted by Keynes and his ilk. He was ignored.
Fast forward 70-some years, during which we saw Keynesianism’s repeated disappointments, the end of the gold standard, persistent inflation with intermittent inflationary recessions and banking crises, culminating in Alan Greenspan’s “Great Moderation” and a subsequent catastrophic collapse in housing and banking. Where do we find ourselves? At a point of profound insight gained through economic logic, trial and error, and objective empiricism? Or right back where we started?
With interest rates at zero, monetary engines humming as never before, and a self-proclaimed Keynesian government, we are back again embracing the brave new era of government-sponsored prosperity and debt. And, more than ever, the system is piling uncertainties on top of uncertainties, turning an otherwise resilient economy into a brittle one.
How curious it is that the guy who wrote the script depicting our never ending story of government-induced credit expansion, inflation and collapse has remained so persistently forgotten. Must we sit through yet another performance of this tragic tale?
11/6/2009: What America Makes Best - Editorial Commentary - Daniel Griswold
AS AMERICANS WERE TRYING TO SHAKE off the worst economic downturn since the Great Depression, the consulting firm IHS/Global Insight recently delivered a bit of humbling news: China will surpass the United States as the world’s leader in manufacturing by 2015.
Critics of U.S. trade policy trumpeted the news as another sign that we are losing an economic war to China. But China’s emergence as the world’s top manufacturer is nothing to worry about. Manufacturing long ago ceased to be the chief benchmark of economic might and success. It is time we adjusted our economic and political thinking and understanding.
Americans will not stop making things. The IHS/Global Insight study projects that America’s manufacturing, as measured in value-added terms, or the value of goods manufactured after subtracting the cost of imported inputs, will resume its growth after the recession and reach new highs.
A Lot of Stuff
America remains a manufacturing powerhouse. As recently as 2007, American factories produced 5,250 complete civil aircraft, 15,341 complete civil-aircraft engines, 81 million metric tons of raw steel, 10.7 million motor vehicles, and 25.6 million computers. That same year, “Made in the U.S.A.” was stamped on 44.5 million household refrigerators and refrigerator-freezers, washing machines, dishwashers, water heaters, household gas and electric ranges, and clothes dryers, according to the U.S. Department of Commerce.
Add to that pile of U.S.-made goods 1.61 billion square yards of carpet and rugs; 28.1 million short tons of chlorine gas, sodium hydroxide, hydrochloric acid, commercial aluminum sulfate, sodium sulfate, finished sodium bicarbonate, and sodium chlorate; 1.5 billion gallons of paint and allied products; and $123 billion worth of pharmaceuticals. That’s a lot of stuff for a nation that supposedly doesn’t make anything anymore.
Americans make fewer shirts, shoes, tables and toys than in decades past, because we have traded up the value chain to a more sophisticated array of goods that play more to our strengths as a nation with an educated workforce and plenty of capital per worker. And we are producing all those upper-end goods with fewer workers, because those still employed in U.S. manufacturing have become so much more productive.
It is one of the Big Lies of the trade debate that we have been giving up middle-class manufacturing jobs to flip burgers at McDonalds and run cash registers at Wal-Mart. Since the early 1990s, two-thirds of the net new jobs added to our economy have been in service sectors, such as education, health care and business, financial and professional services. Average wages are higher in those service sectors than in manufacturing.
The American middle class today earns its keep in the service sector. Knock on the doors of middle-class suburbs and you will meet teachers, managers, carpenters, architects, engineers, computer specialists, truck drivers, accountants and auditors, police officers and fire fighters, insurance and real- estate agents, registered nurses, physical therapists, dental hygienists and other health-care professionals, and self-employed business owners. Those are the occupations that now form the backbone of the American middle class. Those are the jobs our children should aspire to fill.
A major reason why manufacturing is relatively less important in what Americans produce is that it is less important in what we consume. It appears to be an iron law of human development that, as incomes rise, we spend a smaller share on goods, such as food and manufactured products, and a higher share on services.
In 1950, Americans spent two-thirds of their personal consumption income on durable and non-durable goods and one-third on services. Today we spend 60% on services and 40% on goods. The share of personal income Americans spend on food, clothing and shoes has dropped since 1950 from 38% to 18%, and the share spent on durable goods such as motor vehicles and furniture has dropped from 16% to 11%.
About half the increase in spending on services has been for increased medical care in the form of doctors, dentists, and other professionals, and hospitals, nursing homes, and health insurance. The increasing share of gross domestic product for health care is often considered a problem, but it is also a sign of growing wealth.
We have increased the share of our spending on housing, recreation, education and research, religious and charitable activities, domestic and foreign air travel, and “personal business,” brokerage charges, investment counseling, and bank, financial, and insurance services. This also signals growing wealth.
