Archive from February, 2011
11 Feb
2011
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Congratulations to the Egyptian people

There is no doubt that it is reasonable to be concerned about the future of Egypt. But as a believer in the universal right of the individual to take part in choosing their own government, I am happy for those Egyptians who fought to remove the tyrant who has ruled them for so long. Let us hope that this leads to free and fair elections, which do not result in another dictator or Islamic fundamentalist coming to power.

As the GOP is the Party of Lincoln, I hope every Republican would ultimately support the right of the Egyptian people to choose their own government and who will represent them.

9 Feb
2011
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Obama Tells Business Executives That Regulation Is Good

As an individual who works for a very large financial institution, I can appreciate the burdens of excessive government regulation. Sure we need to have some regulation in place to prevent egregious abuses, but when regulation of commercial activity in the United States numbers in the MILLIONS of pages, economic growth is stifled.

Obama recently told many executives from our largest corporations that the regulations that exist and that he has added are “good” for the recovering economy and job creation. He also implied that they are good for consumers. Oh, really? Case in point – what do newly added banking regulations do for consumers? Well, banks are now passing to the increased costs down to the consumer. You like your free checking and savings accounts? This month, both may be disappearing at a bank near you. This is, of course, unless you meet minimum balance requirements of $1500, $2500, or even $5000 in total balances, or direct deposit. By the way, major banks will be scaling back their rehiring plans as well.

It’s clear that Obama has not learned his lesson from the embarassment of the 2010 Elections. It’s clear that Americans have a healthy distrust for big government intrusion into their lives and pocketbooks. Republicans, we have no excuse not to win the presidency in 2012.

8 Feb
2011
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Obama: More Bailouts for Bankrupt States

Question: If you are the overspending father of a family of 5, and your rich uncle keeps paying your bloated credit cards bills, will you ever tighten your belt?  Will your habits ever change?  Will you ever decide that you can live without a new pair of hi-def speakers?

Now let’s depersonalize the situation:  You are a governor with constituents, minority (in the strict sense of the word) interest groups, lobbyists, and legislators knocking down your door.  Each group is dependent in one way or another on your state’s funds; for subsidies (business), for living expenses (pensioners, sick and elderly), re-election (state legislators).  For the past decade you and your predecessor have approved one huge budget increase after the next, able to borrow on the cheap thanks to historically low interest rates and fat tax revenues.  In doing so, you’ve run up quite tab.

But in the last few years, since the Great Recession took firm hold, although interest rates have remained at historic lows thanks to the Federal Reserve, your tax base has eroded, your state is facing 12% unemployment, and unemployment insurance outlays have tripled.  Still in place are the subsidies and so-called social welfare programs, which cost a bundle.  But the day of financial reckoning inches nearer with each new spending bill, and chatter among the financial classes points toward substantially higher interest rates sooner rather than later.

Unlike your fat cat uncle, whose own 401K is vulnerable with the rest of the market, our Federal government has essentially no firm limit to its spending.  It’s true limit is how much power it can project in world affairs.  Until high ranking officials see diminishing returns on their oversees… err, let’s call them “investments,” debt will not be their focus.  If debt becomes problematic in the meantime, the Federal Reserve, ever eager to fire up the printing press, can monetize it.  Thus, direct financial connection to the Federal government coupled with an accommodating President and Congress who never say “No” results in governors only delaying the inevitable.

Fox News reports:

Rising unemployment has placed such a burden on states that 30 of them owe the federal government $42 billion in money borrowed to meet their unemployment insurance obligations. Three states already have had to raise taxes to begin paying back the money they owe. More than 20 other states likely would have to raise taxes to cover their unemployment insurance debts. Under federal law, such tax increases are automatic once the money owed reaches a certain level.

Under the proposal, the administration would impose a moratorium in 2011 and 2012 on state tax increases and on state interest payments on the debt.

This move only perpetuates the charade that you can enact wide ranging government programs without increasing taxes.  As attractive as this sounds to a voter, it’s a cruel deception.  The debt piles up at the national level, where it has recently broached $14 trillion.  The matter really cuts to the heart of the argument for limited government, in which tax dollars are used in defined ways that are relatively fixed in constitutions.

