Road to the Middle Class

The Anguish of the Reactionary President

2012-01-26T06:45:00.000-08:00

Back in the old days, rulers ruled. They ruled over everything, from church, to military, to trade.

But then came the modern mechanical era. God no longer kept the planets in their orbits, and an "invisible hand" seemed to guide merchants and consumers without the constant intervention of a wise ruler.

What is a ruler to do? He worries about "inequality." Not because he's caring and compassionate, or even because he's a brilliant technocrat, but because if you want to meddle with the workings of the "invisible hand" you have to start out by saying that the "invisible hand" isn't doing the job. It's making some people too rich and leaving some people behind as too poor.

Thus Marx. Thus the British Fabians. Thus the American Progressives. Thus the New Deal. And thus our modern "progressives," university liberals, and President Obama.

It's not that the president is a socialist, but that socialism is just one phase in the serial attempts of the modern educated elite to justify its rule over the "commanding heights" of the economy, the culture, and politics.

In President Obama's recent State of the Union speech, we see the box that he and his educated elite friends are in. They want to rule. They want new programs. They want new regulations. They want to be patrons, and they want us to be adoring and grateful clients.

But the science is in. The "invisible hand" really works. And it really works better if the government isn't endlessly manipulating the economy to get out of its latest jam with money printing, debt defaults, and endless subsidies.

And now the educated elite has run out of money. But the band plays on.

In his speech the president has to walk a fine line. He must invoke the great narrative of American exceptionalism, quoting Abraham Lincoln. But he must twist it to fit his ruling-class agenda. Thus he invokes "fairness" to justify increased taxes on the rich. Here's the data from the IRS on this. The rich pay a huge chunk of federal taxes, the rest of the top 50 percent pay almost all the rest and the bottom 50 percent pay almost nothing. What the bottom 50 percent do pay goes towards payroll taxes, i.e., Social Security and Medicare.

I've been arguing with a left-wing friend recently about "inequality." He has a chart that shows that median income went up with average income in the 1950s and 1960s. But since 1980 the median income has lagged the average income, so the rich have been getting more of it.

Folks like Walter Russell Mead and Megan McArdle tell why this happened. The post-World War II economy was corporatist. The benefits were parceled out by an inside deal between the Big Units: big government, big unions, and big corporations. But this crony capitalism ran out of money in the 1970s, as the rest of the world recovered from World War II and began to compete. But then breathtaking new developments in technology and commerce poured gigantic fortunes into the laps of the entrepreneurs that took the opportunities and made them into consumer products, men like Bill Gates and Steve Jobs. Then there was Sam Walton who built Wal-Mart up from nothing to become the world's biggest retailer. There's nothing fancy about Wal-Mart, just hard work to buy low and sell low, and provide an emergency operations center so Wal-Mart can flood assistance into disaster areas.

But what about the salvific progressive political leader? Where does he fit in all this? He really doesn't. We really don't need him. That is why the educated elite keeps coming up with new end-the-world scenarios. That's what political leaders and religious leaders have always done to persuade us to follow them.

And that's the point. Obama ran for office as a salvific leader under whose transformative leadership the "rise of the oceans began to slow and our planet began to heal." But really, global warming is a crock, and we've been working successfully on the environment for half a century, since about the time that Barack Obama was born in Hawaii.

The great Montesquieu imagined the modern government with its separated powers: legislative, executive and judicial. This was not an argument against tyrants, but an argument about the inevitable tyranny of a unified government.

Now we need to expand Montesquieu's ideas into a Greater Separation of Powers, between the political, the economic and moral-cultural sectors. Obviously the scope and power of salvific political leaders will be much reduced.

President Obama and his ruling class will kick and scream all the way to their eventual irrelevance. Oh well. I can handle that if you can.

Duck and Cover, Mr. President

2012-01-25T07:18:00.000-08:00

I suppose that President Obama knows what he is doing with his class warfare strategy for reelection. His State of the Union speech was complete with Warren Buffett's secretary, the one that pays more, percentage-wise, in tax that her boss.

But I'd like to warn you, Mr. President, that there is a ballistic missile en route that may well change the terms of trade in the current political argument. The missile is Charles Murray's Coming Apart: The State of White America 1960-2010. It shows that it's not a question of the One Percent versus the 99 Percent, as our Occupy friends suggest. It is not a question of millionaires and billionaires not paying enough in taxes. It is more a question of the top 20 percent of the upper-middle class doing fine in America while the bottom 30 percent does not.

Last time Charles Murray had a blockbuster it was Losing Ground in the 1980s. That book was an analysis of the effect of the welfare state and its welfare programs. It led to the reform of welfare in the 1990s.

The point that Charles Murray tries to make, over and over again, is that "inequality" is not a problem of millionaires and billionaires making too much money. It is a problem of the governmenet spending too much money on the welfare state.

It sounds very caring and compassionate for the government to spend money on the poor. If only it were true. Instead government spending leads to the breakup of families and the idleness of men.

Government spending doesn't lead to idleness in the upper-middle class because, oddly enough, the government designed by the upper-middle class helps the upper-middle class do what it wants to do anyway: go to school, get a degree, get a job, start a family. But the welfare state has the opposite effect on anyone below the upper-middle class. It encourages women to choose the government over marriage, and it encourages men to abandon the mothers of their children. Unmarried men tend to work less than married men--a lot less. Also, of course, a bums-on-seats education system may work very well for the sons and daughters of the middle class, but not so well for the sons and daughters of the working class, where people learn more by doing that by listening to teachers.

I just have this feeling, Mr. President, that when we look back on 2012, we will remember not your 2012 State of the Union Speech, but the publication day of Coming Apart: January 31, 2012.

Obama is not a Friend of Catholics

2012-01-24T07:50:00.000-08:00

You can understand that the liberal Catholics would want to find a way to support Barack Obama. After all, he believes in a lot of the same stuff they do: social justice, and solidarity. So it's not surprising that they would support Obama in 2008.

But now they are finding out that Obama isn't returning the compliment. William McGurn in The Wall Street Journal:

Now, suddenly, we have headlines about the president's "war on the Catholic Church." Mostly they stem from a Health and Human Services mandate that forces every employer to provide employees with health coverage that not only covers birth control and sterilization, but makes them free. Predictably, the move has drawn fire from the Catholic bishops.

Less predictable—and far more interesting—has been the heat from the Catholic left, including many who have in the past given the president vital cover. In a post for the left-leaning National Catholic Reporter, Michael Sean Winter minces few words. Under the headline "J'ACCUSE," he rightly takes the president to the woodshed for the politics of the decision, for the substance, and for how "shamefully" it treats "those Catholics who went out on a limb" for him.

The problem is that under ObamaCare Catholic charities will have to provide health insurance with birth control and sterilization. No exemption. No opt out. Which rather signals that Obama and his crew aren't interested in helping their liberal friends in the Catholic Church.

McGurn says that this is a shame.

Conservatives may enjoy the problems this creates for Mr. Obama this election year. Still, for those who care about issues such as life and marriage and religious liberty that so roil our body politic, we ought to wish Catholic progressives well in their intra-liberal fight. For we shall never arrive at the consensus we hope for if we allow our politics to be divided between a party of faith and a party of animosity to faith.

Of course, this rather misunderstands the problem. Our politics is not divided "between a party of faith and a party of animosity to faith." Our politics is divided between a party of transcendental faith and a party of secular faith. On this view the liberal Catholics are fools to be supporting the party of secular faith. Unless, of course, their real faith is the secular faith of big government and the subordination of civil society to the political sector. Either way, liberals don't like any civil society organizations that are not subordinate to the liberal establishment, and they work, every day, to marginalize them and subordinate them to political power.

It's my view that the election this year is going to be a lot bigger than we think. Because our mainstream media is so liberal, the discomfort with Barack Obama is still inchoate. As the Republicans begin to campaign more vigorously against the president and get more bandwidth, I think we will see the needle start to move against the president. When it does, our liberal friends will be shocked. They will go into denial. They will not be able to deal with it.

Educrats Chase Teenaged Sailor Round World

2012-01-23T10:48:00.000-08:00

How about that 16-year-old Laura Dekker from Holland, who just finished a round-the-world solo cruise in her 38 foot ketch Guppy?

How about those child-welfare authorities that were hounding her and her parents?

Miss Dekker fled abroad in 2010 when Dutch child welfare authorities took legal action to try to stop her making the voyage. She later won a 10-month court battle, promising judges she would buy a bigger boat with advanced navigation equipment, take courses in first aid and coping with sleep deprivation, and enrol in a special correspondence school.

Godfrey Daniels, I hear you say. Mother of Pearl. Here we have millions of kids in the global underclass getting totally screwed by the family breakdown of the welfare state and the lousy schools, and the bureaucrats still have time to hound a rich-bitch kid and her parents over a teenage adventure.

Of course, there's nothing new here. When Laura was 12 she made a solo trip from Holland to England, just like Arthur Ransome's Swallows in We Didn't Mean to Go to Sea. Only in the Brit novel, it's Brit kids sailing to Holland instead of the other way around. But really, the Dutch version is more realistic. The Dutch are famous sailors. Only they were sailing to the Spice Islands with the Dutch East India Company before the Brits got cracking with their own East India Company and the empire in "Injah." The Brits learned about everything they know from the Dutch.

You can understand those child-welfare authorities. Why, the very idea that some kid could escape the mandatory 12-year sentence to confinement in a government-approved child custodial facility! Not to be endured! What could be more important for a 15-year-old that sitting bored to tears in her government child custodial facility?

On the contrary. Here we have a young woman, in her mid-teens, that has sailed around the world solo! What matters whether she's done her math or her social studies or her sex education. The education she just get in life is worth about five years of confinement in the government's child custodial facility. This idea that government officials would have anything helpful to say to a girl and her parents about sailing, survival, navigation--and "sleep deprivation." It is madness!

Yeah, you are saying. What about "sleep deprivation" training for Italian cruise-ship captains?

In fact, scrub the "sleep deprivation" training. What is needed, for survival in high adventure, is the training to act effectively when you are tired, panicked, and scared out of your tree in the middle of the night in the southern ocean. I'm sure the bureaucrats have tons of experience with that.

But there's a bigger issue. (There always is.) What in the Sam Hill are we doing allowing the government to bully us around with the raising of our children? When are we going to rise up and tell the politicians and the bureaucrats to get lost and come back when they have their deficits, their debt, and their utterly failed programs under control?

The Green "Fight Against Big Oil"

2012-01-19T09:48:00.000-08:00

When actor Robert Redford writes that the Keystone XL decision is an historic victory against Big Oil. He writes:

President Obama has just rejected a permit for the Keystone XL tar sands pipeline -- a project that promised riches for the oil giants and an environmental disaster for the rest of us.

His decision represents a victory of historic proportions for people from throughout the pipeline path and all across America who have waged an uphill, years-long fight against one of the most nightmarish fossil fuel projects of our time.

Oh please, gag me with a spoon. What about the 600,000 miles of pipeline in the US, mostly not as carefully designed as the Keystone XL? And don't you realize, Mr. Redford, that the president is almost certainly planning to allow the pipeline to proceed, once he has got your money and your vote for opposing it?

As Joel Kotkin points out, the Keystone XL decision forced the president to side with "urbanista" America against the rest of America.

There is a word for this sort of issue. It is called a "wedge" issue. The idea is to unite your side while splitting the other chaps. That's why the House Republicans put language in the two-month payroll tax cut that forced the president to make a decision on Keystone XL. Considering that the Democrats had already planned to give up on the white working class this year, it's no surprise that they went with the bigger chunk of their base: the urbanista greens rather than the suburbanista working class.

I've been saying all along: Bring it on. I'm a naturally conflict-averse chap, but I recognize that the great issues facing America have to be fought over. The reason is that, in normal times, the "urbanista" agenda of the liberal educated class gets no pushback. Mainstream media types run around boosting lefty issues, from wind and solar to "diversity" to "gay marriage," and attack anyone that disagrees with them and bigots or deniers, according to taste.

But a great election is a time when conservatives can contest in these ideological wars. Thus the perfect storm of government debt, Great Recession, climate change, ObamaCare, and energy prices create a crisis that will force the American people to confront the issues and make a choice. In normal times, when there is not a crisis, it is very difficult to push back against the liberal agenda.

In normal times, liberals present their statist agenda as caring and compassion, pretending that they are conducting a national conversation in accordance with Habermas's discourse ethic. In fact, of course, they are always playing political hardball and finding ways to silence their critics and turn the "discourse" into domination. But in normal times they manage to persuade moderates that liberals are on the side of the angels.

In crisis times, like right now, conservatives get a chance to fight back against the liberal power plays. We can argue that the "stimulus" spending and regulatory blizzard hurts ordinary Americans. We can show that ObamaCare is a lie that will ration health care to America's grandmas. And during an election conservatives can use paid media to balance the free media that supports liberal ideas.

What is really needed, of course, is for conservatives to make a Long March through the institutions so that the normal times discourse is balanced between liberal agenda and conservative agenda. That is a huge challenge because it means, for a start, neutralizing the government education complex. Then there is the liberal culture complex, the liberal foundation complex, and the liberal mainstream media.

At any rate, there's a good chance that an historic victory can be won in 2012 if President Obama is defeated and the US Senate goes Republican. The mad statist government of 2009-2010 will have educated a whole new generation of Americans to mistrust government.

Meanwhile the liberal "victory" in the fight against Big Oil should remind Americans who is in favor of reducing the cost of filling their gas tanks.

Barack Obama, "Vulture Capitalist"

2012-01-12T10:16:00.000-08:00

What is Mitt Romney going to do to scotch the job-killer label? His Republican rivals have been ramping up criticism of the doings of Bain Capital, some have labeled him a "vulture capitalist." If that's how Republican candidates think, then who knows what the Chicago guys on Obama's team will come up with.

Hugh Hewitt has a clever little sound bite on this. He says that blaming Mitt Romney for job losses is like blaming the lifeboats for arriving too late at the sinking of the Titanic.

My own view is to try a health-care metaphor. Corporate turnaround outfits like Bain are like surgeons. They try to cure companies diagnosed with cancer. Usually, of course, they only come in when the cancer is well advanced, because like people with a pain in their abdomen, the patient is in denial. That's a pity, because advanced cancer often needs radical surgery. It's almost always best to get cancer in its early stages.

That's the business that Mitt Romney was in. Diagnosing sick companies, coming up with a treatment plan, and then executing on the treatment plan. Often times, of course, the treatment plan doesn't save the patient, or only provides a temporary improvement.

The Romney team evidently thinks that a direct attack on the president is the answer. Here's Romney in an airplane aisle.

Well, I’d like to look at Barack Obama’s record, and so as we talk about my experience in the private sector, I’ll talk about his experience… he’s now been a venture capitalist in Solyndra, Fisker, the Tesla… and he’s been a private equity guy in General Motors and Chrysler, so I’ll be talking about his record when I’m facing him.

That just shows why I'm not a campaign manager. It hadn't occurred to me that Solyndra was just waiting there to neutralize the "vulture capitalist" smear. But the Human Events reporter is livid with Romney's sarcastic answer.

Barack Obama is not a “venture capitalist” with a “record in the private sector.” The compulsory extraction of funding from taxpayers by force, to fund massive expenditures on politically favored companies run by top Obama campaign contributors, is not “venture capitalism.” It’s not really capitalism at all, although the term “crony capitalism” has become popular for describing it.

Quite right, of course. Actually, there is a bigger problem with Romney's comment. Most Americans really don't know the different between a "venture capitalist" and a "private equity guy." But maybe they will after the 2012 election. And that would be a good thing!

Sure, Romney didn't go on to spell out what is wrong with Obama's jolly little foray into venture capitalism. But no doubt he will develop the idea in his speeches, in exactly the way that the Human Events guy did. When the government gets into "venture capitalism" it isn't venture, it isn't capitalism, it's force, pure and simple; it is government rewarding its supporters with our money. And the same thing applies when the government plays at the private equity game and bails out GM, the unions, and the banks. President Obama doesn't risk his money or the money of investors looking for a risky play. He is risking our money. And we don't want the government taking big risks with out retirement savings.

The point is that if Mitt Romney can't turn the "vulture capitalism" issue around and make it a liability for President Obama then he's not a good enough politician to be president.

Make Some Lemonade, Mitt

2012-01-10T10:08:00.000-08:00

Now that Mitt Romney has put his foot in it, saying, "I like being able to fire people," the whole question of his Bain Capital years has been put in play. As Mark Steyn says,

McDonald’s makes hamburgers, but what does Bain do? Private equity, high-yield assets . . . golly, that sounds less like Main Street lingo and more like Wall Street; less to do with the kind of business built on the virtues of making and doing, and more to do with the kind of too-clever-by-half monkey business that came close to taking out the global economy in 2008.

The fact is, of course, that finance is a critical part of capitalism, and leveraged-buyout operations like Bain are right in there too. The whole business of turning around failing businesses is a vital part of our economy.

You could say that the LBO boys perform a similar service to the health care industry. Company gets sick, you send in the docs to figure out what is wrong. With diagnosis in hand you come up with a treatment plan, which may include surgery, and probably will include life-style changes and more healthy exercise.

But if you talk to an average American she just wants to "save jobs." The machinations of the turnaround artists are offensive to her. People would rather not admit to losses until actual bankruptcy. And, of course, an old-established firm is usually paying above-market wages to people that are not necessarily performing above the market.

Now that the fat is in the fire, Romney's people have to come out with a good story. They must tell us that America is in a jam and we have to take bold action to get out of the jam and get the economy moving and return to prosperity. Where would you look for someone with those talents? Why, someone that had experience trying to turn failing companies around. You certainly wouldn't expect a chap from a corrupt city machine to be of any use.

To start with, the Romney folks could make a campaign video to laugh at the "I like being able to fire people" meme. He can put his "gaffe" up and then flash a picture of President Obama. Or Harry Reid. Or Nancy Pelosi. Or the Goldman Sachs building. Or some picture that says crony capitalism or bailouts. Because America isn't going to get better until we've done some serious surgery on the body politic.

Mitt Romney needs to turn his lemons into lemonade.

What's the Story?

2012-01-09T10:58:00.000-08:00

I suppose the Republican candidates are all busy fighting each other. But I sure would like to get a feel for the story they are going to tell the American people come the fall.

It's not enough to be against Obama; you need to tell the story about why he is a disaster for America and why the Republican agenda is good for America.

For instance, I don't think that this Romney retort to an Occupy protester does the job.

“You know what?” Romney said. “This president has caused a deepening recession and is responsible for 25 million Americans being out of work or stopped working or not being able to get jobs, and let me tell you, this president’s been a failure and that’s one of the reasons I’m running is to help you get a job.”

Republicans need a better story than that. OK, genius, you say, what's your idea?

I think it must start from the basic failure of Obama's presidency, the failure to realize in the transition after the election that the game had changed. There just wasn't going to be the money to run off all the liberal agenda items that had been kept on ice for 20 years. Forget the porkulus stimulus to pay off supporters. Forget the cunning step towards single-payer healthcare. Forget the uber-regulation of environment and energy. Forget the wasteful infrastructure plans from high-speed rail to bike paths.

Of course, that would have been impossible for him. To brush off his liberal supporters in 2009 would have been impossible. But he could have slipped in a few policies to help gin the economy by lowering the costs of doing business. He didn't of course, because Democrats don't think about things like that. They don't think about helping the goose to lay the golden eggs; they just want the eggs.

So I think that the message should hit the truth that President Obama hasn't governed as a post partisan, hasn't worked to heal the divisions. Instead he has pushed his left-liberal agenda as hard as possible, as if time was short and if he didn't get it done today he'd never get another chance. Here's what I would say.

"Mr. President, you have wasted your chance. You were elected at a moment of national peril, when you could have set the US on a new direction. And you blew it.

"We needed jobs, and you gave us handouts. We needed energy and you gave us crony capitalists. We needed reform and you gave your pals bailouts.

"You talked of cutting spending, and you gave us waste. You talked transparency, and you delivered back-room deals.

"You were elected to bring us together, and you forced us apart.

"You promised hope and change, and you gave us division.

"Your moment is wasted. Your chance is gone. America must come together under a new leader, a leader who will heal the wounds and lead us to prosperity.

"America needs a president who will unleash the power of America's workers and businesses and bring in a new age of prosperity.

"Some wail that the Republican agenda is nothing but 'austerity,' as governments are forced to cut back on programs. I've got news for you, Mr President. 'Austerity' is when the people get less. 'Prosperity' is when the government gets less.

"Frankly, Mr. President, I don't care about the government. I care about the American people. And I am going to deliver prosperity. Not to the K Street lobbyists. Not to the crony capitalists. To the American people.

"It is the first thing I am going to do. It will be the second thing I do, and it will be the last thing I do.

"I only care about one thing. Bringing this economy back, and bringing America back.

"Because America is the last best home of mankind on earth. And America's 's best days are yet to come.

"God bless America."

Obama Deepens the Divide

2012-01-05T09:08:00.000-08:00

The Gang of 14 that tried to compromise the Democratic filibustering of judges during the Bush administration had a reason for their fudge. They knew that the "nuclear option" of demanding an up or down vote on judges would deepen the red-blue divide. It would make Democratic supporters mad.

Politicians are famous for avoiding tough decisions; they know that people on the wrong side of a tough decision appear in force at the next election. Politicians want their supporters to be energized and raring to vote. They want the opposition to be divided and demoralized.

So when President Obama does a recess appointment of Richard Cordray as chief of the new Consumer Financial Protection Bureau and three recess appointments on the National Labor Relations Board when Congress technically isn't in recess he is asking for a fight. He is sharpening the red-blue divide in America.

When Republicans do this sort of thing the mainstream media regards it as outrageously "divisive."

I'm not anxious to argue the constitutionality of the president's actions. Clearly the Republicans are playing games and using technical gimmicks to avoid a formal "recess."

My concern is something bigger. It comes from my definition of "government is force, and politics is talking about force." Or you could say that politics is civil war by other means. On this understanding of politics and government you have in your mind all the time the fact that any winner on any issue in politics is winning a fight, not persuading the losers about an argument. That is why politicians usually try to pass big issues with a "bipartisan majority." They want to create the atmospherics of consensus, that everybody got something to take home with them.

The great achievements of the Obama administration have mostly been raw partisan victories: stimulus, ObamaCare, Dodd-Frank. In addition the Obama victories have been expressions of the pure liberal approach to politics, that almost everything could and should be a bureaucratically administered program of regulation. Thus there is almost nothing in the Obama achievements that conservatives have participated in and have supported. Conservatives believe that government programs and regulations are wasteful at best and usually end up as a corrupt banquet of the special interests.

There was another time in our history when the nation was profoundly divided about its future and when each side used every trick in the book to get one-up on the opposition. It was the 1850s in the run-up to the Civil War.

Can Romney Beat the Mark of Bain?

2012-01-04T10:16:00.000-08:00

Candidate Mitt Romney advertises his private sector experience as a qualification for the presidency. Democrats say that Romney at Bain Capital put "profits over people."

Here's Randy Johnson, a worker laid off when Bain Capital decided to close a plant during a labor dispute. "I really think [Romney] didn’t care about the workers. It was all about profit over people."

It's interesting how union members, whose unions work through intimidation, are outraged when other people do the power play.

But there are many Americans that long for a lifetime job and bridle at the fluctuations in the capitalist market place. They take personally the decisions of business leaders and blame them for the failures that hurt them personally.

Or, like a Seattle supermarket checker told me a year ago, they don't want to close the state liquor stores because they don't want to lose the jobs.

They are asking for something that they cannot have except under communism. And that, we remember, was a system where the government pretended to pay the workers and the workers pretended to work.

One fine day, conservatives are going to have to persuade Americans that we are all better off if we let the market do its work, accept that businesses rise and fall, and that people suffer when once proud titans of industry fall to earth.

Because the future is uncertain, and many magnificent plans shrivel up in the cold light of day.

Meanwhile, Mitt Romney needs to do something about the mark of Bain, and persuade us that he can move the economy off its Obama dead center.

Decline of Violence and Guns

2012-01-03T10:31:00.000-08:00

In his new book, The Better Angels of Our Nature, Steven Pinker documents the extraordinary decline of violence, from 500 deaths per 100,000 per year in the non-state hunter-gatherer era, to about one tenth of that number in the agricultural state era to the present 1 to 5 deaths per 100,000 per year in the industrial democracies?

What did it? Well, first of all, it was states with police and courts that put a stop to the private justice of feud and revenge. And also the Humanitarian Revolution of the 18th century and the Rights Revolution of the 20th century. And "gentle commerce."

So what about the conservative line of More Guns Less Crime? Pinker notes that violence is higher in the South and the gun culture.

But it is also higher, he admits, in the inner city, where the peace of the Leviathan state doesn't extend. That's because the police don't bother to enforce the law for the poor in the inner city. The police "seem to vacillate between indifference and hostility,... reluctant to become involved in their affairs but heavy handed when they do so." A Harlem police sergeant describes how this works.

Last weekend, a known neighborhood knucklehead hit a kid. In retaliation, the kid's whole family shows up at the perp's apartment... The victim's family was looking for a fight... But all of them were street shit, garbage. They will get justice in their own way.

The police and the district attorney could have prosecuted, but "none of them would ever show up in court."

This, of course, is why the conservative argument about guns and concealed carry works. It's because liberals have so bollixed up the policing of the poor that the writ of the government of a monopoly on violence doesn't extend to the inner city. Policing of the poor is a battle royal between liberals who say that violence is due to "root causes" like poverty and conservatives calling for law and order. In that no-mansland, justice and policing have collapsed, and private justice obtains.

Fortunately, in some places, policing has been restored to the inner city. There is Bill Bratton's work in Boston, New York, and Los Angeles, based on the "broken windows" theory of James Q. Wilson to prosecute minor disorders, and implemented through a system called CompStat that tracks crimes and measures the effectiveness of police in following up.

But the Bratton system is hard work. The CompStat system requires leaders at the top to work hard pushing the neighborhood officers to perform. You can't expect too much out of that when you consider that police are, after all, uniformed unionized bureaucrats. And there are always liberal social justice groups looking for a way to accuse officers of "police brutality." The default position for the police is just to show up and let the activists fight it out.

Steven Pinker has to tread carefully. He can't rubbish his liberal friends too much, or they will trash his book. But he wouldn't want to give conservatives too much credit. That might encourage the fascists. That makes his book into a work of Straussian esoterics. For the street liberal, the book is OK because it mouths all the liberal shibboleths. But if you know where to look, it tells a different story.

In my view, the whole thing comes down to commerce. Business needs peace, and business encourages trust in strangers. Fierce local and tribal rivalries are bad for business, and so, wherever business grows, violence declines. It takes a lot of work by liberal and lefty agitators to keep the people enraged at greedy businessmen and corporations.

And wherever liberals have destroyed the peace with their destructive politics, people will need guns to defend themselves against liberal anarchy.

Pinker's Better Angels

2012-01-02T10:24:00.000-08:00

Steven Pinker, who last scandalized us by insisting that humans are not The Blank Slate that social engineers want us to be is back with another.

This time in The Better Angels of Our Nature he is telling the story of the decline in violence--over the decades, centuries, millennia. Then he tries to tell us why.

Yes, why is it that humans don't murder each other at the rate of 500 per 100,000 per year as they did in good old hunter-gatherer days? Is it strong states, that suppress the private justice of feud and revenge? Or the Humanitarian Revolution of the 18th century when the public square opened up to civil discourse? Or "gentle commerce" in which it pays for people to be nice to each other? Or maybe the good offices of liberals that midwifed the Rights Revolution of the second half of the 20th century, de-marginalizing blacks, women, children, animals, and gays? Or all of the above?

When Pinker sets up a Manichean opposition between the Inner Demons and the Better Angels of our nature, you get a little uncomfortable and Brookeish. Maybe it's time to pull up. It's true that, e.g., the Church put a lot of effort into raising the consciousness of Church members in the late Medieval period and states curb private wars. But the rise of Nazism and Communism required an intensification of conflict skills: counter-ideologies and a will to dominate the hated Hun and the cruel Commie.

It is not that violence is bad and peace is good. Different times and contexts call for different measures.

But it seems to me that, if you are a liberal, you have to credit Darwinian natural selection. Societies these days that feature more cooperation and less conflict seem to outperform societies that license conflict and mayhem. No wonderful elite, just the working out of nature's plan. Until the Mongols appear at the gates of Beijing or the Arians on the plain of Mother Ganga. Then, all of a sudden, the skills of peace don't seem quite so urgent.

Pinker does at least provide tons of references to a groaning load of research, good, bad, and indifferent. And for me the big take-away is the Public Goods game. Here's how it works.

You give the players a pile of chips. You suggest to players that they secretly put chips in a pot, which will be multiplied by a factor (often 2) and then shared out equally to each of them. Typically, after a few rounds, only a hard core of givers continue to contribute. Everyone else decides to keep their chips and take whatever the hard-core givers contribute. The only way to get free-riders to contribute is to punish them.

Well now. Who knew? The only way you can get people to contribute to the public good is either to force them to contribute or punish them if they don't. What a concept.

Like I said. Government is force, and politics is talking about force. And the force of government putting its hand into my pocket and forcing me to contribute is violence without the billy club.

The irony of Better Angels is that while liberals like Pinker boost the wonders of peace and non-violence it is liberals that encourage violence in the underclass, free-riding in the middle class, and a huge state that takes, by force, 40 percent of the national product.

That's why the Frankfurt School noticed that, while actual violence might go up or down, instrumental reason is always a tool of domination. It is not a Better Angel as Pinker suggests. It is a tool, for good or for ill.

That is something that we conservatives wish that liberals would realize. Their wonderful rational plans, however well-intentioned, still amount to plans of domination. And domination, according to Pinker, is an Inner Demon.

Will Wall Street Own Romney?

