Category Archives: Economy

My Take on the Debt Ceiling Fight

Like many (whose job doesn’t entail following the news minute by minute), I find myself having a hard time keeping up with the twist and turns in the debt ceiling debate. One minute, there is a deal, the next…who knows. As each day goes by, there simultaneously seems there will be no raise in the debt ceiling and that a last minute deal (to avoid some supposed default) will be struck because neither party wants the default albatross hung around its neck.

However, the GOP seems to have won this particular battle. Senate Majority Leader Harry Reid has signaled that, despite his on-the-record rhetoric, the Senate is not looking at tax increases as part of any Senate deal. This is a singular blow to the White House, and a tacit admission of victory by the House GOP caucus. It seems that perhaps Reid is pushing this issue out another day or two to score some points with his party’s base, before he folds up the proverbial tent, “for the good of the country.” Reid knows that the Democrats’ position in this debate does not enjoy the support of most people, no matter how many times grandma is scared.

Despite all this, the GOP is not out of the woods yet. This issue, seemingly more than any other, has brought into stark relief the division between the class of 2010 and the pre-2010 Election members. The 2010 class, by and large elected through the energy of the tea party and other conservative grassroots movements, came into office with a clear mission to stem the growth of the federal government and stop or slow down the policies being pushed by President Obama and Harry Reid. The debt ceiling debate touches on all of the issues that mobilized so many conservatives in 2010 and will probably do so in 2012. House Speaker John Boehner has seemed able to manage the rift in his caucus up to this point, but some cracks have shown in the facade during this debate. Many of the House freshmen, and their more conservative colleagues, have the fresh memory of the last Continuing Resolution and the many (phony) cuts in spending that were touted by the Speaker which were used to get many of these same house members on board with it.

Of course, all of this talk of default could come to naught. There is the possibility of a government shutdown to avoid default, however that is by no means a long-term cure. Any shutdown, rest assured, will be laid at the feet of the Republicans by the mainstream media and the Democrat party. There is also differing opinions on when a default may actually occur. Despite the perceived public relations damage, Republicans should stick firm to the idea of no increase in taxes. They already have a tacit agreement from Reid, and the President is going to be under ever-increasing pressure to sign anything that comes out of Congress (which the White House alluded to over the weekend). Is the package everything conservatives want? No. Will we have to hold both our Congress members’ feet to the fire to get real, meaningful spending cuts, especially if a debt reduction commission is put in place as part of a deal? Yes. But this was never going to be the singular battle. This is, to use the old tone, a war of attrition. Our system did not become dysfunctional overnight, and fixing it will take just as long, if not longer. Let’s take what we can, and move on to the next fight.

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Filed under Conservatism, Debt, Economy, Spending

Are You Kidding Me?

“Experience hath shewn, that even under the best forms of government those entrusted with power have, in time, and by slow operations, perverted it into tyranny.” ~Thomas Jefferson

Yes, I have been absent for quite awhile. My only excuse is busyness and trying to finish up an MBA degree. Never fear, in just a few short weeks, I will be free to opine on the issues of the day. However, since I am off today, I thought I would take a few minutes to pass along something that happened this morning.

I was watching the news (MSNBC……yeah, I can’t write that with a straight face, it was Fox) this morning, and they had a Representative on talking about the health care issue.

When the anchor asked him about a proposal on the Senate side to tax people’s health care benefits, except those who are union members, he said that union members are covered under collective bargaining agreements, and the government shouldn’t be getting in the middle of agreements between private parties.

I almost spit my coffee out onto the TV! This guy should get some sort of award for having the guts (gall?) to get on the television and say that (especially someone from the Democrat party). Let’s see…..

  • Bank of America/Merrill Lynch
  • T.A.R.P.
  • AIG
  • Chrysler
  • General Motors
  • The “pay czar”
  • “Cap and Trade”

I know, I  know….”but they took tax dollars, so we have a right to tell them what to do!” Really? Our government has a right to abrogate contracts? They have a right to strong arm a corporation into purchasing another? They have the right  to, essentially, determine who wins and who loses in the free market?

I hope that the readers of this blog are not so naive to think that your government did these things to “protect working class Americans”. That rhetoric is as hollow as it is played out…although I must admit the whole class warfare thing has worked out pretty good for Mr. Obama. The government is no more interested in your well-being as it is in giving back the power that we have so willfully given it over the past 75 years or so.

