Friday, July 30, 2010

The Power to Destroy or How Charlie Rangel Got Tangled in His Own Web

From my forever in progress book on the history of taxation in the United States entitled The Power to Destroy.

Chief Justice John Marshall penned the famous words: “…the power to tax involves the power to destroy.”

"In FY 2008, the U.S. Congress pushed through $17.2 billion in pork attached to 12 appropriations bills. There were many moments to cherish but we will consider but one here; certainly not the biggest earmark but one of the most interesting.

Rep. Charles Rangel (D-N.Y.), a nineteen term representative, asked for and got $1,950,000 for a library and archives at the Charles B. Rangel Center for Public Service at The City College of New York. In other words Congressman Rangel received $1.95 million dollars of my money and yours to finance a little library named for himself at a college in his district. He was challenged in his request by a mere two term republican from California, John Campbell who said, “You don’t agree with me or see any problem with us, as members, sending taxpayer funds in the creation of things named after ourselves while we’re still here?” Rangel did not. He responded, “I would have a problem if you did it, because I don’t think that you’ve been around long enough that having your name on something to inspire a building like this in a school.” Huh?

We have strayed too far. This should cause us to converge on Washington. But we have become complacent. The budget is too big, too unwieldy. We’re busy. We have our own jobs to do.

Consider this too. In 2006 138.9 million people filed income tax returns. Approximately 32% of those who filed did not pay income tax, leaving 94.5 million tax payers. If we took Charlie Rangel’s earmark and divided it amongst each of us it would come to something like $0.021 per taxpayer. I don’t know about you, but I might be willing to spot Charlie the two cents if the rest of you were, but when you consider the 17.2 billion in earmarks in FY 2007—that rises to $182 per taxpayer in pork. And if you consider the tally of pork since the Citizen’s Against Government Waste have been keeping track of pork barrel spending in 1991 the total is $271 billion which has cost American taxpayers around $2,868. For some that is a great deal of money. For others it is not.

But the important fact is that it is your money, not theirs. And the fact is, that money is being allocated for pet projects not for the kind of expenditures provided for under the Constitution. Certainly not the way most of us would spend our own money given the other demands on us like food and clothing and providing for our retirement or our children's education. One of the greatest concerns of the Founder’s when creating this nation was the responsibility of government to protect property rights, not confiscate them. Allocating your money for “projects” not requested by or approved of by you is not freedom. It is tyranny. As I thumb through the 2008 Pig Book Summary I see $1.5 million for the Appalachian Fruit Lab, $7.6 million for grape and wine research, $4.8 million for wood utilization research, $1 million for berry research, $750,000 for olive fruit fly research, $211,000 of which is to be spent in Paris, France, millions and hundreds of millions for space centers and aquariums and presidential libraries, for shrimp and lobster and oysters, sea lions and seals, bears and and latinos. Brown tree snakes in Hawaii, 54 million for the ABL Facility Restoration Program, whatever that is, and on and on and on. This is above and beyond the regular budget of $2.7 trillion or $28,900 annually per tax payer households. This is not counting the $32,000 of the U.S. debt that belongs to each citizen. In my household that obligation is 32x 4."

I wrote the above two years ago. The debt per person in the almost two short years Obama has been in office has ballooned to $42,800. We now understand that Charlie Rangel's corruption goes far beyond the interchange I featured. If we stretch our imaginations just a bit we can imagine that there is plenty more of the Charlie style of Congressional entitlement among our representatives yet to be revealed . We wouldn't have to work too hard to conjure up the kinds of frivolous projects the $787 billion stimulus bill is now bankrolling. While many of us seek desperately for jobs, scrape by each month and watch our children's futures click by on the national debt clock. $13 trillion. $13.1 trillion $13.2 trillion...

I am sorry Mr. Rangel will end his career in disgrace. I am sorry that he got caught up in the tangled web of greed. I am sorry that Congress continues to act irresponsibly, recklessly with our children's and their children's futures. I am overwhelmingly sorry. But there is just a little part of me that sees the Rangel case as a pin hole of light, a kind of hope that even in the midst of corruptness, there is a modicum of justice. I am holding onto that.