Those who mourn the relative decline of U.S. manufacturing should blame not foreign competition, but the evolving preferences and resulting spending habits of their fellow Americans.
As usual, the American people are far ahead of their politicians in understanding this transition. The federal government maintains trade barriers against imports such as shoes, T-shirts and sugar, even though the number of Americans working in those sectors is a tiny fraction of those in the service sector who must pay higher prices as a result of those barriers. That same government has spent $50 billion to cushion the decline of General Motors and Chrysler, even though the combined domestic workforce of those two companies is less than 200,000. The $50 billion will be paid largely by the 112 million of us who work in the service economy.
The biggest threat to the American economy and our standard of living isn’t the rise of Chinese manufacturing, but politicians and economists who base policies on nostalgia rather than the aspirations of middle-class Americans striving to better themselves in a more open, dynamic and service-oriented economy.
DANIEL GRISWOLD is director of trade-policy studies at the Cato Institute in Washington and author of the book Mad about Trade: Why Main Street America Should Embrace Globalization (Washington: Cato Institute, 2009.)
11/6/2009: Regarding your editorial “The Worst Bill Ever” (Nov. 2), and considering the 1,990-page health-care bill monstrosity, I think James Madison was prescient when he wrote the following in the Federalist Papers: “It will be of little avail to the people that the laws are made by men of their own choice, if the laws be so voluminous that they can not be read, or so incoherent that they can not be understood; if they be repealed or revised before they are promulgated, or undergo such incessant changes that no man who knows what the law is today can guess what it will be tomorrow.”
Perhaps we should listen to the wisdom of our founders. —Edward M. Levy
11/6/2009: There is a No-Cost Path to Cheaper Health Care by John Shadegg
If your car isn’t working as well as it should, the next logical step would be to take it to a mechanic, right? And if that mechanic tells you he can fix it with a simple, inexpensive repair, most people would get the repair—not junk it and buy a new car! Unfortunately, that’s exactly what our Democrat-led Congress is doing in its efforts to “reform” our nation’s health-care system.
It is true that many Americans cannot find affordable health coverage. However, it is the government-imposed barriers that make coverage expensive, especially for the working poor in America. Fixing these problems would cost the taxpayer absolutely nothing, yet congressional Democrats refuse to consider these no-cost solutions.
The already high cost of insurance is often increased by excessive state regulations. States have passed more than 1,800 benefit mandates, requiring insurance companies to cover services from hair prostheses (wigs) to infertility treatments to acupuncturists to massage therapists. These state mandates raise the cost of insurance, which, in turn, increases the number of Americans who are priced out of the health-insurance market.
You may be thinking, what if I don’t need a hair prosthesis or infertility treatments? Tough luck. Instead of having a choice in coverage you do need, you’ll likely be paying for health insurance at an exorbitant cost to cover things you may never use or desire.
The solution: Allow American families to purchase health coverage across state lines. According to a study by the University of Minnesota, 12 million more Americans would be able to buy coverage if this simple solution were enacted into law.
Another no-cost solution? Give Americans the option to take the cash their employer uses to purchase health care and let them buy a plan on their own. If they are happy with their current plan, let them keep it. If not, let them take their business elsewhere and buy their own health coverage. This would force the insurance industry to innovate and control costs, or face losing business to companies that do.
Americans should also be able to purchase their health insurance on the same tax-advantaged basis as their employers. If your employer purchased health insurance on your behalf today, he would be able to do so with pre-tax dollars. However, in today’s market, if you go it alone, you won’t get any tax incentive to purchase your own health care. This would be a simple remedy to our still antiquated tax code, which favors big government and punishes individuals.
Allowing insurance portability and fixing the tax code is just a cost-savings start. How about enacting restrictions on runaway medical malpractice litigation such as pre-litigation review panels and loser-pay provisions for frivolous suits? Making any one of these changes to our health-care system wouldn’t cost taxpayers a single cent and could save us billions over the long term.
These ideas considered separately or enacted together will reduce costs for those who have health-insurance coverage and enable others to afford it. The savings could be used to fund high-risk pools for individuals with pre-existing conditions, and to provide tax credits and vouchers so no American goes without basic health coverage.
But rather than consider these common sense proposals, congressional Democrats are insisting we push through a new trillion-dollar government controlled scheme.
Proponents of ObamaCare can’t cite one shred of evidence that giving politicians and Washington bureaucrats more power and control will produce better quality health care or lower costs. In fact, the Congressional Budget Office admitted it has had no time to study exactly how much the bill will increase premiums for average Americans—something it routinely does for health-care legislation that is moving through Congress.
Does anyone believe the billions in new taxes as well as hundreds of pages of new rules and regulations being proposed will lower the cost of health care in America? But not knowing how much this will harm families didn’t stop Congress from advancing one of the most sweeping pieces of legislation our nation has ever seen. That’s scary and irresponsible.