In the end, the health care debate isn’t really about health care…just as much as the “green” debate isn’t really about the environment. It is about power and control. I am sure there are people involved in the debate that mean well. But you know what the saying is about the road to Hell. And I believe that even those who say that the government should socialize medicine (or anything else for that matter) generally really think that is the best solution. But when that person is part of the government, they are going to “solve” problems in a way that increases the government’s power and control.

Power and control are a zero-sum game. If the government increases its power and control, ours as individuals necessarily decreases. There is no magic formula whereby the power over our own lives increases as the government’s power increases as well. It just doesn’t work that way. Governments are why the phrase, “give them an inch, they’ll take a mile” was invented. Out Founding Fathers understood this…that governments (of all kinds) become more tyrannical over time by their very nature.

So when the government tells me its wants to “help” me by reforming health care, please excuse my skepticism, because I seriously doubt that any government “reform”…of whatever area…is going to lead to a solution that is going to increase my control (i,e, freedom and liberty) over my own life.

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Filed under Economy, Freedom, Politics

Meet The New Boss

As our government goes into hysterics over the bonuses paid out to executives in the AIG Financial Products division, there is a new wrinkle to the story…

In today’s New York Times, there is an article describing a plan by the Obama administration seeking to put regulatory limits on executive compensation. This won’t just cover institutions that have received federal “bailout” money, but “all banks, Wall Street firms, and other companies.” This, as part of new regulations to supposedly strengthen federal oversight of the financial industry.

Yes…you read the previous paragraph right. The Obama administration wants to be able to dictate how executives at private companies are paid. I can somewhat understand wanting to have a greater hand in executive compensation at companies that have received federal monies. Even this doesn’t make total sense…no other institution dictates how a company that receives a loan can spend the proceeds…and weren’t we told that these bailouts were an “investment” by the American taxpayer? That we would get a return? Sounds like a loan to me…but I digress.

The very idea of anyone in government wanting to do this should be frightening to..well, just about anyone that works in the private sector (which, maybe is the point??). I hate to keep beating the proverbial dead horse…but once we allow the government to dictate to individuals in the private sector what they can and can’t make, we have started down a very dangerous slippery slope. If this goes through, and lets face it, the political environment is such that it could, since these guys are all evil, greedy, capitalists, what is to stop the government from expanding it? Obama says that health care costs are a large part of the economic problem…so, in an effort to control costs, why wouldn’t the government want to dictate how much health care executives make? Then doctors? Then nurses?

You could fill in the blank with just about any industry. Therein lies the problem. The whole point of private enterprise is that it is private, meaning not controlled by the public (government) sphere. It is one thing for the government to want to regulate commerce (in the interest of having a level playing field), but another thing entirely for the government to become involved in the inner workings of private enterprise.

“Wait”, you say, “these guys make way too much money and really screwed up our financial system.” First, who is to say they make too much money? You? Me? The President? The only people that have a right to dictate how much is too much are the owners of the company, i.e. the shareholders. Whether XYZ Company wants to pay their executives $1 Million or $10 Million each is really nobody’s business but the owners. No, I agree that their pay ought to reflect what they are doing for the company…if you make the owners lots of money, you should be compensated. If not, then maybe there is no bonus that year. And if the compensation system is out of whack, the owners (shareholders) ought to vote with their dollars.

Second, I would argue that the system is broken precisely because the government has, in all honesty. stuck its nose where it doesn’t belong. By attempting to dictate outcome, the government created the conditions for a situation that we now blame on “greed”. To be blunt, that is the whole point. One of the defining tenets of capitalism is that each person is free to maximize their own self-interest…if I can make $50,000 at one business or organization, and $100,000 at another, I ought to have the ability to decide to go with Company A or Company B. Now maybe I choose to stay at Company A, because there are other factors that contribute to my “self-interest.”  Again, it is MY decision to determine what my self-interest is. It is up to the sum total of our self-interests (i.e. the market) to determine winners and losers. So, our government decided that more people needed to “win”…and then, when companies lost because they made bad decisions, our government stepped in to keep them from the pain of losing…again dictating outcome. The government has forgotten that there is already a mechanism for determining what to do with companies that lose…called declaring bankruptcy and being sold off to the highest bidder.

Unfortunately, our society has been brainwashed into thinking that we ought not suffer from our actions or decisions. We are teaching our kids that from an early age. We don’t keep score in sports, and we don’t give grades in school. We try and protect their fragile little psyches from the pain of losing and the elation of winning. This, or course, has no bearing on real life. So the natural tendency of people who have been raised like this, as adults, is to not so much level the playing field but level the outcome. Hence the idea that the government (because the government is ALWAYS fair) ought to step in to make sure these people don’t make so much money. Which may seem like a good idea to many of us…until the government gets around to dictating how much lawyers can make…or doctors…or electricians…or secretaries. If we are putting in votes, I vote for the government to dictate how much athletes can make. How come Congress isn’t passing laws to tax A-Rod ninety percent of his salary because he took performance enhancing drugs?