2011-12-30T10:20:00.000-08:00

There's a bit of a dust-up about Kevin Williamson's recent "Repo Man" article in NRO. Kevin argues that there's a reason why Wall Street went for Obama in 2008 and why they are swinging to Romney in 2012. They are betting that Romney won't do anything to curb the extra-high leverage tricks and off-balance sheet borrowings that helped make the Crash of 2008 such a mess. Anyway, they aren't conservative:

Here’s what Wall Street doesn’t want: It doesn’t want to hear from Sarah Palin or Michele Bachmann or even Newt Gingrich, or suffer any sort of tea-party populism. It wants you rubes to shut up about Jesus and please pay your mortgages. It doesn’t want to hear from such traditional Republican constituencies as Christian conservatives, moral traditionalists, pro-lifers, or friends of the Second Amendment.

Radio host Hugh Hewitt says that's all rubbish, and it is "Bilderberger" stuff to think that "they" are working to get the fix in on Romney.

I’m just not going to buy that. I do think they might show up in a Sarah Palin T-shirt, and I do think that they are generally often quite conservative, very Evangelical. Some are deeply Roman Catholic, traditionalist, generous, high-minded people.

Hugh, you are wrong. There may be some Catholics on Wall Street, but, based on my own limited experience, Wall Street is not evangelical. In fact evangelical is radio-active for Wall Street.

I think that Kevin has it exactly right. Finance is important, but the intersection between finance and politics is nothing but trouble. That's because the politicians need the finance guys to float their debt. Right now, with the sovereign debt crisis, they really need the finance guys. Right now, I read, banks are sopping up all but about 20 percent of government debt. Why? Because they don't have to hold reserves against government debt--good as gold, you see.

But there's a problem. Government debt, especially in Europe, is not as good as gold. There is a good likelihood that one or more governments will default on their debt. That means that the banks ought to be holding reserves against those questionable government loans.

The whole point of proper accounting is that it properly accounts for risks and rewards. The whole point of a balance sheet is to show assets and liabilities as honestly as possible. But when the Basel banking regulations say that sovereign debt is a "risk-free asset class" then the regulators are encouraging banks to lie on their balance sheets.

You can see the intersection of politics and finance here. Politicians need the banks to sop up their debt. Banks like the idea of holding debt that doesn't require reserves. Very often in this world, people want things they shouldn't get. And that is certainly true at the intersection of politics and finance.

What happens if things go wrong? Then the politicians have to bail out the banks because, hey, the banks were just following orders.

Under Dutch Finance, invented by the Dutch four hundred years ago, rock-solid government debt is the foundation of the credit system. But under French Finance, invented by John Law three hundred years ago, governments trade on the rock-solid reputation of Dutch Finance to game the system. Government debt turns out to be not so rock-solid after all, and then Poof!

The credit system works when the counter-parties can be trusted. Trust is important because high-leverage, unavoidable in banking, requires that the parties work to manages their assets so that they will always be able to meet their obligations. There is no way you can be sure that the other guy is really doing this: you have to trust him. That's why J.P. Morgan famously said that the most important factor for a banker in evaluating a would-be borrower is trust and character. "Because a man I do not trust could not get money from me on all the bonds in Christendom."

That's because when trust fails, then the whole system grinds to a halt.

Kevin Williamson is arguing that we need to get back to a financial system where the bankers are expected to manage their banks so that they will not require bailouts. That means they need to keep a distance from politics: no rent-seeking by the bankers, and no bullying by the politicians.

One fine day, a president is going to need to unwind the present corrupt connection between finance and politics. Kevin Williamson is afraid that it won't be Mitt Romney.

Yearning for a True Conservative

2011-12-28T10:08:00.000-08:00

I know. All the Republican candidates are disappointing. The serial Great Conservative Hopes have each turned out to have feet of clay, and Mitt Romney isn't anyone's idea of a conservative standard bearer. Anyway, Mitt doesn't seem to have the cojones to go head to head with President Obama and the Chicago gang.

If we are looking for real conservatism, I don't take second place to anyone. In my conservative vision, we chuck every social program in the can, from Medicare to welfare, because we humans are social animals, not soldier ants. We can be trusted to do the social thing, most of the time. But what really makes us into monsters is a check from the government.

The point to remember is that after Obama, we will need a president with the talent to get things done. We know what needs to be done. We need a reform of Medicare; we need a tax reform to reduce loopholes and reduce tax rates. We need a sensible energy policy, and we need to roll back the environmental extremism of the Obamis. We need to shake up the education system, and we need to defund the "grant" economy, the slush funds that keeps liberals in their Priuses and their yeasty urban enclaves.

In other words, we need as president a man with the management skills to implement on a big program. Looking around, you'd say that it wouldn't hurt if this guy had enough work ethic to do a business degree and a law degree at the same time. He would have experience in the business sector, knowing when to save an ailing company and when to sell it. Maybe he should have run a high-profile public project. Of course he should have been the governor of a state.

Sounds a lot like Mitt Romney.

In the best of all possible worlds we would have another Ronald Reagan and all of America would rise up and elect him by acclamation. In the real world the real Ronald Reagan was always, even to Republicans, a rather questionable character. Was he the real thing, or a lightweight movie actor, like the liberals insisted? And what about the payroll tax increases of 1983?

It is only now, in the miseries of Obamadom, that the Reagan years seem like a Golden Age when giants walked the earth.

The political and economic situation in the United States is not that dire. The problem is that every solution will require that Democrats take a hit. Of course they will. Just about every government program in existence is a slush fund for Democratic voters, from government universities to government welfare.

Think of it from the therapeutic point of view preferred by our liberal friends. Democrats are substance abusers, addicted to enormous quantities of taxpayers' money. They won't be willing to get straight until they hit bottom. And pusher Obama certainly won't be the man to tell them that their addiction is ruining their lives.

2012 Isn't 1912 Isn't the Dark Ages

2011-12-27T09:31:00.000-08:00

The real outrage in Osawatomie Bam's speech on Dec. 6, 2011 wasn't the "liberal history." Liberals have to talk like that. Liberals have to say that back in the Dark Ages at the turn of the 20th century people were outrageously exploited and some said it was all the price of progress. Otherwise they don't have the therefore. Therefore, we need big government programs to protect the exploited and the unprotected. Run by caring and compassionate liberals with your tax dollars.

The outrage is that liberals like President Obama are still saying, after boosting the government from 7 percent of GDP to 40 percent in one century, that it's still not enough.

But it is still discouraging to read a chap like Barry Rubin making the Brooke argument. All that Progressivism was all very well--it had a point--but now we need to "pull up" before we "go too far."

There is such a thing as balance. America’s rapid industrialization after the Civil War put the system out of balance and threatened to wreck the country’s constitutionally-mandated system. Robber barons, monopolies, exploitation of labor, and the buying and selling of legislatures were all commonplace. Only due to reforms, largely backed by Democratic presidents before most of us were born, was the balance corrected.

So legislatures were not being bought and sold in, say, 1812? Labor was less exploited, as in plantation slavery and indentured servitude? Let's get real here. In 1900, the price of illuminating oil had been reduced by 90 percent--by Standard Oil. The price of steel was down by 66 percent--by US Steel. Railroads blanketed the nation so that, for the first time in history, farmers could sell their grain to the world. But people were migrating to the US in their millions (because they could do it safely and inexpensively in the new steamships). That kept wages down.

Here was the problem. The political elite was afraid that the new rich, the men who had built the big corporations, would contest for political power. Of course they would. After all, politics for politicians isn't everything, it is the only thing.

So the Progressives set about shredding the power of the business elite and institutionalizing their own power--to control politics, to control commerce, and to control the culture. To do that, they needed a scapegoat, and what better than to stigmatize the new barons of business as monopolists and robber barons and exploiters?

The cure was worse than the disease. The Progressives turned the proud self-made business elite into cringing crony capitalists. And they created "social insurance" programs that weren't social, they were regimental; and they weren't insurance, they were Ponzi schemes.

Here we are, 100 years later, and the "progressives," relabeled "liberals" who were relabeled "Progressives," are still retelling their "narrative."

Well, the postmodernists say that the "narrative" that historians tell us is really an apology for power. When President Obama tells us a story of exploitation he is merely setting us up for bigger and bigger government.

Back in the 19th century, people were quite a bit rougher with each other than we are today. You can tell that from the lynching statistics, and I mean 50 white-on-white lynchings a year and 50 white-on-black lynchings a year in the 1880s. But how bad was it? Well, when the school inspector went visiting factories employing 13-year-old children in 1912 she found that the children much preferred work to school. Why? Because their employers treated them better than their teachers.

The Left Doesn't Like Vaclav Havel

2011-12-26T09:58:00.000-08:00

Vaclav Havel, Charter 77 activist and former president of Czechoslovakia and the Czech Republic, was a hero of freedom. So the left doesn't like him. Let's piggy-back on Ron Radosh's review of two negative lefty anti-Havel screeds.

First of all there's the Guardianista Neil Clark who didn't like the way that Havel dissed the "achievements" of Communist Eastern Europe.

Havel’s anti-communist critique contained little if any acknowledgement of the positive achievements of the regimes of eastern Europe in the fields of employment, welfare provision, education and women’s rights. Or the fact that communism, for all its faults, was still a system which put the economic needs of the majority first.

It's helpful to have the point made so clearly, because it makes it so easy to debunk. Let us make it clear.

Democratic capitalism is the system that puts "the economic needs of the majority first." We know that because wherever democratic capitalism has been tried it has brought the majority up from $3 per day to $100 per day. In socialist countries the opposite is true.

And let us be clear about the reasons for this. Under capitalism, millions of people make millions of decisions in which they determine how to better their lives by serving others. Under socialism, millions of people sit and follow orders while a few politicians and bureaucrats determine what is best for them "in the fields of employment, welfare provision, education and women's rights" so that "the economic needs of the majority" come first. But there's a problem with this noble vision. If the politicians and bureaucrats foul up, as they did time and time again in the socialist countries, and as they do in the government sector in the capitalist countries all the time, well, too bad. Their intentions were good.

Then there is Geoffrey Robertson at the Daily Beast, writing from the arty left. He's upset that the neocons have adopted him as one of their own. To him, Havel was a man of the democratic left, and it's a sacrilege for him to be tarnished with neocon-icity.

That's the other side of the left, the world of fashionable "affect." Capitalism and Reagan and Thatcher are wrong because they send out the wrong "vibes." That's a problem that we have in the United States, where the educated class sneers at the unwashed masses in "flyover country" for their unsophisticated culture and their anti-intellectualism.

Too bad. Vaclav Havel was a man of freedom, and whatever his faults, we salute him.

It's the Strategy, Stupid

2011-12-23T10:12:00.000-08:00

Conservatives like to get our knickers in a twist every time our Republican heroes get out maneuvered by their wily Democratic foes. And in the payroll tax flap they seem to have got their heads well and truly handed to them. Why, they thought that the Social Security Trust Fund was supposed to be a sacred trust! That's what the Democrats have been telling us for the best part of a century.

But think what the Democrats are telling us with their payroll tax holiday:

Trust fund, schmust fund.
What matters is President Obama's reelection.
High taxes do too matter to the economy.
They are stuck with a stupid payroll tax reduction because they have shut off the real solution, lowering marginal income tax rates. Millionaires and billionaires, old chap.

Let's step back a moment and look at the lay of the land. The bigger picture is that, for the last ten to twenty years, Democrats have been on the back foot. They had to run Bill Clinton as a centrist and had to concede welfare reform. They had to run a non-stop campaign of character assassination against President Bush to keep their base energized. And now, on defense and foreign policy they have basically endorsed the Bush doctrine. Only they lack the intestinal fortitude to do it.

On economic policy they are having to lie to themselves that it was greedy bankers that caused the Crash of 2008 and not government credit policy and housing subsidies. They totally muffed the recession by passing all their big government agenda before the economy got a head of steam. And anyway, their Keynesian policy stuff is rubbish. It was rubbish in the 1930s, and it is even more rubbish today because the government is up to its ears in debt and can't really mortgage the nation to "stimulate" it.

What the Obamis are demonstrating in living color, for those of us with eyes to see, is that the weight of government really matters, most especially when the economy is weighed down with underwater mortgages and unknown future costs associated with ObamaCare. And it doesn't help that the Dems are keeping various sacred cows alive on crony capitalist life support.

Look at the big picture. It tells you that the Dems are toast. Because they are running out of other peoples' money. All the sound and fury is telling us something. Macbeth knew, in the moment before a messenger reported to him that Birnam Wood was on the move:

Life's but a walking shadow, a poor player
That struts and frets his hour upon the stage
And then is heard no more: it is a tale
Told by an idiot, full of sound and fury,
Signifying nothing.

So it is, when the roof is about to fall in.

The American people don't know nuttin' about economic policy. But they do know when things aren't working. And when they feel that things aren't working they reckon it is time for a change. Like right now.

Equality the Last Refuge of a Scoundrel?

2011-12-21T09:38:00.000-08:00

Over in the liberal Amen corner, they are all singing the same hymn: "Equality." And James Pethoukakis does us a favor by listing the five parts to the song: The People's Budget, the Brandeis Inequality Tax, Doubling of top income tax rates, Osawatomie Bam, and the Occupy movement.

For conservatives, the question is: why now? Liberals have kept their longing for equality down to a low rumble for many years. Why are they swelling into a thunderous chorus right now?

My guess is that President Obama is the chap that has pulled out the stops on the liberal organ. And so the other players have upped their volume too.

As I've written before, it's a bit scary when the liberals start marching their class warfare army around. Because it is so divisive. And you have to assume that the reason they don't normally do it is because it is electoral poison. Maybe it will be this time, or maybe not. Maybe it will die a quiet death in the spring when the president's handlers decide that it's not working.

Here's another thing I wonder. I wonder if President Obama's strategy of running against Congress is really such a good idea. They say it worked for President Truman in 1948. But the Do-Nothing Congress of that era had actually done rather a lot, including the Taft-Hartley Act to roll back the powers of organized labor. In those days, when 30 percent of the work-force was unionized, there were plenty of people who might be annoyed with Congress.

In my view, the American people expects the president to bash heads together and get things done. I'm not sure that bashing heads together and not getting things done can be expected to get the American people excited about a president's reelection.

And there is this: If Bush were president the air would be full of the horror of unemployment and people choosing between heating and eating. But with Obama in the White House the air is surprisingly calm. That's just the way the mainstream media operates. But coming up is the presidential campaign, a time when the non-political moderates actually get to hear the Republican side of the argument for a change. That can't be good for the president.

So maybe the reason the liberals are all worked up about inequality is that, with Keynesian economics a failure, they don't have any other brilliant ideas.

NYT Still in Denial on Fannie Freddie

2011-12-20T09:25:00.000-08:00

One of the things you need to believe if you are a card-carrying liberal is that it was greedy bankers that caused the Crash of 2008, not government housing policy. At The New York Times they have written nary a discouraging word on the subject. They don't want their readers to find out that it was the Community Reinvestment Act that bullied bankers into making sub-prime loans and Fannie and Freddie that securitized them.

Lately, things have been a bit precarious, because Gretchen Morgenson, an NYT reporter, wrote Reckless Endangerment with Joshua Rosner. It dared to point the finger at folks like former Fannie CEO James A. Johnson, former campaign manager to Fritz Mondale.

But good old faithful Joe Nocera is still plugging the Who Me? line.

Fannie and Freddie got into subprime mortgages, with great trepidation, only in 2005 and 2006, and only because they were losing so much market share to Wall Street... The reality is that Fannie and Freddie followed the private sector off the cliff instead of the other way around.

Peter J. Wallison, who wrote a dissent to the Financial Crisis Inquiry Commission, contests Nocera, arguing that Freddie mis-reported the number of its sub-prime loans for years.

Anyway, if Fannie and Freddie were late to the party, how come that they are in receivership, expecting to cost the taxpayer something like $200 billion in losses, when "Wall Street" is back up and running. It suggests that the Fannie Freddie balance sheet was a lot worse that the average megabank. And why would that be?

And if you want an insider look at Fannie and Freddie, this extraordinary call to the Rush Limbaugh radio program from "Laurie" might give you a clue.

You know, in the late '90s and early 2000s when real estate prices were sharply on the rise, you know, anywhere between '99 and '03 depending upon what part of the country you lived in, housing prices were on the rise dramatically, and there was a lot of pressure at Fannie and Freddie to get mortgages out the door.

We had a representative from FHA, HUD, Fannie and Freddie, all of which visited this mortgage broker's office. And when Fannie began this idea of packaging these things as securities and grouping them together, you'll find that the number of mortgage brokers for residential mortgages in the country skyrocketed because they were suddenly getting what we call wholesale lines of credits from banks. So mortgage company A or B goes to the bank and he gets a $15 million line of credit called a wholesale line. He fills that line up with mortgages and then they're guaranteed, they're bought off. Fannie and Freddie buy them up immediately, repackage them, or leave them whole and send them out to places like Lehman Brothers.

Pressure at Fannie and Freddie? To get mortgages out the door?

The problem with our liberal friends insisting that there is nothing to see here is that it blinds them to what is really going on in the world. When you refuse to credit news that you don't like, there is a penalty. One day you wake up and find that you have been totally blindsided.

Welfare Queens Aren't the Issue, Dems

2011-12-19T10:07:00.000-08:00

In the liberal mind, Republicans are always trying to come up with "wedge" issues that divide the American people and disturb the even tenor of good, beneficial programs that create a safety net.

First it was affirmation action, then welfare queens. Now the Republicans think they have a new issue, according to Mark Schmitt: unemployment insurance.

But now they seem to have found it, in the most unlikely of programs: Unemployment Insurance. The legislation to extend the payroll tax cuts that passed the Republican-controlled House on Wednesday brings the full arsenal of welfare reform gimmicks to the UI program: Time limits; drug tests; requirements to seek work or enter an education program.

Well, I'd have to agree that drug tests and seeking work are gimmicks. But that's because liberals like Mark Schmitt will descend like a murder of crows on anyone that proposes a bigger reform and asks bigger questions.

Don't agree? Well, Schmitt himself pours scorn on Newt Gingrich for a "proposal to have schoolchildren work as janitors." Sorry, I don't bite. Why don't we have schoolchildren getting out to work instead of being confined for their entire childhood in those wonderful government child-custodial facilities without possibility of parole?

And why don't we take a bigger look at unemployment insurance? Why don't we privatize the whole thing: old-age pensions, unemployment insurance, workers' comp, and disability? All of these government programs, that want us to believe that government is giving us wonderful benefits, are merely running wage income through the government and then out again as benefits. Why don't we encourage workers to build their own savings, and supplement it with a bit of insurance when they are young?

I will tell you why, and it has nothing to do with the safety net. It is merely that people in politics want to buy votes. In the case of unemployment the government taxes employers and then turns around and pretends that the government is giving money to the helpless unemployed. Suppose we just gave that money directly to the workers in personal unemployment accounts, and let them borrow from the government during a recession when jobs are hard to find?

The good thing is that the temptation to freeload, however large or small, would be diminished when people are spending their own money on unemployment. And if an unemployed 40-year-old went out and found a job sooner, because he didn't want to touch his nest-egg, well, it's a free country.

That's the difference between conservatives and liberals. Liberals want a benefit society; conservatives want an ownership society.

A Wedge for Me? Or Thee?

2011-12-16T10:19:00.000-08:00

Quick question. What is a "wedge issue?" The answer, according to Jonah Goldberg, is any issue the Democrats don't want to talk about.

In his book What’s the Matter with Kansas? Thomas Frank insisted that Republicans only know how to win on divisive wedge issues that distract voters from their “real” interests. This amounted to McMarxism — a dumbed-down, mass-market version of the old socialist notion of “false consciousness.” Liberals like Frank assume voters are too dumb to know what they should care about.

Like the Keystone XL pipeline. Right now, the White House is in high dudgeon that the eevil Republicans have put the Keystone XL pipeline and its 20,000 jobs on the payroll tax holiday bill.

And I agree. It is monstrous for the Republicans to be raising the false consciousness of the white working class with the mirage of jobs, jobs, jobs, when anyone who knows anything knows that the only way to save the planet is to put the kybosh on fossil-fuel development and shovel money at Democratic crony capitalists and their solar panels and wind farms.

But there's a bigger problem for Democrats than the bitter clingers of the white working class. It is the disappointed hordes of young voters that voted for hope and change in 2008. Voters under 30 voted 66 percent for Obama back then, but they seem to be experiencing buyer's remorse. I wonder why.

According to Carl Cannon, only 32 percent of under-30s approve of the president's handling of the economy. All is not lost, of course. The president still leads a generic Republican among 18-29 year olds by six points. But you can see that the 66 percent is out of the window, and also the enthusiasm.

This is good news. For Republicans there is nothing better than for a whole generation of youngsters to put their faith in a charismatic leader and have their hopes cruelly dashed. Now those young folks will be receptive to our message. This is not rocket science, folks. When government controls everything then young people must join the end of the queue. Because young people don't have much political power. It is much better for young people to rely on their energy and youth than upon Uncle Sugar.

But here is more. It looks like President Obama's class warfare campaign is coming up a loser. The Gallup Poll announces that "Fewer Americans See U.S. Divided Into "Haves," "Have Nots"". Gallup asked people whether they thought the nation was divided into Haves and Have Nots. Back in 2008 Americans split 49% to 49% on this. But now the Is Divided camp has declined to 41%. And here is the kicker. When asked to say whether they felt they were part of the Haves or the Have Nots, 58% said they were Haves, and 35 percent said they were Have Nots. And Americans' self identification has not changed much over the last ten years.

I continue to think that we ain't seen nothing yet when it comes to the election of 2012. It is going to be a watershed election.

Newtonian Politics

2011-12-14T09:48:00.000-08:00

Like most everyone, I'm a bit skittish about Newt Gingrich. Why? Because, you know, he's a bit flaky. Shoots from the hip. And all the other things we "know" about Newt Gingrich, which is to say, stories that his enemies have launched into the public square through their willing accomplices in the mainstream media.

On the one hand, I don't think that Newt is a dreaded "progressive," in the mold of TR, Wilson, and FDR, as Glenn Beck seems to think. On the other hand, I don't think that Newt is a dyed-in-the-wool conservative.

We hear now from former House members that didn't like Gingrich as speaker and thought he was erratic, and then you read Tony Blankley, who used to work for him, write this:

Curious. I remember most of them enthusiastically following his leadership year after year as the Republican whip from 1989-1994. It was the most successful congressional opposition movement since Benjamin Disraeli formed the modern Conservative Party in Britain in the mid-19th century. And after the GOP took back the House for the first time in 40 years (and the Senate, too, by the way), Gingrich's four years as speaker proved to be the most productive, legislative congressional years since at least 1965 to 1967, and they were led by Lyndon B. Johnson from the White House. Working against -- and with -- Democratic President Bill Clinton, we passed into law most of the Contract with America, welfare reform, telecommunications reform (which ushered in the modern cell phone and Internet age), we had the first balanced budget since before the Vietnam War, we cut taxes and lowered unemployment to under 5 percent.

And the other thing about Newt is that when they said: Go, in 1998, he went.

So which is it? The big thing about Newt is that Democrats can't stand him and like to make fun of him. But then they made fun of Ronald Reagan and George W. Bush: they sneer at all conservative Republicans. They have a special reason to be angry at Newt. It was he that forced Speaker Wright (D-TX) to stand down and it was he that led the 1994 campaign that switched the House to R. for the first time since 1954.

I met Newt at a fundraiser back in 1994 when I was working on the congressional campaign for Rick White. What did I think? I think it was outrageous that the left were demonstrating outside the fundraiser. They called Newt a bomb-thrower back then, meaning that he said nasty things about the opposition. You mean like every Democrat that ever lived?

Here's what I think. If the American people are determined to get rid of Barack Obama it won't matter whether Newt is a flake or has "baggage" or has taken money from Freddie Mac.

And you know what? They would be right.

Newt and Romney and Layoffs

2011-12-13T09:08:00.000-08:00

Presidential candidate Newt Gingrich has ruffled feathers with the following challenge to Mitt Romney:

If Gov. Romney would like to give back all of the money he’s earned from bankrupting companies and laying off employees over his years at Bain, then I would be glad to listen to him.”

I get the point. We conservatives believe in the market economy and one of the vital functions of the market economy is performed by companies like Bain Capital: reorganizing bankrupt companies, laying off employees, and recapitalizing them for further growth, if possible.

So what is Newt playing at, doing the Democrats work for them? It is, after all, President Obama who told us, in his role as Osawatomie Bam:

Because there were people who thought massive inequality and exploitation of people was just the price you pay for progress.

But that is the point. Right now I expect that the president and his handlers are rubbing their hands about Mitt Romney and Bain Capital. Democrats have been whaling on Romney for years now about all the companies he bankrupted, and all the jobs he sent overseas. It's time that Mitt Romney came up with a retort.

And that retort better be more than a lame defense. It has to go on the attack. It has to say that companies get into trouble. When they do there are no good options. You have to suck it in and do the best you can with what you have. Back in the railroad era, it was J.P. Morgan who wound up with the nasty job of reorganizing bankrupt railroads. It was a dirty job, but someone has to do it.

We know what President Obama believes in. He believes in taxpayers' money for his union cronies and his crony capitalist contributors. As for coal companies, he's quite happy for them to go out of business and all the jobs with them. As for oil pipelines, from small to XL, who needs 'em?

We all understand that humans are risk averse. We hate to admit it when we are wrong, and we hate to be the bearer of bad news, and we put off unpleasant decisions when the companies we lead are going south. That usually means that the reorganization falls to an expert in reorganization, like Mitt Romney and Bain Capital. We often resent people that are tough enough to do the tough work.

So where is Mitt Romney's home run on the Bain Capital issue?

And of course there is the bigger issue about "inequality" and "exploitation." Of course inequality and exploitation are problems. The question is, can government make them better? The record, I would say, is clear. Government hasn't a clue what to do about inequality and exploitation except take money from people it doesn't like and give it to people it does like.

Take the auto bailouts. That was taking money from ordinary Americans and giving it to the best-paid workers in America. Talk about inequality! And when the government took money from the taxpayers and gave it to solar-panel loser Solyndra it was exploiting all the companies that sell products to market without subsidies. Talk about exploitation!

The whole point about capitalism is that its needs a proper legal basis, one that rewards faithful service and clearly defines the rights of debtors and creditors and punishes fraud. But when you start talking about inequality and exploitation you are getting into pretty deep water. You are saying that the system that took us from $3 per day to $100 per day needs to be bashed around by force. For government is force and politics is talking about force.

How in the world are you going to improve a system of peaceful cooperation with force?

Man Problems: Who's to Blame?

2011-12-12T10:18:00.000-08:00

Let's talk about the "man-child" problem. Or the "preadult" problem. Or the fact that women are doing much better in education and the work force than men. Philip Brand has a review of several books on this problem.

Or is it a problem at all? Hey, men have exploited women since the dawn of time, so maybe it's about time!

But the problem is that it's not just a man problem, it's a class problem. As Charles Murray points out, upper-middle-class men are doing fine. It's the men below them that are having problems, men who don't quite rate the professional, leadership jobs that you get when you excel at college and bureaucracy.

Now, for Kay Hymowitz, pre-adulthood is a "predictable, perhaps even necessary, response to massive changes in the way Americans earn a living." A college education is essential, and women excel in the kind of occupations that have been thrown up by the new economy. Also women are determined to "achieve financial independence before marriage."

Oh yeah? For "women" read "upper-middle-class women." Head down the social ladder and you see women merely using the welfare state. Which, I suppose, is a kind of financial independence.

Then there's the argument of Leonard Sax in Boys Adrift that the educational system is all wrong for boys.

Or, according to Hanna Rosin in "The End of Men" (Atlantic, June 2010) it's the end of the manufacturing wage.

In my view, the reason for the man problem is liberals, liberals, liberals. Granted that the changes in the workplace and the sex-place (see Walter Russell Mead here) are changing everything, the problem is that certain things can't change because liberals are sitting on the switch.

In education we need huge changes, and we need to mix education and early work. But liberals have education bureaucratized into utter stasis and ineffectiveness, and the work-place regulated into inflexibility.

With welfare we have totally marginalized lower-class men. And with health care we have made bio-medicine both free and impossibly expensive at the same time. Warning: liberals at work.

The problem with all this is pretty simple. Liberals believe in government. But government is force, and politics is talking about force. Most things in this world don't lend themselves to force.

The solution to our problems is a cultural revolution, one that removes liberals and their cold dead hands from the levers of political and cultural power.

And Barack Obama is maybe just the man to help. By leaving office on January 20, 2013.

Not Really the Working Class Any More

2011-12-09T09:57:00.001-08:00

Finally, old reliable Michael Barone has weighed in on the Obama "abandon the white working class" strategy.

Of course, he writes, the Dems abandoned the white working class decades ago when they pivoted from Social Security/Medicare to welfare and regulation. Now, apparently, Obama wants to win with the educated, the young, and minorities in swing states like Colorado and Virginia that Obama won in 2008.

So maybe it makes sense for Obama to write off the white working class. Yet he is doing it in an odd way, by enacting New Deal-like programs and expending great energy on raising taxes on high earners.

Of course, the white working class is really the white middle class these days. They may not have big houses and fancy cars, but they do have houses and cars. They may want their Social Security and Medicare but they don't want them expanded. New Deal-like programs really appeal to the minority voters, the replacements for the white working class in the Democratic coalition, people who want a powerful patron and the benefits that flow therefrom.

But I wonder if the president can really expect to keep the educated and the young voters in Colorado and Virginia. After all, the way that the Dems did well with educated suburban voters was on the social issues. Social issues seem to be really quiet right now, and for good reason. Educated voters are taking an educated look at their economic position this year, and they are wondering what all this class warfare does to help them. They are moving towards the economic conservative rather than the socially liberal side of their world view.