Why aren’t we trying, or even debating, these no-cost solutions that insert choice into the health-care reform equation? Before Congress acts and passes an expensive, untested, new health-care system, the American people need to be heard.
—Mr. Shadegg is a Republican congressman from Arizona. Printed in The Wall Street Journal, page A23
Return of the Inflation Tax
Health-Care Bill Doesn’t Index for Inflation; Hits Young and Rising Middle Class Hard - WSJ.com
All of those twenty-somethings who voted for Barack Obama last year are about to experience the change they haven’t been waiting for: the return of income tax bracket creep. Buried in Nancy Pelosi’s health-care bill is a provision that will partially repeal tax indexing for inflation, meaning that as their earnings rise over a lifetime these youngsters can look forward to paying higher rates even if their income gains aren’t real.
In order to raise enough money to make their plan look like it won’t add to the deficit, House Democrats have deliberately not indexed two main tax features of their plan: the $500,000 threshold for the 5.4-percentage-point income tax surcharge; and the payroll level at which small businesses must pay a new 8% tax penalty for not offering health insurance.
This is a sneaky way for politicians to pry more money out of workers every year without having to legislate tax increases. The negative effects of failing to index compound over time, yielding a revenue windfall for government as the years go on. The House tax surcharge is estimated to raise $460.5 billion over 10 years, but only $30.9 billion in 2011, rising to $68.4 billion in 2019, according to the Joint Tax Committee.
Americans of a certain age have seen this movie before. In 1960, only 3% of tax filers paid a 30% or higher marginal tax rate. By 1980, after the inflation of the 1970s, the share was closer to 33%, according to a Heritage Foundation analysis of tax returns.
These stealth tax increases—forcing ever more Americans to pay higher tax rates on phantom gains in income—were widely seen to be unjust. And in 1981 as part of the Reagan tax cuts, a bipartisan coalition voted to index the tax brackets for inflation.
We also know what has happened with the Alternative Minimum Tax. Passed to hit only 1% of all Americans in 1969, the AMT wasn’t indexed for inflation at the time and neither was Bill Clinton’s AMT rate increase in 1993. The number of families hit by this shadow tax more than tripled over the next decade. Today, families with incomes as low as $75,000 a year can be hit by the AMT unless Congress passes an annual “patch.”
The Pelosi-Obama health tax surcharge will have a similar effect. The tax would begin in 2011 on income above $500,000 for singles and $1 million for joint filers. Assuming a 4% annual inflation rate over the next decade, that $500,000 for an individual tax filer would hit families with the inflation-adjusted equivalent of an income of about $335,000 by 2020. After 20 years without indexing, the surcharge threshold would be roughly $250,000.
And by the way, this surcharge has also been sneakily written to apply to modified adjusted gross income, which means it applies to both capital gains and dividends that are taxed at lower rates. So the capital gains tax rate that is now 15% would increase in 2011 to 25.4% with the surcharge and repeal of the Bush tax rates. The tax rate on dividends would rise to 45% from 15% (5.4% plus the pre-Bush rate of 39.6%).
As for the business payroll penalty, it is imposed on a sliding scale beginning at a 2% rate for firms with payrolls of $500,000 and rising to 8% on firms with payrolls above $750,000. But those amounts are also not indexed for inflation, so again assuming a 4% average inflation rate in 10 years this range would hit payrolls between $335,000 and $510,000 in today’s dollars. Note that in pitching this “pay or play” tax today, Democrats claim that most small businesses would be exempt. But because it isn’t indexed, this tax will whack more and more businesses every year. The sales pitch is pure deception.
As for the Senate, instead of the 5.4% surcharge, the Finance Committee bill raises taxes on “high-cost” health care plans. But this too uses the inflation ruse. The Senate bill indexes its tax proposal for the inflation rate plus one percentage point. But that is only about half as high as the rate of overall health-care inflation, i.e., the rate of increase in health-care premiums. So the Joint Tax Committee has found that a Senate tax that starts in 2013 by hitting 13.8 million Americans will hit 39.1 million by 2019.
The return of the inflation tax demonstrates once again the stealth radicalism that animates ObamaCare. In the case of inflation indexing, Democrats would repeal a 30-year bipartisan consensus that it is unfair to tax unreal gains in income, thus hitting millions of middle-class Americans over time with tax rates advertised as only hitting “the rich.” Oh, and the House vote on this exercise in dishonest government will come as early as Saturday.
Printed in The Wall Street Journal, page A24
AMA Wants a Unicorn, Too
In a cameo in the White House briefing room yesterday, President Obama trumpeted the American Medical Association’s endorsement of the House health-care plan. “These are men and women who know our health-care system best and have been watching this debate closely,” he said of the doctors lobby.