With a vengeance.

Thursday, July 29, 2010

The Day the Rule of Law Died

Many years ago, I worked for a Swiss company. I loved the people I worked with, I loved my visits to the home office in Zurich, I loved the elegance and history of the country. But there was one thing I didn't understand. Neutrality. My Swiss colleagues would frequently say things like: Well, I don't know, I'm neutral on that point. I couldn't say really. My view of your strategy proposal is neutral. Then, one day it hit me. Neutral? How can anyone be neutral on any matter of significance? In my world view only two things inform neutrality--a want of knowledge or a want of courage. Even Webster's defines the state of neutrality as lacking stamens or pistils...OK, so maybe I am reaching on that point, but, for me, neutrality is, at the very least, dangerous.

Recently many of my liberal friends have taken to calling themselves independents. I understand the distaste many feel for political parties. I generally share those views. Both are fraught with problems. Being independent denotes in their minds anyway, a kind of neutral ground. A place where criticism and labels can't stick. And then there is the fact that Americans cherish independence. It is a badge we wear. Or at least used to.

Our way of life is changing quickly, each day our liberties are being consumed by the behemoth, lumbering incompetence of bureaucracy. This Administration has shown a reckless disregard for the rule of law and the Constitution. Twisting and obfuscating, politicizing friendly courts, ignoring the rulings of unfriendly ones. Honestly friends, neutrality is no longer an option. It is time to pick a side. Time to back a team, bet on a horse, double down on the side of liberty and freedom. Oh yes, and independence.

The ruling by Judge Bolton in the Arizona immigration case is just another example of the blurring of the separation of powers. According to The New York Times, Carter appointee and immigration law professor at Yale Law School Peter Schuck commented on Judge Bolton's ruling, "She rushed to judgment in a way I can only assume reflects a lot of pressure from the federal government to get this case resolved quickly." That ought to get the attention of some of my independent friends. Three branches of government, each independent of the other. Checks and balances. No collusion. No pressuring of one branch to another. That's what the Constitution provides. Protecting that should fit right in with an independent view of the world.

And there's more.
From The Heritage Foundation's Morning Bell:

Taken alone, the White House's behavior on this issue is troubling enough. But put into the broader context of the first 18 months of this Administration, a truly pernicious pattern emerges. First, there was the Obama Justice Department's decision to dismiss voter intimidation charges against the New Black Panther Party. Then there was the Obama administration's use of TARP to bail out its union allies in what bankruptcy law scholars have called "so outrageous and illegal that until March of this year [2009], nobody even conceptualized it." Then there was the Obama administration's shakedown of BP in the White House's Roosevelt Room. Less than a week later after a federal court found its first oil drilling ban to be "arbitrary and capricious," the Obama administration issued a second oil drilling ban that was wider and killed even more jobs than the first.

Our founder's had it right. I am on their side. The side of conservative constitutional values and the rule of law. To my independent friends: Consider that to preserve our cherished independence it may be time to come down on the side of the values that have made this country great: Our Constitution and the rule of law.

Monday, July 26, 2010

Talking Out of Both Sides of the Presidential Mouth Once Again

President Obama is once again giving Joe Wilson fits. The President publicly decried the Scottish release of the Lockerbie bomber all the while signaling otherwise to the Scottish government in private diplomatic correspondence.

According to The Guardian:

"Although Megrahi was allowed to go home to die in Tripoli, Scottish officials believe this (the leaked correspondence) undermines Obama's vigorous criticisms of the decision to free Megrahi earlier this month, when he said he was left "surprised, disappointed and angry" by the Libyan's release.

The existence and content of the US embassy note was first disclosed by the Guardian last August, at the height of the controversy over Megrahi's release, and its full text has now been leaked to the Sunday Times.

In it, the deputy head of the US embassy in London, Frank LeBaron, said the US believed Megrahi should remain in Greenock jail because of the seriousness of his conviction for killing 270 passengers and crew, and 11 Lockerbie townspeople, by bombing Pan Am flight 103 in 1988.

