Energy Smoke and Mirrors

You have to admit that President Obama is nothing if not a politician. His energy speech Wednesday promised a one-third decline in energy imports to show that he is "doing something" about high gas prices. And, according to the New York Times his speech included:

• boasting of newly approved drilling permits
• new safeguards for deepwater drilling intended to prevent repeating last year’s oil spill in the Gulf of Mexico
• not prepared to open additional public lands and waters to drilling, officials said, but will propose incentives and penalties to prod the industry to develop resources where they already have access.
• producing more electric cars, converting trucks to run on natural gas
• building new refineries to brew billions of gallons of biofuels
• increasing fuel-efficiency standards for vehicles.

In other words, nothing new. The president did seem to indicate that he proposed to criticize oil companies for record profits.

The mess in energy policy is so deep and so wide that it's hard to know where to start. That's because it is a combination of moral imperative and the prophetic. On the one hand, we don't know what the effect of, e.g., increased carbon dioxide, really is on the environment, and on the other we really don't know what the future supply of energy looks like. Everyone has an opinion, and everyone has a pet program they want to advance.

Of course, it is all rubbish. We have a well-diversified spectrum of supply. The Wall Street Journal publishes a pie chart today that shows energy distributed at petroleum 37%; natural gas 25%; coal 21%; nuclear 9% and renewable 8%. That's a pretty wide distribution. You could deal with a collapse in one of those, e.g., Peak Oil, pretty well. Don't agree? Just 500 years ago, don't forget, the energy supply was almost completely: wood 100%. In Britain, during the early industrial revolution, there was an energy crisis as the nation ran out of charcoal from wood. The solution? Coal. Pretty soon there was another crisis, this time in whale oil for lamps. The solution? drilling for oil in Pennsylvania. Then came natural gas and nuclear. There's plenty of energy, whatever happens to Peak Oil or any other hyped up crisis.

My guess is that the current liberal/environmentalist panaceas, wind and solar, will probably collapse within five years, because the size of the subsidies and corruption scandals will create a public backlash.

Then it's back to the serious energy sources: oil, gas, coal, and nuclear. There's a brilliant system that humans have devised to determine which of them to pursue. It is called the price system, backed up by sensible safety and environmental regulation.

But first, the current liberal/environmental chimera must crash and burn. That's the way of politics. You can only get something done when the system is broken. Otherwise the special interests and the crony capitalists are too strong to allow reform.

Obama Like Kaiser Bill

President Obama's clumsiness reminds me of another late dynasty figure: Kaiser Wilhelm II, the lightweight figurehead of state of Imperial Germany.

You'll remember that the Kaiser got his rising country embroiled in a silly European war by frightening the pants off everyone with his reckless rhetoric. He could talk the talk, but when it came to understanding how to lead Germany as it took its place at the head of Europe after half a millennium of French hegemony... Well, he was clueless, he couldn't walk the walk.

I can't help feeling that we have another case of cluelessness in President Obams.

Oh, don't get me wrong. I think that President Obama is smart enough. And I believe he has been great at reading the liberal script. Getting ObamaCare passed was a stunning achievement even if it ends up dragging Democrats into a generation in the wilderness. The problem is that everything the Democrats want to do is bad for America, and President Obama has dug an awfully deep Democratic hole for his party and his country.

First of all, foreign policy. It was great fun to rag on President Bush right through the 2000s. But we now understand that, right or wrong, Bush and his team did some serious thinking about how to respond to the movement of resistance to western hegemony that we call Al Qaeda. There's plenty wrong with democratic capitalism, but Islamic extremism isn't the wave of the future. As President Obama is finding out, the natural role of the United States is to put a stop to movements like Al Qaeda and to keep your average thug dictatorship in a box. So the real "reset" on foreign policy is the reset on all the silly things that Democrats said and did in opposition to President Bush. Unfortunately, President Obama is probably not the right chap to do that.

Second, domestic policy. For the last 75 years Democrats have successfully run a two-speed domestic policy. In the good times, you implement lots of wasteful government spending and build electoral support at the ballot box from the clients of that spending. When things turn south you wail about extremism and budget cuts. But suppose the game has changed? Suppose the Tea Party represents a new center of gravity in American politics that puts the sweet spot at a policy of spending restraint and skepticism about government? Then President Obama, a full-on pedal to the metal spender is not the right chap to lead the Democratic Party into an age of limits.

I like to read about successful leaders and that usually means successful generals. All of them seem to develop a kind of sixth sense about the battlefield and the correlation of forces. I feel that President Obama is good at reading the battlefield of Democratic politics. He proved that by beating Hillary Clinton. But I don't think he really understands moderate Americans like Jay Cost's in-laws.

My father-in-law is a retired steelworker and lifelong (soft) Republican; my mother-in-law is a teacher’s assistant and lifelong (soft) Democrat. They were both partial to Hillary Clinton, and were very uncertain of Obama, right up to Election Day. Even so, they voted for him because, as they told my wife, “It’s time for a change.”

I just don't think that Obama will have anything to say to Jay Cost's in-laws in 2012. I just don't think he understands people like that.

As the president slides into confusion, the question becomes: Who will be his Ludendorff, the chap who takes over when the head of state can't cut the mustard? And what will Democrats do in the spring of 2012 if it start to appear that Obama is in real electoral trouble?

Business: Friend or Foe

Popular progressive author Joe Bageant just died, and Alternet had this to say about his oeuvre.

The recipient of high praise from luminaries such as Studs Terkel and Howard Zinn, Bageant was one of AlterNet's most popular essayists for his work on the corporate takeover of American democracy, the destruction of the middle-class over the past four decades and the plight of Redneck America.

But here is noted capitalist Richard Branson urging folk to start a business, yes, right here in the middle of recession when asset prices are low and talented people are available. Says he:

Start-ups and small firms are the engine of the economy and account for nearly 60pc of private sector jobs. To allow them to flourish, we must ensure we create an economy where it is easier for new companies and innovations to develop.

And then Branson goes on to give would-be entrepreneurs a few tips and tricks for business success.

[Business] is a risky game where one needs to be brave, focused and sometimes lucky. Throughout my career I have made decisions using my instinct, but I have also worked hard at making decisions work. As I look back, a few key patterns keep re-emerging.