Actually, what they’ve been watching is a formula that automatically cuts Medicare reimbursements to physicians—by 21.5% next year—and have made it clear that they’ll endorse virtually anything, no matter how damaging to medicine, as a quid pro quo for eliminating this cut. They didn’t get even that. Democrats amputated the “doc fix” from ObamaCare because preventing the cuts will cost more than $200 billion and pushes the price tag well above $1 trillion. They claim they’ll instead pass a separate bill with the fix, adding all of that to the deficit.
President J. James Rohack was careful to note that the AMA was endorsing both bills as a package, and on a conference call with reporters he wouldn’t say if he would pull support if ObamaCare passes and the doc fix doesn’t. Yet that’s what his political gullibility is likely to get his members. A Democratic revolt last month already killed the two-bill deception in the Senate in a sudden onset of fiscal sanity. In the stampede to pass ObamaCare, Democrats won’t give even a passing thought to leaving the AMA behind—especially now, given that the group has shown how cheaply it can be bought.
Unmentioned by Mr. Obama was that 20 other physician groups came out against his health-care takeover yesterday, which they wrote “will threaten patient access and harm quality.” Led by the American College of Surgeons, these doctors argued the Senate’s bill “will do little to fix” health care’s “underlying problems, and may make them worse.” The letter was signed by groups representing neurological and orthopedic surgeons, urologists, anesthesiologists, gynecological oncologists and others.
Mr. Rohack will also face an uprising among his own members at a meeting in Houston this weekend. But presumably Mr. Obama would say that all these men and women don’t know our health-care system “best.”
Printed in The Wall Street Journal, page A24
11/6/2009: Three Decades of Subsidized Risk by Charles Gasparino
I recently sat down with legendary investor Ted Forstmann to discuss why, on the one-year anniversary of the financial meltdown, the press has largely ignored the role of government in creating the meltdown—and possibly setting the stage for another one—by allowing Wall Street to borrow cheaply and easily during the past three decades.
“I guess reporters think writing about greedy investment bankers is more interesting,” Mr. Forstmann laughed.
Mr. Forstmann knows a thing or two about greedy investment bankers: He’s been calling them on the carpet for years, most famously during the 1980s when he fulminated against the excesses of the junk-bond era. He also knows that blaming banking greed alone can’t by itself explain the financial tsunami that tore the markets apart last year and left the banking system and the economy in tatters.
The greed merchants needed a co-conspirator, Mr. Forstmann argues, and that co-conspirator is and was the United States government.
“They’re always there waiting to hand out free money,” he said. “They just throw money at the problem every time Wall Street gets in trouble. It starts out when they have a cold and it builds until the risk-taking leads to cancer.”
Mr. Forstmann’s point shouldn’t be taken lightly. Not by the press, nor by policy makers in Washington. But so far it has been, and the easy money is flowing like never before. Interest rates are close to zero; in effect the Federal Reserve is subsidizing the risk-taking and bond trading that has allowed Goldman Sachs to produce billions in profits and that infamous $16 billion bonus pool (analysts say it could grow to as high as $20 billion). The Treasury has lent banks money, guaranteed Wall Street’s debt and declared every firm to be a commercial bank, from Citigroup with close to $1 trillion in U.S. deposits, to Morgan Stanley with close to zero. They are all “too big to fail” and so free to trade as they please—on the taxpayer dime.
The conventional wisdom as perpetuated in the media is that these bailout mechanisms are unique, designed to ameliorate a once-in-a-lifetime financial “perfect storm.” They are unique, but only in size. A quick look back at the past three decades will demonstrate what Mr. Forstmann meant when he said the government has been ready to hand out free money nearly every time risk-taking led to losses.
The first mortgage market meltdown of the mid-1980s, spurred by the Fed’s supply of easy money, was among the most painful market upheavals in the history of the bond market. The pioneers of the mortgage bond market, Lew Ranieri of Salomon Brothers and Larry Fink of First Boston (the same Larry Fink now considered a sage CEO at money management powerhouse BlackRock), lost what were then unheard-of sums of money. (Mr. Fink concedes to losses of over $100 million.)
“What happened then was a dry run of what was to come,” Mr. Fink recently told me, as he looked back on the market he created, which would eventually lie at the heart of the most recent financial crisis. Wall Street took excessive risk in mortgage bonds amid the easy money supplied by the Fed—and lost. When the crisis began, the Fed under then Chairman Alan Greenspan slashed interest rates—as it would do after Orange County, Calif., declared bankruptcy in 1994 because of bad bets on complex bonds; and again in 1998 when the hedge fund Long-Term Capital Management (LTCM) blew up; and of course in the bond-market crisis of 2007 and 2008. The lower rates each time lessened the pain of the risk-taking gone awry, and opened the door for increased risk down the line.