And young voters. Any young voter that doesn't thinking she was sold a bill of goods in 2008 deserves... well she will probably still vote for Obama. But don't expect any 65% of young voters going for the president this time around. If anything, I expect most young voters to be very confused. After all, they have spent the last 16 years listening to liberal teachers tell them about the wonders of liberalism and government, and now that they are out in the world, they are looking at their liberal map and deciding that they are completely lost. If I were one of them I would be casting around for a new map, an alternative world view.

Buzzing around in my head is the question: are these Obamis crazy, or crazy like a fox? I resist the idea that they are fools, because that is not a good way to think about the opposition.

Maybe the answer lies in Donald Rumsfeld's line that you go to war with the army you have. Never mind how the Obamis would like to fight the election. The fact is that they can't change uniforms and tactics and weapons on a dime. The Dems are the party of the educated elite and the entitlement beneficiaries, and they can't really pretend to be anything else. They could try to be post-partisan and post-racial in 2008 as the "out" party. But not in 2012 as the "in" party.

Three Hits on O's Osawatomi Speech

2011-12-08T09:08:00.001-08:00

I had a go yesterday at the president's Osawatomi, Kansas speech, but now I'm really worked up. As usual, my thoughts condensed after writing the blog, and now I find three things wrong with the speech.

First, there's the liberal history. I really have a problem with the way that liberals insist that, but for liberals, people would work in sweatshops and Jim Crow would rule the South. As Rush Limbaugh insisted yesterday, that flies in the face of the founding social science of the modern era, Adam Smith's Invisible Hand. By working in the world to feed their families, he argued, people help the larger society. Liberals are taking credit for the miracles of modernity when the credit really goes to the social system we call capitalism. President Obama calls for the rich to pay their fair share. Well, chum, back in the Crash of 1907, J.P. Morgan got the richest men into his library and got them to bail out the economy--with their own money. I didn't see that happen with all the Democrat-contributing rich in the Crash of 2008. So how come that the America of a century ago was worse than today?

Second there's the smallness of the goals. Are we to believe that all the high-flown rhetoric and the dramatic call for fairness in your speech is just to increase college education funding and infrastructure spending? Please, Mr. President. It's not as if we don't already spend a ton of money on education. And infrastructure spending? What happened to the Great Stimulus? I thought that was cram-jammed with shovel-ready projects. The fact is that the problem with education and with infrastructure is not money. The problem is liberals. Liberals are standing the college door preventing reform of education and defending the indefensible status quo. And it is liberals, as environmental activists and regulators, that are standing in the way of improving our infrastructure.

Third, whatever happened to entitlements? You criticize President Bush for his tax cuts that "made it much harder to pay for... Medicare and Social Security" but we don't hear a whisper from you about what you intend to do about them. Apparently you haven't had a thought about the matter since you decided to solve the Medicare problem with the IPAB and rationing.

The fact is, Mr. President, that you have on a direct course for a Greek-like sovereign debt crisis. There is no attempt to reform, let alone reduce government expenditures, just a determination to throw good money after bad at the usual Democratic constituencies. Full speed ahead and damn the torpedoes.

You spoke a lot about "fairness" in your speech. I think a lot about that too. And what I think is that politicians like you don't have a clue what you are talking about. Everyone wants an America where "everyone engages in fair play and everybody gets a fair shot and everybody does their fair share." But here's the thing, Mr. President. We conservatives think that as soon as you get government in on the "fairness" game, putting a thumb on the scales with entitlements and subsidies, then "fairness" flies out the window. We present the history of the 20th century as evidence of this. Let's just take Medicare as the poster-boy example. With Medicare we have prosperous senior citizens like me being subsidized by ordinary working Americans trying to raise a family. Where is the "fairness" in that?

Hell, forget "fairness." What about justice? Where's the justice, Mr. President, in rich older Americans voting politicians into office to take money from struggling young Americans?

President Obama's Tired Program for USA

2011-12-07T09:55:00.001-08:00

They say that President Obama is trying to channel Teddy Roosevelt by going to Osawatomi, Kansas, and puttin' on the class warfare. Good for him. It gave the president another chance to rehearse the Democratic narrative that it's all the fault of the rich.

We have the most productive workers in the world, the president said.

But for most Americans, the basic bargain that made this country great has eroded. Long before the recession hit, hard work stopped paying off for too many people.

Yeah, and I wonder why that is. Greedy bankers, perhaps?

For a while, the president continued, "credit cards and home equity loans" papered over the harsh reality.

But in 2008, the house of cards collapsed. We all know the story by now: Mortgages sold to people who couldn’t afford them, or even sometimes understand them. Banks and investors allowed to keep packaging the risk and selling it off. Huge bets -- and huge bonuses -- made with other people’s money on the line. Regulators who were supposed to warn us about the dangers of all this, but looked the other way or didn’t have the authority to look at all.

Yes. How come that mortgages got to people that couldn't afford them? Banks selling off the risk? How come? Regulators asleep at the switch? Greedy bankers again? Or could it be Democratic politicians bullying bankers into issuing mortgages to people that didn't have a prayer of servicing them?

It was wrong. It combined the breathtaking greed of a few with irresponsibility all across the system. And it plunged our economy and the world into a crisis from which we’re still fighting to recover.

The question is: what do we do about it? Some people, the president said, want to go back to the tried and failed.

And their philosophy is simple: We are better off when everybody is left to fend for themselves and play by their own rules.

Really Mr. President? I guess that would be liberals, since liberals believe that people should free themselves from rules and do their own creative thing, challenging society. Right?

But the president doesn't agree with his liberal cohorts. He wants us all to obey the same rules.

I believe that this country succeeds when everyone gets a fair shot, when everyone does their fair share, when everyone plays by the same rules.

So that means that the president utterly deplores all the legislation that creates special rules for special people, all the way from affirmation action and diversity to tax breaks for the rich to benefit scams for the poor.

Not exactly. The president is concerned that some people want to solve the wholw thing by cutting taxes and regulations and letting the market take care of it, relying on "our rugged individualism and our healthy skepticism of too much government."

But here’s the problem: It doesn’t work. It has never worked.

So we've got to "up our game." Oh good. Now comes the brilliant ideas to renew America.

Education. "It starts by making education a national mission -- a national mission."
Science and Reseach, Training. "we also need a world-class commitment to science and research, the next generation of high-tech manufacturing. Our factories and our workers shouldn’t be idle. We should be giving people the chance to get new skills and training at community colleges so they can learn how to make wind turbines and semiconductors and high-powered batteries."
Infrastructure. We "should be rebuilding our roads and our bridges, laying down faster railroads and broadband, modernizing our schools".

Yes, Mr. President. Brilliant ideas. Boy, oh boy. Like we haven't already been spending a ton of money on these things for decades, and all the time getting less and less return on the dollar. And aso for infrastructure: what about liberal activist groups and regulators that do all they can to prevent us from "paving over the nation."

Of course, these wonderful things don't come free, the president explained.

Of course, those productive investments cost money. They’re not free. And so we’ve also paid for these investments by asking everybody to do their fair share... I know that many of our wealthiest citizens would agree to contribute a little more if it meant reducing the deficit and strengthening the economy that made their success possible.

So all of this song and dance comes down to throwing more money at education, as if we haven't been doing it for the last half century, for very little return. And throwing money at research, as if that hasn't become impossibly corrupted by liberal pet projects in environment and climate. And community colleges. Well, everyone's in favor of that. But we already spend a ton of money on them.

It's true. The wealthiest citizens would agree to pay more. If they thought that the extra money would make a dime's worth of difference.

Mr. President, you proposal is simple. Take more money from the rich so you can pump up the higher-education bubble and send money to all the Democratic voters in the education blob. And send more money to union construction workers to build a few projects in ten years after your environmental friends have delayed the projects with their deep concern for the environment.

Meanwhile Medicare is going broke, Mr. President. How about that?

The truth is that you don't understand the market economy and you don't want to. When we eevil capitalists say "let the market decide" we are not saying that it is everyone for themselves. We are saying that the market is a social and economic system that naturally directs resources at the most urgent needs of the consumers. Why? Because that's there the money is.

But the market gets into real trouble when government subsidizes its pet projects and government credit policies distort it. You know, like in housing with Fannie and Freddie, and in education with student loans that go into buffing up university fees, bureaucracies, and recreational facilities.

Frankly, Mr. President I am glad that you are raising the class warfare issue and proposing tax increases to pay for stupid education expansion and infrastructure. Because it is time that we had a national conversation on this. With any luck, the American people will decide that they are fed up to the back teeth with empty promises about education and infrastructure and vote for the free market.

Because there is one thing for sure. When government spends money, then Wall Street stands at the head of the line for handouts. Why? Because government needs Wall Street to sell the debt.

Then, of course, politicians like you can assess those Wall Street honchos for political contributions, just like you did so expertly in 2008.

Anthony Watts is a Mensch

2011-12-06T09:15:00.001-08:00

One thing has been crystal clear in the Climategate mess. Chaps like Dr. Phil Jones of the Climatic Research Unit are clueless when it comes to computers, IT, email, and the Internet.

We know that because Dr. Phil cluelessly advised his pals to delete emails. Give me a break! Surely everyone knew, back in the early 2000s, that you can't delete an email. Emails are forever!

Put it this way. No American CEO can be ignorant of the fact that everything he puts into an email can be used against him and will be, if he gets sued. One of the basic responsibilities of his job is to manage IT issues like email. Not at the detail level, but at the grand strategic level, to make sure that his company obeys the law, but also protects itself as much as possible.

So how come Dr. Phil Jones, CEO of CRU was so clueless?

I will tell you why. The rules that apply to business don't apply to the little darlings of the NGOs. These little pets of the politicians, so obligingly churning out actionable research that can be used to justify tens of billions in climate rescue programs, don't have to obey the laws you and I do. So they manage to stay stunningly ignorant of the law and the technology.

Anyway, Anthony Watts, proprietor of WattsUpWithThat.com, the climate skeptic site, found out that Jones and Co. had been sending emails to each other with "open links" to their research papers on the websites of the scholarly journals they use to communicate their science to the world. The open links include the password of Jones's account at Journal of Geophysical Research (JGR).

Har! Har! You might guess that Anthony Watts would publish this embarrassing fact to the world, but you would be wrong. Watts is a mensch, and so he sent a private email to Dr. Jones instead.

I know that you know me, and probably do not like me for my views and publications. Regardless of what you may think of me and my work, it has been brought to my attention by a reader of my blog that there are open access links to your manuscripts at JGR included in the email that are now in the public view.

Therefore, it is my duty to inform you that in the recent release of Climategate 2 files there are links to JGR journal review pages for your publications and also for the publications for Dr. Keith Briffa.

For example, this link:

http://jgr-atmospheres-submit.agu.org/cgi-bin/main.plex?el=[access code redacted]

I have verified that in fact that link opens your JGR account and provides full access to your JGR account.

Now that the chaps at CRU have changed the password, Watts has published his email in an interesting post that discusses who could have assembled all the Climategate emails for publication. Answer, it had to be an IT administrator, because only those chaps have both the knowhow and the passwords to do the job.

Actually, it's not surprising that Watts would do this. The famous Robbers Cave experiment shows that when people divide over an issue each side takes a lot of trouble to be different from the other guys. Since the Hockey Team has a culture of bullying, statistical incompetence and data manipulation, it is natural that the skeptics should make a point of being completely different.

But that doesn't alter the fact that Anthony Watts is a mensch.

After the Welfare State

2011-12-05T09:37:00.001-08:00

Whether or not the Tea Party and the Occupy movements are comparable, there is this about them. They both represent discontent with the welfare state.

The Tea Party represents older Americans that experience the pressure of welfare state politics on their wellbeing. The Occupy movement represents young people that drank the Kool-Aid, went to college, and now find that there is no payoff.

The Tea Party and Occupy are not the end of the new activism. There will be more trouble; there always is when a ruling class starts to confront the contradictions of its raison d'etre.

The whole idea of the welfare state was that the green eye-shade bother of social protection were better done by disinterested rational experts.

But the experts were not disinterested; they were shills for the ruling class. And the ruling class, in its contest for votes, has promised the same money to different people. That's why there is an unfunded deficit for Medicare and Social Security.

Also, of course, the "disinterested" experts have made 30, 40-year assumptions about economic growth and demography. The auto companies tried that in the 1940s and the promises they made couldn't be redeemed. So now the auto companies are in bankruptcy and the Obama administration is paying off the promises with monies from the pockets of the taxpayers.

The sensible Robert Samuelson has sensible thoughts about all this. The welfare state was planned in an era of remarkable economic growth.

The great expansion of Europe's welfare states started in the 1950s and 1960s, when annual economic growth for its rich nations averaged 4.5 percent compared with a historical rate since 1820 of 2.1 percent, notes Eichengreen. This sort of growth, it was assumed, would continue indefinitely. Not so. From 1973 to 2000, growth settled back to 2.1 percent. More recently, it's been lower.

There is no mystery about what happens next. There will be a fight for resources. And I suspect that, despite its voting power, senior citizens like me will come out on the losing side. After all, that's where the money is. If senior citizens don't agree to a reduction in benefits then the fight will move out of the voting booth into the streets.

To me, that is the bottom line on the welfare state. It has screwed the young generation. It has given them lousy schools, kept them incarcerated in child custodial facilities and away from the adult world of work. And then, when they actually get to work, they are burdened with outrageous taxes to benefit their parents. Remember them? They are the folks that sent their kids dutifully off the the child custodial facilities. Why aren't the kids all in the streets?

The irony is that the Occupy chaps are in the streets for more of the same: subsidies, freebies, and taxes on the "rich." Don't they realize that's what got us in this mess in the first place?

The way of social animals is that when we are faced with a problem we stumble towards a solution using trial and error. It's not hard to figure out what the solution should be: a lot less top-down rational planning that predictably goes badly astray, and a lot more real social cooperation and social adaptation.

Fortunately we already have a system that does that. It is called democratic capitalism, buttressed by authentic social institutions like the family, the church, the neighborhood and the member association.

The problem is, of course, that such a system leaves no role for an educated elite, disinterested experts, and compassionate politicians. It runs on its own.

We can expect that our liberal friends, who fill important positions as disinterested experts in the educated elite, will fight any such solution to our problem to the last dollar of sovereign debt.

Mixed Employment News

2011-12-02T09:58:00.001-08:00

Unemployment went down last month, to 8.6 percent. The trouble is, it got that way by a statistical fluke. Employment went up by 278,000. That's good. But the labor force went down by 315,000. That's how you get the unemployment rate to drop by 0.4 percent in one month.

It's good news that the unemployment rate went down. But at this stage of the recovery it would be better news if the unemployment rate went up. Why? Because in a healthy recovery you get people entering the labor force in their hundreds of thousands looking for work in lockstep with the people actually getting jobs in their hundreds of thousands. For about a year, when the economy really starts to kick into forward gear, you can expect healthy job growth but no reduction in the unemployment rate.

The labor force has been essentially flat for the last four years. By comparison, from 2002 to 2008 the labor force increased by 10 million. Put it this way. Absent the Great Recession the labor force should be about 4 million higher than it is right now. It will take years of healthy job growth to fix that, and get back to the robust job market of the mid 2000s. And that healthy job growth is only just getting started.

It is true, of course, that, with the housing crash, there was no way to get back to full employment in a couple of years. But it is also true that the Obama administration has made things worse with its regulations, its ObamaCare, its spending splurge, and its green energy boondoggle. The American people might have something to say about that next November.

"Who Lost Egypt" Misses the Point

2011-12-01T08:52:00.001-08:00

In NRO today Andrew C. McCarthy, who prosecuted Sheik Abdul Rahman in the 1990s, is bewailing the election result in Egypt:

It would be hard to overstate what a catastrophe the Egyptian elections are shaping into. Reports about stage one of the long process show not only that the Muslim Brotherhood may be getting over 50 percent of the vote; an even more extreme Islamist party — called “Nour” — is apparently getting between 10 and 15 percent.

Well what do you expect? The army has ruled Egypt for the last half century--Nasser, Sadat, Mubarak--and today Egypt is broke. What do you expect the Egyptians to vote for? A secularist-socialist party with its core support in the educated elite? Please.

The tone of the conservative reaction to the Islamist surge is reminiscent of the "Who Lost China" blame game in the 1950s. Egypt isn't ours to win or lose, any more than China was in 1949. China--and Egypt--has to find its way into the modern era. And that means adapting its moral-cultural tradition to the modern facts of life. Obviously, this is a very hard thing to do.

Usually countries start by making a bad choice. In the 20th century, the bad choice was typically to try and ape the secularist-socialist culture of the western educated elite. That's what Russia tried, China tried, and India tried. It led to starvation and stagnation until they threw off the secularist-socialist yoke and tried a bit of capitalism.

The Middle East tried the same thing and the result was disaster, compounded by the petroleum boom that allowed rulers to coast on oil revenue without needing to confront the cultural challenge of the modern era. Given the failure of their secularist army government, it is natural that the Egyptians should return to Islam. The problem is that Islam has not really confronted the challenge of modernity in the way that Christianity has done. There has been no equivalent of the Protestant Ethic merging with the Spirit of Capitalism. And there has been no attempt to separate church and state in the Muslim world.

The modern problem is that, if you combine church and state you get totalitarianism. And that applies in particular when the church in question is the secular church of socialism or communism. If you combine economy and state you get crony capitalism. And if you combine church and economy you get I know not what.

The challenge and the opportunity of the modern age is to develop a Greater Separation of Powers between state, economy and the moral-cultural sector. If you do not do it, then the result is disaster. But people have to do it on their own. They cannot be prodded or "nudged"--i.e., coerced--into it by a supposedly enlightened elite.

We can see that India seems to have made the break from the 20th century Wrong Turn. China is maybe doing it, if it can get the Communist Party to loosen its grip on political power. Russia seems to have exchanged church-state totalitarianism for economy-state totalitarianism.

The problem for the US in "losing Egypt" is Israel. Will an Islamic Egyptian state decide that the way to the future lies through the smoking ruins of Israel? They certainly might. Typically, post-revolutionary states get pretty expansionary. Take the USA. We conquered most of the North American continent within a century of our revolution.

The US has two options on Israel. It can help Israel fight off the invaders or it can bring the Israelis here to the US. Meanwhile Egypt is broke, and needs a bailout from the international community. That means us.

The Fed Gooses: Dutch Finance or French Finance?

2011-11-30T09:38:00.001-08:00

Today the markets have soared in response to the Fed's latest ploy: making dollars available to foreign banks. But it hasn't solved the problem.

At best, analysts said the move could buy the 17 nations of the euro zone a little more time to agree on a broader plan to stabilize financial markets.

Why is that? Because all the Fed has done is solve the liquidity problem. It has not solved the solvency problem.

The solvency problem is that a number of European nations have run up debts that cannot be repaid. There will be sovereign default, and there will be haircuts for bondholders, and there will be welfare state spending cuts.

Why are these nations in this mess? The reason is quite simple. They follow the principles of what I call "French Finance."

The modern era has two models of national finance. There is Dutch Finance, invented by the Dutch Republic in its war with Spain back in the 16th century. Then there is French Finance, invented by John Law in France in the early 18th century.

The difference is simple, and understandable by any of us financial ignoramuses. Let's start with French Finance.

In French Finance the resident wizard, be he John Law or Benjamin Strong or Alan Greenspan or Ben Bernanke, manipulates the financial system to get the government out of its latest jam. You get inflation, government-sponsored companies like the Mississippi Company and Fannie and Freddie. It always ends in tears. And the reason is pretty simple. The credit system runs on trust (credit means faith). It requires the participants to believe that the other participants can be trusted. Obviously, under French Finance with its John Laws and Alan Greenspan and Ben Bernankes the question always is: how can I manipulate the markets so my political masters can coast through to the next election? They spend and borrow and don't give a damn about the long term. And in the long term the government ends up with debts that cannot be serviced. After the election comes the deluge.

But what about Dutch Finance? Now you are talking. The idea of Dutch Finance is that you take all the government's mess of IOUs and convert them into long-term government bonds. Then you create a tax and allocate it to the payment of interest on the bonds. The tax is big enough that the market has confidence that the interest can be paid,. And paid, and paid. The result is a big boom, because the government's rock-solid bonds become the best kind of collateral for individuals and the best kind of reserves for banks. The Dutch did it, and then they invaded Britain in 1688 and set up the same system up with the Bank of England and the "funds," i.e., the National Debt "funded" with earmarked taxes. If you read your naval fiction you will find that your Jack Aubreys always put their prize money in the "funds." Alexander Hamilton gave the US Dutch Finance in 1792 when he converted all the Revolutionary War debt into government bonds serviced by import tariffs and excise taxes. Pretty soon the US had actually paid off its National Debt.

There is always a temptation for governments to cheat, to pretend that they are doing Dutch Finance when they are actually veering towards French Finance. The Germans had their fill of French Finance in the first half of the 20th century with hyperinflations that reduced money to zero twice after defeat in war. They want a financial system that will never again ruin the German people.

In the present crisis, as the Wall Street Journal opines, everyone wants the Germans to write a blank check for the defaulters. The German people, perhaps more than their leaders, are dead set against it. And who can blame them?

No doubt we will soon get to the end game on this mess, and nobody knows how wide the damage will be. Will the contagion spread to the US and push the economy back into recession? Nobody knows.

But one thing we do know. French Finance always ends in tears. Dutch Finance is different. It leads to peace and prosperity.

What's Wrong With Obama Center-left Coalition

2011-11-29T09:21:00.001-08:00

I'm still thinking about the news that the Democrats are abandoning the white working class. Thomas B. Edsall gave us the news in the New York Times:

All pretense of trying to win a majority of the white working class has been effectively jettisoned in favor of cementing a center-left coalition made up, on the one hand, of voters who have gotten ahead on the basis of educational attainment — professors, artists, designers, editors, human resources managers, lawyers, librarians, social workers, teachers and therapists — and a second, substantial constituency of lower-income voters who are disproportionately African-American and Hispanic.

It seems to be that there are three things that don't compute with this over-under strategy.

There aren't enough "professors, artists... social workers, teachers, therapists" to make up for the departed white working class. Let's think a little more broadly about the "socially liberal, economically conservatives" that voted Democrat during the Bush years. I'd say it was easier to get those educated suburbanites to vote for Democrats during the Bush years than it will in 2012. Today they are not worrying about whether Pat Robertson is going to be invading their bedrooms. They are worrying about their children's careers. Sure, the educated class that works for government will vote Democratic. But that just means that they will be voting their pocket books. The rest of the educated class needs a growing economy to fatten their pocket books.
Don't count on the Hispanic vote. Bush got the Hispanic vote up to 40 percent GOP. Obama took it back to 30 percent. Democrats shouldn't count on keeping that 30 percent.
Don't count on turning out the black vote. Obama was elected on a huge enthusiasm in the African American community. Word is that blacks are deeply disappointed with Obama. They won't be voting Republican, of course, but many won't be voting at all.

If you ask me the Obama strategy for 2012 is a strategy of desperation. They are going the center-left over-under class warfare strategy because that's the only way they have a prayer of winning.

But if you think of it, the Obamis are leaving the center wide open for the Republican nominee. Instead of class warfare, the Republican can invoke all the hoary all-American themes, of hope, hard work, freedom, opportunity, and making America better for our children.

And getting government off our backs.

Entitlements and Realignments

2011-11-28T10:25:00.001-08:00

This just in: The Democrats are abandoning the white working class. The New York Times Thomas B. Edsall says so.

All pretense of trying to win a majority of the white working class has been effectively jettisoned in favor of cementing a center-left coalition made up, on the one hand, of voters who have gotten ahead on the basis of educational attainment — professors, artists, designers, editors, human resources managers, lawyers, librarians, social workers, teachers and therapists — and a second, substantial constituency of lower-income voters who are disproportionately African-American and Hispanic.

Now, of course, the Democrats have always been an over-under party. But the point of the New Deal coalition was that the "under" included the working stiff, the white working class.

It's interesting that the Dems are trying this right now, especially in the light of an article on the same day from Michael Barone. He points out, using a study done by the indispensable Paul Ryan (R-WI) that entitlements actually contribute to inequality. How? Well, a smaller share of entitlement spending is going to the poor these days. According to Ryan:

[T]he distribution of government transfers has moved away from households in the lower part of the income scale. For instance, in 1979, households in the lowest income quintile received 54 percent of all transfer payments. In 2007, those households received just 36 percent of transfers.

Can anyone spell "Medicare"?

Now, I'm all in favor of reducing middle-class entitlements. I think that middle-class people like me in their 60s should be paying for their own retirement and their own health care. But I also understand Irving Kristol's argument that, in order for government to do something for the poor you have to deal in the middle class.

You can see what the Democrats are planning. They are planning to energize their over-under coalition by taking monies from the middle class, including the white working class, to fund their redistributive programs. They want to send more money to the poor (oh, and quite accidentally, the overclass that will manage the redistribution.)

There is one problem with Baldrick's cunning plan. If the Dems start moving money away from the middle class they will reduce middle-class support for entitlement programs and government spending in general. The middle class likes to vote itself free money like anyone else. But if the ruling class decides that the middle class doesn't need so much of the free stuff then the middle class is liable to make the obvious judgment. It will say that if I can't get my share of the loot then nobody else should either.

All of which just shows what we knew already. The upcoming 2012 election will be a momentous election that decides the direction of US politics for decades to come. It won't just be a "wave" election. Or even a "realignment." It will be an earthquake.

The Real Obstructionists

2011-11-25T09:40:00.001-08:00

Democrats have been having a grand old time recently accusing Republicans of poisoning the well by refusing to consider tax increases. But, as Charles Krauthammer writes, that's a lie. Republicans have too proposed tax increases, by proposing loophole-closing measures. Remember when Democrats used to be all wigged out about loopholes? Here is the list of Republican tax increase proposals, as listed by Krauthammer.

Sen.Tom Coburn (R-OK) last year signed on to the Simpson-Bowles tax reform that would have increased tax revenue by $1 trillion over a decade.
During the debt-ceiling talks, House Speaker John Boehner (R-OH) agreed to an $800 billion revenue increase.
Supercommittee member Pat Toomey (R-PA), proposed increasing tax revenue by $300 billion as part of $1.2 trillion in debt reduction.

So much for the eevil obstructionist Republicans. Of course, Republicans aren't exactly innocent lambs about this. They don't want to increase taxes on millionaires and billionaires; they would rather reduce the tax loopholes that disproportionately benefit blue-state taxpayers.

The real obstruction to progress on the budget is Democrats. There's President Obama, for starters, who produced three dead-on-arrival budgets last year: the February budget, the April budget speech, and whatever it was he was proposing in the debt-ceiling debate. Then there is the Democratic Senate that has failed to produce a budget resolution as required by law since the beginning of the Obama administration.

There is a simple reason for the Democratic obstruction. They don't want to face up to the one incontrovertible truth of today's politics. Entitlements must be cut. No, not just entitlements. Medicare must be cut.

In my view, the real agenda behind ObamaCare is/was to cut Medicare by the back door, by forcing everyone in America into a system that would ultimately ration care.

The Medicare problem is pretty simple. Medicare as presently structured does not encourage seniors to economize on health care. As soon as a majority of seniors (like me) start facing deductibles on Medicare then they will start bargain-hunting. As I like to say: wait till the Jewish bubbies of South Florida start treating Medicare like they treat grocery shopping. But Democrats don't want to face up to that. Their idea of politics is that the American people come to them for "benefits". A Medicare system with a fixed subsidy and deductibles doesn't fit their patron-client political paradigm, because it will refocus seniors' attention on bargain-hunting rather than benefit-hunting.

But the current system is heading straight for the rocks. And when it does, it will hurt Democratic voters the most. Hey, who cares? Not the Democrats.

Giving Thanks

2011-11-24T09:01:00.001-08:00

I'm a lucky guy, all thing considered, and I'm thankful.

In the first place I'm a lucky guy to have two beautiful daughters and six strapping grandchildren. One daughter is married to the $2 billion man, and the other has a debut novel, OVERSEAS, coming out next year.

In the second place, things always seem to turn out all right for me on the work and money front. Like right now, when I've "retired" and am now busy writing. But wouldn't you know, my little website, usgovernmentspending.com, is turning in $2,000 per month in Google advertising revenue. Next year, very likely more. Who knew, back in March 2007 when the site debuted?

Then we get down to the details. I'm grateful for President Obama. He is doing more than anyone to bring on the conservative millennium.

I'm grateful for the Tea Party. Only in America is there a movement of sensible, measured conservative renewal, in our case based on the founding principles in the Declaration of Independence and the Constitution. Other nations should be so lucky.

And I'm grateful for the Occupy folks. If they didn't exist we would have to invent them!

I'm grateful for Mitt Romney. Is America ready for a Mormon president, liberals?

I'm grateful for Newt Gingrich. Somebody had to ignite a presidential campaign by needling the mainstream media.

I'm grateful for the climate deniers. They have stuck it to the climate science community and shown to the world that the headline climate scientists are not doing science, they are doing politics. It turns out that they are not very good scientists, and not very good politicians, either.

I'm grateful for American workers and American businessmen working away, trying to make the economy recover, even as the government makes things worse and worse.

And of course, I'm grateful for the lovely Lady Marjorie.

Obama Won't Talk

2011-11-23T09:47:00.001-08:00

I always say that you can tell what you are good at with one simple test. What do you like to do at 9:00am on Monday? If you dread getting back to work at that moment, then you know something important about yourself. You are in the wrong business.

There's a reason why I'll never make a good politician. I don't like to get on the phone at 9:00am on Monday and talk to people. And neither, it appears, does President Obama. That's not me saying that. It's MSNBC's Chris Matthews. Says Matthews of conversations with people on Capitol Hill:

He doesn’t call. He doesn’t write. Matthews continues, “I keep asking them, when did you hear [from the president] last? Silence. He doesn’t like their company.”