You need to surround yourself with trusted and talented people. Setting up businesses takes an enormous amount of time and energy. It is easier to make the big commitments when you are surrounded by people you trust and like. Keeping my many good chief executives and managing directors happy – and finding new ones to start the next ventures – is one of my full-time jobs.

So, on the one hand, we have the progressives telling us that the corporations are ruining America and killing the middle class. On the other hand we have successful entrepreneur Branson telling us that business is all about trust and talent and hard work. Who are we to believe?

There is an answer to this, and it illuminates the fundamental error at the center of the progressive world view. Let us look at the idea of the "corporate takeover of American democracy." Now why would that be possible? It is only possible if government has the power to play winners and losers with corporations. It is only possible if the political system allows corporations to buy influence from politicians.

Back in the old days of mercantilism, the common sense notion was that the government had its work cut out to make business strong. Monopolies and tariffs protected business and the nation from piratical raids. Then the classical economists came along and showed that the mercantilist model was wrong. Mercantilism was a system of thievery, what we now call a crony capitalism that favored the well-connected and prevented new entrants from starting up new businesses and competing with the established firms. The best thing for government to do was to stay out of subsidies and penalties for corporations large and small because they would always end up favoring the best-connected.

But then came the progressives. They wanted to take money from the corporations and give it to the workers. But that meant that government arrogated to itself the power to meddle with corporations, and that meant that politicians could buy votes with subsidies and privileges. So now we have General Electric paying zero corporate income taxes. And now we have automobile companies in receivership, bankrupted by the "benefits" they were forced to pay to their employees.

When the progressives worry about the destruction of the middle class in the last 40 years, they are speaking in code. They are telling us that the union-boosted workers in the private sector reached a peak in prosperity back in 1970, and haven't been able to squeeze anything more out of the system since. After all, the population of union-strong Metro Detroit reached 4 million in the 1970 census and hasn't changed since.

It's understandable that the progressives should be angry. Their vision of the way the world works is in the process of smashing to smithereens. It is built on the ancient way of force and feud, bullying the weak and grabbing tribute to hand out to your supporters. Real business, real prosperity comes from refusing the temptations of power and forming economic relationships of trust and friendship, rewarding the talented, and serving the consumer, just like Richard Branson says.

But before we get to the Branson economy, we are going to have to fight out of the tangled mess of privilege and subsidy left over from the progressive years. Many people will suffer as this unjust system unravels.

The Rampage of "Educated Youth," Again

I just so happens that as we experience the street theater of Wisconsin and now London over "cuts" I am reading the lefty manifesto Multitude from Hardt and Negri.

Hardt and Negri realize that the lefty lexicon needs a bit of a brush-up. It's a bit of a dis-joint to talk about the working classes or the masses as if this is 1848 or the 1930s. The old working class is now comfortably ensconced in their own homes and have union pensions and benefits coming out the wazoo--as long as the money holds out.

But our lefty friends still want to practice "resistance" and "liberation," so they have come up with another word for the oppressed chaps. Their new name is "multitude." You can see the advantage of it. It can cover all the new oppressed groups of the multicultural diversity age, and even the knowledge workers in the new post-industrial economy. Leading the "multitude" of course, are the lefties themselves, first the anarchists of the 1999 Seattle WTO riots, then the ageing lefties getting arrested in Madison singing "Solidarity Forever," and now the breakaway groups that trashed the marquee stores like TopShop and Fortnum and Mason in London's West End.

Hardt and Negri argue that the "multitude" is resisting the permanent state of global war that Empire needs to maintain its state of emergency and deny genuinely participative democracy. Thus Iraq, Afghanistan, and now Libya are faked-up emergencies that keep the attention of the multitude away from the oppression of corporate power back home.

I am slowly coming to realize that the left-wing agenda is an constantly adapting apology for mayhem by the class of "educated youth," young men studying not law, medicine, engineering, or science, but social sciences and politics that first emerged in the 1840s. Like young men everywhere, this "educated youth" is ready for a rumble, and does not require much of a fig-leaf to justify its violence.

But what the lefties experience as "resistance" by the masses or the new multitude is better understood as the strain of social revolution, the movement from country to city. Where do you see resistance and revolution? You see it in cultures on the cusp of revolution from traditional agriculture to industrial economy. You see riots in Britain in the 1780 Gordon Riots and 1819 Peterloo Massacre, but by the 1840s you have the peaceable Chartist movement. In Europe you have the revolutions of 1830 and 1848. In Russia the Revolution of 1917; in China the collapse of the imperial dynasty in 1911. In each of these cases, you had the educated youth in the vanguard of the violence egging on the workers and peasants disoriented by the new world and its new culture. Did the "resistance" do any good? Probably not, because what the masses were doing at the time was jobs, and jobs happen when capitalists and entrepreneurs are creating jobs in an unhampered economy. Want jobs? "Educated youth" knows nothing of job creation. That's what their daddies do; they are above all that.

The problem for "educated youth" is that the society of democratic capitalism has no place for the discourse of resistance and liberation led by a militant "educated youth." Once a group has made the journey from country to city, and has learned the ways of the city, and has got the basic skills you need to find a place in the city economy, well, there's no need for street action.

No street action? What about us, asks "educated youth?"

Sorry, Charlie. In the capitalist economy we are looking for folks that can lead in new forms of economic cooperation not cooperate in new forms of political leadership.

Now you understand why "educated youth" talk endlessly about alienation. You'd feel alienated too if you were all gussied up for "protest" and nobody but a couple of long-haired lefties came.

The point is that the world is not in a state of permanent war, as Hardt and Negri assert. There is only war on the Islamic margins where pre-industrial political and economic and social relations obtain. There is not egregious exploitation by multinational corporations; there is only exploitation by thug dictators stealing their country's mineral wealth on the one hand and political elites stealing up to 40 percent of national income in welfare state redistribution programs on the other.

To right the wrongs of the modern era we need less of "educated youth" and their eternal dream of rampaging street action and more of peaceable reformers with a vision of limited and separate powers, political, economic, and moral/cultural.

What Happens After QE2?

The current money printing operation at the Federal Reserve is supposed to end in June. 2011. But what happens then? Does the Federal Reserve truly stop monetizing federal debt and bravely start raising interest rates, and actually selling federal debt to the public again? Peter Ferrara writes about the possible downward spiral in the government finances.

The Fed's policy today is known as QE2, meaning the second round of "quantitative easing" (printing money) under the Obama Administration. That basically involves using the printed money to buy 70% of the Federal bonds issued to finance the deficit, a classic prescription for inflation...