Easy money wasn’t the only way government induced the bubble. The mortgage-bond market was the mechanism by which policy makers transformed home ownership into something that must be earned into something close to a civil right. The Community Reinvestment Act and projects by the Department of Housing and Urban Development, beginning in the Clinton years, couldn’t have been accomplished without the mortgage bond—which allowed banks to offload the increasingly risky mortgages to Wall Street, which in turn securitized them into triple-A rated bonds thanks to compliant ratings agencies.
The perversity of these efforts wasn’t merely that bonds packed with subprime loans received such high ratings. It was also that by inducing homeownership, the government was itself making homeownership less affordable. Because families without the real economic means to repay traditional 30-year mortgages were getting them, housing prices grew to artificially high levels.
This is where the real sin of Fannie Mae and Freddie Mac comes into play. Both were created by Congress to make housing affordable to the middle class. But when they began guaranteeing subprime loans, they actually began pricing out the working class from the market until the banking business responded with ways to make repayment of mortgages allegedly easier through adjustable rates loans that start off with low payments. But these loans, fully sanctioned by the government, were a ticking time bomb, as we’re all now so painfully aware.
A similar bomb exploded in 1998, when LTCM blew up. The policy response to the LTCM debacle is instructive; more than anything else it solidified Wall Street’s belief that there were little if any real risks to risk-taking. With $5 billion under management, LTCM was deemed too big to fail because, with nearly every major firm copying its money losing trades, much of Wall Street might have failed with it.
That’s what the policy makers told us anyway. On Wall Street there’s general agreement that the implosion of LTCM would have tanked one of the biggest risk takers in the market, Lehman Brothers, a full decade before its historic bankruptcy filing. Officials at Merrill, including its then-CFO (and future CEO) Stan O’Neal, believed Merrill’s risk-taking in esoteric bonds could have led to a similar implosion 10 years before its calamitous merger with Bank of America.
We’ll never know if LTCM’s demise would have tanked the financial system or simply tanked a couple of firms that bet wrong. But one thing is certain: A valuable lesson in risk-taking was lost. By 2007, the years of excessive risk-taking, aided and abetted by the belief that the government was ready to paper over mistakes, had taken their toll.
With so much easy money, with the government always ready to ease their pain, Wall Street developed new and even more innovative ways to make money through risk-taking. The old mortgage bonds created by Messrs. Fink and Ranieri as simple securitized pools had morphed into the so-called collateralized debt obligations (CDOs), complex structures that allowed Wall Street banks as well as quasi-governmental agencies Fannie Mae and Freddie Mac to securitize ever riskier mortgages.
Mr. O’Neal, the man considered most responsible for Merrill’s disastrous foray into risk-taking, told me in an interview last year that in the fall of 2007, when he saw that the firm’s problems were insurmountable, he had a deal to sell Merrill to Bank of America for around $90 a share. But Merrill’s board rejected it, believing he would be selling out cheaply. The CDOs would eventually recover, they argued, as the Fed pumped life into the markets.
Likewise, nearly to the minute he was forced to file for bankruptcy, former Lehman CEO Dick Fuld believed the government wouldn’t let Lehman die. After all, government largess had always been there in the past.
All of which brings me back to Mr. Fortsmann’s comment about policy makers helping turn a cold into cancer. What if the Fed hadn’t eased Wall Street’s pain in the late 1980s, and again after the 1994 bond-market collapse? What if policy makers in 1998 had allowed the markets to feel the consequences of risk—allowing LTCM to fail, and letting Lehman Brothers and possibly Merrill Lynch die as well?
There would have been pain—lots of it—for Wall Street and even for Main Street, but a lot less than what we’re experiencing today. Wall Street would have learned a valuable lesson: There are consequences to risk.
—Mr. Gasparino is a CNBC on-air editor and the author, most recently, of “The Sellout: How Three Decades of Wall Street Greed and Government Mismanagement Destroyed the Global Financial System,” just published by Harper Business.
Printed in The Wall Street Journal, page A25
11/4/2009: Obama and the Liberal Paradigm By John Steele Gordon
The sheep are quite capable of looking out for themselves. Someone tell the Democrats.
Valerie Jarrett, senior adviser to President Barack Obama, recently explained the White House war on Fox News as an example of “speaking truth to power.” Much of the American political world collapsed in laughter, pointing out that her boss was president of the United States, the most powerful man on earth. His every word is news around the world. Fox News is a cable channel rarely watched by more than a few million people at a time. How could she have so blithely said something completely out-of-sync with reality?
Simple: She’s a liberal. [Today, being a liberal appears to me to be a form of mental illness, a complete inability to see reality.]