When he first got elected as Governor of California, Ronald Reagan's aides pushed him in a different direction. Forget about going home at five pm, they said:

You have to get to know the legislators, especially the leaders, especially the Democrats. You have to have drinks with them. Tell jokes with them. They have to get to know you, like you, and trust you.

Over at the Wall Street Journal Holman Jenkins details how his isolation worked against President Obama on the recently failed Supercommittee. The president could have picked up the tax-increase idea floated by Sen. Pat Toomey (R-PA) and fashioned a compromise. But he didn't.

Mr. Obama, if he had the political creativity he credits himself with, would now pick it up and run with it, instantly redeeming the super-committee "failure" with an act of presidential leadership.

Ah yes. Leadership. What voters are generally looking for in a president. But leadership, according to Ronald Reagan's aides, means getting out and talking with the players. Because unless you get out among them, you will find it impossible to twist their arms when the moment comes to make the final push on a key piece of bipartisan legislation.

Napoleon said that in battle, the moral is to the physical as three to one. When Gen. Sherman was marching through Georgia, his troops liked to get a look at their "Uncle Billy" to make sure that things were still all right.

When things get tough in 2012, how will Obama's troops get the same reassurance from the man that nobody knows?

Teeing Up For 2012

2011-11-22T09:04:00.001-08:00

The Supercommittee, writes John Podhoretz, was never meant to work. Or rather, it was designed to kick the can down the road once more. And it did. Forget about "dysfunction." The debt ceiling debate of July 2011 demonstrated the current stalemate between the two parties. Republicans don't have the power to change, and Democrats have the power to stand pat. Only an election can decide it.

The central dispute between the camps of the supercommittee — the Republicans wanted no tax increases to stimulate economic growth and entitlement cuts to shrink the size of government, while Democrats wanted tax hikes on the wealthy — will certainly be the central debate of the upcoming national election.

And that is as it should be.

It is also right and proper, writes Yuval Levin, that the Democratic Party should be demonstrating the two sides of progressive liberalism: its technocratic side in the yearnings of people like Peter Orsag for less democracy, and its populist side in the envious ravings of the OWS crowd.

Yuval proposes two types of liberalism, the conservative liberalism of constitutionalism and limited government and the progressive liberalism of progress towards an ideal society.

One view, which has always been the less common one, holds that liberal institutions were the product of countless generations of political and cultural evolution in the West, which by the time of the Enlightenment, and especially in Britain, had begun to arrive at political forms that pointed toward some timeless principles in which our common life must be grounded, that accounted for the complexities of society, and that allowed for a workable balance between freedom and effective government given the constraints of human nature. Liberalism, in this view, involves the preservation and gradual improvement of those forms because they allow us both to grasp the proper principles of politics and to govern ourselves well.

The other, and more common, view argues that liberal institutions were the result of a discovery of new political principles in the Enlightenment — principles that pointed toward new ideals and institutions, and toward an ideal society. Liberalism, in this view, is the pursuit of that ideal society.

The Tea Party, a popular movement to restrain government, is today's instantiation of conservative liberalism, and the Democrats, with technocrats and populists blazing away, exactly represent what you would expect from progressive liberalism: frustration in the technocrats that they can't execute their well-crafted plans, and envious rage from the street that the ideal society hasn't happened yet.

Everyone thinks that next Fall the decision will be a pretty close-run thing. But I don't. I think we are going to see a 55-45 Republican win. It's true that the president is stirring up his base and lambasting the Republicans at every turn and he is moving the needle on his popularity. But the problem is that the president doesn't have a plan that gets us out of the jam. Raise taxes? Steady as she goes? You must be joking.

The American people are frightened, and are looking for someone to lead them forward. They know that government is too big, and they know that we need jobs. Obama's plan isn't working, and it doesn't look as if things are going to be much better by next fall. The Euro debt debacle will take care of that.

But don't think that a resolution of the Euro debt mess would help the president. If the Europeans turn the corner then the hot money presently sitting in US debt as a safe haven will be looking at Europe for safety. That would not be good for US Treasury debt yields, and it would not be good for President Obama's reelection.

Supercommittee Fail

2011-11-21T10:15:00.001-08:00

The Supercommittee failure was predicted by Newt Gingrich back in August, according to Rush Limbaugh. The reason? All those members of Congress weren't going to let a committee of 12 make all their decisions for them.

But bigger than that is President Obama's nasty bind. Let's assume that he and the Democratic High Command know that entitlements must be reformed. Let's assume that they also know that healthy, sustainable entitlements are vital for the core Democratic vote, the lower income folks who don't have capital assets. So why isn't the president out in front proposing a practical, sensible reform of entitlements?

Because to do would demoralize the troops. It would admit that the Democrats have betrayed their base, promising benefits that cannot be paid out to the party faithful. President Obama is planning a reelection campaign in which he fights for his base against the mean, Do Nothing Republicans. Admitting that the Democrats have overpromised on welfare-state benefits doesn't fit the narrative.

Moreover, there is the first law of government checks. The shortest measurable time interval in the world is the time between someone getting a government check and deciding he deserves it. Any cuts in government benefits are hugely unpopular. Because the people receiving them reckon they deserve them.

Maybe, one day, Democrats will vote for reform of entitlements. But, like the Europeans, they will only do it in the context of a threatened sovereign debt default. Because in their political calculus, only the end of the world justifies cutting government benefits.

You and I can argue about the morality of big government. We can wail about the social destruction that government "social protection" programs cause. But practical politicians don't care about that. They only care about the next election, and elections are won by promising loot to your supporters.

Reform of the welfare state, if it comes before total financial meltdown, will only occur in the context of a moral movement of reform, something like the anti-slavery movement of the 19th century. And even then, it may not succeed without violence. The fight over slavery ended in war because slavery was very profitable, and getting more so. There was no way that the South could be persuaded on the moral merits of emancipation. They were making too much money. And they had also seen how emancipation had ruined the sugar planters of the British West Indies.

I'm afraid that the same is true about the welfare state. It's likely that the beneficiaries will want to fight to retain their benefits. And judging from the way that the Democrats have given the Occupy movement a wave and a nod, it's unlikely that Democrats will stand in the way of a violent movement to protect "our" benefits.

The Coming Labor Split

2011-11-17T08:47:00.001-08:00

When is the white working class going to get it? That's the question I asked in my latest American Thinker piece. You can't thrive when you are endlessly running to government for help. Because in the end, the government stiffs you.

So yeah, government support of labor unions helped some workers for a while--until the unionized steel industry went broke and the auto industry needed a bailout.

Now of course we have the Democratic Party joined at the hip with public sector unions. And private sector workers are getting the shaft. President Obama recently "postponed" the Keystone XL pipeline that is designed to carry crude oil from Canada to the refineries in the Gulf of Mexico. He sided with environmentalists and public sector workers against private sector workers.

The hype over "green jobs" is of course at attempt to paper over the fact that today's Democratic Party is radically anti jobs. Daniel Henniger lays out the reality.

The Democratic promise to private blue-collar workers has been that the party would use its clout to in effect "manufacture" new jobs out of public budgets—high-speed rail projects, school construction and the like.

But really what hope is there for that, given the budgetary death struggles in the deep Blue states, where the Democrats are committed to supporting their public sector union buddies to the last tax dollar? "There isn't going to be anything large left over for "public-private" job schemes." As in. There is no more money!

Sooner or later, private-sector blue-collar workers are going to have to get it, that the Democratic Party is no friend of the working man.

Yesterday the news came through that the Seaway pipeline between Oklahoma and the Gulf had been sold. The new owners planned to reverse the flow so that it will now flow from Oklahoma to the Gulf. Crude prices and the stocks of oil companies invested in the new oilfields in the Dakotas immediately reacted.

This is how energy policy really works. Capitalists react to changed market conditions and create jobs by responding to the needs of consumers. Whenever government gets into it, it always ends up in crony capitalism and epic failures, as in Solyndra and the fatuity of California's high-speed rail to nowhere.

Come on in, workers. Capitalism is great and the water's fine. Leave the Democratic Party to its last ditch defense of the indefensible public-sector bloat.

Beyond Constitutionality on ObamaCare

2011-11-16T09:45:00.001-08:00

Columnist David Harsanyi is in a foul mood as he contemplates ObamaCare lumbering up to the Supreme Court for a constitutionality test. Never mind the constitutionality of forcing Americans to buy health insurance, he writes. It's the whole process that got us here: the lies, the corrupt process, and now the fact that an ObamaCare cheerleader sits on the Supreme Court.

Now, numerous news organizations have falsely reported that the Supreme Court agreed this week "to decide the fate" of Barack Obama's health care policy. Fortunately, the fate of Obamacare can still be decided by voters and -- more likely, in time -- by its overwhelming fiscal and moral failure. The court does not historically like to strike down federal legislation. Those who oppose Obamacare might hope for the best in July, but rather than stake their argument solely on the constitutionality question, they should be prepared to fight on grounds of bad policy and corrupt process.

Sooner or later we are going to have to confront the whole of the welfare state and its "springtime for freeloaders." It's appropriate that an age that rejected the notion of divine justice, that God will get you even if earthly policemen and judges don't, has reverted to an older, crueler form of social control: the blunt force of government. Because that is the grand theory of the welfare state: Force.

The reason that humans first invented divine justice, according to Nicholas Wade in The Faith Instinct, is that it is much better to have God deal with freeloaders than society, for with God you don't need policemen and jailers.

In the old hunter-gatherer days, freeloaders were controlled by the "force" of divine justice, but in the agricultural age real force was needed to keep the agricultural surplus away from robbers and brigands, so we got the warrior landowners to enforce property rights and protect farmers from thieves.

Capitalism came along and changed the rules again. Instead of divine justice or land barons it offered freedom. If you didn't trust someone, you were free not to deal with him: freeloaders beware.

A lot of people were scared to death by the new freedom. What if my employer just fires me on a whim? What if my best worker ups and quits? So we got a new birth of compulsion. Activists decided that government had to fill in the gaps in private education. So now we have a government monster that fails to educate the majority of students. Even at the top end, half of college freshmen need remedial courses. Instead of mutual aid and charity, with the discernment to pick out the freeloaders from the honest folk coming on hard times "through no fault of their own" we have government welfare with qualification rules that the poor have become expert in scamming. Instead of a flexible, adaptable health care system we have a government monstrosity that is eating up the budget.

The fundamental truth about social animals is that social behavior reduces the need for force. You can't have social animals if everything is decided by force. But with the welfare state we have regressed to a pre-social community. For in the welfare state everything is decided by politics, and the decisions of politics are fast-frozen into bureaucratic rules. Unfortunately there is an unavoidable truth about this. Politics is power, government is force. By deciding societal matters by force we revert to a pre-social society where everyone is a freeloader unless restrained by the police and the enforcement officers.

It's a tragedy that an age that invented a stunning system of social cooperation without force decided that it was much happier living under the knout of the politician and the bureaucrat.

Obama's Keystone XL Punt

2011-11-15T08:45:00.001-08:00

One of the hardest to bear of the many liberal hypocrisies is the idea that liberals are trying to save the environment. If only they were!

In reality, liberals are like Siddhartha Gautama, the young Indian princeling and upper-class ascetic, who decided to dump wifey and kids and princely burdens for a life of contemplation and enlightenment. They are ramming their religion down our throats, the religion of upper-class asceticism. It goes something like this. We are well-to-do educated chappies, and we have found that getting more stuff doesn't make us happy. So we have decided that you chaps shouldn't have any more stuff either.

President Obama is the leader of the liberal upper-class ascetics in America and his job is to make sure that the great unwashed don't get out of hand and build stuff to create jobs and prosperity. That would disturb the liberal vision of everyone living simply so others could simply live. So he punted on second down on the Keystone XL pipeline that's designed to get oil from Alberta to the gulf state refineries in the US. Apparently the pipeline is routed through the Nebraska sand hills and a pipeline rupture might harm sensitive aquifers. Wouldn't want to upset lefty enviros right before the presidential election.

According to liberals, we need regulation so that we can do the science on technical projects. But of course, in reality the regulation serves as a perfect vehicle for liberals to legislate their morality on the rest of us. The result is a complete mess in the energy industry and crony green capitalism as entrepreneurs get the message and massage the liberal pols in a pay for play deal that would make the old robber barons blanch.

The same thing applies everywhere that liberals are active. There's education, a complete mess, that is generating high-school graduates that can't write and college graduates that can't get jobs. Liberals want government-dominated health care, as if it isn't government power that has screwed up health care this half century and more.

Rich Lowry writes about the comical side of all this. President Obama tells us that we don't do the big things any more, like build the Golden Gate Bridge. We have become lazy and soft in recent decades, apparently. If only.

If we don't build Golden Gate XL bridges, it is because liberals are standing in the courthouse door. If we are lazy and soft it is because liberals have forced a welfare state on us that has become springtime for freeloaders. If we have an energy problem it is because anti-science liberals have prevented common-sense energy development in favor of pie-in-the-sky green energy. If we have an entitlement problem it is because liberals refuse to sign on to a solution. They would rather demagogue about "saving Medicare as we know it" and win the next election.

Every political dynasty begins in vigor and reform. Every political dynasty ends up frozen in fear and unable to do the simple necessary things to get things done. Unfortunately, we have not yet reached the end-game of dynastic liberalism. Liberals are still powerful enough to stop change and reform, but the American people aren't yet angry enough to sweep them aside onto the ash-heap of history.

Obama Brings Liberal Stereotypes Back

2011-11-14T09:08:00.001-08:00

The great theme of the Clinton presidency was the effort to hide the liberal stereotypes that had sent liberals to the political wilderness. The only way for a Democrat to get elected, the Clintons believed, was by keeping a distance from "liberal, liberal, liberal." But now Obama has gone full frontal nudity and exhibited all the offensive the liberal traits. Yuval Levin enumerates them at the Weekly Standard.

The Big Spender. Liberals like to shame us into making "investments" but "investments" are wasteful spending by any other name.
The Incompetent Economist. Liberals want to have their cake and eat it too on the economy. The result is the 1930s Great Depression, the 1970s Great Inflation, and the 2010s Great Recession.
The Bureaucratic Technocrat. Liberals believe you can cheat the market with regulations and subsidies. It always ends in tears. See Hayek.
The Big Taxer. It is amazing that the Democrats are going full out on this.
The Class Warrior. Once you unleash the Big Taxer you need the Class Warrior to stigmatize the rich and make the American people forget that everyone pays taxes.
The Cultural Elitist. Keep quiet there in the back of the bus or we may make an example of you.
The Peacenik Protestor. Given how much the American people hated this chap the last time around, it's a bit strange that Democrats think he'll do them any good with the #OCCUPY movement.

For the veteran conservative it seems incredible that the Obamis could think they could win with this combination. You start to doubt yourself and wonder if the Obamis know something you don't.

Most likely, we are seeing a generational thing. It was raised at the time of the Crash of 2008. Financial crashes come only once or twice a century. They occur because nobody now working was around the last time. You have to think that the Obamis, earning their chops in the Hyde Park liberal enclave, just never talked to an ordinary American. So they will have to learn the lessons of the 1960s the hard way.

Marx wrote that: "Hegel remarks somewhere that all great world-historic facts and personages appear, so to speak, twice. He forgot to add: the first time as tragedy, the second time as farce."

He forgot to add that the third time, history repeats itself as a reality show.

Krugman: Welfare State Not To Blame!

2011-11-11T10:00:00.001-08:00

Well that's a relief. The New York Times' Paul Krugman assures us that the welfare state is not at the bottom of the current Euro crisis. Some countries with big social protection expenditures like Germany are not in trouble, he tells us. Anyway, back when the Euro was first proposed, a lot of conservatives were for it.

Then there is austerity.

The other thing you need to know is that in the face of the current crisis, austerity has been a failure everywhere it has been tried: no country with significant debts has managed to slash its way back into the good graces of the financial markets. For example, Ireland is the good boy of Europe, having responded to its debt problems with savage austerity that has driven its unemployment rate to 14 percent. Yet the interest rate on Irish bonds is still above 8 percent — worse than Italy.

Of course, he has a point. But I would argue the bigger point. Let us borrow a principle from environmentalism to do this: the Precautionary Principle.

The fact is that modern government pushes the economic system as hard as it can. Partly the reason is to get cheap credit. Partly the reason is to goose the economy to get revenues. Partly the reason is to get out of a jam. All of this violates the sacred Precautionary Principle, which says that you should know the outcome of technological actions on the environment before you barrel in. How come that the party of the Precautionary Principle got us into such a jam with its non-environmental policies? Surely the Precautionary Principle can be applied to all of life.

Instead what we get, every day, is some new subsidy program that just bandages some arbitrary economic wound.

Today is Veterans Day, and we are celebrating a veterans jobs bill that will give businesses a tax credit for hiring veterans. It passed the US Senate on November 10. It's nice to help veterans, but it would be better to have a solid stable economy in which all Americans can look for jobs and 9 percent of Americans aren't out of work.

Probably we won't get an economy like that until we have a proper separation of economy and state. We all worship at the altar of the separation of church and state, although everyone wants his religion endorsed by the government. Still, one of the defining ideas of the modern era is to separate throne and altar, to divide the powers of force and moral persuasion. In the agricultural era the condominium of secular and religious power was endlessly abused, and as soon as God died, the idea got reborn in the modern secular religions like socialism and fascism.

Government makes a complete mess of the economy, because government is force and the economy relies on completely different principle: trust, the freedom of employment at will and consuming at will, and submission to the "creative destruction" of the marketplace.

And that is the problem at the bottom of the Euro crisis. Everyone is busy trying to get the government to support their pet plan. But if there was any virtue in those "pet plans" they would get funding without the intervention of government.

The current financial crisis represents the bonfire of the pet plans. Some of them are subsidy plans like Fannie and Freddie. Some of them are due to unaffordable pension and health care plans. Some of them are just bad luck.

But there is no excuse for any country to have a National Debt over about 20 percent except after a bruising war. A big National Debt is just asking for trouble. And it will come.

It's the Freeloading, Stupid

2011-11-10T08:51:00.001-08:00

It seems so stupid the way that tin-pot dictators screw up their nations' economies. Don't they get it that debt default and inflation cause untold misery to millions?

Megan McArdle recalls how she, as an economics writer, used to rail at the Third World:

And the other journalists and I would cluck our tongues and say "Why can't they do the right thing when it's so . . . bleeding . . . obvious?"

Well, now we start to get it. It's all too easy to for politicians of any stripe to hand out promises and goodies to their supporters. The problem comes later on when the bill comes due and the supporters start to get really angry, and refuse to admit that their freeloading benefits have got to go. Cue Greece, Italy, California, and now Ohio. When voters get really angry, the politicians bolt.

If you want to know how things will develop, a good example is Vallejo, California, which recently emerged from three years in bankruptcy. Here is the report from the liberal Huffington Post.

In an article on the state of California's legendary fiscal troubles, Vanity Fair scribe Michael Lewis pins the blame for the city's economic woes squarely on public sector pensions. "Eighty percent of the city's budget—and the lion's share of the claims that had thrown it into bankruptcy," wrote Lewis, "were wrapped up in the pay and benefits of public-safety workers."

At present the courts have been reluctant to cut public pensions, so the cuts will fall elsewhere. There will be spending cuts and the firefighters are getting a new lower pension deal. But here is the kicker: "some creditors [will be] only getting back as little as five percent of the full amount they are owed by the city."

That will probably be the pattern. A lot of spending cuts in jobs and libraries. Some public employee give-backs. And a real haircut to the creditors.

Call this the battle of the freeloaders. Freeloader public employees want their pensions and health care. But the number of public jobs is going to go down. Seniors demand their entitlements. But they are taking a haircut in low interest rates on their savings accounts and facing a haircut on their bonds.

We are humans, social animals. We can do better than that.

Blue Splitsville?

2011-11-09T18:43:00.000-08:00

Our liberal friends are quick to detect splits in Republican ranks, particularly between the kind of Republican they like--the moderate, compromising kind--and the kind they don't--the social conservative kind.

Now Walter Russell Mead has unearthed a split in the Democratic ranks. It has arisen in a police corruption case in New York City. The folks at The New York Times are shocked, shocked that police out in the Bronx have been fixing tickets, and worse. They were even more shocked when police, prompted by their union, demonstrated outside the courthouse where the accused ticket-fixers were being tried.

But here is the kicker. Across the street from the courthouse was a welfare office, and the welfare recipients jeered at the cops: "Fix our tickets!" they cried. Not to be outdone, the cops returned the compliment. "EBT! EBT! EBT!" they chanted. "EBT," for you innocents, is the way that food stamps and the like are distributed electronically these days.

The fact is, Mead tells us, the folks in the Democratic coalition don't like each other. The cops hate the welfare cheats, especially the way that they are not allowed to really police the poor, and the welfare chappettes obviously have hated police brutality since the invention of urban police forces. The relation between the public service workers and the goo-goo liberals is interesting. You might say that the liberals fill the pockets of the public union workers with cash to shut their mouths. Scratch a policeman, a teacher, a welfare worker, a health worker, and you'll hear war stories of the scum they are paid to baby sit. You need good money to put up with that and not actually do anything about it but just sit there saying "yes, sir, no, sir" to your liberal masters, never knowing what crazy twist they will introduce into the care of the poor next week.

One underappreciated component in the Democratic coalition is Wall Street. The Wall Street guys are the middle-men that provide the cash for the welfare state in the form of bonded indebtedness. Every public official needs a good relationship with his banker, and vice versa. So it's a bit shocking that the young libs in the Occupy movement are blaming Wall Street.

Of course, there's a reason for that. The young skulls full of mush actually believe the line that their liberal daddies give them about evil Republican fat cats on Wall Street. They are too dumb to realize that all the bankers are Democrats.

Still, it's important to realize that all these people that hate each other, and are united only in their pursuit of money--taxpayers money. That is why Democrats talk about nothing but revenue increases.

Unfortunately the money has run out, and so the folks in the Democratic coalition won't be getting the full amount they have in mind in the future. There is every prospect that they will start to fight amongst themselves over the diminishing spoils.

No need to discourage that.

Klein's Obamanomic Lament

2011-11-07T07:01:00.000-08:00

Young Ezra Klein is a coming man in LiberalLand, and so he's the chap The New York Review of Books selected to push back on Ron Suskind's White House tell-all Confidence Men.

Take an Obama announcement in September 2010 where Treasury Secretary Tim Geithner was "looking sheepish," according to Suskind.

So I went back to the tape... I paid special attention to Geithner. Suskind’s right: his suit is too big. But he doesn’t look sheepish or ashamed. He looks, by turns, bored and interested. He clasps his hands behind his back. He nods attentively. He tries not to fidget. He looks like every experienced bureaucrat looks when they’re asked to stand like a prop near the president. Blank, and trying not to make any news. He failed.

OK, so we liberals can ignore Ron Suskind. But Klein has bigger fish to fry: the failure of Obamanomics. What went wrong? It wasn't the clash of the "confidence men." It was political reality. Theoretically, if your program isn't big enough to turn the economy, you make it bigger.

If the initial stimulus is too small, you make it bigger. If your housing policies are too modest, you toughen them up. If the private sector sheds jobs and long-term unemployment becomes a problem, you begin hiring workers directly.

Sound great, but this ignores political reality. The reality is simply that there is no way that Obama could have got a bigger stimulus through Congress.

When Obama angrily dismisses Romer’s umpteenth argument for more stimulus, it’s not because he disagrees. It’s because he can’t get it passed. “Enough!” Suskind quotes him as shouting. “I said it before, I’ll say it again. It’s not going to happen. We can’t go back to Congress again. We just can’t!”

And then there is Ben Bernanke; he's too "timid." A more activist chairman could have goosed QE2 with a bigger boost.

This raises the question of whether the Obama administration made a mistake in reappointing Bernanke. If it had managed to install a more activist chairman at the Federal Reserve, then its inaction might have been more effectively offset by the Fed’s actions.

Of course, what Klein doesn't do is question the caloric content of the Keynesian menu. Suppose "stimulus" is just empty calories that leaves the economy hungry after a quick sugar high? Then a bigger stimulus wouldn't have made a difference. Suppose that Fed easing just feeds through into inflation. Suppose that supporting the housing market just puts off the inevitable need to clear the overhang of underwater mortgages? Klein doesn't even consider that.

The reason the Republicans oppose the Obama economic menu is that we believe that Reaganomics showed that Keynesian fiscal and monetary stimulus isn't nutrititous for the economy. When you have a big crash the Reagan menu says you need to cut government spending and lower tax rates and reduce government regulation.

The Obama menu says you should fatten up on subsidies to Democratic client groups, get ready to raise taxes on the rich, and boost government regulation on energy and health care.

Young Ezra Klein never even begins to wonder if that kind of food is economic poison.

But don't despair. Ezra Klein is young. But surely he is smart enough to know the difference between science and pseudo-science. When he has reached the age of wisdom.

Good News on Employment

2011-11-04T07:41:00.000-07:00

For donkey's years, we have concentrated on the Unemployment Rate as the measure of economic wellbeing. But the Unemployment Rate has always been a problem. As right now.

The Unemployment Rate today declined from 9.1 percent to 9.0 percent. More of the same, it seems. But if you look at the BLS Household Survey you see that employment has been rising solidly for three months in a row. Here are the numbers.

Month	Employment (000s)	Change (000s)
Jul	139334
Aug	139296	-38
Sep	139627	331
Oct	140025	398
Nov	140302	277

There are no two ways about these numbers. They are good numbers and show that there is solid increase in employment in the economy. So why has the Unemployment Rate stayed so high? The reason is that the labor force is also increasing as more people start to look for work. Here are the numbers.

Month	Labor Force (000s)	Change (000s)
Jul	153421
Aug	153228	-193
Sep	153594	366
Oct	154017	423
Nov	154198	181

The Unemployment Rate is the employment level divided by the labor force. If both employment and labor force are increasing at the same rate, in this case by about 300,000 per month, then the Unemployment Rate won't change.

There is more good news here. Our friends in the mainstream media will doubtless soon find it necessary to tell us the good news. In the past, in the early 1970s, early 1980s, and early 1990s, recessions and recoveries usually occurred during Republican administrations, so the MSM was delighted to put the worst face on the economic numbers. But now that a Democrat is suffering from bad economic numbers things must change. And the best way to do it is to show that the solid increase in job numbers is good news that is more important than the continuing bad news in the Unemployment Rate.

A National Conversation about Debt

2011-11-01T09:03:00.000-07:00

With the European project flushing down the toilet, I think it is time for a national conversation about debt.

This is hard, and you know why. It is hard because of a trait that our liberal friends share with Harvard men. You can always tell a liberal, but you can't tell her anything. Liberalism is a religious cult, rather like Harvard. It is a closed system, and is almost impervious to persuasion.

My point is this. I can understand having a debt crisis when the nation's existence is at stake, when we have to strip the nation of assets in order to feed its armies fighting against the Nazis or the Commies. But should we really be facing a debt meltdown over paying grannie's Medicare?

Everyone wants to make grannie's golden years a comfort to her. But what happens when grannie's Medicare/Medicaid takes 12 percent of GDP?

It seems to be a good idea to mortgage the whole nation if an earthquake had leveled San Francisco. That is what government is for, to rally us all after a crisis, and help pay for the trillion dollars needed to rebuild. But should we bankrupt the nation on multigenerational welfare?

The great advantage of keeping the national debt down to about 10 to 15 percent of GDP is that it means that the nation is ready to assume any extraordinary burden that comes along, whether it is a war to defend democracy or a natural disaster. When it is up at 100 percent like it is now, then the nation is not ready to assume extraordinary burdens. It already has enough burden shouldering today's debt.

Don't get me wrong. I think that pensions are a great idea. Health care is a wonder. But people value these things enough to do them without the government. Of course, after 70 years of Social Security and 40 years of Medicare many Americans can't imagine life without them. But we'd find a way if the government went broke. In fact, I'll bet my nickel that the aftermath of a government default would see wonders of invention: oldsters like me figuring out how to make a buck, physicians figuring out how to deliver health care to people that had to pay for health care with their own money.

And there is the societal aspect to consider. Most ordinary people derive their most satisfaction in meeting the routine challenges of life. In today's welfare state only the educated elite gets to meet challenges. Everyone else just sits around telling victim stories and waiting for the handout. No wonder we learn that, e.g., young people are curiously diffident these days. Nobody is challenging them.

Of course, there is a bigger problem with the welfare state than just debt. It is the demographic problem, that welfare state people don't get married and don't have children, as in Germany and Italy, and Spain. Here in America conservatives have about 50 percent more children than liberals. That is an existential disaster that, so far, is not suitable for polite conversation and a national conversation.

So when we look at the national government budget for 2011, courtesy of usgovernmentspending,com:

Government Pensions	$1.0 trillion
Government Health Care	$1.1 trillion
Government Education	$0.9 trillion
National Defense	$0.9 trillion
Government Welfare	$0.6 trillion
All Other Spending	$1.6 trillion
Total Government Spending	$6.0 trillion

You have to ask: Wouldn't most of this stuff be done better if the American people did it themselves? We wouldn't do it alone, of course, but in revived voluntary collective associations, first reported by Tocqueville to the world in the 1830s.

And in that national conversation about this, let us ask a difficult question, appropriate for national conversations. Is America ready to discuss the fact that it's all welfare, all $3.6 trillion of Social Security, Medicare, Medicaid and Temporary Assistance to Needy Families and on and on?

Imagine an America in which all these functions were being done in a vigorous, can-do American spirit. Bureaucrats need not apply.

Let's Have a Class War

2011-10-31T09:16:00.000-07:00

Our Occupy friends want to string up the bankers. I see their point. The bankers do seem to have screwed things up pretty badly.