QE2 is scheduled to continue through June, at which time most commentators expect the Fed to end this reckless policy. But if the Fed suddenly stops this "quantitative easing," who is going to step in to buy the bonds to finance the 70% of the remaining federal deficit of $1.645 trillion for this fiscal year, and the $1.4 trillion deficit the CBO projects for the next fiscal year? Finding real buyers for those bonds is going to require paying soaring interest rates on them, which will only further increase the deficit. And that will cause soaring interest rates across the credit markets as well.

And that will mean another recession about a year later. Which would be in the middle of 2012. Which is why that is not going to happen. Which is why QE2 will be followed by QE3, QE4, and quite possibly QE5, just to make sure no recession or ominous economic clouds darken President Obama's door during his glorious 2012 re-coronation tour[.]

This is a pretty dark picture, but the question is: what to do about it?

The big question for me is what the government does when it gets to default. Broadly, it will renege on the debt, probably cutting interest rates on its long-term bonds. It's been done before. It will renege on the entitlements. I'd guess that it will fudge on Medicare and Medicaid, not by cutting benefits but by cutting payments to providers and thus causing them to cut back on Medicare services. Then the government will take over Medicare, nationalize it, demonizing the doctors to great acclaim, with glorious promises to do the right thing by seniors. But then the rationing will begin.

My big question is whether the government will actually stage asset seizures. The government in Hungary already did the equivalent of seizing peoples' 401(k) private pension accounts in exchange for a government pension. You could call it nationalizing private pensions. Then, what about gold ETFs? Suppose that the $56 billion GLD SPDR Gold ETF is up to $1 trillion in a couple of years. The Obama administration might try to do a swap in devalued dollars for gold. You don't think so? Think again. That's what the federal government did in the 1930s. The feds called in gold coins at $20.75 an ounce and then devalued the dollar to $35 per ounce.

In other words, given that the government is behind the 8-ball and will continue its money printing after the end of QE2, and at some point will have to face the music, how does an honest citizen protect himself from the thieves and the robbers from the government?

The Humanitarian Intervention Gambit

In NRO Stanley Kurtz, author of Radical in Chief, argues that President Obama's Libyan efforts are a product of a doctrine advanced by academician Samantha Power, "a powerful member of Obama's foreign policy team." Power believes in a doctrine call "humanitarian intervention." This doctrine is described in the lefty Multitude by Michael Hardt and Antonio Negri.

In the view of Hardt and Negri the human-rights doctrine represents an effort to undermine the legitimation of nation-state violence both outside and within nation states. Thus,

The majority human rights position now advocates violence in the service of human rights, legitimated on its moral foundation and conducted by the blue helmets of the UN military.

Everyone agrees--or at least everyone left of center--that the nation state is a problem. So the human rights doctrine of violence legitimation represents an effort to do an end run around the legitimacy of nation states.

Hardt and Negri aren't happy with the new concept because, they notice, it only gets applied to the weak. If Libya is a human rights problem you can send in the US Air Force. But if the US is a human rights problem you can do... nothing.

It seems clear that, contra the conservative notion of President Obama as a ditherer, the president is acting consistent with his principles, that of a somewhat lefty multinational elitist. That's why his intervention has not provoked the opposition that President Bush's actions provoked. The international elite of the educated class is the entity that has advanced the human-rights doctrine of violence legitimation, so on that view President Obama seems to be doing the right thing in a difficult situation.

The problem is that our liberal friends have never dared to involve the American people in the development of this doctrine. In fact the president has been circumspect about the advertising of all his principles. That's because, as Rush Limbaugh says, liberals can't admit who they really are. If they did, the American people would kick them out of power.

Going forward, the president has two problems. The first is whether his vision will actually work. In the conservative view his domestic policy will fail because the administrative model of governance with its administratively controlled benefits and eligibilities and deliveries simply does not work. His foreign policy will fail because it fails to understand that foreign policy, whether conducted under the banner of a nation state or a supranational authority is still a contest of power. The idea of supranational authority is still a concept rather than a reality. There are no sovereign supranational authorities. Not yet, anyway.

The second problem is that our liberal friends have not persuaded, not even attempted to persuade, the American people to follow their policies. They imposed ObamaCare by legislative trickery and profoundly misleading rhetoric. They imposed their human-rights-based foreign policy over a people that thinks in terms of America as the exceptional nation state.

No good can come of governance without persuasion. Which is why I think that we ain't seen nothing yet when it comes to the decline and fall of liberalism.

Perfect Storm Forecast

The big, the only question for President Obama and his administration is: can they get past November 2012 before the roof falls in? The whole point of the Federal Reserve's QE2 is to keep the benefits going for the president's supporters until he is safely reelected.

After that? Apres moi, le deluge.

But the big question, looming larger and larger, is whether the administration will get to the election before the deluge. Here's a report from the financial front from Jim Lacey that suggests that time is running out.

When the Fed’s $600 billion QE2 buying spree ends, there will not be enough buyers left to purchase the $1.4 trillion in debt the administration has built into this year’s budget, at least not at current interest rates.

The Fed is not only looking to stop buying new debt, it also wants to get rid of the nearly $1.3 trillion currently on its balance sheet. Absorbing $1.4 trillion in new debt, rolling over maturing debt, and simultaneously purchasing debt the Fed bought during its quantitative-easing forays is a lot to ask of the market.

So what this chap is saying is that interest rates are going to have to go up a lot if the federal government is going to get the market to buy its debt. And that will increase interest expense, and that will create a need to float more debt, and that...

What you get at the end of all that is a sovereign debt crisis, when the government starts reneging on all its promises.

Here's a bellwether. The Democratic Congressional Campaign Committee is already going after Rep. Paul Ryan's (R-IL) FY2012 budget, anchored by a website called stopbenefitcuts.com.

Well, of course they are. If we are going to do anything about spending, then we are going to have to do something about those trillions in benefits going out every year to Democratic voters. Want to know how much is at stake. As always, usgovernmentspending.com has the numbers.

There it is. Government pensions: $1.0 trillion. Government health care: $1.1 trillion. Government education $0.9 trillion. Government welfare: $0.6 trillion. National defense, by the way, is another $1.0 trillion.

You tell me. When the bond market starts to shy away from Treasuries, and the government has to cut spending in order to get "confidence" back into the financial markets, where are they gonna cut?