But he added: "Nevertheless, if Scottish authorities [conclude] that Megrahi must be released from Scottish custody, the US position is that conditional release on compassionate grounds would be a far preferable alternative to prisoner transfer, which we strongly oppose" (emphasis mine)."

The Scottish government took the U.S.'s response to represent only "half-hearted" opposition to Megrahi's release. And so he was sent home. To Libya. On compassionate grounds. Because he had less than three months to live.

Yet now we learn according to a July 26th article published in The Scotsman, the medical expert who examined Megrahi, the convicted murderer and terrorist, did not endorse the view that he had three months or less to live:

"A cancer specialist who examined the Lockerbie bomber has revealed he did not endorse the view that he had less than three months to live. Professor Jonathan Waxman, one of the world's leading oncologists, visited Abdelbaset ali Mohmed al-Megrahi in prison a year ago but said he was not surprised to see him alive today. Megrahi's release on compassionate grounds was on the basis of a medical report which indicated he had three months to live - but next month will mark a year since he was freed."

270 lives perished on Pan Am flight 103 over Lockerbie in 1988. Eleven more people on the ground also died that day. Mass murder. Lives cut short. Children taken from parents. Parents taken from children. Wives and Husbands. Grandmothers and Grandfathers. Murdered.

But in the twisted world of "compassion" that uneasily co-exists with the tragic reality faced by the victims each and every day, the prisoner, the perpetrator, the murderer is released. It is compassionate. He is dying of cancer we are told. And the victim's families? They are forgotten in all hoo-haw. They are counting on society to remember, to rally around and do the right thing. Meanwhile, the president of the greatest, most compassionate and fair-minded country in the world, who claims to be "surprised, disappointed and angry," the evidence would suggest, is none of the above. Another cold and calculated, purely political gesture that stands in direct opposition to the facts. Another Joe Wilson moment--for those of us paying attention--to swallow.

This one made me so sick, I couldn't write about it for days. I hope you will join me in mourning the victims. The forgotten ones. It seems to me to be the truly compassionate thing to do.

Saturday, July 24, 2010

When Words Cease to Have Meaning

"I do solemnly swear (or affirm) that I will support and defend the Constitution of the United States against all enemies, foreign and domestic; that I will bear true faith and allegiance to the same; that I take this obligation freely, without any mental reservation or purpose of evasion; and that I will well and faithfully discharge the duties of the office on which I am about to enter: So help me God" (emphasis mine).
Congressional Oath of Office

I am one of those people that think words mean something. I spend a great deal of my day with words. As a college professor, I love meeting new ones, sorting through my brain to recall old ones, searching the dictionary for a precise meaning of a specific one. I hang my hat on words. I depend on them. I respect them.

Which is why I am so troubled with the careless and reckless disregard for the meaning of words in our Congress and by this President. Joe Wilson took a lot of heat for shouting "you lie" during President Obama's health care speech. Decorum aside I didn't really see what all the fuss was about. We don't live in a monarchy or a dictatorship. Disagreement, discourse--these are givens in a free society. One has to merely watch a few minutes of floor debate in the British Parliament to appreciate the relative benignity of Wilson's comment. I am not justifying his outburst, I am merely reflecting on his right to do so. I encourage you to listen to the speech and determine for yourself if the President spoke the truth or Congressman Wilson did.

In Federalist 51, James Madison writes: If men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary. In framing a government which is to be administered by men over men, the great difficulty lies in this: you must first enable the government to control the governed; and in the next place oblige it to control itself.

Our government is out of control. In the last year and a half our President has repeatedly overreached the bounds of his office. Congress has passed thousands of pages of new legislation without reading it and without demonstrating a sound understanding of the very Constitution that provides their job description. The one that they have sworn to uphold. Their lack of respect for the Constitution may come from a lack of familiarity with same. House Judiciary Committee Chairman, Representative Jon Conyers referred to the "good and welfare" clause as his justification of the health care bill's constitutionality. There is no "good and welfare" clause. Representative Phil Hare cited Americans' right to "life, liberty and the pursuit of happiness" as his constitutional justification for voting for the health care bill. The phrase life, liberty and pursuit of happiness comes from the Declaration of Independence not the Constitution.