But if you want any street cred as a conspiracy theorist you really need to be able to see behind the guy who is saying "pay no attention to that man behind the curtain."

The power of bankers is limited. They do the bidding of the central bankers. And the central bankers do the bidding of the politicians. This is true even of the best financial system, the "Dutch finance" of the old Dutch Republic, the Bank of England prior to World War I, the financial system of Alexander Hamilton and J.P. Morgan. The government sets the tune.

It's the same with the corporate chieftains. As ruthless as they may be, they are under the thumb of the politicians. After all, who has the guns? Who pays tribute with political contributions? Who pays taxes? Who gets to hand out subsidies of Other Peoples' Money?

When we talk about the one percent, we need to think clearly. Who are the guys with the power? Sorry Charlie, it's not the Wall Street bankers. They have power because they serve the interests of the political elite. It's not the corporate CEOs. They have power because they sell good products or, in their crony capitalist version, because they suck up to the right politicians.

If we are going to have a class war in this country, let it at least be between the people and the powerful, not the people and the toadies. The powerful today are the folks in the permanent educated elite, the New Class of top academicians, journalists, activists, politicians, and bureaucrats. They are the people with political and cultural power, and they have economic power because of their political and cultural power.

Glenn Reynolds has a bunch of good links to today's Power Elite, and it's worth following them up. Anne Applebaum speaks of the upper-middle class that has detached, and differentiated itself from the middle-middle. Reynolds himself links the anti-American sneer to the New Class.

And here is Ross Douthat:

The public-sector workplace has become a kind of artificial Eden, whose fortunate inhabitants enjoy solid pay and 1950s-style job security and retirement benefits, all of it paid for by their less-fortunate private-sector peers...

Our entitlement system, meanwhile, is designed to redistribute wealth. But this redistribution doesn’t go from the idle rich to the working poor; it goes from young to old, working-age savings to retiree consumption, middle-class parents to empty-nest seniors... Then there’s the public education system, theoretically the nation’s most important socioeconomic equalizer. Yet even though government spending on K-to-12 education has more than doubled since the 1970s, test scores have flatlined and the United States has fallen behind its developed-world rivals...

The story of the last three decades, in other words, is not the story of a benevolent government starved of funds by selfish rich people and fanatical Republicans. It’s a story of a public sector that has consistently done less with more, and a liberalism that has often defended the interests of narrow constituencies — public-employee unions, affluent seniors, the education bureaucracy — rather than the broader middle class.

View in this light, the Occupy protesters are clearly useful idiots of the New Class, helping the elite rough up innocent scapegoats while the guilty go free.

Sooner or later the American people are going to remove this self-interested clique that imagines itself born to rule, while it corrupts itself with its sinecures and impoverishes America with its folly. But, in the way of politics, the American people will probably not get it right first time. And that's a shame.

Targeting the Fed

2011-10-28T09:28:00.000-07:00

If there is anything that demonstrates the failure of expert-led government it is the Federal Reserve Board. Every time the economy tanks we find out that the Federal Reserve Board screwed up again and we hear demands for a new target to guide the Fed in its monetary policy.

In the 1920s the Federal Reserve was sterilizing gold flows; after the late 20s boom that was declared a failure. In World War II and after the Fed targeted long term interest rates and monetized World War II debt. In the early 50s that policy was abandoned that when inflation increased. Then in the 70s Nixon turned back to inflationism in order to get reelected. In the late 70s, after the dreadful inflation, the new target was the rate of increase in the money supply. In the Greenspan years the target became inflation.

Now everyone agrees that inflation targeting is all wrong. What is needed, according to economist Scott Sumner is "NGDP targeting." Instead of targeting consumer prices or the GDP deflator, we should just increase nominal Gross Domestic Product by a sensible amount each year.

Maybe this new target would be better than the old target. Who knows? The problem is that central bankers are, first of all, the government's banker. Central bankers make sure to smooth credit conditions for the government. Smooth credit conditions for the government may not be the best policy for the economy.

Central bankers sit in the hot seat, so ever since government took over the central banks central bankers have been government bureaucrats and they have wanted a simple rule to govern their actions. And there lies the problem.

The central problem in economic management is not money supply or inflation or economic growth. It is to keep the credit system healthy. Borrowers must make payments on time and people must have confidence that the balance sheets borrowers and lending institutions are healthy.

The proximate cause of the current crisis was that the holders of home mortgages failed on both these counts. Overextended borrowers started failing to pay their mortgages. That meant that their mortgages, considered as assets at the bank, were worth a lot less. Thus the balance sheets at the banks got hammered. Everyone headed for the exits.

Sensible bankers would have said by the mid 2000s: Wow! Housing prices have shot up. We should clean up our balance sheet and make sure that, if this developing bubble should pop that we have good assets that won't melt away if home prices drop.

But they didn't. They couldn't, because the government had forced them to originate lots of loans at high loan-to-value (risky because a slight decline in home prices would put the loans under water) and lots of loans to borrowers with poor credit (risky because those borrowers are more likely to default).

There's a lot of mumbo jumbo around banking and credit. So it helps to look at the experience of a banker like the young W.T. Sherman, of Marching Through Georgia fame. This inexperienced banker became manager of a small bank in San Francisco in the mid 1850s. He didn't like the look of the economy so he cleaned up the bank's balance sheet. A key action was in reducing the loan balance of a politician that he didn't trust. When the politician skipped town, leaving millions in defaulting debts, Sherman's bank easily survived a run, while other banks went under.

How hard can it be? OK, it helps if the government isn't breathing down your throat forcing you to do stupid things.

The problem with government financial regulation is that it is always backward looking. The time to stiffen credit terms is on the upswing of the business cycle, to say: Wow, asset prices are really climbing; we should not be originating any 80 percent or 90 percent loans. Instead we get Barney Frank calling for Fannie and Freddie to roll the dice. The time to relax credit conditions is right now, when asset prices have tumbled for a couple of years and aren't likely to decline much more. Instead we get the Dodd-Frank bill that stiffens credit standards with impenetrable regulations.

There's a way forward here, but it isn't some new simple-minded target for the Fed. What we desperately need is for the financial system to be run by leaders like old J.P. Morgan who really know what they are doing. Politically-connected chaps like Alan Greenspan and Ben Bernanke just don't cut it.

Three Big Problems

2011-10-27T09:56:00.000-07:00

In a way, the Occupy Wall Street protesters are right. Wall Street is the epicenter of our problems. But not in the way the protesters think.

Actually, the left has rigidly determined to misunderstand everything about the modern era. The interesting question is Why. Why would they be so superstitiously determined to call this age of prosperity and opportunity a monstrous age of exploitation?

The big problems we face today are a consequence of the vanity of the current ruling class, the educated elite. Our present rulers began in the middle of the 19th century as a moral witness against the huge dislocations of industrialization. That was a useful, if widely overblown critique. The industrial revolution was and is rough and tough, just like Major Bagstock. But then any transition is rough and tough, J. B.

The great mistake the modern educated elite made was that it wasn't satisfied with moral critique. It wanted to get its hands on the levers of political power. One thing we know in the modern age; the combination of moral and political power is a recipe for disaster. Then it gets worse. Pretty soon, when you combine political and moral power, you find it is not enough, so you decide to get your hands on the levers of economic power as well. Then you have totalitarianism.

It is telling that there is idle talk among the Obamis about the need to postpone elections. They just don't get it.

So let's get to the three problems.

Government is lousy at pensions, health care, education, and welfare. Government is only good at things that require force, like policing and warmaking. They are lousy at everything else. On pensions, they have turned savings programs into vote-buying programs, On health care they have tried to regulate the details when the details, indeed the whole system, keeps changing. On education they have turned teaching into a pension program, and gutted the learning. On welfare they have broken up the low-income family.

Government is lousy at finance. There is an argument for government getting control of the financial system. But only during a war when government ought to have access to every instrument for winning the war. But in all other times, government is a financial pest, because it manipulates the financial system to buy votes with low interest rates and subsidies and it abuses its debt issuing power until it ends up in debauching the currency and/or defaulting on its sovereign debt.

Government is lousy at long-term anything. It is comical that politicians and their bribed apologists like to criticize business for short-term thinking. Politicians are worse. Government really cannot be allowed to do anything long-term, because it loses interest after a couple of years and then the special interests and the crony capitalists take over.

The Occupy Wall Street folks are right that Wall Street is a problem. But only as a symptom of the bigger problem, that government is a failure and it always tries to paper over its failures with debt. And Wall Street is where you go when you need to issue debt.

Every politician needs a friendly banker. And that's the problem.

Never Mind Who Lost Arabia

2011-10-26T11:11:00.000-07:00

Before we start arguing about "who lost Arabia" let us revisit the previous argument over "who lost China."

When Mao won the half-century civil war in China after the collapse of the Manchu dynasty, the reaction in the US elite was to argue about who allowed Mao to win. As it happened, it didn't matter. Mao managed to make China into an economic midget with his crazed socialist plans. He managed to wreck China on both socialist fantasies: first, that a political elite can manage the economy better than business people, and second, that political activists running around annoying people are anything other than a nuisance. The first fantasy wrecked China in the Great Leap Forward and the second fantasy wrecked China in the Cultural Revolution. Mao's great achievement was to utterly discredit the lefty menu and clear the decks for Deng Xiaoping to inaugurate a capitalist economy and an economic takeoff.

When we look at the "Arab Spring" and start arguing about whether Bush or Obama made it worse, we are missing the point. The peoples of the Middle East have to figure out how to get out of the economic, political and cultural mess they are in. Whatever they do it is obviously going to be uncomfortable for us in the West. In Tunisia, the election Sunday produced a victory for the main Islamic party and for moderate parties that ran on accommodation with the Islamists. Does that mean that Tunisia will now go on a rampage and try to eliminate Israel? Maybe, but if it does the US has the power to help Israel stop it.

What about Egypt? Well, the Muslim Brotherhood might win power and it might want to go on a jihad in the Middle East to restore the glory of Egypt. And that means they might use Israel as a foil. But if they do, the US has the power to stop it.

The fact is that almost every political regime that takes power after a revolution tends towards aggressive behavior. The Brits won a global empire in the century after the Glorious Revolution. The French invaded the rest of Europe after their Revolution. And the US conquered a continent after the Revolutionary war. We should expect the same from the Islamic revolutions and develop plans to contain any aggression that damages our interest.

There is one problem for the Islamic forces if they plan on conquest. War needs money, and the way you get money in the modern era is to have a thriving modern economy. That is something that is sadly lacking in most of the Islamic world, in particular in Egypt.

Let us look at Iran, which spent the ten years after its 1979 Revolution in a fruitless war with Iraq. For all its meddling, what has it achieved? Anyway, at 30 years after its revolution the revolutionary generation will be soon dying out. Normally, the fiery revolutionaries get replaced by less impressive time servers.

The bigger threat from Islamism is the migration of the Islamic peoples into Europe where they are inheriting the rotting corpse of the welfare states. Over the past half-century the native peoples of Europe have seemed too materialistic to suffer the costs of childbearing and childraising. There is a cost to that. It means that someone else will inherit the future.

You Must Remember This

2011-10-25T09:33:00.000-07:00

It's 31 years ago now. I remember the moment exactly, driving home from work in the summer of 1980. Ted Kennedy was delivering "The Dream Shall Never Die" speech, and it terrified me. How could the lightweight Ronald Reagan ever win against rhetoric like that?

The answer then, and probably now as well, is that Americans aren't persuaded by left-liberal class warfare rhetoric. It makes them want to upchuck. And anyway, back then the "lightweight" Ronald Reagan beat incumbent President Carter in a landslide, and went on to become America's most beloved and successful president since whenever.

That's what David Brooks is saying today in "The Fighter Fallacy." It is one thing to promise big government when Americans trust government, and back in the middle of the last century, about 70 percent did. Today, "only 15 percent of Americans asked said that they trust the federal government to do the right thing most of the time." Writes Brooks:

This is a problem for Democrats. But Democrats can win elections in this climate if they defuse the Big Government/Small Government ideological debate.

Bill Clinton did it with the Third Way, and snuck a bunch of liberal policies through. Barack Obama did it in 2008 as the post-partisan candidate. Then he governed as the left-liberal president.

After the 2010 election Obama tried compromise with the Republicans (he did?) but it didn't work. So now he is running as a fighter.

If Obama were a Republican, he could win with this sort of strategy: Repeat your party’s most orthodox positions and then rip your opponent to shreds. Republicans can win a contest between an orthodox Republican and an orthodox Democrat because they have the trust in government issue on their side.

In other words, "The Dream Shall Never Die" won't work today either.

And then there are the facts, or rather the myths. John Hawkins has an article on five myths the Occupy crowd believe in. He does it well, but I've boiled it down further.

Wall Street Created Housing Bust. Oh no kiddies. The government did it. They told banks to lend to bad credit risks or they might have an "accident." Now the whole economy had an accident.
Obama hates Wall Street. Yeah, I've got a bridge to sell you.
Iraq War created deficit. CBO says war cost $709 billion. Doesn't seem so big any more after the bailouts and stimuli.
GOP wants to kill SoSec, Medicare. However much GOP hates old people, there's a $100 trillion hole there that won't get filled by class warfare.
Tax the Rich. Sorry chum. Not enough money there to make a difference.

The Occupy chappies also believe the government should forgive their $1 trillion in student debt. Sounds like a real vote winner among the young set. But probably poison to the other 99 percent.

Too Little Too Late on Housing?

2011-10-24T10:14:00.000-07:00

With the news that the president will announce a plan to make it easier for homeowners to refinance their underwater mortgages and a Larry Summers article boosting the idea in the Washington Post it is clear that the Obama administration is "doing something" about the housing meltdown.

Just how much it will help is a good question. After all, if the government lets underwater borrowers refinance at lower rates then it is forcing the bankrupt GSEs like Fannie Mae and Freddie Mac back to subsidizing high-risk debt. The only way that we will finally get out of the mess is when the market clears and the foreclosed homes are no longer hanging over the market and home prices start to climb.

Larry Summers, at least, has a good idea. It is nonsensical for the government's conservators at Fannie and Freddie to stiffen their lending requirements at the bottom of the business cycle.

[C]redit standards for those seeking to buy homes are too high and too rigorous. The characteristics of the average successful applicant in 2004 would make that applicant among the most risky today. The pattern should be the opposite, given that the odds of a further 35 percent decline in house prices are much lower than they were at past bubble valuations.

That is a universal problem. People are wildly optimistic at the top of the business cycle and pessimistic at the bottom of the cycle. The risks to lenders are highest when asset prices are high after a strong run-up, and lowest after a substantial decline. If government has a role to play in credit, it should be to lower credit standards at the bottom of the cycle and raise them as a bubble develops. If home prices increase by 20 percent in a couple of years, then lenders should stop offering 80 percent mortgages and crank back to 75 percent or 70 percent. But try telling that to geniuses like the Sen. Dodds and Rep. Franks of the world.

The administration's moves seem to have moved the homebuilder stocks a little. But I wonder if it isn't all too little too late for the president and his reelection. Even with these efforts at tweaking the housing market the economy is hardly likely to be a barn burner by next summer. If Obama wanted to run on the economy, he should have had the economy in good shape by summer 2011 at the latest.

The president and his party are paying for the mistakes of 2009. They thought back then that it was first and ten, and they could fix the economy and enact the liberal agenda at the same time. They were wrong; it was first and twenty on the five yard line, and now they are reduced to a Hail Mary on fourth down with a quarterback not known for his strong arm.

Steve Jobs and the Coolness Factor

2011-10-21T10:02:00.000-07:00

Now they tell us. Steve Jobs apparently told Barack Obama in 2010 that he was on track to be a one term president. From HuffPo:

"You're headed for a one-term presidency," he told Obama at the start of their meeting, insisting that the administration needed to be more business-friendly. As an example, Jobs described the ease with which companies can build factories in China compared to the United States, where "regulations and unnecessary costs" make it difficult for them.

Jobs also criticized America's education system, saying it was "crippled by union work rules," noted Isaacson. "Until the teachers' unions were broken, there was almost no hope for education reform." Jobs proposed allowing principals to hire and fire teachers based on merit, that schools stay open until 6 p.m. and that they be open 11 months a year.

But Jobs offered to author campaign ads for the president in 2012. So here's a question. Just how bad would it have to get for the cool kids like Jobs to vote for a Republican? Here was Jobs, who lived and worked in the most anti-business state in the Union, yet he obviously went to his grave a Democrat.

We know why, of course. Democrats and liberals have managed to define Republicans and conservatives as narrow-minded bigots, "anti-science," racists, and bitter clingers. So they have persuaded generations of Jobses and "economically conservative, socially liberal" educated people that Republicans and conservatives are radioactive extremists.

Jay Cost describes how this process of political irradiation works. He calls it "front-lashing." Here's how it got Harry Reid reelected to the Senate in Nevada even though Nevadans were both anti-Obama and anti-Reid.

A solid majority of Nevada voters disapproved of both President Obama and Senator Reid, yet the latter was able to win a secure victory. The reason? A decisive minority of this group found Angle to be unacceptable. She only won 78 percent of the Obama disapprovers and a terrible 82 percent of the Reid disapprovers.

Over 90 percent of the Obama/Reid approvers voted for Reid. Only 80 percent of the Obama/Reid disapprovers voted for Angle. "A staggering 45 percent of voters thought that Angle's positions were "too conservative," and 75 percent of them voted for Reid.

Obviously, Cost writes, the Obamis are going to be trying this strategy.

Any time you hear the Democrats squawking about how the Republicans are “anti-science,” that’s the frontlash in action. The goal is to tag the GOP as a bunch of flat earth throwbacks who are too extreme for the independent swing voters to support.

Notice that in 2008 it was difficult for Republicans to play this game by painting Obama as "too liberal" without running into the race card, especially as Obama was presenting himself as "post partisan."

It really is about time that conservatives broke out of the box we've been put in, and start to define liberals as narrow-minded and intolerant and anti-science. It's not as if there's no evidence to prove it, e.g., political correctness and climate "science."

Some day we conservatives are going to have to get Steve Jobs and the cool kids back on the side of conservatism. After all, conservatism ever since Edmund Burke has been a moderating influence against the craziness of modern secular religion, from Jacobinism to Communism to environmentalism. What could be extreme or uncool about that?

Economy 2012

2011-10-18T08:49:00.000-07:00

The big question for the economy in 2012 is the impact of QE2. That's the Fed's huge money-printing operation that ended in the middle of 2011. How big?

The Fed's response to the 2008 meltdown was QE1. The Fed increased the monetary base from about $0.8 trillion to $2.0 trillion, more than doubling it. Then in QE2 the Fed increased the monetary base further from $2.0 trillion to $2.7 trillion where it now stands.

The question for ordinary Americans is what happened to the actual money supply. Back in 2008 the M2 monetary aggregate stood at about $7.7 trillion. The first monetary burst took M2 up to $8.5 trillion, a 10 percent increase. Then M2 flatlined for about six months before resuming "normal" growth. In the last three months it has ballooned from $9.0 trillion to about $9.6 trillion in response to QE2.

Of course, M2 has not increased in proportion to the increase in the monetary base. This shows that people really are "deleveraging" and reducing their debt load. But in the end the increase in the monetary base will feed into M2.

Generally speaking the nominal GDP growth (i.e. GDP growth including inflation) is reckoned to parallel M2 growth, with a lag. Thus, the M2 pulse at the end of 2008 yielded a bounce by mid 2009. And so we should expect the QE2 money pulse to boost GDP starting about now.

But the question is whether the monetary pulse will result in real GDP growth or just a pulse in inflation. If it results in real growth, it will lead to a hangover a year later, just when the next administration is inaugurated. If the pulse just feeds into inflation then we will not see any real growth next year but just price increases, particularly in food and fuel.

President Obama is clearly setting up his campaign to run against economic villains. We have had millionaires and billionaires and Wall Street thus far. Can Wal-Mart and Exxon be far behind, as food and gas prices balloon?

The ugly truth about the economy is that it is never the fault of corporations. The government sets the rules for commerce, from Wall Street to Main Street. The government controls the money supply; the government makes the regulations; the government awards the market-distorting subsidies; the government hands out entitlements to its supporters.

Then the government blames Wall Street, banks, and corporations when things go wrong.

What a world!

Will Obama Benefit from OWS?

2011-10-17T10:12:00.000-07:00

When the president of the United States does something, even if it is stupid, his action benefits from the aura of the office. So when the president launches into a full-throttle Occupy Wall Street class warfare campaign, even the most hardened opponent has to wonder: Does he know something I don't know?

After all, there is a reason why politicians are very careful about choosing their enemies. When you get attacked, it wakes you up. It makes you angry. It prods you into getting an opposition organized. No politician wants that. He wants, if possible, to put the opposition to sleep.

So I've been watching the daily Rasmussen Reports daily Presidential Tracking Poll, looking for changes that might reflect reactions to the president's class-warfare campaign. Frankly, I don't see any results. Not yet.

If you look at the Total Approve number, it started declining during the Debt Ceiling debate, and has flatlined at 43-45 percent ever since.

If you look at the Strongly Approve number, it has been in steady decline since the start of 2011, and seems to have flattened out at 21-22 percent since the beginning of September. So is this the effect of the class warfare campaign, that it has stopped the erosion in the president's base support? Big Deal!

If you look at the Strongly Disapprove number, it had declined from about 43 percent at the end of 2010 to about 36 percent by May 2011. But during the Debt Ceiling debate the Strongly Disapprove numbers strongly rallied back to 43 percent. Since the beginning of August the number has flatlined at 42-43 percent.

I don't know what the Obamis see in their polls. But I'd say that whatever it is they are doing, it isn't working.

Looks like the old Clinton campaign slogan still applies. It's the economy, stupid.

A Test of Class War

2011-10-14T10:01:00.000-07:00

Republicans rail at Democratic "class war" rhetoric. That makes sense because the Republican Party is a resolutely middle-class party. Republicans, who are mostly neither rich nor poor, think that class-war politics is likely to damage the prosperity of the corporations they work for or the small businesses they own.

But maybe President Obama is on to something. Maybe he can pump up the rage of the unemployed and win the election with it.

The problem is, of course, that the experts all say that you can't win an election merely turning out your base. You have to win the moderates, the independents.

Here's Jay Cost writing that President Obama can't win without the independents, and right now he has 35 percent support from independents. Jay Cost proposes a thought experiment.

[L]et’s conduct a little thought experiment. Suppose that the same percentage of Republicans, Democrats, and independents turn out in every state in 2012 as happened in 2008. Let’s also suppose that Obama does as well with Republicans and Democrats, but with independents he suffers a 17 percentage point decline in every state (which is in keeping with his dropping from 52 percent support among independents on Election Day 2008 to 35 percent today). What would that election look like?

It would look like 2004, and the Republican would win with 50.5% of the vote. But that scenario is really too generous to the Democrats, he reckons. More likely, Republican "soft partisan" vote will swell and the Democratic "soft partisan" vote will shrink in 2012 when compared to 2008. On that scenario the Republicans win in a blowout with a 10-point lead in the popular vote.

Then there are the Catholics. Colleen Campbell details how in numerous instances the Obama appointees have pressed Catholics on sensitive issues, from abortion to adoption to traditional marriage.

A candidate who won their support by pledging to respect the religiously grounded views of those with whom he disagrees has morphed into a president whose administration relentlessly attacks religious liberty.

The fact is that President Obama and the Reid-Pelosi Congress has done nothing for independents. Stimulus, ObamaCare, and cap and trade were all about throwing money at the Democratic base. Yet now the president is running for reelection by ginning up the Democratic base.

Does he really think he can raise enthusiasm on his side without waking the sleeping bear on the other side?

The problem with big government is that it amounts to a kind of secular religious state. In every big program it is pushing secular religious morality and repressing traditional religious morality. Liberals absolutely hate the right "legislating morality." But they seem to be clueless about their own agenda. And that boils down to "legislating liberal morality."

Everyone except liberals hates it when liberals legislate morality. So that's why I wonder about Obama and his class-warfare campaign for reelection.

Where's the Astroturf?

2011-10-12T10:13:00.000-07:00

When the Tea Party emerged in the winter of 2009 and staged numerous Tea Parties across the United States on April 15, 2009, the reaction of the liberal elite in the media and in politics was uniform. It was contemptible and it was anyway, as Nancy Pelosi said, astroturf.

That is, the demonstrations were ginned up by the Republican Noise Machine and were not authentic grass-roots political activism.

Now that the Left has taken to the streets in the Occupy Wall Street movement, the Right is quick to discover a guiding hand in the movement from the Obama campaign and from labor unions.

Who is right? Who knows?

All I can say is that the Tea Party activism was a surprise to me. In the winter of 2009 I experienced the Republican/conservative coalition preparing to hunker down, ready to compromise as necessary with a popular new president and his agenda. I think the "Republican establishment" was initially taken by surprise and confused by the Tea Party, and also worried that Tea Party extremism might compromise their ability to appeal to the moderate middle.

Yes, but what about the Koch brothers? Yeah, well what about George Soros?

It makes good left-wing copy to conjure up a movement organized by the Koch brothers, but if you want reality, not a conspiracy theory, you have to recognize that the Koch brothers have been funding libertarian think tanks for decades, and were probably taken by surprise as much as anyone. But once the Tea Party emerged, they were glad to help and organize. Hey that's politics.

But what about the Occupy Wall Street crowd? How close are they to the liberal establishment, and more significant, how close to the Obama campaign?

My guess is: a lot closer than anyone is letting on. It's curious, isn't it, that the Occupy Wall Street demonstrations started just after the president committed to a class warfare campaign with a jobs bill that was designed to be indigestible to Republicans.

I'm not arguing for a conspiracy here. Its just that the relations among the various groups on the left are a lot closer than on the right. It starts right with the notion that on the left politics is everything, and that the whole point of politics is to mobilize the marginalized and raise their consciousness with organizing. That's the point of the president's brief internship as a "community organizer."

The bigger question is whether all this street activism will work? That remains to be seen. On the right we tend to believe that left-wing street activism is all about the sacred rituals of the "over" part of the over-under coalition we know as the Democratic Party. Our liberal friends see themselves as altruistic and idealistic leaders of the marginalized and the exploited. They do not stop to ask whether their enlistment of the poor into their political army is not a mere cynical exploitation of the poor to prop up liberal power.

What does the American people want? Ask me in December 2012.

A Tale of Two Tariffs

2011-10-11T09:29:00.000-07:00

Back in the 19th century the Republican Party rode to victory, election after election, on the Tariff. It was common sense, really. By charging a fee on imports we Americans could make imports from decadent Europe a little more expensive and help boost American jobs and wages.

It all worked like a charm until the economic Armageddon of 1929-33. Then the Smoot-Hawley tariff helped bury the Republican Party for a generation.

That was then; this is now. Now the Democratic Party is reaching the end of the line on their Tariff. The Democratic tariff is not a tariff on imports. The Democratic tariff it is a tax on jobs.

Think about it. If you are a "job creator," as we Republicans like to say, you find that when you pay a new employee you must also pay the government for the privilege. There's the 7 percent payroll tax, the 1 to 6 percent unemployment tax, the premiums on the state's workers' comp. program. It could add up to a 20 percent tariff that you pay the government on each dollar of each worker's pay. Then the worker pays their share of the payroll tax, plus income tax if they earn decent money. That's another tariff, another tax on jobs.

But hey, it's just common sense, right? We have to fund the government's social insurance programs for retirement, health care, and unemployment compensation somehow. Right?

Back in 1937 when Social Security taxes first started the tariff on jobs was one percent on the employer and one percent on the employee. And only the rich paid income tax. The big 1937 recession was probably not caused by the new FICA tax, but by the 1935 Wagner Act that resulted in huge boosts to union wages.

But now that the tariff on jobs--on ordinary low wage jobs--is hitting 20, 30 percent... Well, just think back to the days of the Smoot Hawley tariff, when tariffs on imported products reached almost 20 percent.

Economist Deirdre McCloskey writes:

“‘Jobs’ are deals between workers and employers, and so ‘creating’ them out of unwilling parties is impossible. The state, though, can outlaw deals, and has.”

Let us expand this notion. If "Jobs" are deals between workers and employers, then "Products" are deals between producers and consumers. Everything the government does to get between workers and employers or between producers and consumers is going to sour the "deal." Whether it's a tariff on an import, or a tax on a job, it makes the deal less attractive to the parties to the deal. At some point, they are going to say: "screw it, the deal is just not worth it."

So now tell me that the Obama administration, intent upon raising the tariff on labor, is as smart as they say it is.

Let's Make the Payroll Tax Cut Permanent

2011-10-10T10:14:00.000-07:00

Conservative talk-show host Michael Medved is worried that President Obama has a plan to make the current payroll tax cuts permanent and make up the difference on higher income tax rates. The president has already tipped his hand that 2012 would not be the right time to "raise middle-class taxes".

[T]he new low rates in payroll taxes for every American household, from 6.2 percent in 2010 to 3.1 percent in 2012, won’t suddenly evaporate at the end of 2012; they will become permanent almost inevitably, shrinking revenues not by $240 billion in a single year but by at least $2.4 trillion over 10 years.

But I say: Bring It On.

The current payroll tax, falling heaviest on wage earners, is part of the system of political defense in depth for Social Security and Medicare. It preserves the illusion, promulgated first by FDR and believed by many Americans, that Social Security and Medicare are insurance programs. I paid into the trust fund, Americans say, so I got my benefits coming.

But if politicians cut the tax so that it clearly is no longer funding Social Security properly, then the inconvenient truth starts to emerge, that Social Security is really a welfare program. Then, of course, the sacred aura surrounding the program starts to fade away. People might start to say: how come those Latinos down in Chile got a genuine savings program and we just have this joke of a welfare program?