Let's start with $200 billion in "Pentagon waste." Oh good. That means that all the rest of the cuts have to come from Democratic supporters and their benefits.

You can see why the Democrats are already taking to the streets.

Stop. Benefit. Cuts. Dot com.

Yes, senator. Right away, senator.

ObamaCare vs. Conflict of Visions

Thomas Sowell's 1987 book, Conflict of Visions has a simple argument. All the political differences between conservatives and liberals come down to a different vision of human possibilities.

Conservatives believe in a "constrained" vision that humans are all about the same in ability, and that social systems and cultures evolve by millions of interactions between millions of people.

Liberals believe in an "unconstrained" vision that certain humans are more evolved than others. These evolved folks have the ability to teach the others how to advance to a higher plane and they have the ability to organize the future in specific political projects.

Like ObamaCare.

In Why ObamaCare is Wrong for America, authors Grace-Marie Turner, James Capretta, Thomas Miller and Robert Moffitt take the "constrained" vision of conservatives, that you cannot design a system of health care in a 2500 page law and expect it to work. Grace-Marie Turner:

The law claims that experts in Washington are going to figure out what is the right treatment, and what's going to be the protocols. Doctors are going to be judged based on how they follow those protocols whether or not it's the right thing for their patient.

The ObamaCare assumption is that you can design a protocol in Washington and apply it in a one-size-fits-all centralized mechanism to the whole country. Reality, says Turner is different.

We're moving toward ever more personlized care, where we can find out before somebody starts a round of chemotherapy, for example, whether or not that chemotherapy is going to work with them through genetic testing. That's where science is moving, to make sure that treatments are targeted toward what we can learn about that individual patient.

In other words, effective health care is care individualized for the individual patient in a collaborative process between doctor and patient.

This is the basic conflict between conservatives and liberals. Conservatives say that society, culture, and the economy are all discovery processes where people interact and discover through organic processes like the price system what works and what doesn't. Liberals believe that an avant garde of advanced experts and ethicists can design and implement a positive plan that can be administered by a central administrative structure.

Conservatives have said again and again that the market system has demonstrated that the liberal vision is just wrong. Whenever liberals have designed and implemented a rational top-down system, whether in Social Security, Medicare, public education, clean energy, or welfare, it always fails because the world is just too complex a place to be fitted into a one-size-fits-all plan.

Thus ObamaCare is a vast real-world test of the liberal vision, more ambitious and more risky that any previous of their national plans. We will see in the coming months and years whether the American people will put up with this top-down plan, and also whether it can work at all without utterly breaking up the health care system.

Dems Should Worry About President "Present"

This week the conservative herd all seems to be talking about President "Present." President Obama certainly does seem to be avoiding all the hard decisions, on Libya and everything else while he tosses teeny little chicken bones to his liberal base, as Kimberly Strassel writes: "A quip here about the Wisconsin labor dispute, a gun-control op-ed there. A promise to quit defending the Defense Against Marriage Act."

Yes. But. Shoring up his popularity rating isn't going to cut it for 2012. The president is that he needs to make decisions yesterday on the economy and the budget so that the economy will be in good shape by summer 2012. My guess is that by the summer of 2012 we will see nasty inflation in the 7 percent range, still high unemployment in the 8.5 percent range, increasing interest rates as the Fed starts to panic about inflation. The MSM will do their best to protect the president but I suspect that the American people won't be interested.

The chickens are all coming home to roost on our liberal friends, but they are huffing and puffing like southerners in the 1850s.

Back then, the South became more and more truculent as the political tide turned against it. Hey, they said, slavery is a great idea: let's push it out west! (As in: hey, labor unions made the middle class by championing pensions and health care benefits) Hey, they said, the North will never go to war over secession, because the Northerners were wimps that don't understand war. (As in: Harry Reid saying that the Tea Party will fade away).

The truculence of our liberal friends is breathtaking. But maybe it's already too late. It is now pretty obvious that President Obama should have reversed course on his economic policy, by cutting spending, boosting the economy with tax rate cuts, and cutting the deficit with a quick economic recovery. His actual policy was to let Congress throw money at liberal constituencies in a trillion dollar orgy--understandable after 20 years of Puritanical Republican restraint. Except of course that, in the years of so-called Republican restraint, liberal government workers were all partying with big pay increases and big health care and pension subsidies. Liberals seem to have no idea about what is coming.

My guess is that when the crash comes and the Feds have to cut something like $500 billion a year, the biggest cut will come out of Medicare/Medicaid. Why? Because that's the place where you can do smoke and mirrors. Social Security is a pretty clear-cut program. You get a check every month. You can tell if it gets cut. But with Medicare you can get up to all kinds of mischief by changing the rules on the health care industry and then blaming the doctors and hospitals when the system starts to crack. It's like attacking the oil companies for price gouging when the government's inflation policy starts to bite.

But Medicare cuts won't be enough. That means that liberal government workers are either going to have to take big benefit cuts or big layoffs. All the truculence of the liberal base cannot get around the fact that, when the government starts getting into difficulty selling its debt and paying the interest, the government is going to have to cut programs and cut government employment.

Of course, my theory is that President Bush deliberately staged the financial meltdown to sucker the Democrats into a big debt-ballooning stimulus that would eventually eat the liberals' lunch. Call me a conspiracy theorist!

No kidding! Here's a nickel that says that some headline liberal pundit will push the Bush-Did-It meme out there as President Obama sinks out of sight in the polls in September and October 2012.

Culture Power and Government Power

What happened to the marriage between parents and teachers, wonders Bill Murchison? Used to be that parents backed up teachers and teachers backed up parents so that "Johnny would read. Susie would con her multiplication tables. Because the middle class expected no less." What went wrong?

Well, writes Murchison, "the compact came apart when the kids themselves took as role models all the fun-loving, war-protesting, authority dissing "campus activists," as the papers called them." Then the idea got about that "Wasn't every little kiddie a potential genius best left to himself?"

Indeed it did. I will have something to say about that. But first this from libertarian John Stossel. He's boosting a speech by black conservative John McWhorter. McWhorter wants to end the drug war because it is tempting too many young black males into the drugs business. "The attractive illegal livelihood relieves men of the need to develop skills that would provide stable legal incomes." Then they get caught and put in jail and another generation of black kids grows up without fathers.