When our representatives in Washington--our congressman and senators and president--swear to uphold the Constitution and then don't, we have more than a problem on our hands, we have a crisis.

Thursday, July 22, 2010

Speaking Out of Both Sides of the Presidential Mouth

"When we continue to spend as if deficits don't matter that means our kids and our grand kids may wind up saddled with debts that they'll never be able to repay."
President Obama on signing the Improper Payments Bill 7/22/10
"You just can't make this stuff up."
Nancy Tengler 7/23/10

This from the most outrageously spendthrift administration in the history of the United States. This from the man who increased the deficit from north of $400 billion when Bush left office to a CBO estimated $1.85 trillion in 2009.

Let's start with a definition of terms shall we?

  1. deficit equals the difference between government revenues and government spending. During the last year of the Bush Administration the deficit was greater than $400 billion. In 2009, the first year of Obama's Administration the deficit was estimated at $1.85 trillion. For 2010 it is expected to be around 1.5 trillion. Our government is borrowing 41 cents for every dollar it spends. It is crucial to understand that a deficit in one year is added to the deficit in the previous year. That cumulation of deficit spending becomes our debt. Current debt? $13.2 trillion or approximately $42,798 per citizen. And they're just getting started.
  2. government revenues = taxes. Taxes are my money and your money being hijacked by the government to pay for programs we have no say in. Entitlements, give aways, preferential hiring and spending--things the Founders, in their wildest nightmares, could never have imagined. Sen. Byron Dorgan's recent statement on the Senate floor is all you really need to know about Washington's perspective on revenues and taxes. He went after Republicans who supported tax cuts that would "reduce this country's income." Our representatives in Washington think it is their money. Not ours.
Obama decries the spending out of one side of his mouth while signing into law another $33 billion extension in unemployment benefits almost simultaneously. $33 billion dollars we don't have. Just pile it on, no problem. But don't think we are going to "continue to spend as if deficits don't matter." No sir. We're not going to saddle our children and grandchildren with debt. Not on your life.

Well, not at least until we have to start paying for Obama's Health Rationing Plan. Wait to you see the bill for that one!

Saturday, July 17, 2010

When Labor (as in AFL) Still Wanted to Work

In the summer of 1934, about the same time in FDR's Administration as we sit in President Obama's, despite the creation of numerous new agencies and bureaucracies designed to get Americans working again, the unemployment problem simply would not improve. With upwards of 20% of Americans not working (Not so very far off from today's U-6 of over 17%. U-6 is the Labor Department's gauge of underutilization, which accounts for those who have given up looking for work or can't find full time jobs.) William Green, head of the American Federation of Labor (AFL) began arguing with one of FDR's New Deal Agencies--the National Recovery Agency (NRA) over new job creation. As Amity Shlaes explains in The Forgotten Man, Green wanted "industry, not relief agencies, to solve the economic problem" (Shlaes 201)

Addressing the surge of NRA hirings and subsequent layoffs, AFL's Green said, "We cannot indefinitely support one-sixth of our population on money borrowed against future taxes" (201).

The New Dealers were worried because after all the gyrations and machinations, after the grabs for power and unprecedented centralization the "...Depression was refusing to disappear" (202). At the American Bar Association's annual meeting during the summer of 1934, a report submitted showed that over the last year of FDR's Administration, 10,000 pages of new law had been written dwarfing a century and a half of federal law which numbered 2,735 pages. For all the agencies created and money spent to puff up government the unemployment rate during that one year period had declined from 22.9% to 21.2%.

The AFL's Green understood instinctively that growing government would not put the people back to work. Today's union leaders, however, instead of fighting against our unprecedented and unsustainable borrowing from future generations that has done nothing to improve the unemployment picture would seem, rather, to feed at that very trough.