As a liberal she carries around in her head the liberal paradigm of how the world works and what needs to be done to make it work better. There’s nothing wrong with that. We all use paradigms to make sense of what we see around us and couldn’t get along without them. Unfortunately, the basic liberal paradigm hasn’t shifted in a hundred years, while the world we live in has changed utterly since the late 19th century, when modern liberalism was born.
What is that paradigm? The basic premise is that the population is divided into three groups. By far the largest group consists of ordinary people. They are good, God fearing and hard working. But they are also often ignorant of their true self-interest (“What’s the matter with Kansas?”) and thus easily misled. They are also politically weak and thus need to be protected from the second group, which is politically strong.
The second group, far smaller, are the affluent, successful businessmen, corporate executives and financiers. Capitalists in other words. They are the establishment and it is the establishment that, by definition, runs the country. They are, in the liberal paradigm, smart, ruthless and totally self-interested. They care only about personal gain.
And then there is the third group, those few, those happy few, that band of brothers, the educated and enlightened liberals, who understand what is really going on and want to help the members of the first group to live a better and more satisfying life. Unlike the establishment, which supposedly cares only for itself, liberals supposedly care for society as a whole and have no personal self-interest.
Thus the liberal paradigm divides the American body politic into sheep, wolves, and would-be shepherds. The shepherds must defeat the efforts of the wolves.
11/4/2009: Dismantling America by Thomas Sowell
Thomas Sowell: “Just one year ago, would you have believed that an unelected government official, not even a Cabinet member confirmed by the Senate but simply one of the many ‘czars’ appointed by the President, could arbitrarily cut the pay of executives in private businesses by 50 percent or 90 percent? Did you think that another ‘czar’ would be talking about restricting talk radio? That there would be plans afloat to subsidize newspapers -- that is, to create a situation where some newspapers’ survival would depend on the government liking what they publish? Did you imagine that anyone would even be talking about having a panel of so-called ‘experts’ deciding who could and could not get life-saving medical treatments? Scary as that is from a medical standpoint, it is also chilling from the standpoint of freedom. If you have a mother who needs a heart operation or a child with some dire medical condition, how free would you feel to speak out against an administration that has the power to make life and death decisions about your loved ones? Does any of this sound like America? How about a federal agency giving school children material to enlist them on the side of the president? Merely being assigned to sing his praises in class is apparently not enough. How much of America would be left if the federal government continued on this path? ... How far the President will go depends of course on how much resistance he meets. But the direction in which he is trying to go tells us more than all his rhetoric or media spin. Barack Obama has not only said that he is out to ‘change the United States of America,’ the people he has been associated with for years have expressed in words and deeds their hostility to the values, the principles and the people of this country. ... Nothing so epitomizes President Obama’s own contempt for American values and traditions like trying to ram two bills through Congress in his first year -- each bill more than a thousand pages long -- too fast for either of them to be read, much less discussed. That he succeeded only the first time says that some people are starting to wake up. Whether enough people will wake up in time to keep America from being dismantled, piece by piece, is another question -- and the biggest question for this generation.” [Read entire article]
11/4/2009: We’re Governed by Callous Children by Peggy Noonan
“Our Federal Government, from the White House through Congress, and so many state and local governments, seems to be demonstrating every day that they cannot make things better. They are not offering a new path, they are only offering old paths -- spend more, regulate more, tax more in an attempt to make us more healthy locally and nationally. And in the long term everyone -- well, not those in government, but most everyone else -- seems to know that won’t work. It’s not a way out. It’s not a path through. ... When I see those in government, both locally and in Washington, spend and tax and come up each day with new ways to spend and tax -- health care, cap and trade, etc. -- I think: Why aren’t they worried about the impact of what they’re doing? Why do they think America is so strong it can take endless abuse? ... We are governed at all levels by America’s luckiest children, sons and daughters of the abundance, and they call themselves optimists but they’re not optimists -- they’re unimaginative. They don’t have faith, they’ve just never been foreclosed on. They are stupid and they are callous, and they don’t mind it when people become disheartened. They don’t even notice.” [Read entire article]
11/4/2009: Unhealthy time change
Although daylight-saving time was sold politically as an energy-conservation measure, it does no such thing. Studies conducted in Indiana prior to 2006, when that state operated under three different time regimes, show either no difference in energy consumption or a small increase in power usage during the months after clocks were moved one hour ahead.
The annual ritual of springing forward and falling back thus possibly produces no energy savings and may be counterproductive. It also requires those who live in places where daylight-saving time is observed to waste time twice a year adjusting their clocks and watches.
Yet the costs of switching between daylight-saving and standard time go far beyond the hassles of “losing” an hour in the springtime and “gaining” it back in the fall.
...Adding to the bill, some students of daylight-saving time suggest that accidents involving pedestrians spike immediately after the return to standard time as well, because drivers have not yet adjusted to commuting home in the dark.