In both of these cases, the writers are expecting government to do a job that government cannot do. Government education cannot make little Johnny read. Government drug prohibition cannot force young black kids into the drug trade. Let's illustrate this with the example of the Irish.

Back in the 1830s the big problem was the shanty Irish. They were poor, they were backward, they were criminal, and they were Catholic so the elite of the time decided that the government "common school" would be just the thing to reduce crime and cure the Irish of their Catholicism. But the whole thing was a failure. First of all, there was a massive crime explosion in the 1840s just as the government schools expansion was getting under way. Secondly, the Irish violently opposed the idea that their children should go to government schools and read the Protestant Bible. So, under leaders like John "Dagger" Hughes, the Irish built their own schools, the famed parochial school system that still notably outperforms the government schools. In planning and implementing this great project the Irish came into the mainstream of American society--by teaching the Protestant elite a lesson.

Today, of course, the government school system is in a terrible mess. It no longer seems to be able to teach little Johnny to read, as functional illiteracy in adults is at least 15 percent. What happened to the consensus on education?

How about this? Today, the educated class that drives the school agenda is no longer interested in literacy and numeracy. That is the agenda of a rising middle class. But a risen middle class takes literacy and numeracy for granted. It is interested in the uses of literacy and numeracy--in a word, creativity.

But wait! What happens to the folks like the underclass black kids whose parents still lack functional literacy? Well, there's always drug dealing.

My point is this. There is no magic government bullet that is going to solve the problems of the black community. It is the black community that has to solve its own problems. Back in the 19th century the elite didn't give a damn about the Irish. The Irish had to pull themselves up and define what it meant to be an Irish American--in defiance of elite culture and opinion.

The problem for blacks today is that they have a protector, the liberal educated class that uses blacks as political pawns to maintain liberal political power. Sheltering in the political power of the liberals blacks have been diverted from the tough, character building work of defining themselves in defiance of the current elite. That means creating an education for their kids in spite of the government, and protecting the black family in spite of the government's war on drugs.

But I am an optimist. I'll bet a nickel that even as we sit here wringing our hands about the broken education system and the broken black family the solutions are already forming and developing under the radar. Because the American Dream beats in the heart of everyone, from parents frustrated with the government education system to blacks frustrated with the government's war on drugs.

The first step is to take the Reagan pledge. "Government is not the solution to our problem. Government is the problem." But you knew that.

Sowell on "Blacks and Republicans"

Thomas Sowell, the noted black conservative economist, periodically urges Republicans to get out and fight for black votes. This week he did it again.

As an economist, he points out how liberal economics hurts black people, for instance:

• Restrictive zoning. You rarely see a black person on the San Francisco peninsular. That's because of environmental politics and land-use restrictions over the past generation.
  

  But the building restrictions-- and outright bans-- resulting from the political crusades of environmentalist zealots sent housing prices skyrocketing in San Francisco, San Jose and most of the communities in between.

• Minimum wage laws lead to high unemployment among black youths. That comes from liberal politicians, and it hurts blacks.
• Job protections for union teachers hurts education. That's a big deal for blacks whose best route for advancement begins with education.

If Republicans won't talk about these issues with blacks, says Sowell, they are throwing away an opportunity to earn their votes.

But I think that economist Sowell is missing the point. People don't switch to the conservative side on these issues until they have succeeded as middle-class people and realize that the middle-class proposition--that you get an education, develop your skills, and then offer yourself to the labor market--really works.

The fact is that modern economics is not common-sense economics, any more than modern mechanics is common-sense.

Common sense tells you that you can't make anything move unless you push it. If you stop pushing, it will stop. Modern mechanics says that things move at a constant speed unless pushed. Really? Common sense says you gotta be kidding.

Same thing with economics. Common sense tells you that the rich landlord can jack up rent any time he wants to screw the poor people. Common sense tells you that the employer can lower wages as low as he wants when he wants to screw the poor people. Common sense tells you that you've got to hang on to those teacher jobs come what may because, after all, that's where the paychecks come from.

Low income people, of any race, believe that the economy is a dog-eat-dog world in which the poor go to the wall unless protected by a powerful patron. That's why they vote for liberals. Liberals say, again and again, that they fight for the poor people and for blacks and minorities. Liberals support benefits for blacks and poor people. It doesn't matter that liberal economic policies prevent blacks from getting into the middle class. What matters to the average low-income voter is that liberals siphon some of the money of the rich into their pockets. Obviously, there is no way that conservatives can compete when it comes to benefits for poor people.

The right thing for conservatives to do is to champion modern economics over feudal liberal economics, just as scientists champion modern mechanics over common-sense mechanics. Every time a black indicates an interest in conservative ideas we should jump and push out the welcome wagon.

Years ago, liberals kept the average white working stiff in the New Deal coalition by frightening the heck out of him. Today, liberals keep the average black in the Democratic column by playing the race card. But there came a day when the average white working stiff had a house and a car and a kid in college, and he found himself voting for Ronald Reagan and repudiating the useless Jimmy Carter. The day will come when the average black voter does the same thing. That day is sooner than you think.

"The MSM is Silent"

The 2008 presidential election was a remarkable experience for conservatives. The mainstream media, in an unprecedented way, went into the tank for Candidate Obama. Not one discouraging word was allowed to disturb the narrative of a moderate post-partisan healer who was a test of America's readiness to elect its first black president.

Now, as Hugh Hewitt writes, the MSM is covering for President Obama's weaknesses and mistakes.

The president preaches fiscal restraint but advanced a reckless budget and refuses to suggest any entitlement reform. The MSM is silent.

The president imposed Obamacare on an unwilling country and then issues more than a thousand waivers to the friends of Obama and the politically connected. The MSM is silent.

And now with gas prices soaring and an angry population turning their political fury on the president, he runs from the responsibility which is surely his and claims childlike wonder at the idea that his no-growth/no-oil policies are to blame. And the MSM is silent.

Personally, I believe that the mainstream media is making a grand-strategic mistake on this. I think that the MSM needs to maintain its image as non-partisan, while bowing to the liberal line on occasion. In 2012, with a substantial army of moderates upset and reacting against the Obama first term, there is going to be a stunning opportunity to ramp up the ratings if you are pushing a center-right agenda. There is just going to be a huge demand for media that is sharply critical of the president.