Where is the outcry from labor now? Andy Stern, former president of the country's largest union, the SEIU, (the powerful service workers union) in now a member of one of the very agencies Green decried. Stern, who until he left his job to join the Administration was one of the most frequent guests to the White House is now a member of the National Commission on Fiscal Responsibility and Reform.


Thursday, July 15, 2010

Thankfully You Can't Fool All the People All the Time

From The Heritage Foundation's "Morning Bell:"

"Today, President Barack Obama will attend a groundbreaking ceremony in Holland, Mich., for a South Korean-owned factory that will make batteries for electric cars. The purpose of the trip is to highlight the "success" of the President's $862 billion economic stimulus package which the White House claimed yesterday has already "saved or created" 3 million jobs. Specifically, this factory is being subsidized by $151 million of stimulus funds from an even larger $2 billion honey pot of stimulus money set aside for electric car battery investments. This one plant is expected to employ 300 workers. That works out to more than $500,000 per job created. $500,000 per job. This plant, in a nutshell, explains why the President's stimulus plan has been an objective failure.

The American people know the President's stimulus has failed. A new CBS poll out today shows that 74 percent of Americans believe the Obama stimulus either damaged the economy or had no effect. And a Washington Post poll released Tuesday again showed that a majority of Americans disapprove of President Obama’s handling of the economy. So how on earth can the White House claim they "saved or created" 3 million jobs? By rerunning the same economic models that predicted the stimulus would prevent unemployment from ever rising above 8%. That's right. The White House's 3 million jobs number is not based on any real world data."

The Heritage Foundation is right. Americans are no longer fooled, well at least 74% of them. The economy is getting worse. No matter how often this Administration says otherwise. Their claims and their logic are so flawed it is almost laughable.

From my November blog:

Dear Mr. President:

I was so happy to see that $16 billion of the $800+ billion. February stimulus package has been spent. And 30,383 jobs were created/saved. Wowie. That means that each job created/saved only cost $526,610.00. You guys sure must be working hard to spend all that money.

Not to be presumptuous or anything but I think I can help. While you all are writing checks I was wondering if you could make one out to me for $263,305.00 (that's half the amount you are spending to save/create a job in Washington) and I promise to create/save a job (maybe two!) in California. We're having a tough time out here. You see our unemployment rate is 12.2%, higher than the rest of the country because we have been spending much more than we take in for decades now.

Well, anyway, I sure could use some money and since my house needs cleaning it occurred to me that with a little stimulus money I could hire myself to clean my house. You know,if health care is a right and all, maybe in addition to Life, Liberty and the Pursuit of Happiness, I might be entitled to a clean house. Just a thought. And I am willing to save/create one job for half the price they're costing you. For just $263,305.00 I will hire myself to clean my house and save the government $263,305.00 in the process. One of those win wins, right?

Respectfully yours.

Almost as absurd of the pablum being dished out in DC.

Monday, July 12, 2010

Six Million Pigs

In September 1933, the Agriculture Adjustment Administration in an effort to raise the prices of commodities slaughtered six million young pigs. With unemployment hovering at 22.9%, the homeless numbers rising each day, in the middle of the Great Depression, Franklin Roosevelt's economic policy to drive up prices in order to help the farmer resulted in the slaughtering of six million pigs. Never mind that millions of Americans went to bed hungry each night, six million pigs were sacrificed to the economic experiment of FDR and his advisers. Not only did the poor and hungry not get to eat those pigs, but the policy had the desired effect and the price of pork soared until a single slice of bacon was prohibitively expensive.

FDR's policies were breathtakingly naive and their destructiveness, far reaching. The parallels to the policies being pursued by our current Administration are chilling though far less understandable. President Obama didn't inherit the disastrous economy FDR did, rather, he is hell-bent on creating one.