Yeah. Let's raise income tax rates. Let's screw the rich. But the problem is that US tax rates are already pretty high by international standards. If we make them higher then people are going to start serious tax avoidance, and maybe even move to more friendly tax regimes. And the higher you make the rates, the more that it pays people to pay politicians to carve out crony capitalist exemptions and deductions.

And there is another reason. One of the ways that Democrats prospered in the 2000s was that the professional middle class was doing well, tax wise. Taxes on wages were moderate, and tax rates on capital were reduced. The result was that upper-income people did not need the Republicans to represent their interest and started to dwell more on the embarrassing religious enthusiasm of the downmarket social conservatives.

President Obama's interest in taxing the wannabe rich is going to concentrate the minds of the "economically conservative, socially liberal" educated professional classes. And that won't add up to votes for our Democratic friends.

"Care About" or "Care For"

2011-10-07T10:43:00.000-07:00

The eternal complaint about the government is that the government doesn't care, and so politicians are always anxious to present themselves as caring. The pollsters are always asking the question to voters: "Does the government care about people like me?"

So Peggy Noonan listening in on a couple of focus groups hears this:

What do they want in a political leader? Someone who cares about "Jane Doe on Main Street that can't pay her electric bill." Someone "with passion not for himself but for America."

The problem is that it is a short step from a leader "who cares about me" to a government that "cares for me." But this is actually a big step. It is the step into slavery. Robert Lacey and Danny Danziger tell how this worked in England in The Year 1000. Slavery back then could be a penalty for crimes ranging from "certain types of theft to incest." And, of course, you could be captured by the Vikings and sold into slavery. But you could become a slave by your own act.

People also surrendered themselves into bondage at times of famine or distress... [I]n the year 1000 the starving man had no other resort but to kneel before his lord or lady and place his head in their hands... It was a basic transaction--heads for food.

When a free man places his head in the hands of his lord he gives up his freedom, his birthright, in return for a mess of pottage. He no longer wonders if his lord "cares about" him. He has changed the relationship. Now his lord must "care for" him and provide his food.

In reality this boundary is not as clear cut as it might seem. You can see this in the way that ordinary people in Peggy Noonan's focus groups think about the role of the banks in the mortgage meltdown.

Who are the culprits behind our economic calamity? "The banks and the people who took the loans." But more the banks, because they had, as one woman put it, "the authority." When they gave out the loans, people thought "it must have been OK." People were "lured in" by the banks—don't worry, home values will keep going up—which pocketed the fees and kept walking.

I've noticed that a lot of people think this way. The bank has responsibility because they shouldn't have loaned to me if I couldn't pay. The whole authoritarian welfare state, of course, is built upon this equivocal attitude to freedom. Employers don't just have a responsibility to pay you, but to provide benefits. Corporations are supposed to act not just as purveyors of products and services but "give back" to the community.

This subordinate attitude, so encouraged by our liberal friends and the mainstream media, would have seemed shameful to the sturdy folk in George Eliot's Adam Bede. In the English Midlands of 1800, Adam Bede is a modest carpenter, and believes that his work is part of his religion, "that good carpentry was God's will"; he is the perfect expression of Max Weber's Protestant ethic. Adam looked to himself and his interpretation of the Bible to guide his life. There is not a whisper of subordination in his character, or in the remarkable character of Dinah Morris, a twentysomething lay Methodist preacher and textile worker. These people of the Great Awakening lived a culture of deep moral inquiry and personal responsibility. They did not think to blame others for their troubles, and they had plenty of them.

Our time is a time when the "care for" culture of the authoritarian welfare state is collapsing in moral and actual bankruptcy. There is a simple reason for the collapse. Government is force. Government does not care for anything except its power. Government must "care about" its people, because their prosperity is the foundation and the reason for its existence. But when it pretends to "care for" its people then it enters a wilderness of mirrors.

Conservative Jonah Goldberg, jokes that too many of our liberal friends believe in a government that is a "non-hierarchical, consensus-based, extremely deliberative form of direct democracy." In their confusion they grasp a truth. Humans as social animals prize as an ideal a society that is non-hierarchical, consensus-based, and deliberative. But government is necessarily hierarchical, and its consensus is always something of a sham. Because when the majority votes a bill into law after due deliberation, it votes to compel the losers to obey the new law. Government is force, and always will be.

Unions, Soros Join "Occupy Wall Street"

2011-10-06T10:15:00.000-07:00

Back in the 1960s the New Left used street protest to oppose the Vietnam War. They brought down a Democratic president and helped elect a Republican, Richard Nixon.

In the 2000s the Angry Left, assisted by capitalists like George Soros, the mainstream media, and the Democratic Party, took to the streets to oppose President George W. Bush and everything he stood for.

Now, with the Occupy Wall Street movement, we see the Democratic Party use street demonstrations to support an incumbent president. And George Soros and the labor unions are along for the ride.

With sympathetic reporting on the protests from the mainstream media, we must assume that President Obama is backing the protests as part of his Soak the Rich reelection strategy. It shows that he really is a movement leftist, as his conservative critics have charged, and really lives his community organizer values. Left-wing protest is what he knows; left-wing protest is what he does. So he has decided to live or die by the street protest.

Just one thing, fellas. When the Democratic Party last tried this in the late 1960s the American people hated it. The liberals and the mainstream media all fell over themselves about the wonderful "kids" demonstrating for a just and liberated society. But the American people went the other way.

In fact, the protest era of the 1960s and 1970s ended the Democratic Party's reign as the Everyman's party. That's because for the American people, as opposed to rent-a-mob activists, the economy and the country must work for them to prosper and thrive. It may be tremendous fun for "students" to create mayhem in the streets, but ordinary working people need to get back to peaceable work. The people most upset by the Wall Street protests are the retail business people in the area (often immigrant minorities) trying to run a business.

In a way, I feel amazed. President Obama and his people can't really believe that they can get reelected this way. By sending left-wing demonstrators into the streets? By making the American people afraid? If it works, they will be geniuses.

But my money says that President Obama is creating a gigantic opening for the Republican Party to take and hold the center ground of American politics. One big reason: Women. Politicians in recent years have avoided calling people into the streets because they know that women hate that sort of thing. Women hate street fighting. They like to see politicians that get together and discuss their dilemmas and all agree to get along. Candidate Obama of 2008 was a politician who was all about people getting along and getting past the childish partisan games of the 2000s.

What has changed since then? The answer is Obama himself. Back then he was the cool challenger, and everything was going his way. Now he is the embattled incumbent and things seem to be falling apart.

When pilots experience an emergency, they go with their training. That's why the airlines do tons of emergency training. When something goes wrong, the pilot doesn't have to think, he just applies his training.

That's what President Obama is doing in the current emergency. He is going back to his training. And his training is in left-wing grievance politics. The problem is that his training doesn't really apply to the welfare state in crisis with failed programs, massive debt, and 9 percent unemployment.

So he will make it worse. That is going to cost the US. Big time. And it is going to cost the Democratic Party. Really big time.

Newt's New Contract

2011-10-05T09:30:00.000-07:00

The Contract with America worked for Newt Gingrich in 1994 when he led the House Republicans to their first House majority in 40 years. So why shouldn't it work again?

Presidential candidate Newt has published a 21st Century Contract with America on his newt.org website, and it's a work in progress. But his legislative agenda is ready, and here it is.

Repeal ObamaCare.
Return to robust job creation. with 12.5 percent corporate income tax, zero capital gains tax and death tax, and optional flat tax. Reform the Fed.
Unleash America's full energy production potential. with "all of the above" energy exploration and production.
Save Medicare and Social Security with proper savings and insurance programs.
Balance the federal budget "by freeing job-creators to grow the economy, reforming entitlements, and implementing waste cutting and productivity improvement systems".
Control the border and make English the official language.
Revitalize our national security system.
Maximize the speed and impact of medical breakthroughs "by removing unnecessary obstacles".
Restore the proper role of the judicial branch. Includes replacement of judges.
Enforce the 10th Amendment by transferring power back the states.

You can see what it is all about. It is an "all of the above" recitation of the conservative agenda. Except that it has nothing about the social issues. And no wonder. First we have to get the economy moving and heal the damage that Obamanomics has done to the economy before we try to mend the broken society.

Two points: First, this program represents a kind of consensus in conservative and Republican circles. And really, apart from the ever touchy subject of the entitlements, Newt's contract shouldn't have much trouble with the American people.

Second, every bullet point in the contract is poison to liberals. Everything in it dismantles decades of liberal dreams and liberal legislation. It reminds us that the upcoming election is going to be a real choice, reprising the old Goldwater chestnut about "a choice, not an echo."

As the 2012 election unfolds, I can't help thinking that the Democrats are in a miserable position. You can tell from the actions of their leaders. Here we have President Obama going for a class warfare campaign against millionaires and billionaires, in a country that defines itself as middle class, and we have Majority Lead Reid pushing a vote on a punish China bill. These efforts by Democratic leaders are worse than criminal. They are just stupid.

FoxNews in 2012

2011-10-04T09:03:00.000-07:00

It all began in 1964, according to Jeffrey Lord, when the news media took out after Barry Goldwater, calling him the "rallying point for white resistance" to desegregation. Barry Goldwater?

The man who, during his tenure on the Phoenix City Council and in the Arizona National Guard, helped desegregate all Phoenix schools, restaurants, and the state's National Guard itself?

At the 1964 Republican National Convention in San Francisco, former President Eisenhower couldn't take it any more. He said this to the delegates about the three liberal networks.

The delegates, he said, should "particularly scorn the divisive efforts of those outside our family, including sensation seeking columnists and commentators, because… these are people who couldn't care less about the good of our party."

The Republican delegates reacted instantaneously.

Delegates shot to their feet, shouting furiously, their applause thunderous. Many jumped up on their chairs in decidedly un-choreographed and quite spontaneous rage turning to face their media antagonists, literally shaking their fists at what Goldwater biographer Lee Edwards would describe as "startled anchormen in the glassed-in television booths high above the convention floor."

But it took 32 years before America had its first conservative TV news network. Rupert Murdoch opened the Fox News Network in 1996 and put Republican operative Roger Ailes in charge. Today Fox News earns a little less than one billion a year, and it defines TV news. Now our liberal friends know what it is like to watch political stuff on TV that trashes everything you believe in. Everyone should have that experience. It builds character.

Probably 2008 was the last hurrah of the liberal media, as they jumped in the tank for Obama and, by hiding all the questionable stuff about him, were responsible for electing perhaps the worst president in living memory. Here's a item that illustrates the point. President Obama is not a man that likes to get on the phone with Democratic Senate leaders.

But in 2012 the American people will be desperate to consume political news that tells them how to get out of the horror of Obamanomics, ObamaCare, Obama's truckling to the labor unions, Obama's horrible left-wing racism and classism. Now, with a seasoned Fox News, a teenager at 15, they have a place to go to get the news they want.

That, as they say, is progress.

Peggy Noonan and Narratives

2011-09-30T10:04:00.000-07:00

Peggy Noonan recently got back to LiberalLand after attending a symposium in Colorado and she was struck by the ubiquity of The Narrative.

The Narrative has nothing to do with what is actually happening in the country. That would make too much sense. The Narrative is the story of a candidate or a candidacy, or the story of a presidency. Everyone in politics is supposed to have one. They're supposedly powerful. Voters believe them.

No, no, no, writes Peggy. You can't impose a narrative from above; it bubbles up from below.

Sorry, Peggy. You are talking rubbish. The Narrative is everything in politics. Every leader must learn to tell the story of America so far, and the story of America as it is meant to be. Ronald Reagan was the master of The Narrative, shamelessly appropriating the notion of the city on a hill and the last best hope of mankind on earth for all those who must have freedom. Get the story right, and you've got the election almost sewn up.

But once you get elected then you better make sure that your narrative meshes with reality.

The Democrats have got completely tangled up in their narrative, and none more so than President Obama. Their problem is that they are spinning stories for tactical moves, trying to move the public opinion needle, changing the story every time they speak to a different audience

The whole point of a narrative is to make sense of the world as it is, and as it ought to be. The Democrats' problem is that their Grand Narrative, from Keynes to diversity to evil Bushism is failing. It is failing because it does not explain how the world works. It only shows that the Democrats don't know how the world works.

There is nothing catastrophic about this. Narratives fail all the time. Democrats love to talk about the failure of the Creationist narrative at the hands of Charles Darwin. And talk and talk about it. They talk so much that they don't notice that their own narrative is failing at the hands of a conservative future.

Peggy explains the Democratic obsession with narrative from their misreading of the Reagan era. They thought Reagan's ideas were rubbish, and that he fooled the American people with a good story about Morning in America. OK, they could play that game too.

But the Democrats decided Reagan was rubbish because they had to. They had to believe that in order to keep on believing in their big-government narrative. Reagan showed them that their economic and social ideas were all washed up. They couldn't bring themselves to admit it.

But now the Democrats are about to pay for their delusion, big time, in the court of public opinion and election results.

Every human lives by narrative. But the smart ones know when the old narrative is washed up and it's time to find a new one.

Liberals Always Go Too Far

2011-09-29T09:15:00.000-07:00

Karl Rove thinks that President Obama will have his work cut out for him next year. It's not going to be easy to pivot from base-pleasing class warfare to principled moderate and uniter. Particularly as Obama is badly down with the voters that got him elected in 2008: young voters, Hispanics, and women.

In fact, says Jonah Goldberg, Obama has done the one thing he must not do. He has awakened the sleeping bear of America's innate conservatism. "If you make no sudden moves and talk quietly, you can get a lot done. But if you wake the bear, as Democrats did in the late 1960s and early '70s, the ursine silent majority will punish you." Of course, you could argue, Democrats still got Medicare and Medicaid passed back then, so it was worth it.

Anyway, that was then and this is now. Peter Ferrara thinks that we are looking at a wipeout for the Democrats next year. With the loss of Ted Kennedy's Senate seat, the blowout mid-term elections, and now the loss of an historically Democratic seat in New York City, things are trending worse for Democrats than in the Carter presidency.

Let us be clear. The Obamaification of the Democratic Party is not just Obama. The whole Democratic Party wants to be the party that Obama has made it. It wants ObamaCare, wants swingeing regulation of everything from banks to light-bulbs, wants "green" energy, wants bigger government.

Back to the sleeping bear. It woke up the moment that Obama was elected and it hasn't slept a wink since then. But what does the awakened bear want? John Agresto has an answer.

[T]he fairest nation on earth will be the one that prattles least about “social justice”; that the most neighborly will be the one that least tries to enforce artificial community; and the most compassionate will be the one that most cultivates the qualities of freedom in the souls of its citizens.

The tragedy of the educated class is that it couldn't be satisfied with persuasion, to educate the American people to its modernist religion of equality and peace and justice. It decided that it had to have power as well, to force the bitter clingers to do the right thing. But the combination of religion and politics has never gone well in the modern era.

In America, of course, the combination of church and state is actually illegal. But the educated class attempt to combine its secular religion with the powers of government is obviously worse that a crime. It's a blunder.

Rush! Make the Complex Understandable!

2011-09-28T10:20:00.000-07:00

Yesterday a listener called Rush Limbaugh and riffed on the Elizabeth Warren flap. The hypothetical business owner she cited, benefiting from the taxes and police and fire and roads, wasn't just benefiting from the government. He was benefiting from the labor of the workers he hired. Said Jeff the caller:

He didn't get rich because he dug more ditches than anyone else. He got rich and most people in the country get rich because they've got other people working for them, which means they're selling the labor of these other people for more than they're paying for it. They're paying a guy $8 to dig a ditch, and they're charging somebody else $20 for that ditch. Abraham Lincoln said that "before there's capital there's labor, and all capital comes from work that real human beings do."

This line, Rush was quick to tell his listeners, comes from the Daily Kos, in a January 29, 2009 article, "Abe Lincoln: Pro Labor. Send THIS to your R friends.", boosting the famous stimulus of that winter. The "THIS" in question is an image and a quote from President Lincoln, here, made in his first message to Congress in 1861:

"Labor is prior to, and independent of, capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much the higher consideration."

Rush responded, in due course, that this goes back to the idea that labor is paid less than it is worth.

This guy believes (I'll use myself here as an example) that I am getting rich -- and I'm not admitting that, by the way -- by paying the people who work for me less than what they are worth (not what they deserve, less than what they're worth) and getting rich off of it. Therefore, I am screwing the people who work for me.

Of course, the idea that it is scandalous that a contractor bills his client $20 for a employee that costs him $8 comes from Marx. To justify the intervention of politics into the relation between worker and employer, Marx needs to find an injustice. He finds it in the fact that the worker does not obtain the full value of his labor. The employer gets more than he does by appropriating the surplus value of the worker's product over and above the value of the wages paid to the worker.

Help us out here Rush! Let's come up with a rejoinder to these lefties and Marxists! Let's make the complex understandable!

Here's my take. It is true that "labor is prior to capital." Of course it is. That is why the capitalist must pay the the worker his wages before he pays the bank. Before he pays his taxes. Before he gets paid by his client. Before he pays the bond-holders. And before the chaps that come last of all, the shareholders, the risk-takers. That is the principle of capitalism; it agrees with Abraham Lincoln. The worker gets paid first. The stockholders, accepting the risk proposition, come last; they live off the remainder left after all other stakeholders have been paid. They make profits, or they suffer losses.

The welfare state is different. In the welfare state the non-workers, from Social Security recipients to Medicare beneficiaries to welfare recipients to politicians to government workers, they all get paid first. And if there is enough money left over after all this government beneficiaries have been paid, then the workers can get paid.

In socialism, things are different. There the workers do not come first. They do not come last. In socialism, the only thing that matters is the state. So the workers do not really exist. That is why they often just starve.

Herman Cain's 9-9-9 Plan

2011-09-27T10:05:00.000-07:00

On the face of it, Heman Cain's 9-9-9 tax plan to reorganize federal finances on a three-legged stool, with 9 percent personal income tax, 9 percent corporate income tax, and 9 percent national sales tax sounds like a winner. Remove all the complicated exemptions and deductions and let's get real!

But the obvious question is: who benefits? On the face of it, the rich. Surely they will benefit if high income tax rates and corporate income tax rates come down.

But the 9-9-9 plan also replaces the FICA tax on wages. Right now (forgetting the temporary cut in FICA) the total FICA bite is 15.3 percent. So a moderate income worker is going to get a cut on that (assuming that the worker gets the employer share of FICA).

The 9 percent sales tax will obviously hit the poor hardest. Sales and excise taxes on consumer goods have always been understood to hurt the poor. But maybe the poor will suffer more from elimination of the Earned Income Tax Credit, which can be $2,000 per family per year.

The wild card is the corporate income tax. If you eliminate FICA and reduce and simplify the corporate income tax it is going to have a substantial effect on corporations. That will raise stock prices, but it will also enable employers to bid more for employees. What really is the net effect for ordinary people when you lower corporate taxes?

The problem with a huge change like the 9-9-9 plan is that a ton of people are going to get a windfall gain and a ton of people are going to get a windfall loss. The people experiencing a windfall loss are going to be really upset.

Herman Cain may find that out the hard way in the months ahead.

The New Praetorian Guard

2011-09-26T09:00:00.000-07:00

Every schoolboy knows that, as the Roman Empire aged, its emperors declined from being Augustan gods to being shuffled in and out by the elite imperial guards, the Praetorian Guard.

Maybe Julius Caesar started the rot when he violated Roman law by bringing his army in Gaul across the Rubicon river and marched it into Rome.

As the welfare state careers towards disaster we are seeing the emergence of a new Praetorian Guard. It is the organized mobs of government workers outraged that their over-market wages and over-market pensions are being cut. You do not see dangerous mobs of ordinary citizens in the streets, unless you consider the peaceable and good-natured Tea Party a mob. You see the civil servants in the streets. No doubt the events in Madison, Wisconsin, of last winter will be repeated elsewhere as noble teachers and professors demonstrate their outrage now that their life-time employment and pension deal turns out to be less than gold-plated.

You could have seen it coming. The politicians enrolled these supporters into powerful special interests to help them with their reelection. And now their supporters are demanding that the checks keep coming.

In a perfect world, I'd say to hell with this ungrateful recipients of government loot. For make no mistake, every dollar poured into the pocket of a government worker or a government benefit recipient has been obtained by force.

But reality is not as simple as that.

Our liberal friends have built their supporters up into a formidable political force. That was the easy part. The hard part is going to be persuading these lottery winners that you don't get to win the lottery every day of the year. The tricky thing is going to be getting these folks to retreat without burning the place down as they leave.

Some politician is going to figure out how to do this, and I suspect that the key is understanding that most government employees--nurses, teachers, social workers--are women. Let's face it, women in government, unionized as they are, aren't like the miners and the railroad workers and the auto workers that defined the union movement. Women just don't do rioting in the streets.

Still, a grand betrayal of all the progressive promises is heading right down the tracks. It is essential that the blame is put right where it belongs, on the liberals that promised that government could conjure up wonders.

What a crock. Government is force. If you want to do something practical, something productive and compassionate, perhaps, then you don't get government involved. You rely on the cooperative nature of the social animal we call homo sapiens.

Meanwhile we've got the new Praetorian Guard trying to scare us into coughing up more money, and it's going to get worse before it gets better.

The Patronizing Dr. Warren

2011-09-23T10:04:00.000-07:00

Liberals were famously irritated in the 2000s by the Texas swagger of George W. Bush. You can understand why. Elimination of the male macho personality type is precisely what liberalism is all about. It is male aggression that brought us all those wars, not to mention domestic violence and gay bashing.

Judging by the response to Elizabeth Warren's riff about the wonders of government, it is clear that she represents an equivalent hot button for conservatives.

It is exactly the patronizing professorial attitude so common in liberals like Dr. Warren that drives conservatives to donate thousands of dollars to their favorite conservative candidates.

In fact you could say that both President Obama and Dr. Warren are poster boys for a particular type of liberal, the Pauline Kael type that couldn't understand why Nixon won the 1972 election, because she didn't know anyone who voted for him. They live so completely in a liberal enclave that they never articulate in their speech the least notion that anyone thinks differently or needs persuading to the glory of liberal thought.

The beauty of Warren's comment that "nobody in this country that gets rich on his own" is its gloriously reactionary atavism. She makes the common liberal mistake of conflating society and government. To get rich, she patronizingly says, requires roads, educated workers, police, fire, and the armed forces. No kidding!

Then the pull quote:

But part of the underlying social contract is that you take a hunk of that and pay forward for the next kid that comes along.

Quite right. As the Dalai Lama puts it, we need karuna, a directed altruism of action, issuing from a personal commitment to compassionate action. Obviously that issues from a personal commitment in the individual.

The mistake liberals make that they assume that their compassion, directed into government programs, is the same thing, or the closest thing to real, personal compassion.

But we conservatives know that the liberal notion of government compassion is an atavistic holdover from the old days when society and government were not yet differentiated. In the ancestral village, government is not yet a bureaucracy. Government is the gathering of the elders, carrying the opinion of the whole community. When the community does something it is truly "we."

But in the modern era we have differentiated the spheres of human socialization. We have government as the department of force. It says you must. We have the market economy as the department of stuff. It says we could. We have various religions, secular and transcendent, in the department of meaning. It says we should. We have decided that we need a separation of powers in society to avoid dangerous concentrations of power.

This is not hard. In the modern era when you combine the economy and government you get crony capitalism, as in crony Solyndra, crony LightSquared, and crony Goldman Sachs. When you combine religion and government you get totalitarianism, as in Hitler, Mao, Castro. When you combine religion and capitalism you get liberals bossing business around.

The great problem of the current age is that liberals refuse to understand that their model of expert-led bureaucracy is flushing society down the toilet. Modern society is much bigger than that; there just aren't enough experts to supervise, and there is no way they could know enough to supervise. Modern society is a dense network of social cooperation in which millions of individuals contribute their knowledge and their skills to the whole.

For conservatives, we must resist the temptation to put businessmen on a pedestal. For liberals, they must resist the temptation to put government on a pedestal.

The whole point of modern society is that it is not one big thing that makes it go. It is everything working in concert that makes it go. And until our liberal friends accept that, this country is in for a long nightmare of failure and conflict.

Obama Not Good On Economics

2011-09-22T09:51:00.000-07:00

Now that the dam has broken on the Obama White House, we are getting our first real look at the man and his ideas--without the PR. Says The Money Illusion blogger:

It seems increasingly clear that Obama doesn’t have a good understanding of economics. He approaches issues like a very bright non-economist using his common sense.

This is not good. Because the whole point of economics and, for that matter, physics since Newton is that common sense doesn't do it on economics. It would seem, from common sense, that productivity kills jobs. You replace a man with a machine, and you lose a job. Right?

Economics is the non-common-sense knowledge that says it ain't what you think. The machine releases the worker for other work. And there is plenty of other work to be done. We've seen this process right from the start of the industrial revolution. The workers that manned the textile factories were men that had lost their livelihood on the land. Two centuries ago, about 80 percent of workers worked in agriculture. Now it is less than 3 percent. Then the factories started emptying out and manufacturing jobs started to decline. A century ago, a huge proportion of workers worked in mining, steel, and railroads. Now almost nobody works in those basic industries. Yet overall Americans are much more prosperous than a century ago.

So it matters that President Obama doesn't get economics.

The bigger problem is that he doesn't get that he, or the next guy, is going to be the president that reneges on all the pretty promises about government entitlements. Someone, and it better be soon, is going to have to reverse a century of liberal politics and cut entitlements, cut subsidies, cut labor regulation, cut environmental regulation and stop trying to gun the economy with the credit system. The problem for Democrats is that their entire political existence is built upon entitlements, subsidies, labor "gains", environment, and cheap credit. So if President Obama does fixes the economy he loses his base.

Right now the president seems to be focusing on the need to head off a primary challenge from the left. No doubt once he is sure of the nomination he will pivot to the center.

But the problem for the president that doesn't understand economics is that when he pivots to the center there may not be anyone there. The president has been laying down a record for the last 30 odd months, and that record is spend, tax, regulate. The American people want jobs, jobs, jobs. And they mean jobs in the private sector, jobs that aren't procured by crony capitalism.

Any voter that thinks that Obama will deliver on jobs in the private sector any time soon deserves what he gets.

Buffet's Secretary Betrayed

2011-09-21T10:20:00.000-07:00

Let's accept the argument of Warren Buffet, that his secretary pays a bigger share of her income in federal taxes than he does. Why would that be?

The reason is that his secretary pays payroll taxes and he does not, or at least not so much.

But what are these payroll taxes? They are usually characterized not as taxes merely, but as insurance premiums on the government's social insurance schemes, programs to protect ordinary people from the vicissitudes of life: old age, sickness, and poverty.

So Warren Buffet's secretary pays a ton of money to the government so she can collect Social Security and Medicare. Gee, it's a pity that Social Security and Medicare are bankrupt, so Warren's secretary may not get what she was promised.

But that is not all. Warren Buffet pays a ton of taxes to the government on his secretary's behalf. We are talking about the employer share of FICA taxes and stuff like unemployment tax and state worker's comp. (By the way Warren: Do those business taxes count as her taxes or your taxes?)

Looked at all together these taxes paid either by Warren Buffet's secretary or by Warren himself are taxes to fund the government's social insurance programs. The idea is that ordinary people aren't powerful enough or sensible enough to make provision for old age, for unemployment or to insure themselves against injury. So the government must take taxes from them and their employer in order to give it back to them, less a processing fee.

Is that really true? Are ordinary people not capable of making sensible provisions against the future?

Of course the problem is not just that the government is doing things that people could be doing on their own. Politicians use these programs to make promises to voters. They say: Yeah! We are going to force employers to give you more time off when you have a baby. They also raise the cost of doing business in a dozen different ways. All of these measures are either wages that could have been paid to the employee but have been diverted to a government program, or they just make the cost of hiring people more expensive.

Unfortunately all of these programs are rife with inefficiency and with cheating. It's the free-rider problem, the basic problem of any society. People scam their way onto disability programs. Medical providers scam Medicare. Ordinary honest people get cheated out of a portion of their contributions.

The person I feel for is Warren Buffet's secretary. After all she's not a rich billionaire like Warren Buffet. Whatever happens, he's got enough money to take care of himself and his family. But the ordinary people of the middle class cannot afford to waste resources. like a rich guy. They work because they have to, not because they are brilliant stock pickers. They hope one day to send the kids to college and then to retire. All the wasteful government programs they are forced to fund with their taxes make it harder to make ends meet and to achieve financial security. And the wasteful programs are supposed to help them!

One day, the ordinary middle class is going to wake up and realize that they have been betrayed. They will realize that all the social insurance programs are social insurance in name only. The programs are really just means by which politicians bid for votes. The idea is to buy the votes of people by offering them material benefits. The whole transaction is in the promise and in the vote. If the promise actually gets enacted, if the monies actually help people, it is just an accident. Almost certainly some special interest will get in line to get the money first, and almost certainly the money won't be there in 20, 30 years.

Almost certainly, the ordinary person would have done better to save money themselves rather than let the politicians get their hands on the money.

So the question about Warren Buffet and his secretary is upside down. The question is not whether Warren should pay more in taxes. The question is why his secretary is forced to pay so much.

Why should Warren Buffet's secretary be forced to contribute to so many programs that serve her so poorly?

Obama's Cunning Plan

2011-09-20T09:06:00.000-07:00

Now that President Obama has turned sharp left with his tax-the-rich rhetoric, the question is this.

Is he crazy, or crazy like a fox?

If he's crazy like a fox it's because he and his campaign operatives see the danger of a candidate coming out of the left to challenge him. He needs to keep the left-wing base on side until it is too late to challenge him in next winter's primaries. On that view he would pivot to the center in mid-February and everyone would live happily ever after.