The big thing in politics is that ordinary people need to feel that someone in power hears their concerns. People don't expect miracles from the political system. But they do want to feel that someone is willing to listen.

The way things are shaping up it looks as if moderate voters will be looking for media that reflects their concerns, and they won't find it from "the MSM is silent" media that is protecting President Obama from criticism. Willy nilly, they'll be finding their way to FoxNews and the various other center-right media.

By the winter of 2013 we could be talking about another step-change in news viewership, as frustrated citizens turned in 2012 from an "MSM is silent" media to a media that, while it may not be perfect, at least seems to be listening.

Social Security Isn't the Problem

Columnist Charles Krauthammer makes an impassioned case against President Obama's cavalier attitude to Social Security.

The new line from the White House is: no need to fix it because there is no problem. As Office of Management and Budget (OMB) director Jack Lew wrote in USA Today just a few weeks ago, the trust fund is solvent until 2037. Therefore, Social Security is now off the table in debt-reduction talks.

Well, yes. As Dr. Krauthammer tells us, there is no "trust fund." There are IOUs, special Treasury Bonds that pay interest to Social Security. To pay Social Security benefits in the future from the bonds in the "trust fund" the federal government will have to raise taxes or reduce spending in the future.

But the president is right. Social Security isn't the problem. Medicare and Medicaid are the problem. You can see that in the Congressional Budget Office's Long Term Outlook.

If you click the image you can get to the numbers. Social Security right now costs 4.9 percent of GDP. It will rise gradually to 6 percent of GDP in 2050. But Medicare and Medicaid are a horse of a different color. Right now they are 5.6 percent of GDP. No problem there. But they will rocket to 12.3 percent of GDP by 2050 and go up from there. There's no mystery about that. Medicare and Medicaid provide subsidies for health care. If you subsidize something you will get a bigger demand for it.

Of course, it would be nice to reduce Social Security and turn it into a genuine savings program. That would be doing the younger generation a favor, because it would mean that the older generation was actually saving money for retirement, creating the capital for the jobs for the young people. But it isn't the real problem. Government health care is the real problem.

No doubt that is why President Obama is making the government health care problem worse with ObamaCare. After all, what does he care? In either two years or six years he'll be a former president, with the privileges and perquisites of that office.

The Wisconsin Fallout

Most of the time in politics the two sides stalk around each other, avoiding risky actions that could backfire.

But occasionally they go for a win. In the two years of Democratic power in Washington 2009-2010 President Obama and the Democratic Congress marched boldly forward increasing the size of government and pushing towards their holy grail of complete government health care. We know what happened: the American people reacted with alarm and elected a Republican House of Representatives in the biggest switch in half a century.

Now we've seen Republicans, newly elected to a majority in Wisconsin, push union collective bargaining reforms to curb the power of public-sector unions in that state. Will that bold push provoke a similar backlash? Who knows?

What is shocking to me, as a conservative, is the astonishing double standard when liberals take to the streets. It's considered an outrage when conservative demonstrators put one foot wrong. But hey, when liberal demonstrators invade the Wisconsin state house that's just the people taking action against injustice, the rage of the workers against the mean-spirited actions of the bosses.

Of course, both sides in the political wars tend to outrage about the shenanigans of the other side, and overlook their own indiscretions. But my experience as a conservative is that you always have to be thinking about how you look to the uncommitted moderates in the middle. You get the feeling that the liberals in Madison, Wisconsin, just don't care about how they look to the moderates in the middle.

Perhaps liberals are just used to the old media rules in which the liberal MSM always condoned bad behavior on the left and always played up bad behavior on the right. It's the conceit of conservatives that the rules have changed and that liberals can't get away with stuff any more, because FoxNews and citizens with pocket video cameras can bring lefty outrages onto the national radar. The recent sting on NPR executives, timed just as Congress is considering its funding, suggests that the game has changed.

But nobody can tell how the political battles since 2008 will work out. Have Democrats pushed too far with ObamaCare? We won't know until after the 2012 elections. Will Republicans in Wisconsin get punished for curbing the power of government worker unions? We'll get an early look from the results of the recall campaigns that the Democrats are planning against Republican state senators.

My concern, expressed in "Radical Suits and Their Suckers," is that Democrats are playing their public-sector union supporters for suckers. In the end, government workers are going to be paying a lot more for their pensions and health care. After all the parades and demonstrations, the radical suits will head off to the next gig, and the government workers in Wisconsin will be stuck with fewer benefits.

The Futility of Energy Policy

For some reason, people think that the government ought to have an energy policy.

You'd think we would have learned by now that politicians and political activists are clueless when it comes to anything in the economic sphere, but hope springs eternal.

But it's not just crazed lefties that fall for this folly.

Here is energy expert Nansen G. Saleri worrying about energy efficiency. He's right to suggest that there is little worry about $200 per barrel oil, for there is plenty of oil and plenty of natural gas (particularly given the new horizontal drilling technologies).

The problem is inefficiency.

According to a 2007 study by National Petroleum Council, at the request of the U.S. Department of Energy, approximately 61% of energy produced is lost due to factors such as poor insulation, gas-guzzling vehicles or suboptimal power plants. On average, only one out of three reservoir barrels is recovered, which translates to an overall efficiency of only 13% for oil that is converted to a usable form. Improving energy efficiency should be a top priority, not just in our surface usage but also at the point of extraction.

Then he calls for a national energy policy. The Obama administration is ambivalent about energy, he worries, and needs a clear strategy going forward.

This will require real leadership and the clear articulation of energy goals, costs and priorities. Ambiguity will not serve the best interests of future generations. The U.S. does not have an energy problem. It has an energy strategy problem.

Oh dear. Look, efficiency is not a problem. It just means that, all things being equal, we can afford to put off making vehicles and power plants more efficient. People are not fools; they weigh, instinctively, the advantages of continuing as usual and making investments in efficiency. And the problem right now is that the Obama administration, bowing to its liberal environmental base, is going flat out trying to force the nation into a post-fossil-fuel era with chimerical ideas like wind and solar power. God knows what the penalty in inefficiency will be from this hare-brained effort.

What's needed is a separation of economy and state. Let the state set forth environmental standards, even including the dreaded CO2 if they can get away with it. But when it comes to efficiencies and technologies, then the government should get out of the way.

Who knew five years ago, apart from industry insiders, that horizontal drilling and "fracking" would revolutionize oil and gas drilling? No national energy policy worth the name could have forecast this game changer.

