Politics: Showtime

Don Boudreaux pulled back the curtains that hide the "wizard." When things are given proper perspective it becomes obvious how shallow the politicians of Washington are. The example here is Obama's call to cut $100 million from the budget. See the original post here.

...President Obama today "challenged" his cabinet to "cut the budget by $100 million" ... What courage. A President who proclaims the importance of making "hard choices" calls upon his government to trim away a whopping one thirty-six-thousandth of its projected expeditures for the year - or, alternatively reckoned, one twelve-thousandth of its projected budget deficit.

To put this budget "cut" in perspective, suppose that the typical American family, earning $50,000 annually, plans this year to run a budget deficit proportionate to the deficit that Uncle Sam will run. Such a family would plan to spend $75,000. Now suppose that this family, seeking to signal its faux-commitment to financial prudence, promises spending cuts equal, in proportion to its budget, to the cuts announced by Mr. Obama.

This family would declare - surely with much fanfare - that it will reduce its planned expenditures for the year by $2.08! Perhaps it might promise to survive the year with one less gallon of gasoline or with one less cup of coffee.

Who would take such a gesture to be anything other than audaciously insulting sarcasm by the chronically irresponsible?

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Economy: Russ Roberts says "Let Them Fail"

Russ Roberts writing over at Cafe Hayek, had this to say (see it here):

We're going to run out of money.

We can't keep GM and AIG and Fannie and Freddie and every insolvent bank and every mortgage afloat. It can't be done. It's not a strategy. It's just desperation to avoid pain.

We're going to have to start letting them fail.

Sooner is better than later. Otherwise, we continue to throw good money after bad.

Let them fail.

When you're in a hole, the first lesson is to stop digging. Let's start by putting down the shovel and admitting we are heading in the wrong direction.

Let's taste some bankruptcy. Let's let some resources and capital get out of the hands of the people who are misusing it and into the hands of people who can use it more productively, wisely, and prudently.

I agree completely. If some state government wants to get involved, then there might be an argument for it. But I doubt that I would buy it.

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Government: Financing Through Deficits

There's a question of what a budget deficit is. One website defines it this way:

The amount by which a government, company, or individual's spending exceeds its income over a particular period of time. also called deficit or deficit spending. opposite of budget surplus.

Another site agrees:

The amount by which government spending exceeds government revenues.

Nobody seems to say that deficits are good, only necessary at times (say war, or during economic downturns like now). Arguments are made over which way will bring in more revenue, like making the rich pay more, or reducing taxes generally to encourage commerce (thereby producing more in income and business taxes). But rather than tax cuts, I want to see the government spend less. The fiscal troubles of government will never end until the funding is cut off. The government has to take the money from people before it can give it back to us. This reminds me of a quote by Edwin Feulner: "The best way to put more money in people's wallets is to leave it there in the first place."

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Politics: Bennett Makes a Campaign Stop in Southern Utah

On Saturday, February 14, 2009 Senator Bob Bennett stopped by Cedar City. He is starting his reelection campaign. The elections are still about 21 months away, but the political race seems to never stop.

Politicians nowadays must have tremendous pressures; they deal with massive amounts of legislation, must respond to their constituents, deal somehow with special interests, and the media is always watching, waiting for the slightest slip to use as garnish for the news reports. I don't envy them at all.

In fact I have a great deal of respect to anyone who wants to take on that much responsibility. Whether I agree with them politically or not they deserve some approbation.

If I do, in fact, disagree with any politician then it is my responsibility to take the time to lay out my reasons in a letter or email, and, if possible, offer an alternative for them consider. And it is important to understand that any politician may, after considering everything, choose something other than what I might have. I still am responsible for treating them with courtesy and kindness. And a free society demands that people treat each other in that manner.

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Congress: The Inmates and the Asylum

MoveOn.org sends me an occasional email. Fair enough, I'll be open minded. In a recent one they were asking me to "sign [a] petition to Congress, urging them to act now to rein in Wall Street greed." Here's the problem with that: It is like asking the inmates to take care of the asylum. What evidence could I put forward to support my view? I point to the 27th Amendment to the Constitution. This amendment states:

No law, varying the compensation for the services of the Senators and Representatives, shall take effect, until an election of Representatives shall have intervened.

This was ratified in the month of May 1992. Apparently in 1989 an automatic "cost of living adjustment" law was passed (here) and "in nine of the last 10 years, Congress has given itself a raise, totaling more than $30,000." (here). While $30K is much smaller than the millions of dollars that go to executives, the executives get it legally. Congress is doing an end run around the very document that gives them the authority to legislate in this nation.