Your uncle has cut you off.  You still owe huge sums of money.  There are two modes of action which will enable your to more effectively service your debt – reduce current consumption (i.e. send less money away) or get a raise (i.e take more money in).

Any government has parallel choices, with one caveat.  Like you, it can cut spending.  This is straight forward.  But in terms of getting a raise, it has two methods: either it can raise taxes, or it can expand its tax base by “growing” the economy.*  If it raises taxes, it runs the risk of chasing business away.  Why not set up headquarters in Singapore, or Europe, or  China?  There are many attractive options, and as margins migrate to more accommodating countries, so does business.

States can increase taxes in an attempt to give themselves a raise and close budget gaps, like Illinois recently did - by 66% for some – but they run the risk of chasing away residents, or having those residents move their money into (mainly non-productive) tax shelters, such as municipal bonds and real estate.

The best way to reduce budget deficits, like the best way to lose weight, is to consume less.  For states, this means slashing budgets.  30 states will learn that lesson.  But this new talk from our Federal government assures it will be learned later rather than sooner.

*”Growing the economy” and any metaphor which conflates providing a stable political environment in which business can flourish and assigning to government the role of business proprietor is tragically misleading.  Business is not a function of government but the private sector.  Governments, to the extent that they encourage business at all, provide safety, a strong legal code which respects private concerns, and oversee the orderly transition of one government to the next while keeping taxes low.  Regulations, price controls, subsidies, special incentives, and redistribution overwhelmingly tend only to stunt business growth and discourage personal initiative.

6 Feb
2011
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Wal-Mart in New York City

How is Wal-Mart a relevant political issue for us? It’s an issue when far-left groups seek to prevent it’s opening in otherwise low-income neighborhoods. It’s also an issue when liberal unions are keeping out employers who would otherwise create jobs.

Rumors are circulating that Wal-Mart is looking to open a two-floor, 180,000 sq. ft. Supercenter in a brownfield, retail redevelopment complex in Brooklyn’s East New York neighborhood. This area has a high concentration of low-income and crime-ridden areas, which, unfortunately, affects a disproportionate number of blacks and hispanics. While the area is slowly improving (but still harsh), East New York is a “food desert”. Union driven mini-supermarkets and corner stores limit affordable and healthy food choices for many low-income residents in the neighborhood. Wal-Mart would make food stamp budgets go further and provide jobs for a neighborhood experiencing 17% unemployment.

Far-left groups seeking to promote “social justice”, want to keep Wal-Mart out due to “abusive wage practices” and “a conservative culture that discriminates against women and minorities”. However, is preventing job creation and affordable food choices promoting “social justice”? Is charging low-income earners dues who work in union stores addressing the poverty concerns in the area? Is preventing captialistic adjustments that these stores would have to make in the face of Wal-Mart good for the economy of the neighborhood?

These stores will not go out of business if they make the addjustments they need to make to stay alive. They have loyal customer bases that Wal-Mart doesn’t have. Besides, given the anti-Wal-mart sentiment that exists amongst New Yorkers, what do these overpriced union stores have to fear? They just want to keep their political and business cash registers ringing at the expense of low-income minorities. It’s no accident that the mini-supermarkets and the unions are in collusion with each other. High prices keep both groups happy, while neighborhood residents travel far to afford basic necessities. As you can see, liberals don’t have a monopoly on “social justice”.

5 Feb
2011
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Ronald Reagan’s Centennial Birthday and Sarah Palin

On February 6, 1911, one of America’s greatest presidents was born. Ronald Wilson Reagan led us out an economic dark age in the early 1980’s, helped defeat Soviet communism, and improved our nation’s standing in the world. His legacy today is shown by a largely united Republican party whose big tent must beat big-government liberalism.

Sarah Palin spoke at a Reagan centennial event sponsored by the Young America Foundation. She said that the United States is on “the road to ruin” if we keep going in the big- government direction that we are. She highlighted the failures of Lyndon Johnson’s Great Society programs and how they have not helped the poor advance their position in society. Also, themes of energy independence and gun rights are pushed in stark contrast to liberal results of (leading to) the discouraging of fossil fuels and limiting options for self-defense.