When FDR began manipulating the price of gold over breakfast in his White House bedroom in the fall of 1933, he had already vacillated so dramatically and capriciously on monetary policy, British and European financial and political leaders not to mention American businessmen were furious. His efforts failed to calm the markets instead, increased uncertainty. In the spring when he had ordered the Treasury to no longer honor its own gold clause in contracts (a political maneuver that effectively took the U.S. off the gold standard) there was no formal mechanism to set the price. FDR desired to do so and a willing Senate complied with an amendment providing the Executive with the power. Senator Elmer Thomas of Oklahoma cheered the inflationary redistribution of wealth from the creditors (wealthy) to the debtors (those without wealth) by saying: "No issue in 6,000 years save the World War begins to compare with the possibilities embraced in the power conferred" by that action (Shlaes 158).

Yet Roosevelt confided to one of his advisers that he didn't know what his own policies might be at any given time. He was on "an hourly basis and the situation changes almost momentarily" (162). As Shlaes summarizes Roosevelt's behavior, "...the president was also inconsistent because he saw no cost to being inconsistent" (162).

But Roosevelt's arbitrary gold pricing program did not have the desired result. In January of 1934, FDR submitted a bill to return to the gold standard. Almost a year was wasted on his great gold experiment while one in four Americans remained unemployed, millions lost their homes and Hitler strengthened his grip on Germany. The cost of inconsistency was great.

History will reveal the cost of Obama's inconsistency and destructive economic policies. Millions have been and will be hurt irreparably. All of us will bear the scars. The slaughter of six million pigs by FDR's Administration in the face of unprecedented unemployment and suffering during the Great Depression was unconscionable. One wonders what will tip the scales for Obama?

Will it be Mr. Obama's reckless disregard for national security demonstrated by his Administration's lawsuit against Arizona, unwillingness to protect our borders, proposal to try terrorists as common criminals in New York City, and efforts to close Guantanamo? Or will it be the profligate spending of Trillions of dollars placed on the backs of future generations? Will Health Care--not just the policy but the way it was achieved--be the final straw for historians? Or his ineffective and incompetent management of the Gulf Oil Spill? Relations with Israel? Inconsistent execution of the war in Afghanistan? Or will it simply be that while unemployment rose this president shamelessly and relentlessly worked only on lowering his golf handicap?

Time and history will tell.

Thursday, July 8, 2010

Time to Spread the Manure

"Money, pardon the expression, is like manure. It's not worth a thing unless it's spread around, encouraging young things to grow."
Dolly Levi in Hello Dolly!

It's true. Growth is good. Growth is what has distinguished America over the centuries. It is also true redistribution is bad. Redistribution is what defined the failed Soviet Union. Dividing up an increasingly smaller pie doesn't take you very far. Dolly Levi knew it. John F. Kennedy and Ronald Reagan knew it. So did ole Silent Cal Coolidge. Now would someone please tell Mr. Obama and Ms. Pelosi?

Mr. Obama's redistributionist tendencies were well documented during the campaign in his oft repeated interchange with Joe the Plumber where he confessed he wanted to "spread the wealth." Ms. Pelosi has made her tendencies clear with her recent statement regarding unemployment benefits: "It creates jobs faster than almost any other initiative you can name." She added that unemployment benefits have the "double benefit" of helping the jobless and serving as a "job creator" on the side.

Sounds marvelous. A win win, right? Wrong. Ms. Pelosi's incoherent logic and Mr. Obama's "spread the wealth" philosophy are not just bad economic policy they are dangerous to America's future. Read in its entirety, Dr. Arthur Laffer's op-ed piece in today's The Wall Street Journal entitled: "Unemployment Benefits Aren't Stimulus." No one can explain economic principles in a more common-sense, logical and entertaining way that Dr. Laffer. No one else can present the case so clearly as to why Washington's favorite policies simply won't work. History, of course, could short-cut the arguments but Laffer's analysis is much more accessible.