All this reminds me of the quip from Cullen Hightower (here): "Talk is cheap -- except when Congress does it."

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Government: Bailouts Justify Government Meddling

Another post at Cafe Hayek leads me to another great article by Donald Boudreaux; see it here. He is writing about the bailouts, or, more specifically, the limits put on executive salaries at companies that accept the government's money. (Or rather the taxpayers' money that the politicians spend as if it were their own.) Early in the article Don lays down this point: "[T]he most egregious problem ... with all ... restrictions and requirements that are attached to bailout funds, is that it sets a frightening precedent." That precedent, as I see it, is that the government now has the responsibility to manage these companies that it keeps alive.

That precedent is very dangerous. If it is justifiable, then the consequences are far reaching. If the government can manage any company that benefits from bailout money then look at your own business or place of employment. Boudreaux points to how far it might go:

... Which ... firms ... feasted on Washington's bailout bounty? This question is not as easy to answer as you might think. Sure, it's clear that, say, Chrysler got bailout funds. But what about Chrysler's suppliers that, while none received any direct handout of taxpayer funds, enjoyed higher profits as a result of Chrysler remaining in operation?

Indeed, what about every firm in America? After all, the financial and auto-producer bailouts, and the more general "stimulus" packages, are meant to assist the entire economy. Funds spent on the bailouts and on the stimuli eventually wend their way throughout the whole economy, benefiting everyone. That's government's stated goal.

Because (the presumption is) without these bailouts and stimuli the U.S. economy would have collapsed into ruins, it stands to reason that every firm -- every American, even -- received government largess. And because this largess was bestowed, either directly or indirectly, upon every firm, no firm deserves to be excused from having to follow detailed marching orders from Washington.

I hope I'm wrong. But I genuinely fear that the extensive and massive "economic rescue" spending pouring today from Washington will combine with the newfound enthusiasm for hyperactive government to quickly create a culture of government direction of the economy as this country has never before known.

The correct answer is to never allow the federal government to get into the bailout business. If any reader would suggest that a state government should, then there could be a discussion. But that is not the role for the federal government.

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Society: Some Questions on Abortion

I first saw this video on the blog "On Life and Lybberty," see the post here.

Also, an article on the subject can be found here. It is found at LDS.org.

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Economy: Russ Asks If the Stimulus Will Help

Russ Roberts over at Cafe Hayek posted this.

I have started asking people I encounter whether they think government spending a trillion or so extra dollars is going to be good for the economy. The front desk clerk at my hotel—a marketing major—gave me a very honest, "I don't know." The other four people I asked, all under the ago of 30, said they thought it wouldn't help. My favorite response: They wasted the other money [me: a reference to the TARP, I think]. Why will this be any different."

I encourage you to start asking people. Do you think the stimulus will help? Ask without malice. Without sarcasm. Without an edge. Pure curiosity. See what they say. I think most people are very skeptical. The people in favor of this plan are some economists (calling Bryan Caplan), governors in states that are broke, and the politicians who will spend the money.

Maybe it can be stopped if enough people think it's a waste.

I have an idea on how to proceed. In the meanwhile, start asking and educating.

I am curious what he is up to. Anyway, what do you think? Will the "stimulus" help the economy? Tell me what you think.

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Economy: Boudreaux on Deficit Spending

Don Boudreaux had this to say in a letter to the Chicago Tribune (see it here):

President-elect Obama prescribes fiscal stimulus as the cure for America's ailing economy ... Well let's see.

With the exception of a few years during the Clinton administration, the U.S. has run annual budget deficits continuously for the past four decades. And from 2002 through 2008, Uncle Sam ran budget deficits each year, totaling $2.13 TRILLION dollars. That's a frightful amount of fiscal stimulus, and yet the economy today is struggling.

Now with the bailout, the budget deficit for 2009 alone is projected to be close to $1 trillion - nearly seven percent of GDP, a figure much higher than at anytime since WWII. If deficit spending were good for the economy, Americans would now be, not on shaky ground, but in Shangri-la.

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Economy: Job Creation

Here's a line clipped from a Cafe Hayek post by Russ Roberts; read the rest here.

...it's easy to create jobs. The hard part is creating productive jobs. Jobs alone do not create prosperity. Creating wasteful jobs reduces our standard of living.