Many liberal elites and others of the big-government coalition (especially here in New York City) dis Sarah Palin as a joke, hillbilly, redneck, moron, or some other diatribe. In reality, she is a woman who represents the American dream. She is very hard-working, motivated, ethical, entrepreneurial, patriotic, religious, and family-oriented. She is a self-made woman.

Sound familiar? That’s who Ronald Reagan was too. As the poor son of a town-drunk, he was a self-made man emblematic of the American dream. As liberal elites seek to control the country’s agenda, we must be vigilant in fighting back to preserve the values this country was founded on.

4 Feb
2011
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What Would Hayek Do?

Bruce Caldwell, Hayek scholar and editor of The Collected Works of F.A. Hayek, has a recent piece at Heritage offering his and Hayek’s views on our current and enduring recession depression.

In Ten (Mostly) Hayekian Insight for Trying Economic Times, Dr. Caldwell examines a number of economic insights which help explain why after 34 months after the collapse of Bear Stearns significantly elevated unemployment remains a concern.

The ten themes are as follows:

Theme #1: The Business Cycle Is a Necessary and Unavoidable Concomitant of a Free-Market Money-Using Economy.

Theme #2: The 1970s and Why Keynesian Economics Was Rejected

Theme #3: Some Regulation Is Necessary…

Theme #4: …But a Lot of Regulation Is Fraught with Problems and Will Make Matters Worse.

Theme #5: The Economy Is an Essentially Complex Phenomenon for Which Precise Forecasting—on Which the Construction of Rational Policy Depends—Is Ruled Out.

Theme #6: In Any Complex Social Order, Any Action May Have Both Good and Bad Unintended Consequences.

Theme #7: Basic Economic Reasoning Captures What We Can Know and Say About the Essentially Complex Phenomenon That We Call the Economy.

Theme #8: The Cry for Social Justice Is Both Misguided and Dangerous.

Theme #9: The Basic Hayekian Insight—Freely Adjusting Market Prices Help Solve the Knowledge Problem and Allow Social Coordination.

Theme #10: The Basic Public Choice Insight—More Often Than Not, Government Cures Are Not Only Worse Than the Disease, but Lead to Further Disease.

Dr. Caldwell explain these themes in some detail.  It is an excellent piece for anybody looking to understand how government has sabotaged the recovery.

One quibble with Dr. Caldwell’s article.  He writes

But even more fundamentally, the Austrian perspective counsels politicians to do nothing at a time when all their instincts are to show voters that the government is doing something.

In later years, Hayek proposed that the Fed be done away with and that the competitive issue of private currency by banks be put in its place.  Hayek proposed that the Fed be done away with and that the competitive issue of private currency by banks be put in its place. This alternative has been trumpeted by certain present-day Austrian economists, and such ideas need to be more widely disseminated and debated. But for those who do not want to go into the intricacies of alternative monetary regimes, it is simply important to recognize that the Austrian message was not popular in the 1930s, is not popular today, and will never be popular. Rather than argue directly for it, perhaps a better strategy is to warn of the dangers of Keynesian economics. [emphasis mine]

It’s unclear what Dr. Caldwell means when he says “the Austrian message was not popular.”  The 1930’s Austrian message was to resist the urge of fiscal stimulus (i.e. increased spending) and allow interest rates to rise – in the parlance of today that amounts to “do nothing,” a phrase used by Dr. Caldwell himself.  The 1970’s Austrian message was to denationalize currency (and abolish the Federal Reserve), an intriguing idea with merit and theoretical soundness, but practically unimaginable at the present juncture.  Because he explicitly writes “the 1930’s Austrian message,” so I thus read his sentence as follow: “The Austrian message to do nothing was not popular in the 1930s, is not popular today, and will never be popular.  Rather than… a better strategy is to warn of the dangers of Keynesian economics.”

Milton Friedman, no fan of Austrian economics and no believer in the Austrian Business Cycle Theory, spent an entire career warning of the dangers of Keyesianism.  For his life’s work we unquestionably are a better nation.  Unfortunately, his rejection of the Hayek explanation of the business cycle and Hayek’s recommendation for government to “do nothing” (arguably, Hayek probably would have promoted the reduction of government spending and a commensurate reduction in taxes), led him advocate monetary interventionism.  We see this in the policies of Fed Chair Ben Bernanke, a Friedman acolyte.