But is there a danger of a serious candidate from the left? A candidate that will challenge America's first black president? I can't see a candidate from the left doing any more than embarrass the president. Might he not be more vulnerable on the right in his party? Such as a Clinton candidacy?

The other possibility is that this is "Baldrick's Cunning Plan," a stupid panicky effort of the kind often proposed by Blackadder's rather slow-witted TV sidekick.

The panic notion is supported by the recent tittle-tattle book about life inside the Obama White House, Confidence Men by Ron Suskind. It's the first solid indication of just what kind of a leader we have in the White House. The New York Times reviewer puts it this way.

Mr. Obama emerges in this volume as an oddly passive chief executive whose modus operandi was to sketch out overarching principles, “wait until others had painted in those outlines with hard proposals” and then “step down from his above-the-fray perch to close the deal.”

If this is true then it tells us that Obama is not a "commander" personality type. It means that he is likely to get confused and overwhelmed when the going gets rough.

When people get in a tight spot they find it difficult to think clearly and decisively. Some people are just good at keeping their head cool in a crisis. Most of us need training so we can overcome our fear when the bullets are whistling by our ears. That's why the military trains its people to act on instinct. That's why people who have studied airplane emergencies tell us that the crew always reverts to their training when the going gets tough. Small wonder that when airlines put their pilots in the simulator they throw emergencies at them.

Now let us think about what President Obama would do in a tough spot. He doesn't seem to be the decisive type. And he doesn't have a lot of executive experience in dealing with tough situations. He would revert to what he knew, his basic belief system, the tried and true. But for President Obama the "tried and true" is the belief system of his left-wing youth and young adulthood.

We have seen peeks at his basic belief system when the president has been caught short by an unexpected question. When Joe the Plumber asked him about taxing the rich, he talked about "spreading the wealth." When Charles Gibson asked about higher taxes on capital gains, he talked about "fairness."

My guess is that the president is getting really overwhelmed, now that things are going seriously wrong with his presidency. So he is instinctively going back to his training and his many years of experience on the left and in the lefty foundation world.

That stirs hopes in me of a blowout election in 2012. We've had pretty close elections in recent years because the parties have been pretty careful not to scare the moderate horses in the middle. But it looks like a panicked Obama might stampede those nervous moderates.

Could we have a 60-40 election in 2012? Don't count it out.

Our "Circumlocution" President

2011-09-19T05:43:00.000-07:00

Back in the dawn of the modern era, in the middle of the 19th century, Charles Dickens nailed modern government in Little Dorrit. Dickens invented the Circumlocution Office, staffed by the Barnacles and the Stiltstockings, and the motto of the office was "How Not To Do It."

Decades from now, I predict, professors will be using the Obama administration as an awful example of "How Not To Do It."

Of course, for liberals, the example will be how the Obama administration managed not to do it to the greedy bankers. There's a lovely piece today from New York magazine, a dialog between Frank Rich and Adam Moss about the new White House tell-all book Confidence Men by Ron Suskind. Their big problem with Obama is that in the chaos of conflict between Tim Geithner and Larry Summers the Obama administration failed to reform the financial system and nail the greedy bankers. That's the liberal narrative of course, that the financial meltdown was all due to greedy bankers, and Rich and Moss are sticking to it.

For conservatives, of course, the "How Not To Do It" of the Obama administration lies in its liberal folly. It failed to realize that the financial mess required a leaning of government and an all out effort to get the economy restarted. Instead the Obamis went with a wasteful stimulus that mainly went into the pockets of Democratic supporters, and terrified all job creators with higher costs and taxes in ObamaCare and swingeing environmental regulations.

In back of all this is the bigger question, the monstrous betrayal of the American people, the cynical pandering for votes that has left the US bankrupt and will require the reckless promises on health care and pensions to be rolled back.

Then there is the devastating indictment from Reuven Brenner on education.

In fact the much discussed increasing inequality in the U.S. and other Western countries may be, in part, explained exactly by the fact that governments subsidize so extensively high-schools and universities. After all, the best and brightest benefit disproportionately from these subsidies.
If someone is not thrilled about math and the sciences, but is excited to repair cars, and would like to open a garage, the government doesn’t offer him a $50,000 to $100,000 subsidy. Yet the bright kid gets just such subsidy – and more – when studying math, engineering, biology, or medicine.

The problem is not just that the liberal elite has skewed the education system by sluicing money in favor of the kind of education they want for their kids, but that the whole economy is riddled with this privilege and subsidy regime, in which the $500 million load guarantee to bankrupt solar panel manufacturer Solyndra is just the poster boy.

One fine day, the educated class has got to wake up and admit to themselves that they know nothing about the economy or education or anything else, and that their high-handed efforts to make it more fair just ends up encouraging rent seekers to lobby for favors.

I keep saying: it probably had to be like this. The only way for everyone to realize that government is lousy at everything except simple force--keeping the peace--is to have the government try all the cool stuff, from education to pensions to health care to welfare, and then fail miserably at it.

And that is where we are at with this failed "Circumlocution" president. We are in the middle of a great demonstration that government is always and everywhere a great Circumlocution Office, filled with place-holders like the Barnacle family, hanging on like grim death to their sinecures, and pathetically devoted to the practice of "How Not To Do It."

Yes, Conservatives are Radical, Dr. Krugman

2011-09-16T07:38:00.000-07:00

Yes, Dr. Krugman. We conservatives are radicals. I'm glad you noticed. We want change at the root. As you write in your column:

[M]odern conservatism is actually a deeply radical movement, one that is hostile to the kind of society we’ve had for the past three generations — that is, a society that, acting through the government, tries to mitigate some of the “common hazards of life” through such programs as Social Security, unemployment insurance, Medicare and Medicaid.

I couldn't have said it better myself. You see, we conservatives believe that when society "acting through the government" works to mitigate the common hazards of life, it diminishes people and damages society. We believe passionately that society should act to mitigate the common hazards of life. We just believe these things should be done through people, not through government.

Conservatives think that the mitigation of the common hazards of life is one of the basic functions of society, but that society, that is, people working together collectively, must cooperate together to do this.

Conservatives believe that when government is deputized to do this, when these mitigations of the common hazards of life are organized by government force in government taxes and government spending then the whole of society is put at hazard. Humans are social animals, not social slaves.

Social Security: It is common knowledge that Social Security discourages people from saving for their old age. That's a double harm, because it makes people more dependent and it reduces the opportunities for young people created by older peoples' savings. Now it's going broke, and betraying the people it was meant to help.

Unemployment insurance: People that receive unemployment payments don't look for work very hard. After all, it's not their money they are spending. And unemployment insurance costs many employers a bundle. For instance in Washington State in construction it can go up to 6 percent. Imagine if that money went into a personal account for the worker. Unemployment insurance is not insurance; it is an encouragement for free-riders.

Medicare, Medicaid: These programs are going to bust the budget, because the programs give away a lot of free services. The only way to reform them is to get the government out of them and start to make everyone pay for routine care up front. Anyone who, e.g., smoke cigarettes, can afford to pay a little more on their health care.

Viewed from the conservative perspective the great social programs that liberals are so proud of represent a monstrous betrayal. After promising the moon to the workers we are now facing the fact that the promises cannot be redeemed. Modest, ordinary people that put their faith in politicians are going to be screwed.

Imagine: Suppose that Social Security had been a proper savings program from the start. That means that many people of modest means would have saved a significant capital sum that they could pass on to their children. But not with Social Security. Suppose Medicare/Medicaid were true insurance programs with realistic deductibles and co-pays. Why then the grannies would be ferociously shopping for the best prices and the best service. That's a big difference from right now where they care only about the service and not about the price. The two programs are going to eat the budget, so there will have to be cuts, and sooner rather than later. And without the government programs that let prosperous people off the hook, then we could all work together to make sure that people that have come upon hard times "through no fault of their own" could be properly helped.

Worst of all, after the liberal politics of the last three generations we now have an entitlement society where people expect to get a ton of services for free--because it's their right. That is not society. That is looting. The health of any society depends on the amount that people are prepared to put into it, not by compulsion from taxes or from forced labor, but from their own cooperative spirit. Liberals have managed, "in the last three generations" to destroy that cooperative spirit and turn the society of voluntary association into a selfish grab-it-and-go society.

The impression we conservatives get, Dr. Krugman, is that liberals believe that big government programs equal a compassionate society. The facts argue otherwise. In Makers and Takers, Peter Schweizer reports that liberals, people that believe in the welfare state, are less generous at a personal level than conservatives. And less honest. And more angry. In other words, liberals are less social that conservatives. I wonder why.

If you liberals really believe that government spending equals societal compassion, Dr. Krugman, I've got a bridge to sell you.

The Liberal Bigotry Problem

2011-09-15T08:42:00.000-07:00

The lyrics from South Pacific tell it all when it comes to bigotry and hate. Of course that was in the good old days when liberals were noble folk trying to break up the encrusted superstition and bigotry of the ages.

You've got to be taught
To hate and to fear

You've got to be carefully taught.

Yeah. Well that was then. This is now. And now it is liberals that have been carefully taught to hate and to fear. Who do they hate? Why Christians, of course. Not to mention Mormons.

And the fact is that the person nominated in 2012 for President of the United States by the Republican Party is likely to be either an enthusiastic Christian or a faithful Mormon.

Right now I am just finishing up a Teaching Company lecture series by a Smith College professor, Jay L. Garfield, called The Meaning of Life. This 36 lecture series starts with the Baghavad Gita, continues with Job, Aristotle, the Stoics, Buddhism, Kant, Mill, Nietzsche, Gandhi, and the Dalai Lama.

Notice anything missing? Yeah. Christianity. Not to mention Augustine and Aquinas. How in the world could you do a lecture series on the Meaning of life without including these great Christian thinkers? And how can you look at the modern age by just palming off capitalism with the Marxian put-down of "commodity fetishim?"

I'll tell you how. Liberal anti-Christian bigotry. And we are also talking about liberal anti-womanism. Because Christianity is pre-eminently a girl religion, focusing on the perfect relationship between you and God.

Liberal anti-religious bigotry is going to lead them into the abyss in the next few years. Liberals have systematically demolished the normal human modes of social cooperation: family, religion, God. And they have demolished the substitutes for kin relationship like the Moose and the Elks. People are desperate to find effective ways of social cooperation and belonging.

And now that the liberal system has crashed with Social Security and Medicare on the block, and the Great Recession hammering blacks and the working class, the American people are looking for something better than the cold machanical system of the authoritarian welfare state and its permanent class and race war.

But what will they do when a full-on Christian is a nominee for president of the United States?

Another Look into the Abyss for Dems

2011-09-14T09:05:00.000-07:00

It's been obvious for months that Democrats are looking an an annus horribilis next year. Their politics of privilege, their society of subsidy, their legalized looting has elected generations of Democrats to power. But now it looks like it is collapsing, all at once.

Because the government has run out of other peoples' money.

Democrats have pressed every policy button they know, but it doesn't look like anything will change the economy for November 2012. And why should it? Why should business expand and hire when a gigantic tax cliff is coming in 2013, as the Wall Street Journal reminds us.

Democrats are in the same position as the Republicans in 1931. For decades the Republicans had seduced the working man with the protective tariff, telling him that the tariff protected his wages from low-wage Europe. But, of course, when the Progressive era Federal Reserve finance system screwed up in 1929-32 the working man got hammered. And he returned the compliment by hammering the GOP and handing over the keys of the kingdom to the Democrats.

Now the Democrats are facing a similar fate. For years they have promised the average working man that their Social Security, their Medicare, their unemployment and workers compensation benefits would be a solid safety net under the vicissitudes of life. Now those promises are proving to be empty. It's not just that Social Security and Medicare are broke. The problem is that all these benefits hit the economy as taxes on jobs, the payroll taxes that mostly get paid by employers and that make them hesitate before hiring.

Yeah! We'll make sure those stingy employers pay for your benefits! That's what Democrats have told the workers. And it's all a lie. The workers would have done better by saving their own money and buying their own insurance. Because you know what? If they had, then all that money their employer paid in taxes would be their own money, saved in bank accounts and mutual funds and life and disability insurance.

Well, after the special elections on Tuesday, all Democrats now know they are in trouble. Unfortunately for them the US is out of smoke and mirrors. We'll have to get out of trouble the hard way, with work and saving, and cuts to wasteful government programs. There is no other way.

Taxing "Millionaires and Billionaires"

2011-09-13T08:39:00.000-07:00

Now that President Obama has actually come out with a proposal for taxing "millionaires and billionaires" we can get a handle of his proposal. Just how much does he propose to tax those folks who are already at the point where average citizens may ask how much more do they need.

According Carol E. Lee and Janet Hook in the The Wall Street Journal the president's proposal to phase out deductions for those earning more than a taxable income of $250,000 a year expects to collect $400 billion over ten years.

According to the SOI Table 5 (xls) IRS analysis of individual income tax returns, the floor of the top one percent of taxpayers is around $200,000. It's been going down recently, of course, due to the Great Recession. In 2007 to 2009 the Feds collected about $400 billion each year from the top one percent. So the Obama tax increase on millionaires and billionaires, $400 billion over ten years, is going to increase the federal income tax bill on the millionaires and billionaires by about ten percent. The increase is not nothing, and it's not outrageously punitive.

Problem is, of course, that the millionaires and billionaires in question are exactly the people we are counting on to start hiring at some point in the future when they have got off their capital strike. So ramping up their taxes can't really help in the jobs department.

Here's what I think. I think that the Republican House should pass the president's tax increase on millionaires and billionaires. I think they should say: here Mr. President. Here is what you want. Tax the rich. See how many jobs it creates.

Tax-the-rich is pure left-wing politics. It's required for lefties because the left has to believe that it is a lack of tax payments from the rich that is keeping the poor poor. If you don't believe that, and you don't believe that corporations are screwing the workers and the consumers then you don't have a reason to pass swingeing legislation to tax and regulate and crush those evil capitalists and their partners in crime, millionaires and billionaires.

You'd just think that, wow, in the last two hundred years under the reign of the corporations daily income has gone from about $3 to $100 in constant dollars. Somebody was doing something right.

The truth is that left-wing politics is "living by looting" in exactly the same way as the "barons of the crags" once lived by looting the travelers on the alpine passes. The problem is, of course, that when you live by looting instead of working to make products and services for other people, it turns you into a monster. Thus it turns out, according to Peter Schweizer's Makers and Takers, that liberals are meaner and less honest than conservatives. Looting for a living does that to you.

9/12 Plus 10

2011-09-12T08:47:00.000-07:00

I've found myself unwilling to do a 9/11 retrospective. I suppose that's because, for me, conflict is conflict, war is war. 9/11 was not so much an outrage as a marker.

There is--there has always been--violent disagreement about what the world is and what the world should be. And this disagreement is usually conducted by young hot-heads. In our day these hot-heads are the sons of the educated elite. Thus it was that the 9/11 terrorists were mostly the sons of well-to-do Saudis.

Today the world is divided. It is divided mostly between those that are trying to understand the meaning of the industrial revolution and those trying to oppose the industrial revolution. Some people say: there has been a profound revolution in the way that the human race lives its life, due to the scientific and energy revolutions. We need to discover how to live our lives in recognition of that fact. There are others, and many of them live in the West, who say that industrialism, capitalism, and prosperity have combined to divorce humans from their humanness and from God, and that only a violent turn away from democratic capitalism can save us.

In my view, the present democratic capitalism based upon Judeo-Christian culture is the best thing going. Every effort in the last two hundred years to attack it or to substantially restructure it has been a bloody failure. The great religious movements of socialism, communism, and fascism failed after monstrous religious wars and outrages. Now we are in the middle of another religious movement, the Islamic reaction against Judeo-Christian democratic capitalism.

The immediate reaction of the United States government after 9/11 was to ramp up its security apparatus, both foreign and domestic, and we can see now that the results were mixed. At home the government has erected a huge bumbling inspection regime that has humiliated the American people in dozens of ways. Abroad the government has found that wars against Islamist-harboring thug dictators is a lot more complicated than anyone would want.

Domestically, the government seems to think that the only way to protect the American people is to herd them around like cattle. Abroad it has found that military force leaves a horrible political vacuum in its wake. These failures of post 9/11 US policy are not scandalous. All government action is drenched in failure. But there seems to be an important lesson that the US government is slow to learn.

Humans are not cattle. Americans showed, from the first moments after the first plane exploded on the World Trade Center, that they are capable and resourceful in responding to the terror threat. The passengers on Flight 93 understood, from communications with the ground, that they had to stop the flight and they did, sacrificing their lives in the process. They ended the "airplane hijack" era in which hijackers were the actors and passengers were the non-actors. IT was passengers that subdued the underpants bomber. Government policy must pivot to encourage and respect the abilities of the resourceful American people.

In military operations it is clear that military questions cannot be divorced from political questions. And beyond both is the battle of ideas. We westerners must politely but firmly assert our ideas and values against the ideas and values of the Islamic extremists. And that means everyone, from the pope on down.

The result of the great battle between democratic capitalism and socialism has now been won. The two great cultures of India and China were initially seduced by the socialists, the revolutionary communists in China and the democratic socialists in India. In the years since each country abandoned socialism their peoples have vaulted into the democratic capitalist world with an energy that leaves the rest of the world breathless.

The same will doubtless be true when the peoples of Islam abandon their fight against democratic capitalism. We may hope that in doing so they will bring a critique to democratic capitalism that will improve it.

But meanwhile the West must oppose the forces that wish to demolish our democratic capitalism.

Another Laundry List

2011-09-09T08:51:00.000-07:00

Man and boy, I've been watching presidents stand at the rostrum of the House of Representatives for about 40 years. And I'm getting a bit tired of it. Why is it considered statesmanlike to go through yet another a laundry list of warmed over government programs and imagine that this contributes to national welfare?

Here we had President Obama, sucking empty on the sine qua non of any presidency: a healthy economy. And what does he come up with? More subsidies. More spending. More urgency.

The astonishing thing about his speech on Thursday evening to a joint session of Congress is what he did not do. He did not act to relieve the huge costs that government places upon the private sector, the chunk that government takes of every paycheck, of every product sold, of every service delivered. That is what is killing the economy. Reality finally caught up with the progressive game that worked so well for so long. You impose enormous costs upon producers and consumers, distributing favors to your supporters with the proceeds, and then take the credit for prosperity and growth.

Maybe the progressive game still works in normal times. But not after a teeth-rattling financial meltdown.

Yes, Virginia, it's true that government is indispensable to a healthy economy. But its role is stage-setting, providing the property laws, the stable financial basis platform which players in the game of capitalism can rely.

President Obama is still going full bore on his progressive agenda, shoveling out money at Democratic constituencies. His speech was no pivot, but more of the same, throwing good money after bad. It's a measure of the impossible position he's in. He can't do the things he ought to do: reverse ObamaCare, Dodd-Frank, Sarbanes-Oxley, anti-energy regulation. Because if he did that he'd lose his Democratic base. Why? The support for these programs among Democrats is not practical and empirical. It is religious.

In a sad way, Republicans and conservatives can take comfort from the president's speech. Here we are, two and a half years into his term of office, with failures littered all over the political landscape, and he still doesn't get it. It makes you confident about the results of November 2012.

I am starting to believe in a 55-45 America: A 55-45 percent Republican presidential popular vote, a 55-45 Republican Senate, and a 55-45 percent Republican House.

Will Liberals "Go Off the Deep End?"

2011-09-08T08:38:00.000-07:00

Over at the American Spectator the "Green Lantern" worries that liberals will go off the deep end if their Obama loses next year.

Environmentalists, now embarrassed about being arrested in front of the White House for opposing their favorite President's policies, will be right back where they want to be -- throwing their bodies at the juggernaut of the American economy. Young fanatics will be blowing up pipelines and power plants because they are unable persuade 300 million Americans to give up prosperity and live on wind and sunshine.

Really? I don't think so. It's true that leadership Democrats successfully prodded their liberal rank-and-file to protest the whisker-thin victory of George W. Bush in 2000, so that liberals spent eight years in a fantasy-land of "Selected, not Elected", Bushitler and Darth Vader Cheney.

Yes, it's true that liberals have mostly "continue[d] to prosper while moving rapidly toward the angry left." over the past decade. It's true that they all vomit out standard Democratic talking points: the Tea Party is "crazy"; Gov. Walker (R-WI) is "insane"; the president's troubles are all due to "racism". But that's why we have elections.

I recall back a few years ago when the Religious Right got up an initiative to limit abortion in Washington State. It went down 25-75. That was the end of social-conservative politics in the Soviet of Washington. It's amazing what an election will do. If Obama goes down 45-55 in November 2012 it will have a similar effect on liberals, Oh sure, they will snap at you about the asininity of President Perry/Romney, whoever. But they will be cowed. They will be beaten. They won't be staging stupid terrorist tricks, because they will have read the election returns. They may say that the American people are racists or mentally ill. People say things like that, to keep up their spirits. But they will know they are beaten.

In my view, the presidency of Barack Obama is the best thing that could have happened to conservatism. Liberals got to do everything they had ever wanted. They passed the Holy Grail of universal health care. They passed their trillion-dollar Keynesian stimulus. They whacked Wall Street with swingeing new regulation. They flooded the nation with windmills and very fast trains.

And the whole thing flushed down the toilet. ObamaCare is a disaster. The stimulus came and went. Dodd-Frank ended up entrenching "Too Big to Fail" and President Obama is backtracking on draconian EPA regulations.

Don't forget how this all appears to liberals. They thought that with intelligent people, finally, in charge, the nation would turn around from the incompetent Bush years. Teach those greedy bankers a lesson, give the economy a shot of sponduliks, and here we go for reelection. They cannot believe that it has all gone wrong.

But they will. And come 2013, after the liberal annus horribilis, liberals will be sadder and wiser. And a lot less cocky.

CLOUDs in the Cloud Chamber

2011-09-07T09:28:00.000-07:00

The Wall Street Journal's reporter Anne Jolis puts it so innocently. The physicist folks at CERN finally got around to testing the theory of Henrik Svensmark, that cosmic rays (charged particles entering the earth's atmosphere) "seed" clouds by creating cloud pre-nuclei as they speed through the atmosphere.

At the Franco-Swiss home of the world's most powerful particle accelerator, scientists have been shooting simulated cosmic rays into a cloud chamber to isolate and measure their contribution to cloud formation.

Do tell. So, after half a century of particle accelerator chappies using cloud chambers to track high- energy charged particles we have to test whether charged particles entering the atmosphere leave tracks of visible moisture? You mean charged particles out in the atmosphere behave just like they do in cloud chambers? Golly, those physicists are smart.

CERN has notoriously taken over a decade to run this experiment. You can understand why. Confirmation of Svensmark's hypothesis means that climate is driven in large part by the solar cycle. When there are few sunspots, we know, more cosmic rays penetrate to the atmosphere. So if cosmic rays seed cloud formation and clouds reduce the amount of solar radiation reaching the surface of the earth, why, maybe the Little Ice Age, coinciding with a major solar minimum, was caused by excessive cloud formation from cosmic rays. Better soft-pedal that one. We government-funded physicists wouldn't want to tread on the gravy train of our government-funded climate scientist friends.

It looks like the whole climate-change hysteria is reaching the end game. That's why the climate scientists reacted hysterically to the recent Spencer-Braswell article on cloud feedback. Just as well, really. We could use the money to repair the government's balance sheet.

I wonder what the liberals and the environmentalists will come up with next.

When Liberals are the Oppressors

2011-09-06T09:20:00.000-07:00

Liberal ideas were developed in the good old days when landowners, slave owners, and business owners were the bad guys. So liberals developed the notions of protest, civil disobedience, and passive resistance as the means by which the oppressed, assisted by their educated allies, could register their protest against injustice, expose the hypocrisies of the powerful, and win through to a just society.

But now a new justice movement has emerged onto the political radar. Only this time it is not a liberal movement, enthusiastically supported by our liberal friends. Instead this movement, the Tea Party movement, is anti-liberal. It has arisen to oppose the injustices of liberalism.

As you might expect, our liberal friends are not reacting very well. Protest, civil disobedience, mass meetings are one thing when they are used for a progressive purpose. When used by conservatives--even conservative religious women--liberals talk of "incivility", of "terrorism", of racism, and worse.

Over the last week we have seen a ton of bad behavior from liberals on this matter. Exhibit A is probably the head of the Teamsters union, Jimmy Hoffa, who introduced the President of the United States by calling workers everywhere to a war on the Tea Party.

Let's take these son of bitches out and give America back to an America where we belong,

Hey, we all like to throw out red meat to our supporters. But using war metaphors is considered inappropriate for Sarah Palin and the Tea Party. So why is it OK for a labor union leader?

Then there's the remarks of Rep. Andre Carson (D-IN) at a Congressional Black Caucus meeting.

Some of these folks in Congress right now would love to see us as second-class citizens. Some of them in Congress right now with this tea party movement would love to see you and me — I’m sorry, Tamron — hanging on a tree.

Mike Adams, a professor of criminology, is a practiced provocateur. His latest wheeze is to exploit the new federal edict on sexual harassment, requiring vigorous prosecution on campus using a "preponderance of the evidence" standard. So, writes Adams, that means that when an impressionable young woman hears her lefty professor refer to Tea Party members as "tea-baggers," a reference to oral sex, that young woman is clearly being sexually harassed.

Obviously, when a male political science professor dismisses a female supporter of the Tea Party as one who enjoys oral sex, he has offended her. And that falls squarely within the university definition of sexual harassment.

Adams wants this followed up. For either we will get rid of a bunch of obnoxious lefty professors or our liberal friends will suddenly discover that a higher standard of proof is needed in sexual harassment cases.

Nothing here is all that remarkable. It's what you expect from a ruling dynasty when it loses the Mandate of Heaven and finds that the peasants are restless. Agitators! Traitors! Murderers!

Right now I am listening to a grand liberal apology on audio from The Great Courses, The Meaning of Life, by Prof. Jay Garfield of Smith College. We've just got to Gandhi and his non-violent protest against British racism and colonialism. In the rehearsal of Gandhi's life Garfield talks about how the British divided the Indians, religion against religion, caste against caste, even extending to dividing Bengal in 1905. Government should not divide people like that. "Government could not be an institution that allows some people to benefit and others to suffer."

The Greek philosopher George Maroustos once said that you can't tell how good a dog is when it's out hunting. You can only tell when it's being hunted. The measure of liberalism will be how it deals with political and moral adversity, when it is challenged to live up to its values by forces with which it disagrees.

Things are not looking good right now, as liberals find that they are being hunted. Liberals are responding to their troubles badly. My guess is that we ain't seen nothing yet.

Healthcare From the Trenches

2011-09-05T10:51:00.000-07:00

I recently talked with a physician from south New Jersey. He thoughtfully enlightened me on a couple of healthcare talking points.

The 30 million uninsured
A while back, says my friend, a woman physician in south Jersey got a grant to start a clinic that would exclusively serve the uninsured. He helped her getting started with office space in his own clinic. The clinic for the uninsured closed after a couple of years due to lack of business. The truth is that when an uninsured person gets sick they can probably sign up for Medicaid on the spot. So why bother getting insured? An elderly acquaintance from Peru, wife of a retired Lima physician, reports that when she gets health care in the US she never has to pay. Now why would that be?

Those Medicaid reimbursement rates
How, I have wondered, given that Medicaid reimbursement rates are notoriously low and Medicaid patients have trouble getting physicians to see them, do Medicaid patients get their health care? My friend told me. In south Jersey they have recently set up a federal funded chain of clinics to serve the Medicaid folks. How do the clinics get paid, I wondered? They get paid through the usual reimbursement schedules, just like the private docs. But, of course, they also get federal funding. Nice gig if you can get it.

Entitlement mentality
The wife of a friend of mine here in Seattle works in University Hospital and complains that Medicaid patients tend to move in, and often only get discharged after a couple of weeks when the Medicaid coordinator puts an end to their shenanigans. Regular patients with private insurance are whisked in and out in a couple of days. My south Jersey friend has similar experiences. He gets Medicaid recipients that come in and say: Give me the works, doc: MRIs, CAT scans, the whole enchilada! Whatever happened to the grateful poor?

Maybe we should all be outraged by this corruption of the entitlement state. But I am not. It is perfectly obvious to me that any entitlement program or indeed any government program of any kind is bound to be riddled with waste, fraud, and abuse. Government programs are not responding to human need; we have a market economy for that. Government programs are projections of political power: We are doing this because we have the power to do it. In the end all government programs regress into a simple scramble for loot. But at least when Boss Tweed looted the City of New York the city gotuilt a magnificent marble City Hall for their trouble. The monument to our corrupt liberal welfare state will just be the broken lives and gigantic debt it left behind.

Democrats Losing It

2011-09-02T09:16:00.000-07:00

Back in the 2000s leadership Democrats encouraged their rank and file in a lot of smash mouth partisanship. It worked, up to a point, in delegitimizing President Bush and setting up their 2006 capture of Congress and 2008 capture of the presidency.

But the smash-mouth tactics doesn't work so good when your guy is in the White House. That's because while vigorous opposition is a necessary safety valve for the loyal opposition, vigorous attacks on the opposition are another matter. It makes you look like fascist thugs.

Thus, for Cenk Uygur to complain about the president's treatment by Speaker Boehner over his upcoming address to a joint session of Congress is foolish and ignorant.

President Obama has now changed the day of his address to Congress to accommodate the Republicans. They were having a GOP presidential debate on the original date he picked. So, Boehner told him to move his speech. He is the president for Christ's sake. Of course, they should have accommodated him, not the other way around. But as usual, President Obama bowed.

Er, well, no. The president doesn't have the power to order up a joint session of Congress. Congress gets to decide that. That's the whole point of a divided government and a separation of powers.