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Economy: Kling on the Stimulus

Okay, I'm back. Having survived the holidays, even trying to shed some of the fat I gained from the sugary holiday diet by playing a little basketball this morning I think that I am ready to start posting again. Here's one that jumped out as I scanned the internet; it is by Arnold Kling, and you can find it here.

Kling's two points, as I see them, are this: first, if a solution doesn't work, the same solution in greater amounts won't likely work either. Second, why do we think that any one of the "experts" would have the wits to handle spending the billions of dollars that is being called for.

On his first point he says:

I was reminded of the Battle of the Somme, one of the worst policy blunders of all time. Having experienced nothing but failure using offensive tactics up to that point, the Allies decided that what they needed to try was....a really big offensive. Just as Feldstein and Stiglitz [the "experts" in his article] pay no attention to the on-the-ground the housing market, the British generals ignored the impact of machine guns on men advancing over open fields.

As I see it this has been brewing and bubbling for years. The "free market" gets blamed every time something goes wrong, but it was government meddling that creates many of the problems. So the calls for more government spending to stimulate the economy is wrongheaded. Let those who make the financial mistakes pay for them. Let the people help that want to, and leave the rest alone.

On his second point he says:

How many people will have meaningful input in determining the overall allocation of the billion stimulus? 10? 20? It won't be more than 1000. These people--let's say that in the end 500 technocrats will play a meaningful role in writing the bill--will have unimaginable power. Remember that what they are doing is taking our money and deciding for us how to spend it. Presumably, that is because they are wiser at spending our money than we are at spending it ourselves.

The arithmetic is mind-boggling. If 500 people have meaningful input, and the stimulus is almost $800 billion, then on average each person is responsible for taking more than $1.5 billion of our money and trying to spend it more wisely than we would spend it ourselves. I can imagine a wise technocrat taking $100,000 or perhaps even $1 million from American households and spending it more wisely than they would. But $1.5 billion? I do not believe that any human being knows so much that he or she can quickly and wisely allocate $1.5 billion.

I will only add one of my favorite quotes from Hayek: "All political theories assume, of course, that most individuals are very ignorant. Those who plead for liberty differ from the rest in that they include among the ignorant themselves as well as the wisest."

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Holidays

Hope everyone has enjoyed their Christmas. I'll try to get back to blogging regularly starting with new year ... Thanks for your patience.

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Economy and Religion: Who Do We Trust?

This article puts a very different perspective on our economic woes. It is by Kendall Wingrove, and it is found here.

Perhaps the challenge in the credit crunch and economic downturn lies not in our politicians, but in ourselves.

To be sure, federal policymakers in the executive and legislative branches have outraged taxpayers. The so-called experts have repeatedly dropped the ball or turned a blind eye to difficulties until they've exploded into crises.

The shortcomings of the public sector are matched by bad judgment and, yes, even corruption in the private sector. ...

But as we resent some in the executive suites, and point our fingers at the pork-barrel politicians who build bridges to nowhere, it's important to remember they aren't much different than many Americans who are fellow travelers on the road to bankruptcy.

For decades, too many have lived beyond their means. Consumers buy items they can't afford and pile up debts they are unable to pay. The concept of sacrifice is largely ignored. In the ceaseless quest to acquire more toys, instant gratification trumps patience.

Then he ends his article with this:

Instead of legislating, taxing and spending our way out of this mess, it's time to realize that the solution has been around for 2,000 years.

While we drown in debt and beg for bailouts, Jesus offers a peace that can calm the storms of life. In John 14:6 in the Bible, he said: "I am the Way and the Truth and the Life. No one comes to the Father except through Me."

Earlier in the book of John, it chronicles how Jesus went to Jerusalem and found men around the temple selling cattle, sheep and doves and others sitting around exchanging money. He drove them from the sacred area, scattering the coins of the money changers and overturning their tables.

According to Jesus, a person's life does not consist in the abundance of possessions. The real value is found in a person's soul. The day of reckoning has arrived, and all must ask: Does the almighty dollar merit worship, or is it in God that we trust?

A new occupant at 1600 Pennsylvania Avenue might make a difference. But let's have the audacity to hope that Americans are able to change. Yes we can.

It has been some time since I have heard anybody in the general media suggest that personal responsibility is important (and an invitation to turn toward God, also). Ben Franklin, in his autobiography, outlined 13 virtues (here), among them can be found:

Temperance

Frugality

Industry

Moderation

Rarely is temperance spoken of anymore. Moderation is almost unknown. Industry tends to be avoided. Frugality is scarce, almost never voluntary. Perhaps as Americans we need to pause and examine ourselves.

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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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