I am sure that there are going to be all kinds of arguments trotted out by the administration and others that support this move. There will be ties made between this and “fiscal responsibility” (as if someone that trots out a $3 Trillion budget can say one word about it, in all seriousness), and that these people’s greed is hurting the rest of us. It will all sound good and helpful and…well, right. It still does not remove the fact that this step is another attempt to further government control over the private sector, and by extension, our private lives.

In closing, I refer you to a quote by James Madison, that describes the proper perspective between the government and the private sector. Perhaps our politicians would do well to read a little of Madison’s writings:

“The rights of persons, and the rights of property, are the objects, for the protection of which Government was instituted.” – James Madison

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Whither AIG ?

More words have probably been written about the situation with AIG in the past 96 hours then can possibly be read. So I am not going to dwell too much on the issues that got us to this point. However, I think that what is happening (even as I write this) in Washington, in our name, needs to be brought to the surface.

Like most people, I find it extremely difficult to swallow that the executives at AIG that caused the problems with the company got the types of bonuses that they did. Most of us will never see that kind of money, even if we become super-successful in our lines of work. However, after hearing Ed Liddy yesterday talk about his rationale, I can understand the decision. Leaders, no matter what size organization they run, are often given the choice of the lesser of two evils. I have no reason to doubt his explanation as to why he didn’t do more to abrogate the compensation contracts of the executives in that particular division.

The larger issue here is how our government is responding to the AIG mess. I, for one, have been quite embarrassed by the behavior of our politicians, especially in Congress. It goes through both sides of the aisle – from quips about the “Japanese” way to shrugging off death threats, our so-called leaders are acting out of emotion. Quite frankly, acting on emotion is what got us here is the first place.

Then there is the constitutionality of the whole matter. I am not a lawyer, and I did not attend law school. But I do know something about our Constitution. What is being lost here, in the rush to “do something”, is that the Congress is treading on very slippery ground. The framers of our Constitution specifically prohibited the Congress from passing what are called Bills (or Acts) of Attainder (see here and here. These usually seek to enact laws that punish or impose some other type of “pain” on a specific group or class of people. The Constitution also prohibits Congress from passing Ex Post Facto laws, or laws that are retroactive to a certain date or action (Article I, section 9, clause 3).

So, I ask the question…does not what our Congress is contemplating today not fit into this definition? Not only is law it is seeking to pass argeted at certain people, it is also being contemplated after the fact. The whole point of having this prohibition in the Constitution is to keep the government from using its ability to write laws as a weapon against the people. As stupid as the idea is of the folks at AIG taking these bonuses, Congress is “doubling down” on the stupid bet by contemplating passing laws to tax or other wise confiscate the bonuses from these executives (as well as others). All to cover their you-know-whats for specifically allowing it in the first place. I could go on and on about this topic, but I am sure you get the point.

At risk of sounding fatalistic, I would tell you to call and email your representatives…but it isn’t going to do any good. They are going to do what they want, Constitution be damned (just as an aside…when do you think was the last time any of them read it?). I am going to, but I also like jousting with windmills. You may even agree with what Congress is doing today. If you do, just ask yourself what happens when the “them” that Congress is going after becomes you? Once the door is opened, what is to stop government from using its power to putatively punish you? One of the points of the rule of law is to protect all of us from the fickle tides of emotion. When our government stops paying attention to the highest law of the land, the rule of law erodes. Once the rule of law begins eroding, all of us become subject to the ebbs and flows of emotion.

Part of the result of the American Revolution was the institutionalization of the rule of law; that no one person, no matter the office, is above it. When emotion replaces reason and the rule of law, you get not the American Revolution, but the French Revolution.

(Here is another great article about the bonuses by Johan Goldberg of the National Review.)

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Filed under Constitution, Economy, Freedom, Politics

Quote of the Day

Here is something that caught my eye this afternoon. It is a quote by Friedrich Hayek, an economist who was a contemporary of John Maynard Keynes and one of his greatest critics. It speaks to a question that is, and ought to be, fundamental to our times. Namely, who knows better how to allocate our economic resources, individuals or government?