Then there are the cute "theocracy" attacks on the Republicans. This is a recurring tactic of Democrats; they must think it works a treat. They take the statements of Republican politicians that their religious beliefs inform their politics and inflate them into a secret plan to legislate morality. This is actually part of the whole "Democrats are pro-science" and "Republicans are anti-science" meme. It shows an astonishing ignorance in Democrats for not realizing that their progressive beliefs are in fact religious and not scientific. Everybody brings their religious beliefs to politics; it's just that Democrats bring their secular religious beliefs in socialism and progressivism and statism to the table.

Here is the Washington Post's liberal Chris Cillizza acting dumb about the whole issue.

But here is my prediction. All the smash-mouth tactics being ginned up by the Obama guys are going to fail. The American people don't care about church-state issues this year. They don't care about Speaker Boehner playing footsie with the president. They just want someone to fix this lousy economy. And because President Obama is the president they figure that he's to blame.

Obama's Wet Jobs Noodle

2011-08-31T07:26:00.000-07:00

According to ABC's Geroge Stephanonpoulos, the president's new economic plan for jobs will include three major components.

Tax Relief "for companies that create jobs and hire new workers."
Infrastructure Investment in "clean energy and new construction projects to build schools and transportation."
Assistance for Long Term Unemployed that will feature a program like Georgia's to give "unemployed Americans eight weeks of training at a local company while allowing them to still collect their unemployment benefits."

Stephanopoulos also adds that the president's will speech will include "a proposal for how the government will pay for these initiatives without adding to our debt."

All this shows how deep in a hole the president is, and yeet he's still digging. The president's problem is that to revive the economy he really needs to undo everything he has done. To get the economy going again, as Tony Blankley writes, he really needs to choose the "nuclear option" and steal all the Republican ideas.

He could decide to embrace all the major Republican, Tea Party free-market ideas - marginal business and personal tax-rate cuts (leading to a net tax cut); big discretionary spending cuts to be implemented before the 2012 election; genuine long-term reductions in Medicare, Medicaid and Social Security costs written into law now; major deregulation, including Environmental Protection Agency rules, Dodd-Frank financial burdens and nanny-state consumer regulations; unlimited oil- and gas-drilling and shale-fracking authorization; permanent extension of the George W. Bush tax cuts; repeal of the double tax on American corporations’ foreign profits; limits on unemployment insurance extensions; and withdrawal of his big union initiatives, such as the National Labor Relations Board’s opposition to the Boeing Co. building a factory in South Carolina.

Imagine that! Then he would have stolen the Republicans' clothes.

Republicans, of course, would vote for all of them, as they are Republican positions. The Republican candidate for president as well as GOP congressional candidates would be left with almost nothing (except opposition to Obamacare) on the economic front to oppose in the president’s policies.

You might ask: well why not? The answer is that if the president did all that stuff he would lose his Democratic base. All those policy ideas are poison to the average New York Times reader and NPR listener. And as for the average MSNBC watcher and "progressive:" To them such a program would be a "sellout." What's the point of being a liberal if you give it all away just to create jobs for the American people and profits for the American entrepreneur?

Race Mob Violence and Obama

2011-08-30T07:24:00.000-07:00

Now that it has happened, the wonder is that it didn't happen sooner. I am talking about the race-mob violence in cities like Denver. It started in 2009, according to John T. Bennett.

In 2009, a four month wave of mayhem broke out in Denver. There were at least 26 violent robberies committed by two black gangs. The victims were -- without exception -- whites and Hispanics. When the dust settled from that initial spate of violence, victims were left with injuries ranging from a skull fracture to broken noses and shattered eye sockets.

Of course the Denver police and the media did not alert people to the fact that these incidents were caused by black gangs were operating out of their neighborhoods. They didn't alert the public to the racial nature of the events at all until the local TV news finally broke ranks at the end of 2009.

Of course the rest of the mainstream media are soft-pedaling the race angle of this, as they have soft-pedaled black violence for half a century.

This wave of racist flash mob violence presents our national leadership with an astonishing opportunity to end the race madness of the last 50 years, the post-civil rights era.

Here we are in 2011 with a black president and a black attorney general. They can make history by initiating a national conversation on race and race violence. Race violence is unacceptable when it is white guys in sheets and it is unacceptable when it is black guys in baggy pants and reversed baseball caps.

But I don't think that President Obama and Attorney General Holder will do that. They are race-based politicians and, give them credit, they actually believe the poisonous race doctrines of the race industry and the identity left.

But they are standing in the way of history. America desperately wants to get beyond the corruption and the hate of race cards and race hustlers.

Think of it: here we are with a black president and a black attorney general. It is the ideal moment to close down the evil of liberal race politics. But Obama and Holder won't do it. They wouldn't know where to start.

Unfortunately, the people that will suffer for their ignorance and their bigotry are the African Americans. They desperately need a politician to lead them out of the land of racial Egypt and into the Promised Land of race harmony. But don't look for Obama to be that leader. Because he just doesn't get it.

Warren Buffet, Crony Capitalist?

2011-08-26T07:55:00.000-07:00

Remember the letter that President Perry (or was it Romney) sent to the Danbury Tea Party in 2015? Here is an excerpt:

I contemplate with sovereign reverence that act of the whole American people which declared that their legislature should "make no law respecting an establishment of business, or prohibiting the free exercise thereof," thus building a wall of separation between Economy & State.

Yeah. It's a pity that they left that bit out of the Bill of Rights. Because what we have, in Hurricane Obama, where politics and business are all mixed up, is an "establishment" or virtual nationalization of business. And just as you can't trust divines to get mixed up in politics or politicians to get mixed up in religion, surely we can all agree now that it is death to let politicians meddle with business. Just as nobody would think of letting businessmen run the government.

Exhibit A in all this is Warren Buffett, Sage of Omaha. He's just ponied up $5 billion for some preferred shares in Bank of America, currently fingered as the weakest bank. That comes a couple of weeks after Buffett penned an Obama-friendly op-ed in the New York Times and just before Buffett hosts an Obama fundraiser at the end of September.

Perfectly harmless you say? OK, let's put Republicans in all the speaking roles. Remember when old Sam Walton penned a Bush-friendly op-ed in the Wall Street Journal, then invested a few billion to rescue bankrupt Enron, then hosted a Bush fundraiser, all the time getting calls from the president on economic policy? You don't remember that? Of course not. Neither Sam Walton or the Bushies would dare to mount such an obvious staging of crony capitalism.

If I were Warren Buffett in the US in 2011, I would be hedging my political bets. Look here. Berkshire Hathaway is valued today, August 26, 2011, at $172 billion. At any moment some political aide at the White House could sicc the SEC or the Justice Department or the new Consumer Financial Protection Bureau on one of Buffett's businesses, just as the SEC and the EPA are currently hounding the horizontal "fracking" business. Right now the jackals, from New York State Attorney General Eric Schneiderman to Elizabeth Warren of the Consumer Financial Protection Bureau, are hounding Bank of America, trying to get BofA to pull the nation's mortgage chestnuts out of the fire.

How do you get the jackals to go away? Call in Warren Buffett!

Let's go back 100 years, to the aftermath of the great Crash of 1907. Back then J.P. Morgan got the richest men in America, locked them in a room, and wouldn't let them out until they had triaged the US economy. They let the insolvent firms go to the wall, the healthy ones survive on their own, and lent money to the firms they thought would survive with a bit of help. They did all this with their own money.

Fast forward a couple of years and the politicians had their progressive knickers in a twist over the "money trust." Just a few men, you see, seemed to own most of American business. Yeah. No doubt. And those were the men who, with Morgan stiffening their backs, kept their heads in the market meltdown when everyone else was losing theirs.

I'm sure that Warren Buffett is an honorable man, not a crony capitalist. But in times like these, when Hurricane Obama could rip the roof off your business just in order to narrow the odds on a marginal state next year, what businessman in his right mind would not be paying protection money to the politicians? After all, that's a nice business you got there, Mr. Billionaire. It sure would be a pity if something happened to it.

Deconstructing Sam Harris

2011-08-25T08:20:00.000-07:00

Sam Harris is the chap who, in The End of Faith, asserts that we need to develop a "rational ethics" instead of the transcendental ethics handed down by prophets from God.

Problem is, "rational ethics" is rubbish. You can't derive ethics from reason; that's why humans invented God. Someone has to be the "decider" as President Bush used to say.

In fact, of course, Sam Harris is a conventional liberal espousing all the liberal pieties, and this week, (per Instapundit), Timothy Sandefur has his fun with Sam Harris and his rational ethics which always turn out to support the existing ruling class and its commandments. In other words, God is a liberal.

Instapundit also links to a law review article about the foundation of law, God, and little godlets. I didn't know that humor was allowed in law review articles.

Leaving aside the question of whether God exists (and my personal view is that, since the death of God, the mystery of the nature and origin of the universe only gets curiouser and curiouser) there has to be, in any society, a declaration of commandments. Someone, or some thing, such as a Constitution, speaks with the voice of God, and everyone scurries around trying to hear the voice of God.

In my view, the point of laws and constitutions and ethics is human flourishing in its widest sense. You can set up a a terrestrial paradise, such as Communism, but if it doesn't work then humans will chuck it out. But every social system is an act of faith. Our current democratic capitalism is an act of faith. We believe that the combination of free market and the circumscribed rule of the majority is the best system yet developed for human flourishing. We know, all of us except the Sam Harrises of the world, that the authoritarian welfare state version of democratic capitalism is seriously flawed; it needs reform. The Obama administration is an effort by the Sam Harrises to give the authoritarian welfare state one more college try.

But we know that the vast administrative state is a mistake. We knew it back when Charles Dickens wrote about the Circumlocution Office and its Barnacles and Stiltstockings in Little Dorrit. We were shown an alternative to the administrative state back in the 1980s when Ronald Reagan led the US out of the stagflation of the 1970s, but liberals insisted it was all a mirage.

Ben Franklin said it all: "Experience keeps a dear school, but fools will learn in no other." Now liberals are going to learn the hard way in the dear school of the 2012 elections; it will be an annus horribilis for them, but they refused to learn from the experience of the 1980s.

We can only hope that the America that emerges from the current mess is a better America.

Democrat-voting Conservatives

2011-08-24T08:21:00.000-07:00

For some reason it is considered a bad thing that few minorities vote Republican. It's a failure of Republican outreach, or outright racism in the Republican Party.

Michael Medved tries a variant of this. He quotes the August 1 Gallup Poll that has 41 percent of American adults call themselves "conservative" against 21 percent that call themselves "liberal." How come then that President Obama won the 2008 election 53 percent to 47 percent? The reason is simple:

The voters who support Obama in spite of ideology are to a great extent black, Hispanic, and Asian conservatives who feel drawn to right-wing ideas but remain allergic to the Republican Party.

Even in 2010, "In national balloting for House seats, only 9 percent of black voters backed GOP candidates, along with 38 percent of Latinos and 40 percent of Asians."

(Wow! 38 percent of Hispanics and 40 percent of Asians? That's better than I thought.)

The reason for the low minority share for the GOP is usually attributed to white racism and the idea that the party is a "closed country club welcoming only elderly, white, Christian males." So what's the GOP going to do about it? Huh?

I think this misstates the problem. The reason that minorities vote Democratic is that the Democratic Party is a party that celebrates hyphenation. If you think of yourself more as black, or Hispanic, or gay, or feminist rather than American then the Democratic Party is the party for you. And nothing that Republicans can do will change that.

The Republican Party is the party of unhyphenated Americans, people who believe that if you get an education, get skills, work hard, and pay your taxes, then America will deliver. The Democratic Party is the party for people who believe that without governmental intervention, they are screwed.

The Republican notion is the counter-instinctive idea that grew up in the last half-millennium and is packaged in Adam Smith's idea of the "invisible hand." The natural human instinct is to trust in family and the kindred and the tribe, and to be suspicious of the chaps down the road who might launch a dawn raid on our village any day. Trust a stranger or a chap from a different ethnic group? You gotta be kidding. Yet the fact of the last 200 years is that you can trust strangers, usually. If you do, and if the stranger is indeed trustworthy then everyone benefits. And capitalism, down the decades, has developed pretty good ways of figuring out who is trustworthy and who is not.

The two most Democratic groups are blacks and Jews. They are the folks that are the most scared of Republicans: blacks because Republicans are white and Jews because Republicans are Christian. They are scared because their leaders work constantly at making them scared. Any moment black leaders say, whites will break out the white sheets and turn back the clock on civil rights. Any moment, liberal Jewish leaders insist, Christians will start a new pogrom against the Jews. The current effort to brand the Tea Party as white, Christian, and racist is transparently part of this effort. The only way to make 90 percent of any group to agree on something is to scare them witless.

The way for Republicans to detoxify the brand has to lead through this shameless fear-mongering of black and liberal Jewish leaders. Shame the black and Jewish leaders and short-circuit their fear-mongering and you'll find the numbers moving in the Republican direction.

Let's ask a different question. Why is it that 38 percent of Hispanics and 40 percent of Asians voted GOP in 2010? Could it be that their leaders don't work night and day to frighten them off the Republicans?

The Liberal Story Falls Apart

2011-08-23T08:09:00.000-07:00

In BigHollywood.com Lawrence Meyers writes about the way that the liberal "story" dominates our lives. Here's how it grabs our eyeballs every day in movies and TV dramas:

Corporations are evil — using unwitting poor Africans for pharmaceutical testing (Constant Gardener) or dumping toxic chemicals into nature (Erin Brockovich, A Civil Action) or responsible for the end of mankind (Rise of the Planet of the Apes)... Radical Muslim terrorists are never villains. Trial lawyers are crusading do-gooders.

Humans understand everything as a story, and liberals, for the last century, have been the main story-tellers. It is their stories that dominate our culture and their stories that dominate politics.

When a criminal suspect fails to convince a jury of his innocence, we say that his story "fell apart" or "failed to hold up." It reminds us that we keep our stories until they fall apart and fail us.

Right now, the liberal story is falling apart, and just about all a conservative needs to do is point to liberal stories lying around in pieces on the floor.

Roger Kimball points to the liberal story about the recession that is cluttering up the national floor right now. Here's how you create a story that fails to hold up.

Make $1.5 trillion of risky loans to people you know are unlikely to repay them;
Allow financial instituions to slice, dice, and repackage the loans, leveraging them up to 30-1;
Require financial institutions to value their assets according to strict “mark-to-market” rules, thus denying businesses needed flexibiity during a crisis;
Impose onerous new regulations not only on financial institutions but on U.S. business across the board;
Keep talking about raising taxes so people and businesses pay their “fair share,” even though 43.4 percent of those who file pay no income tax at all;
Create an economic leviathan in the form of health care legislation that will simultaneously worsen health care in the U.S. while also making it wildly more expensive;
Keep emphasizing “green” jobs and “green” energy production at a time when unemployment is above 9 percent and energy costs are skyrocketing;
Invest billions of dollars of the taxpayers’ money into failing private businesses with huge union obligations to keep the business going for a while longer so that the unions can squeeze more money out of the taxpayers.
Ignore the warnings of credit-rating agencies when they warn you are spending too much money and do not have a credible plan to address your skyrocketing deficits and then blame them when, months later, they downgrade your credit rating.

I recently had a e-mail exchange with a liberal still desperately hanging on to the narrative. Here are some of his comments:

How much are the Koch Bros and Rove paying you and other Tea Party supporters to put out this garbage?
The REASON we paid off the huge WWII debt was the emergence of a middle class, union benefits and wages, and a GI Bill that allowed millions of GI's to go to college and fuel the industry in the 1950's and 60's
The real beginning date of our demise was 1980. Ronald Reagan was elected, the corporations began their ascent to total power and control and now young man, we live in a corporate oligarchy.
34,000 lobbyists in DC. Paying for campaigns and writing bills for their employers.
2% of the US owns 63% of the wealth. The top 2500 corporations paid no Fed Income tax in 2010. $2.5 Trillion in corporate cash on the sidelines creating NO jobs.

It's hard to get annoyed with that sort of stuff. It is the story of the wheels coming off the liberal "whig history," the tale of social progress directed by wise legislation and socially conscious intellectual leaders that moves us closer and closer every year to a just and equal society.

It is all falling apart right before their liberal eyes, and they can't believe it.

Corporations are People

2011-08-22T08:23:00.000-07:00

It's interesting to read The Nation's reaction to Mitt Romney's "Corporations are People" remark. John Nichols obviously thinks that the activists of Iowa Citizens for Community Involvement scored a real coup by getting Romney to admit the truth of his oligarchic agenda.

When Romney began to ruminate on how he would not “raise taxes on people,” the Iowa activists shouted: “Corporations!”

As the crowd began to cheer on the idea of taxing corporations that enjoy the benefits of government bailouts and subsidies without—in all too many cases—giving anything back, Romney became incensed.

The former corporate CEO shouted: “Corporations are people, my friend.”

The crowd shouted: “No, they’re not!”

“Of course they are,” replied Romney, with a “there, I said it…” statement that he and his staff would later confirm as his true faith.

It is curious to experience just how central to the leftist faith is the idea of corporations as evil. And that a "corporate oligarchy" rules America.

One of the central articles of faith is a conspiratorial interpretation of the mainstreaming of the limited-liability corporation in the notion of immortal "corporate personhood." Lefties think that the development in law of corporations as entities separate from their managers and owners is a deep dark conspiracy to take over the world.

But as Thomas Crump reminds us in The Age of Steam, the truth is more prosaic. Corporate personhood was invented in the usual fudge job of legislators responding to crisis. In the mid 19th century limited liability corporations were needed in the development of railways. The risks and the scale of railway development just could not be met with informal methods of incorporation where all the equity investors were liable for debts of the enterprise without limit. People wouldn't sign up for that kind of risk. The limitation of liability meant that investors could routinely put their money into speculative enterprises like railways without worrying that mistakes or malfeasance by the managers could wipe out not just their investment bu the rest of their assets. And railways dwarfed the manufacturing industry in the mid 19th century.

The curious doctrines of our lefty friends require them to construct a narrative of corporate malfeasance. If there weren't a corporate oligarchy they would have to invent it. Otherwise there is no warrant for big government.

The immense value of the Obama administration is that it seems determined to utterly delegitimize the progressive project and its monument, big, unjust government in its massive effort to tax and regulate everything that moves. The effort bids fair to destroy the free-market economy.

The problem is that until we get there, the American people are going to suffer real hardships as the whole economy gets sucked into a maelstrom of liberal folly and fantasy.

What Can You Say?

2011-08-18T07:53:00.000-07:00

Over the last week I've been exchanging emails with a man that identifies himself as an "ex-Goldwater Republican." He rages about the corporate oligarchy and thousands of corporate lobbyists, and generally emits left-wing political memes. In other words, this chap is a Democrat. But he's a disappointed man: at 66 he is earning half what he did ten years ago.

When I asked him what he would do about the "corporate oligarchy" he responded thus:

You either, from the ground roots, elect dedicated people that will over time rewrite laws, enlist oversight and regulations and turn this around OR as a 64 year old female client said yesterday, wonder what the reaction would be to 3 or 4 million armed people , converging on the Capital or Wall Street? There is your answer. 1790 France.

I suppose that makes sense. If you believe that corporations are stiffing the American people, rather than being the cause of raising income from $3 per day to $120 per day since 1800; if you believe that the financial system is a crock, that the wealthy should give up their wealth in redistribution, and if all the left-wing economic ideas of the last 150 years have failed, then political or revolutionary action is the only remaining option.

The problem is that government is force, politics is power, and we humans are social animals not soldier ants. Neither government or politics grow a single corn plant or produce a single stick of lumber to build a house.

I've been wondering over the last year or so about the incessant corporate exposé journalism of the left. Every left-wing magazine, almost every month, will feature an exposé of some corporate malfeasance.

I've decided that the endless attack on corporations is a necessary prop to the left-wing belief system that justifies government force. If there weren't outrageous crimes from the corporate CEOs then you couldn't justify government regulation and supervision of the private sector. You would say: well, there are bad apples, but still...

Alas, our lefty friends have trapped themselves in a closed system in which government force is always the answer. Because everything that goes wrong is an economic crime, and every crime must be met with a new law to stop it. The result is a spiral dive into economic madness, as every detail of economic life becomes dominated by government and politics instead of by the demand of the consumers.

How do you talk to such a person? How can you break the spell of the closed world of ideas? Who knows? I just try to stay polite and return insults with friendly replies.

"Inconsequential" Government

2011-08-17T08:25:00.000-07:00

Gov. Rick Perry (R-TX) has certainly hit the campaign trail with a bang, what with his blast at the Fed for printing money, and his promise to make government "inconsequential."

To liberals, writes Jeff Jacoby, the idea of making government inconsequential is outrageous. Chris Matthews took the bait immediately.

The governor is saying "not just that the era of big government is over," Matthews hyperbolically told his "Hardball" viewers on Monday, "he's saying the era of government is over... Let's get rid of the government, basically."

I suppose that is how it plays to liberals.

But beyond outraged liberals, there's a big issue here. It is the issue of prudence. The bigger and more consequential that government becomes, the more it is likely to create real hardship for people when it makes a mistake. And government finds it very difficult to correct mistakes.

Let's say it is time to apply the Precautionary Principle to government.

Here's what I mean.

The federal government made itself real consequential in housing. It legislated mortgage interest deductions, it created government-sponsored enterprises to securitize mortgages, it got really interested in the ways that banks rationed credit to low-income and minority borrowers. But the upshot of all this consequence, at least in part, was a world-wide financial meltdown as the value of mortgage bonds and mortgage derivatives came into question world-wide and the solvency of banks world-wide came into question. And guess what. When the dust settled after the housing crash, minorities and women were hardest hit. Net worth among blacks is down by 90 percent.

Why be surprised? Politicians know about winning elections, but don't know too much about loaning money to sub-prime borrowers.

I could go on. What do politicians know about retirement finance, geriatric health care, education, energy? They know enough to use them to get elected and reelected.

Let's back this out further. Down the ages, governments have pretty well taxed and borrowed to the limit. They taxed until they provoked tax revolts; they borrowed until they went broke. In the old days all this taxing and borrowing was done to finance wars of aggression. In our age, after the megawars of the early 20th century, governments tax and borrow to fund entitlements, principally pensions, health care, and relief of the poor. They have made government very consequential in these areas, and they have taxed and borrowed pretty well to the limit in order to deliver lots of pensions and health care and welfare. Unfortunately they have way over-promised, particularly in regards to geriatric health care. That's Medicare to you and me.

Let's stipulate that there is an argument for modest programs to help old people who are unable to support themselves or get health care, from no fault of their own. And there are poor people of all ages that need help. Wouldn't it be better to have small, inconsequential programs to help those in need rather that gigantic programs for the middle class that threaten the very survival of the state when they go wrong?

That's what I understand when I read about government becoming "inconsequential."

Fixing Our Broken Finance

2011-08-16T07:53:00.000-07:00

It's forty years since President Nixon took the US off the gold exchange standard. Since then the dollar has declined from $35 per ounce of gold to the present $1,800 per ounce. Not good. With the dollar as paper, our ruling class has expanded credit, government debt, and near government debt recklessly, and ordinary savers, people who save money in banks and bonds, have been screwed. The question is: what do we do?

Actually, I think there are two questions. What does each of us do individually, and what should we do collectively.

Let's get me, individually, out of the way first. I reckoned, back in the early days of the current recovery, that the government was going to print money big time. So I determined not to hold more than a minimum in dollars. Thus I converted my cash into gold ETFs and resolved not to hold dollar-denominated bonds. The stock market may go up and down, I reckoned, but it represents the wealth-generating power of the US economy. The dollar may go to zero, but the US economy won't. Nor will gold.

But what about the nation as a whole? What should we do to stop the damage? The easy solution is to say: get back to gold; set a new gold price for the dollar and stick to it. The problem is that this doesn't solve the other problems, the moral hazard of the central bank as the lender of last resort, the resort to inflation to gun the economy in a recession, and the dense net of credit subsidies embedded in the economy. It will be difficult to fix any of those things because the current ruling class gets so much of its power from their continuance.

I'm going to go out on a limb. I think that a new credit and monetary system is going to grow up alongside the current government-dominated system. The Dutch finance system of central bank, funded government debt, discounted short-term debt, and money-denominated bonds is going to wither away. Because the government abuses it so badly.

The modern financial system began, they say, with people depositing their gold with goldsmiths, who then started to lend money on the credit of the deposited gold. In our present world we have gold ETFs that are supposedly storing gold in vaults in return for electronic depositary receipts. How long can it be before someone figures out a way to turn the gold ETFs into a kind of bank? Don't ask me how. That is for those financial wizards and their lawyers to figure out. But right now a ton of people are sterilizing their cash by storing it in gold in the vaults of the ETFs. Not good. Nature abhors a vacuum and finance abhors one too. Finance is all about getting money from where it is to where it is wanted. Something has got to give, and sooner or later it will.

What will happen then is anyone's guess.

Fixing the Economy

2011-08-15T08:18:00.000-07:00

You could call it the Summer of Reality. Liberal opinion leaders are confronting the reality that their response to the Crash of 2008 has failed. But, of course that doesn't mean that they are ready to ditch their Keynesian-Entitlement-Regulation policy brew. That will come later, and not before the end of the annus horribilis of 2012. Take James K. Galbraith, economist and son of famed liberal-socialist John Kenneth Galbraith. He's ready to admit that the Obamis shot the wrong arrow:

In fact, stimulus alone was never going to bring recovery. This crisis was caused by financial collapse, rooted in massive banking fraud. The financial system is our economic motor and when it fails it cannot be revived simply by pouring money on it, any more than a wrecked reactor can be restarted just by adding fuel. Team Obama faced a situation not seen since the 1930s — a worldwide banking meltdown. The financial system needed to be rebuilt — and it still does. But Team Obama chose to overlook this.

But he's not ready to admit the reason for the "massive banking fraud." It was government sponsored enterprises like Fannie and Freddie fire-hosing dodgy sub-prime assets into the credit system. The role of the bankers was in dressing up as much of the dreck as possible to look like investment-grade debt so that the banks and the insurance companies and the pension plans could buy it. The investment banks are middle men; their business is selling bonds to institutions. One way or another, they will sell it. The government's No. 1 job is to make sure that its own debt is investment grade. That's because, ever since modern finance was invented by the Dutch and adopted by the Brits, the foundation of a healthy credit system has been rock-solid government funded debt. The worst bubbles have occurred when government-sponsored enterprises have floated dreck, as in the Mississippi Bubble, the South Sea Bubble, and the Fannie Freddie Bubble.

Here's an article by Alex J. Pollock on the real story of the 2000s financial meltdown. The problem is "agency debt."

The huge debt of Fannie Mae, Freddie Mac, other government-sponsored enterprises, and other off-budget government agencies (“agency debt”) fully relies on the credit of the United States. This means it by definition exposes the taxpayers to losses, but it is not accounted for as government debt.

How much is it? Well, in 1998 agency debt was $4 trillion, the same as the Treasury debt held by the public. In 2009, it was again the same as the Treasury debt--at $8 trillion. Between those dates, during the credit binge of the 2000s, the agency debt was larger than the Treasury debt. In 2002 agency debt was $6 trillion, 50 percent more than Treasury debt held by the public. So the real debt that the full faith and credit of the United States was committed to honoring was about twice the published amount.

We can holler all we like about "massive banking fraud" and "greedy bankers." But until liberals acknowledge that the central player in the late great 2000s credit bubble was government, we really can't start healing the economy.

And to suggest, as the president and Professor Galbraith do, that an "infrastructure bank" is just the ticket is to demonstrate nothing more than an alcoholic's morning-after craving for a pick-me-up.

When Gold Hits $2,067 an Ounce

2011-08-11T07:45:00.000-07:00

In the last couple of days, the gold price breached $1,800 an ounce. Oh well, ho hum. So the gold bugs are making some money.

But let us think about something. One day soon, perhaps this year, perhaps next year, gold will breach the magic number of $2,067 an ounce. Why is that a magic number? Because, 100 years ago, before the modern wonder of the Federal Reserve System, you could buy an ounce of gold with 2,067 pennies.

Yes. The value of today's dollar in gold is getting perilously close to one percent of its value 100 years ago, when the government would exchange an ounce of gold for $20.67.

Now some people don't like to evaluate the value of the dollar in gold terms; for those, I suggest measuringworth.com's GDP deflator. It shows a price index of 6.23 for 1911, with 2005 prices as 100. Today the index is 111, so the value of the dollar is 5.61 percent of the 1911 dollar. On that measure the dollar buys about one twentieth what it could buy a century ago, rather than one hundredth.

Yeah, I know; many things we can buy today you couldn't buy then for love or money.

How did the dollar get to be worth 1 percent, or 5.6 percent of its value a century ago? It happened every time that the government got in a jam. In the Depression, after the Fed had gunned the economy in the 1920s, FDR devalued the dollar to $35 per ounce. Then in the 1970s Richard Nixon got in a jam and they floated the dollar. By 1980 the dollar had declined to less than $600 per ounce, but then Ronald Reagan became president and over the next twenty years gold declined to $270 an ounce in 2001. But since then, to get out of a jam in 2001, the Tech crash, and in 2008, the housing crash, the government has been devaluing the dollar with gusto. Now it's around $1,700 to $1,800 per ounce.

You might wonder why this keeps happening. It's not all that hard. Lots of people want easy money, cheap credit. So the government uses its credit to shovel money at deserving recipients. It might be farmers and farm credit, or it might be exporters and the Ex-Im Bank. Or it might be minorities that need affordable housing. No problem. We'll just shovel Fannie and Freddie at them, and when the whole thing comes tumbling down, why, we can refloat the nation's mortgages by taking the dollar down another 50 percent.

Let's call the 20th century the Century of Inflation. But let's make the 21st century something better. Because devaluing the dollar every generation to get out of a financial panic is no way to run a railroad. For one thing, as with most things, minorities and women and orphans and the poor get hardest hit.