There are few, if any, measurable benefits from switching to daylight-saving time in the spring and back to standard time at the end of October. But time shifting imposes some very real costs. Those costs, we now suspect, are not limited to feeling out of sorts temporarily or investing effort in adjusting clocks rather than doing something more enjoyable or productive. The twice-a-year ritual of time travel actually kills.
11/3/2009: Election 2009: Republicans Win Governor’s Races in New Jersey and Virginia
Republicans swept to victory in two critical governor’s races today, with independent voters helping deliver twin setbacks to Democrats who hoped to consolidate gains scored by President Obama last year.
GOP victories in Virginia and New Jersey were fueled by unease over the economy and growing skepticism of government, according to exit polls.
Obama carried both states last year. But the GOP gubernatorial candidate racked up huge margins among independent voters, notwithstanding the White House’s efforts to boost the Democrats.
Republican Bob McDonnell won the race in Virginia, beating Democrat Creigh Deeds. It marks the first time Republicans won a governor’s race in the state since 1997.
And in New Jersey, Gov. Jon Corzine, D-N.J., was defeated in his reelection bid by former federal prosecutor Chris Christie. The heavily Democratic state was considered the party’s best chance to steal a victory in a tough electoral climate.
11/2/2009: A Loan in the Dark: The Los Angeles Times reports on California’s latest effort to mismanage the state’s finances:
Starting Sunday, cash-strapped California will dig deeper into the pocketbooks of wage earners--holding back 10% more than it already does in state income taxes just as the biggest shopping season of the year kicks into gear.
Technically, it’s not a tax increase, even though it may feel like one when your next paycheck arrives. As part of a bundle of budget patches adopted in the summer, the state is taking more money now in withholding, even though workers’ annual tax bills won’t change.
Think of it as a forced, interest-free loan: You’ll be repaid any extra withholding in April. Those who would receive a refund anyway will receive a larger one, and those who owe taxes will owe less.
Tax refunds are evil, because they fool people into thinking they’re “getting” something from the government, when in fact all they’re receiving is their own money, months late. If the private sector tried this--say, your insurance or power company “borrowed” money by tacking $20 on to your monthly bill and refunded it, without interest, the following year--it would be a pretty clear case of fraud.
11/1/2009: The Worst Bill Ever
Epic new spending and taxes, pricier insurance, rationed care, dishonest accounting: The Pelosi health bill has it all.
Speaker Nancy Pelosi has reportedly told fellow Democrats that she’s prepared to lose seats in 2010 if that’s what it takes to pass ObamaCare, and little wonder. The health bill she unwrapped last Thursday, which President Obama hailed as a “critical milestone,” may well be the worst piece of post-New Deal legislation ever introduced.
In a rational political world, this 1,990-page runaway train would have been derailed months ago. With spending and debt already at record peacetime levels, the bill creates a new and probably unrepealable middle-class entitlement that is designed to expand over time. Taxes will need to rise precipitously, even as ObamaCare so dramatically expands government control of health care that eventually all medicine will be rationed via politics.
Yet at this point, Democrats have dumped any pretense of genuine bipartisan “reform” and moved into the realm of pure power politics as they race against the unpopularity of their own agenda. The goal is to ram through whatever income-redistribution scheme they can claim to be “universal coverage.” The result will be destructive on every level—for the health-care system, for the country’s fiscal condition, and ultimately for American freedom and prosperity.
• The spending surge. The Congressional Budget Office figures the House program will cost $1.055 trillion over a decade, which while far above the $829 billion net cost that Mrs. Pelosi fed to credulous reporters is still a low-ball estimate. Most of the money goes into government-run “exchanges” where people earning between 150% and 400% of the poverty level—that is, up to about $96,000 for a family of four in 2016—could buy coverage at heavily subsidized rates, tied to income. The government would pay for 93% of insurance costs for a family making $42,000, 72% for another making $78,000, and so forth.
At least at first, these benefits would be offered only to those whose employers don’t provide insurance or work for small businesses with 100 or fewer workers. The taxpayer costs would be far higher if not for this “firewall”—which is sure to cave in when people see the deal their neighbors are getting on “free” health care. Mrs. Pelosi knows this, like everyone else in Washington.
Even so, the House disguises hundreds of billions of dollars in additional costs with budget gimmicks. It “pays for” about six years of program with a decade of revenue, with the heaviest costs concentrated in the second five years. The House also pretends Medicare payments to doctors will be cut by 21.5% next year and deeper after that, “saving” about $250 billion. ObamaCare will be lucky to cost under $2 trillion over 10 years; it will grow more after that.