A few excerpts:
  • The flaw in their logic is that when it comes to higher unemployment benefits or any other stimulus spending, the resources given to the unemployed have to be taken from someone else.
  • The government doesn't create resources. It redistributes them. For everyone who is given something there is someone who has that something taken away.
  • While the one person who is unemployed may "buy" more as a result of unemployment benefits, the other person from whom the unemployment sums are taken will "buy" less. There is no stimulus for the economy.
And that is the best way to think about government spending. Since the government produces nothing (unless you count grief and frustration) the best way to think about government revenues (in the form of taxes) is that they come at the expense of the production of private citizens. Any amount of tax paid is money I can't spend or save for retirement or invest in my business.

In February I wrote a blog entitled: "Superbowl of Government Spending--A Zero Sum Game" where I discussed James Payne's 1991 book, The Culture of Spending. In that book, Mr. Payne introduces the concept of the "bureaucratic rule of two."

He writes, "When the government purchases what people can buy for themselves, two additional costs are introduced: the cost of taxation, including the distortion of incentives governing production; and the cost of administration, including the distortion of incentives governing consumption. Calculating these costs is quite difficult but preliminary estimates suggest that for each dollar the federal government recycles through the taxation-subsidy system it wastes more than one additional dollar."

Citing research studies at the time on the taxation side of the equation (cost is about 60 cents for every dollar collected) and the disbursement side (50 cents for each dollar spent) Payne ,and we, can conclude that government production of a typical good or service in 1991 cost twice as much as the same items produced in the private sector. Hence, the "bureaucratic rule of two." Not only is the government sucking capital from the private sector which produces our food and clothing and iphones and the majority of our JOBS, but each dollar collected costs more to collect than the value of that dollar. Or as we like to say in the private sector (mostly when referring to government bureaucracy): it's a lose lose.

If the above argument isn't compelling enough, consider this final thought also from Dr. Laffer's op-ed: "Since late 2007 the federal government has spent somewhere around $3.6 trillion to stimulate the economy. That is a lot of money."

With very little to show for it.

Wednesday, July 7, 2010

Does Anyone Listen to Paul Krugman Anymore? Let's Hope Not!

In a July 6th entry to his blog entitled, The Conscience of a Liberal, Paul Krugman cites Lincoln's statement to General McClellan that if McClellan wasn't going to use the army to engage in battle against the South, Lincoln would like to "borrow it for a while," as a springboard for his argument that the government must continue to stimulate the economy even if it means borrowing the money. (For those who have lost their way in the blizzard of Obama spending, we are referring here to more of the same $787B Stimulus Bill--recalculated by the CBO to actually cost $862B. The same Stimulus bill that Obama promised would ensure unemployment remain under 8%. 18 months after the Stimulus Bill was passed, unemployment--those who haven't yet given up on finding work--hovers at 9.5%. It is estimated the real unemployment rate or U-6* as the Bureau of Labor Statistics calls it, is more like 16.5%. Either way, a far cry from 8%, 862 billion dollars later.)

Yet Mr. Krugman still believes more spending will solve the problem. It seems, if one follows his logic, the only problem here is that we haven't spent enough. He (and others) observe that American corporations are holding large levels of cash and idle cash doesn't help anyone. Spending money will benefit the economy. You know, like the Obama Stimulus plan improved the unemployment picture. If $862B didn't make a dent, perhaps we should double down? For a Keynesian like Krugman, spending is always good. Borrowing to spend? Even better. I invite you to read the following excerpt from his blog: "So shouldn’t that be our response to all that idle corporate cash? We don’t literally have to borrow from the corporations; they’re parking their funds in the money market, and the feds would borrow from that market. But the end result would be to put some of that idle cash to work — and, ultimately, to give the corporations a reason to start investing, too, so that the deficit spending would crowd investment in, not out."

For my part, I don't understand how the government borrowing MORE money will "give the corporations a reason to start investing, too, so that the deficit spending would crowdinvestment in, not out." Because Mr. Krugman says so? Because Obama says so? Because Nancy Pelosi believes that Unemployment checks are the biggest single incentive-for- growth tool that the government has to utilize? Following their logic we should all quit working, collect unemployment and spend ourselves into prosperity.

