Economy: The Shrinking Pool

Mark Landler and David Kirkpatrick writing in the New York Times about the frenzy at the Treasury Department, see it here. This part of the opening:

When the government said it would spend $700 billion to rescue the nation’s financial industry, it seemed to be an ocean of money. But after one of the biggest lobbying free-for-alls in memory, it suddenly looks like a dwindling pool.

...

Of the initial $350 billion that Congress freed up, out of the $700 billion in bailout money contained in the law that passed last month, the Treasury Department has committed all but $60 billion. The shrinking pie — and the growing uncertainty over who qualifies — has thrown Washington’s legal and lobbying establishment into a mad scramble.

The Treasury Department is under siege by an army of hired guns for banks, savings and loan associations and insurers — as well as for improbable candidates like a Hispanic business group representing plumbing and home-heating specialists. That last group wants the Treasury to hire its members as contractors to take care of houses that the government may end up owning through buying distressed mortgages.

The lobbying frenzy worries many traditional bankers — the original targets of the rescue program — who fear that it could blur, or even undermine, the government’s effort to stabilize the financial system after its worst crisis since the 1930s.

This is predictable. Has there ever been a large amount of money that did not attracted the honest, the beggar, as well as the thieves and robbers? Frederic Bastiat, a nineteenth century French economist, pointed out that "Everyone wants to live at the expense of the state. They forget that the state lives at the expense of everyone."

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Economy: More on the Auto Bailout

Sheldon Richman is editor of The Freeman magazine, and has plenty to say about the bailout of the auto companies. Here's one of the points (which can be found here):

What is so irritating about this story is how old it seems. The Japanese car makers have been accurately anticipating the preferences of American car buyers for quite a while. In the 1980s, after Chrysler won loan guarantees from Congress, the Japanese were so good at serving this market that the Detroit firms implored President Reagan to grant them “breathing space” against the foreign competition so they could catch up. In one of his most egregious betrayals of his stated free-market principles ... Reagan demanded that the Japanese “voluntarily” restrain their exports to the United States . . . or else. They did so.

This puts the current appeal for rescue into perspective. Yes, the government is partly at fault for the companies’ woes, and the general economy is flagging. But the company mangers and union leaders are hardly blameless. In any event, it shouldn’t be made the taxpayers problem. (The emphasis is my own.)

Later in the article Richman points out:

What gets lost in the debate is the fact that either the government or the market is going to determine who gets access to scarce resources. Capital devoted to making cars can’t be go into making anything else. So whether Congress gives or lends the money to the Detroit firms or simply guarantees repayment of private loans, it deprives other entrepreneurs of capital needed for their projects. That means consumers won’t get to enjoy the fruits of those still-born ventures that die for lack of resources. That’s a real cost of government intervention, but since it is unseen, it isn’t counted in most discussions of the proposed bailout.

What if I want to start a little business, or my neighbor does, the resources that go to the support of Detroit won't go to my neighbor or myself. And if it is extracted through taxes, grudgingly, then my freedom goes with it.
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Post Election: Some People In Mourning

On one of the roads I travel when coming home from work this flag was hung out. Curious, I went and talked to the owner. He says that November 4, 2008 is "the day America began to die." He didn't have any hope for our government (although he was very pleasant to talk to, a good natured fellow).

I hope he's wrong.

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Business: Another Reason to Oppose the Bailout of Automakers

The idea that the bailout of American automakers is another handout to big business is one reason to oppose it. But another reason, more subtle, but maybe more important, is displayed in Congress' demands before bailout approval. From Reuters there is this:

Congressional leaders agreed on Thursday to give Detroit automakers until next month to make their case for a rescue but demanded that GM, Chrysler LLC and Ford Motor Co show they have business plans that can keep them out of bankruptcy.

...

The restructuring plans will have to show how management and labor are making concessions in order to clinch the government rescue portrayed by automakers as the only alternative to bankruptcy and massive job losses.

Or, in other words, Congress is now an expert on business management. Companies don't usually make plan to get into bankruptcy, unless it will get them largesse from the government. Not only will Congress attempt to save the economy (with other people's money), they think they can manage each and every part of it also.

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Economy: A Simple Argument by Boudreaux

Sometimes the simple arguments are the ones overlooked. Here's one from (found here) from Donald Boudreaux:

[R]esources given by government to these corporations must be taken from somewhere else. Government cannot conjure billions of dollars of resources out of thin air.

The number of different places from which these resources will be taken is large and spans a continent. So it's easy to overlook the fact that each of many productive firms from across the country will, as a result of this bailout, pay more for steel, machine tools, fuel, and other inputs they use in production. These other firms will contract their operations; they'll employ fewer workers; they'll produce less output.

The bailout might well save GM, Ford, and Chrysler. If so, politicians will celebrate it as "successful." But that success – which will be easy to see and capture on video tape – will likely really be an economic failure because of the resulting (if hard to see) contracted economic activity throughout the economy.

The idea that the government has the ability to assist the economy is false. The government can act like the brakes, but never the engine. If it gives you something, it took something from someone else. Simply put (in the words of von Mises): "Government cannot make man richer, but it can make him poorer."