• Expanding Medicaid, gutting private Medicare. All this is particularly reckless given the unfunded liabilities of Medicare—now north of $37 trillion over 75 years. Mrs. Pelosi wants to steal $426 billion from future Medicare spending to “pay for” universal coverage. While Medicare’s price controls on doctors and hospitals are certain to be tightened, the only cut that is a sure thing in practice is gutting Medicare Advantage to the tune of $170 billion. Democrats loathe this program because it gives one of out five seniors private insurance options.
As for Medicaid, the House will expand eligibility to everyone below 150% of the poverty level, meaning that some 15 million new people will be added to the rolls as private insurance gets crowded out at a cost of $425 billion. A decade from now more than a quarter of the population will be on a program originally intended for poor women, children and the disabled.
Even though the House will assume 91% of the “matching rate” for this joint state-federal program—up from today’s 57%—governors would still be forced to take on $34 billion in new burdens when budgets from Albany to Sacramento are in fiscal collapse. Washington’s budget will collapse too, if anything like the House bill passes.
• European levels of taxation. All told, the House favors $572 billion in new taxes, mostly by imposing a 5.4-percentage-point “surcharge” on joint filers earning over $1 million, $500,000 for singles. This tax will raise the top marginal rate to 45% in 2011 from 39.6% when the Bush tax cuts expire—not counting state income taxes and the phase-out of certain deductions and exemptions. The burden will mostly fall on the small businesses that have organized as Subchapter S or limited liability corporations, since the truly wealthy won’t have any difficulty sheltering their incomes.
This surtax could hit ever more earners because, like the alternative minimum tax, it isn’t indexed for inflation. Yet it still won’t be nearly enough. Even if Congress had confiscated 100% of the taxable income of people earning over $500,000 in the boom year of 2006, it would have only raised $1.3 trillion. When Democrats end up soaking the middle class, perhaps via the European-style value-added tax that Mrs. Pelosi has endorsed, they’ll claim the deficits that they created made them do it.
Under another new tax, businesses would have to surrender 8% of their payroll to government if they don’t offer insurance or pay at least 72.5% of their workers’ premiums, which eat into wages. Such “play or pay” taxes always become “pay or pay” and will rise over time, with severe consequences for hiring, job creation and ultimately growth. While the U.S. already has one of the highest corporate income tax rates in the world, Democrats are on the way to creating a high structural unemployment rate, much as Europe has done by expanding its welfare states.
Meanwhile, a tax equal to 2.5% of adjusted gross income will also be imposed on some 18 million people who CBO expects still won’t buy insurance in 2019. Democrats could make this penalty even higher, but that is politically unacceptable, or they could make the subsidies even higher, but that would expose the (already ludicrous) illusion that ObamaCare will reduce the deficit.
• The insurance takeover. A new “health choices commissioner” will decide what counts as “essential benefits,” which all insurers will have to offer as first-dollar coverage. Private insurers will also be told how much they are allowed to charge even as they will have to offer coverage at virtually the same price to anyone who applies, regardless of health status or medical history.
The cost of insurance, naturally, will skyrocket. The insurer WellPoint estimates based on its own market data that some premiums in the individual market will triple under these new burdens. The same is likely to prove true for the employer-sponsored plans that provide private coverage to about 177 million people today. Over time, the new mandates will apply to all contracts, including for the large businesses currently given a safe harbor from bureaucratic tampering under a 1974 law called Erisa.
The political incentive will always be for government to expand benefits and reduce cost-sharing, trampling any chance of giving individuals financial incentives to economize on care. Essentially, all insurers will become government contractors, in the business of fulfilling political demands: There will be no such thing as “private” health insurance.
All of this is intentional, even if it isn’t explicitly acknowledged. The overriding liberal ambition is to finish the work began decades ago as the Great Society of converting health care into a government responsibility. Mr. Obama’s own Medicare actuaries estimate that the federal share of U.S. health dollars will quickly climb beyond 60% from 46% today. One reason Mrs. Pelosi has fought so ferociously against her own Blue Dog colleagues to include at least a scaled-back “public option” entitlement program is so that the architecture is in place for future Congresses to expand this share even further.
As Congress’s balance sheet drowns in trillions of dollars in new obligations, the political system will have no choice but to start making cost-minded decisions about which treatments patients are allowed to receive. Democrats can’t regulate their way out of the reality that we live in a world of finite resources and infinite wants. Once health care is nationalized, or mostly nationalized, medical rationing is inevitable—especially for the innovative high-cost technologies and drugs that are the future of medicine.
Mr. Obama rode into office on a wave of “change,” but we doubt most voters realized that the change Democrats had in mind was making health care even more expensive and rigid than the status quo. Critics will say we are exaggerating, but we believe it is no stretch to say that Mrs. Pelosi’s handiwork ranks with the Smoot-Hawley tariff and FDR’s National Industrial Recovery Act as among the worst bills Congress has ever seriously contemplated.
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