Many years ago when Gray Davis was still the governor of California, I sold my company to a much larger one and became the CEO of the larger, somewhat troubled company. My predecessor was a generous man in Mr. Krugman's world. He liked to spend. So the company had an earnings problem. The State of California was suffering from the same malady. I was preparing a report for the Board of Directors to explain what steps we were taking to cut costs and grow revenues. About that time I heard Gray Davis answering a question from the press on the budget deficit California was facing. He said (and I paraphrase for I don't remember the exact words though I do remember the essence): It's not that our spending was too great, just that our revenues were too low. I would have liked to try that one on my Board. Just for laughs, you know.

Revenues are taxes. For bureaucrats there are never enough revenues and ever increasing, more revenues are good. Politicians don't view taxes as a burden on the working public, they view them as revenues. More revenues, more spending, more debt, more borrowing, more everything. Until tomorrow. Until they wake up and realize money comes from somewhere. Until they realize we have to pay it back. Or, until we kick them out of office.

*The U-6 unemployment rate is the Bureau of Labor Statistics’ (BLS) broadest unemployment measure, including short-term discouraged and other marginally-attached workers as well as those forced to work part-time because they cannot find full-time employment.

Sunday, July 4, 2010

The Immorality of Groups--read: Government

"...groups are more immoral than individuals."
Martin Luther King
Letter from Birmingham Jail

Anyone with a modicum of common sense would acknowledge that mob rule is not a good thing. Our Founders understood it. They understood it to their very core. Power corrupts. Absolute power corrupts absolutely (Lord Acton). And, because they understood the effect power has on individuals and on large groups, particularly when those groups are in the ruling majority, they sought to limit the power of the government over the rights of the individual.

As early as the Declaration of Independence printed on July 4th, 1776, some 234 years ago, Jefferson wrote: That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed. The Founders intended for government to gain their authority and legitimacy from the people. The intention was never to impose arbitrary policy onto the people. The purpose of the Declaration which led to the Revolutionary War, was to preserve the rights of the people and create a governmental system grounded in individual liberty and freedom of choice.

Alexander Hamilton wrote in Federalist 15: Why has government been instituted at all? Because the passions of men will not conform to the dictates of reason and justice, without constraint. Has it been found that bodies of men act with more rectitude or greater disinterestedness than individuals? The contrary of this has been inferred by all accurate observers of the conduct of mankind; and the inference is founded upon obvious reasons.

Stay with me. Just a few more lines of Federalist prose. Hamilton goes on: Regard to reputation has a less active influence, when the infamy of a bad action is to be divided among a number, than when it is to fall singly upon one. A spirit of faction, which is apt to mingle its poison in the deliberations of all bodies of men, will often hurry the persons of whom they are composed into improprieties and excesses, for which they would blush in a private capacity.

Thomas Jefferson understood the capriciousness of rulers. The authors of the Constitution understood the nature of man and the nature of man in power. Senator Charles Sumner who championed the 14th Amendment understood the way men of power abused their authority. Despite the protections articulated in the Constitution and the Bill of Rights, he saw the States' unwillingness to grant those very rights to the population of recently emancipated Slaves so he sought an amendment to the Constitution to protect those rights from abuse by the States. Martin Luther King understood the immorality of groups in power as he wrote his defense from the Birmingham jail.

We live in tenuous times. Our rights are being infringed upon; our Constitution ignored at best, flagrantly flaunted at worst by a rogue government intent on increasing its collective power. This immoral group respects us, the people, so little they determine to tell us how much salt to put on our food, how much air to put in our tires, how much gas and electricity we should consume, how to conduct our health care, and how to spend our hard-earned money. This immoral group has set aside the lessons of history, the veracity of the Declaration and the Constitution and seek, rather, to obtain ever more power over an increasingly un-consenting population. They claim the moral high ground in all that they do. And they do not blush over their "improprieties and excesses."

As we reflect on the foundation and history of this great country, let us not forget how Alexander Hamilton referred to us in Federalist 16: they, as the natural guardians of the Constitution.

Get a copy of the Federalist Papers and read them. In these "times that try men's souls" you will find great comfort.

May God Bless America on this Independence Day.