The fact is that the market economy is the only way to combine the whole bundle of economic questions: future resource availability, efficiency, technology. It's not very good at it, but it recovers from its mistakes quickly.

But government is different. It doesn't learn from its mistakes. In fact it only changes policy after it's driven the country into the ditch. An example is the folly of ethanol subsidies. This energy policy has converted 40 percent of the corn crop to fuel production from food production, has raised the cost of food, and is a net loss, energy-wise, because of the energy cost of converting corn to ethanol.

It is admittedly not the case that every aspect of any national energy policy will suffer from the same problems as the ethanol program. The chances are that the ethanol scandal will look like a molehill compared to the mountain of problems and disasters that a real national energy policy will create.

Arguing About the 2007 Deficit

A lot of people are comparing the federal deficit for the last month--a record $223 billion--with the deficit in FY 2007 in the Bush administration. But somehow nobody can agree on the Bush number.

That's where usgovernmentspending.com comes in. It has a special Budget Analyst so you can look things up. In particular it has an "estimate vs. actual" feature that lets you look at a specific fiscal year, say 2007, and look at the forecasts for spending and deficits compared with the actual outcome.

When the president publishes his budget it includes estimates on future spending and revenue as well as reports on past spending and revenue. In the FY12 budget just sent up to Capitol Hill, the president sent Congress his estimates for FY12 starting in November 2011, as well as his report on actual spending for FY10.

So here is how the federal deficit for FY 2007, in billions of US dollars, worked out, in forecast and in hindsight.

	FY2003 Budget	FY2004 Budget	FY2005 Budget	FY2006 Budget	FY2007 Budget	FY2008 Budget	Actual FY 2007
Federal Deficit	-104.0	178.2	241.3	312.1	354.3	244.2	161.0

So there it is, straight from usgovernmentspending.com.

It is shocking to see how the deficit estimate changes from year to year. Imagine! In the FY 2003 budget the president estimated a surplus for FY 2007. But that was before the War in Iraq got started. Then the estimate changed, so that by the time that President Bush sent the FY 2007 budget to Congress in February 2006, he was estimating a budget deficit of $354 billion. Then, after all that fuss, the deficit came in at $161 billion.

You gotta wonder. Who's in charge here?

Bill Whittle's Three Ages Theory and Mine

If you want to explain the world simply and dramatically, the best way is usually through a Three Ages theory: first there was a golden age, then things got screwed up, and now the new age will restore the goodness of the old age in new ways.

Bill Whittle has just done this with a YouTube video, "The End of the Beginning."

His three ages start with the Agricultural age, when the invention of agriculture and settled life allowed the development of the city state, government, and money. In the United States and its constitution this created a society that was open, horizontal, decentralized. But then came the Industrial age and the robber barons. They bribed politicians to favor themselves and their monopolies (see picture of Rockefeller, Vanderbilt, Carnegie, and Morgan here). To challenge this corruption of the system came the Progressives to build up a central government power to challenge the power of the robber barons. But now comes the Information age, that is "horizontal, independent, light, fast, agile, decentralized, local, smaller, cheaper." For this age the Progressive menu and its powerful government and labor unions is a corrupt remnant of the Industrial age.

My Three Ages theory is different, because I think that the idea that the robber barons were corrupt and politically powerful is mistaken.

In my view it was understandable in the 19th century to imagine that the industrial barons could be dangerous, but the events showed that they were not. Let's take the four robber barons pictured in Bill Whittle's video. John D. Rockefeller was only interested in bribing politicians when he needed political permission to, e.g., build pipelines from Pennsylvania oilfields to the Atlantic ports. Rockefeller retired from active business in his 50s and turned to philanthropy. Cornelius Vanderbilt was a railroad man that built the powerful New York Central from New York to Chicago out of a bunch of smaller railroads. Again, Vanderbilt had to get land for his ventures and land means politics. Vanderbilt was not a philanthropist. Carnegie was an unpleasant fellow, but he built the steel industry and gave us cheap steel before selling out to J.P. Morgan for a fortune in bonds. He ended his life as a philanthropist. J.P. Morgan was at the apex of banking and specialized in railroad bankruptcy. Railroads were commonly built upon and wing and a prayer, and often collapsed from too much debt. Morgan cleaned up the financial messes: "morganizing," it was called. As Morgan got older he built a large art collection and gave most of it to the Metropolitan Museum in Manhattan.

The point is that none of these robber barons were particularly interested in political power. They were interested in their businesses, and when they got older they turned to philanthropy. Moreover their monopolies were short lived. Rockefeller had a huge monopoly in oil, but as soon as the Progressive trustbusters started after him wildcatters found oil in Texas. So that was the end of the oil monopoly. Carnegie and US Steel? Yes, but it was challenged by Bethlehem Steel. Vanderbilt and the New York Central? Challenged by the Pennsylvania Railroad. But what about big central government? Who was there to challenge its monopoly power?

So my three ages theory is different. In the hunter-gatherer age society was horizontal and egalitarian. But the invention of agricultural society and its wealth created a vertical society of lords, empires and temple religions that ended with absolute monarchs, bureaucracies, and state churches.

On my view the third age is the industrial age, the age of revived horizontal and egalitarian society. It releases enormous economic powers but those powers are not threatening in the way that emperors, temple priests, and central bureaucrats were and are. That's because in the last half millennium we have developed a political philosophy of separated powers, to keep the power of the economic sector separate from the political power and the religious, or moral/cultural power.

The Progressives built their politics upon an illusion, that the industrialists were more than an economic power. The industrialists were a political power to be feared, and could only be defeated by a countervailing political power. Thus they built a centralized political power that was way more powerful than it needed to be in order to deal with the new economic power. The result is all around us, in a dollar worth about one percent of its value a century ago, a vast political patronage structure that has revived the peonage of the feudal era with big government pensions, health care, education, and welfare. On top of the political structure is a corrupt and venal educated class that just hasn't a clue about its cruelties, its corruption, its wastefulness, its injustices, and its delusions.

We don't need a unified political system with extraordinary powers. We need a separation of powers between the political sector, the economic sector, and the moral/cultural sector.

Modern liberalism is a political movement committed to a unitary political power that has, in its extreme versions, brought unimaginable miseries on billions of people. Modern conservatism is a political movement that hates the unitary state and is committed to the new vision of a society of separated powers, a society not just a state.