Competent and honest economists must continually inform and remind the public of basic economic fallacies and their multifarious manifestations in public policy.  It may be true that it runs counter to human nature to dutifully stand by and watch a stock market implode and unemployment spike as the inevitable result of government induced credit expansion.  However, Dr. Caldwell should remember that another one of Hayek’s main themes was that basic human instinct must be tempered by learned and inherited moral traditions; and that it is these moral traditions that give rise to civilization by allowing trade to flourish and the division of labor to expand beyond a single village or small town.  Abstaining from large scale intervention as a futile therapeutic – or better yet, foregoing the use the narcotic of false credit in the first place – should be no harder than learning not to steal from one’s neighbor, or not resort to react violently, as a 2 year old would, to unpleasant circumstances one finds himself among.  We do not accept barbarism on the street; why should we accept it in Congress?

2 Feb
2011
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The “De Facto” Leader

The Left does not get Conservatism, much less talk radio.  As this article in Commentary Magazine explains, of all the leaders on the Right, none is less understood than the dynamo Rush Limbaugh.

Loved and hated, Rush’s popularity in the Obama era is as formidable and influential as ever.  What doesn’t the left get about Rush?  In part,

He is equipped with a resonant and instantly recognizable baritone voice and an unusually quick and creative mind, a keen and independent grasp of political issues and political personalities, and—what is perhaps his greatest talent—an astonishing ability to reformulate complex ideas in direct, vivid, and often eloquent ways, always delivering his thoughts live and unscripted, out there on the high wire. He conducts his show in an air of high-spiritedness and relaxed good humor, clearly enjoying himself, always willing to be spontaneous and unpredictable, even though he is aware that every word he utters on the air is being recorded and tracked by his political enemies in the hope that he will slip up and say something career-destroying. Limbaugh the judo master is delighted to make note of this surveillance, with the same delight he expresses when one of his “outrageous” sound bites makes the rounds of the mainstream media, and he can then play back all the sputtering but eerily uniform reactions from the mainstream commentators, turning it back on them with a well-placed witticism.

A tenet of successful warfare is to know and understand one’s enemy.  The Left, to the extent they acknowledge Rush at all, understands him only superficially. Whenever they are foolish enough to engage him directly, he drags them through the mud and emerges the victor.  Cf. Bill Clinton, Harry Reed, Barack Obama, to name only the biggest fish.  (In their latest feeble attempt at marginalizing Rush, they attacked him as some anti-Sino xenophobe for mocking Chinese President – and Communist Party Head – Hu Jintao… as if after 2 1/2 decades of similar laughably lame attacks had worked in the past.)

The article is worth a read in its entirety.  Hopefully the Left doesn’t catch on.

1 Feb
2011
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Judge: Obamacare is Unconstitutional

The American people won a huge victory in court yesterday when a Florida Federal Appeals Judge ruled that all of “Patient Protection and Affordable Care Act” (aka Obamacare) violated the Constitution.  This is the second ruling in two months against Obamacare.

In December, Virginia District Court Judge Henry Hudson ruled with respect to the “individual mandate” to purchase health insurance:  “An individual’s personal decision to purchase — or decline purchase — (of) health insurance from a private provider is beyond the historical reach” of the U.S. Constitution,” Hudson wrote. “No specifically constitutional authority exists to mandate the purchase of health insurance.”

Judge Roger Vinson went further than Judge Henry  Hudson, arguing that his decision was unseverable, and thus rendering the entire piece of legislation (as opposed to only the individual mandate) unconstitutional. The Wall Street Journal reports:

In his 78-page ruling, Judge Vinson wrote that the entire law must be voided because the individual insurance mandate is “not severable” from the rest of the law. Some laws contain what’s known as a severability clause that says the rest of the law stands should a judge strike down a piece of it. But Democrats left it out.

The Obama Administration, in spite of the decision, continues to implement the legislation:

The judge said he didn’t believe an injunction to stop the health overhaul was appropriate, because it is generally understood that the executive branch will obey a federal court. The government, however, doesn’t believe the ruling requires it to stop implementing the overhaul.

The battle over Obamacare will inevitably end in the Supreme Court, where, to the extent the judiciary is partisan (not an insignificant consideration) Republicans hold a tenuous majority.