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Economy: Horsey on the Meltdown

Sometimes David Horsey hits the bull's-eye. You can find this one here.

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Politics: Where's the Watchdogs?

After the election I have been going through a "political detox," avoiding the news, and the internet, the emails ... It was going to last until Thanksgiving. But I couldn't let this one pass. It is from washingtonpost.com and by Amit R. Paley (and it can be found here):

In the six weeks since lawmakers approved the Treasury's massive bailout of financial firms, the government has poured money into the country's largest banks, recruited smaller banks into the program and repeatedly widened its scope to cover yet other types of businesses, from insurers to consumer lenders.

Along the way, the Bush administration has committed $290 billion of the $700 billion rescue package.

Yet for all this activity, no formal action has been taken to fill the independent oversight posts established by Congress when it approved the bailout to prevent corruption and government waste. Nor has the first monitoring report required by lawmakers been completed, though the initial deadline has passed.

While I'm not completely sure what "committed" means, it sounds like they have given out nearly half of the $700 billion, and it reminds me of the quote from P. J. O'Rourke: "Giving money and power to government is like giving whiskey and car keys to teenage boys."

Somewhere we have to "just say no." If we allow congress to keep handing money out, with or without oversight, we are sunk. Am I working just so congress can hand out money to their friends?

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Elections: Voter Fraud

Every time we go to vote there are stories of election fraud, or how poor the voting system is, like these comments from a blog I subscribe to:

I was shocked by how dysfunctional the whole process was. I didn't have to show ID. I just told them my name and they found my name on a roster and I initialed next to it. When I was actually voting it was marking bubbles on a scantron sheet. ... it would be quite easy to "adjust" the ballot box thing so that the incorrect bubbles are marked without the marker knowing an error was made. The wording on the ballot, especially for all the various propositions was also very confusing and often times quite biased, either for or against a proposition. I can totally see how older or uneducated people could be confused by the whole process. I know I was and I don't consider myself to be too old nor too uneducated. After I was done marking the scantron, I wandered around trying to find out what I was supposed to do with my ballot. I finally found a guy at a table who said he would take it. I gave it to him and that was that. As I walked out of the building ... I realized that I have no idea if my vote will actually be counted. ...

So as I was driving to work I didn't feel good about doing my civic duty. I felt anxious because I didn't trust the whole process at all. ... There has to be a better way to vote.

Several years ago when I heard murmurings like this I decided to volunteer to sit at the polls, to see how fair they were. The first two or three times I offered to help I was passed over, as they likely had enough people. Then one year the County Clerk's office sent a notice for asking me to help. This happened to be the first year that my state used electronic voting machines. There was a training session, and then I had to show up to the polls on election day.

The point I'm driving towards is this: the elections are as fair, in my view, as humanly possible. No, they are not perfect. Yes, there are sometimes minor errors, but the elections are fair, and those involved try to do the best job possible. Sometimes I hear a call for more technology to be used, but that won't necessarily help. What is the best solution is for people to get involved, find out what goes on in the election process, see what safeguards are in place, and if they have ideas to share them with election officials (in between the elections please, not in the middle of one). Mostly, quit your belly-achin'. Unfounded doubts and murmurings about the election system do nothing except keep people from going to the polls.

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Economics: Sheldon Richman Talks About the S-Word

This showed up Friday at the FEE website

So the S-word has surfaced in the presidential campaign. One candidate accuses the other candidate of being a socialist because he would raise taxes on the wealthy while "cutting taxes" for, among others, workers who pay no income taxes. The accused laughs it off, saying next he'll be called a communist for sharing his toys in kindergarten. (Of course, then he was sharing his own toys.) Meanwhile, the first candidate -- the one hurling around the "socialism" charge -- says if elected he'll buy up shaky mortgages and send checks to people who pay no income taxes so they can get medical insurance.

I'm beginning to understand how Alice felt.

This is as weighty as political campaigns get in America. Those with an appetite for hearty political debate are suffering the pains of malnutrition, which nothing short of nightly doses of "The Daily Show" can relieve.

As for the S-word, certain distinctions are worth maintaining. As Ludwig von Mises noted, socialism and interventionism are different beasts. Strictly speaking, a (state) socialist longs for the abolition of the market, free exchange, money, and private ownership of one's labor and the means of production. Central planning of all production would take the market's place. The interventionist "merely" longs to distribute some of the fruits of the market according to his own high-minded predilections.

Today no one is calling for the nationalization of anything.

Well, except for the banks.

And the insurance companies. But nothing else.

Ok, the auto companies too. But that's it. The rest of the market would remain in operation. I mean it.

...

What's so funny about the "socialism" charge is that if we were to rid the government of all wealth transfers, there would hardly be anything left. It's what government does. It's built in, and the progressive income tax is not the only culprit. Under a flat tax some people would pay no taxes -- there's always a zero bracket, or personal exemption -- and those who earn more would pay more dollars than those who earn less. Assuming everyone gets the same government "services," we have to conclude that the richer subsidize the poorer. The only way out of this would be a head tax, but that's not going to happen.

The rest of it is here. Comments, suggestions, and questions can be directed to test.veeschay@gmail.com