Health Insurance Doesn't Matter?

Surely you are joking, Mr. Feynman.

I've written about this before: the fact is that there's only been one longish-term study on health insurance, the RAND Health Insurance Experiment. The result was the same as the Folgers coffee test. No difference. Well, not exactly. As Jim Manzi says,

According to the study, “The poorest and sickest 6 percent of the sample at the start of the experiment had better outcomes under the free plan for 4 of the 30 conditions measured.”

Otherwise the study showed that the more "free" health care people get, the more they use it. That's all.

I suppose that the reality in back of health care is that, when people are sick, they use their human ingenuity to get access to health care. Humans are good that that, presumably for evolutionary reasons.

But the problem with health care is that there are two kinds: health care that makes you better and health care that makes you worse. Manzi then goes on to kick a hole in the whole approach to health care proposed by liberals like Ezra Klein.

Klein clearly has a very sophisticated take on the issue, and wrote in 2009 that health-care reform is not primarily about improving health, but in reducing how much we spend on it. As he put it, “The purpose of health reform, in other words, is to pay for health care — not to improve the health of the population.” Fair enough. But the real debate, then, would be about whether market forces or bureaucratic control would be better at reducing costs, not about which would be better at promoting health for the “poorest and sickest” or anybody else.

Oh come on? ObamaCare is all about reducing health care costs? Really? Is Ezra Klein seriously suggesting that the political hardball of 2009 and 2010 was just a decent effort to search for ways of reducing health care costs?

If there is anyone left in the world who thinks that the bureaucratic method is the way to reduce costs on anything, I've got a bridge to sell them.

The fact is that people in politics are people interested in power. They get power by winning elections. Politicians, left and right, design programs to distribute money to their supporters. Democratic politicians distribute money to their supporters with spending programs; Republican politicians distribute money with tax cuts. There are plenty of people that love the idea of free health care for them and their family. That kind of person votes for politicians that offer free health care and the politicians know it.

Obama and Reelection

Pundits are now seriously turning to the question of President Obama's reelection chances. Jay Cost's "Morning Jay" at The Weekly Standard gives his usual sensible advice. Forget the hysteria and the ups and downs in the pundit market.

[F]irst, Obama looks no more or less beatable now than he did four months ago; second, he looks fairly vulnerable.

Given the four standard reelection scenarios--economy good/president responsible, economy good/president not responsible, economy bad/president to blame, economy bad/president not to blame--he picks door #4 as the likely scenario.

Personally, I think that we are getting closer to the possibility of #3, the Hoover option. President Obama's beliefs and instincts lead him towards stupid economic policy, from bailouts to stimulus to regulation to inflation to the latest administration wheeze "to force the nation's biggest mortgage servicers to cough up $20 billion for principal write downs on 'underwater' mortgages," according to the Wall Street Journal edit page.

When will liberals learn not to monkey with the balance sheets of the banks?

If the president wants to avoid the Hoover reelection scenario he needs to get with a pro-growth economic policy really fast, and one that gets the housing market above water by methods other than stupid liberal pet tricks.

That's why I think that Stanley Kurtz's worry about Obama doing the Alinsky is beside the point. Kurtz reckons that Obama is crazy as a fox in keeping his ideology under wraps for Alinsky taught him to keep his "views to himself, and to act by soliciting (and quietly manipulating) the desires of others instead."

This sounds creepy and conspiratorial, but most politicians act that way, agreeing with the voters on everything and speaking in general platitudes, pushing their agenda with flank movements rather than direct ideological attacks.

Whatever his ideology, Obama has to act fast to get the economy visibly on track by the spring of 2012, and time is getting awfully short. Chances are that liberal stunts aren't going to work--they've pushed the entire boat out anyway. No, Obama is going to have to get pro-growth, and fast, if he wants reelection. Otherwise the economy is still going to be in the tank by the spring next year and it will be all over for the president and the Democrats.

Win or lose, a pro-growth agenda from the Democrats will be a good thing for America. Liberals have spent the last century running away from the basic fact of the modern economy; you can't bang it around with a billy club. Government's role is to set the rules, stand back, and fight the temptation to dig young plants up by the roots to figure out why they aren't growing fast enough.

A 19th Century Climate Character

Michael Barone talks about the end of Big Unit America. He means the end of the Galbraithian universe of countervailing powers: Big Business versus Big Labor with Big Government as the referee in the middle.

The problem with Big Unit America, apart from its economic impossibility, was that it turned into an inside job. The Galbraithian assumptions were wrong. The three parties didn't countervail for the greater good like he said. Instead they colluded to rip off non-Big Unit America. Now, of course, Big Unit America is broke.

But the Goliath of Big Unit America wouldn't be in trouble today without an army of Davids slinging well-aimed pebbles at it. The climate denier movement (Rule One: embraced the pejoratives of the other side) has been driven by Davids, men like Steve McIntyre and Anthony Watts.

But in the second rank has been the curious character of Willis Eschenbach, a college dropout going fearlessly up against the Big Unit climate champions like Phil Jones, Michael Mann and Gavin Schmidt. You always wonder about people that go up against the System, because there are so few of them.

Now Willis has published a quickie bio, "It's Not About Me," in Wattsupwiththat.com, and if I were a Big Unit climate guy, I would tremble. Willis is the kind of guy that flourished in the 19th century: He's lived his entire life outside the System, and when he and the System came to blows the System lost. As in: getting himself thrown out of the US Army in the mid 1960s after a harrowing trial of strength involving Army mental hospitals and copious quantities of thorazine.

And no wonder. Willis was raised on a ranch, went to a small school, and has lived by a simple code:

I made some rules of thumb for myself that eventually turned me into a generalist. One was that my motto would be “retire early … and often”. Another was that given a choice between something I had done and something I had not done, I would always do the new thing. Another was that if I was offered security or adventure, I’d choose adventure.

I'm familiar with the Willis kind. I've read about them. They flourished in the middle of the 19th century, right before the rollout of the modern Government Child Custodial Facilities in which children are confined from age 6 to 18 with no possibility of parole. They were remarkably intelligent, remarkably courageous, remarkably sociable, and remarkably difficult to control. That's why the modern Government Child Custodial Facility was invented: to control these uncontrollables. For the most part, it's done its job. But there are always a few that escape the dragnet, and Willis Eschenbach is one such.

The only thing is: We need more of them.