The real question is not whether man is, or ought to be, guided by selfish motives but whether we can allow him to be guided in his actions by those immediate consequences which we can know and care for or whether he ought to be made to do what seems appropriate to somebody else who is supposed to possess a fuller comprehension of the significance of these actions to society as a whole.

Hayek was firmly against Keynes’ theory of aggregate demand, which led Keynes to the belief that government ought to maipulate the economy to maintain aggregate demand (and thus, full employment). To make the point a little more clearer, Keynesian economics is what is driving our government wanting to bail out and “stimulus” the country back to economic health.

Just as an aside, I strongly suggest (if you are interested in economics) to read some of Hayek’s writings. His defence of classical economcs is in large part where the economic and fiscal principals of modern American conservatism come from.

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Notes and Views

If imitation is the sincerest form of flattery, then Jay Nordlinger of the National Review should be proud of himself.  One of my favorite writers at NR, Jay puts out a column regularly of just little items that catches his attention. I generally enjoy his insights and his sense of humor. Also, I figure that you, my faithful reader, need a break from what has become the normally long-winded posts found on this particular corner of the blogosphere…

True to his word, President Obama, signed into law the $800+ Billion dollar “stimulus” bill yesterday.  Almost instantly afterwards, ground was broken on the proverbial first stimulus project in Missouri, construction of a new bridge. The ABC anchor that was reporting on the story this morning noted that the bridge that was being replaced was built as part of one of FDR’s works programs during the Great Depression. She almost gleefully noted that, 76 years later, we find ourselves building another bridge through a similar program.  Hopefully, it won’t take quite as long (and another world war) to get us out of this economic crisis (because government intervention in the markets has worked so well in the past).

On the stimulus bill, there has been a great deal of skepiscism and criticism amongst economists over the bill as passed, not to mention the path the government took in general to try and help the economy out of its doldrums. You may not know that if you get your news from CNN, MSNBC, or any other network that doesn’t include the letters F-O-X.  However, it isn’t often that you find a Harvard economist come out in such strong terms on anything the Left does (I suspect it isn’t a “career-enhancing” move to do so at Harvard).  Nonetheless, Robert Barro minces no words on the stimulus bill in his interview with Conor Clarke of The Atlantic. In it, he calls the stimulus bill “garbage” and “the worst bill that has been put forward since the 1930’s”.  Bravo, Mr. Barro, for sticking to your macroeconomic guns.

I saw this morning where the President is deploying upwards of 17,000 more military personnel to Afghanistan. In announcing his decision, the President stated that the war was “still winnable”, but that the U.S. had lost its focus by invading Iraq. Outside of the fact that this particular argument is getting tiresome, the President may want to send a little thank you note to the last Democrat president, Bill Clinton, for his wonderful job in drawing down our military’s combat power, especially in the Army and Air Force.  Maybe that old standard of being able to wage two concurrent major regional conflicts wasn’t such a bad gauge after all.

Lastly, it wouldn’t be proper for me to close without sending birthday wishes to my father.  He is the person who taught me what an honor it is to live in this great country, and the responsibility we all have to preserve and protect it. I know that he shares many of my concerns for the direction our country is headed, but he also taught me to keep the faith. Hope you have a great day, dad!

Thanks for reading…until next time.

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Economics, Part I

So I promised a big post – a magnum opus, if you will – on the economy. I have since scaled down my lofty ambitions to just go over a few items, expecially given the speech that President-elect Obama gave on Thursday announcing a large government-sponsored economic recovery plan. He touched an many aspects of the plan, a few of which caught my ear.

The first topic is one of my favorites, one that I really love and I know a lot of you do as well…taxes. Obama said that part of two bajillion-million (okay, $800 Billion) package is tax cuts. Woohoo! I mean, any chance to get back part of my hard-earned money from the government is a cause for celebration. Quite frankly, government (at all levels) takes way more than enough. However, there is more to this than meets the eye.

Obama stated that “95% of working families will receive a $1,000 tax cut – the first stage of a middle-class tax cut that I promised during the campaign and will include in our next budget.” If this tax cut lines up with similar statements that he and his team made regarding taxes during the campaign, that means that many of those getting tax cuts didn’t actually pay any income taxes at all. In effect, a payout from the government.

And what about the 5% that aren’t getting a tax cut? Why don’t they deserve a tax cut? They already bear a disproportionate burden of our tax base, and also tend to be the ones that are the linchpin of our economy: those that own or heavily invest in business enterprises.  While I understand that our tax system is progressive (read that leftist), that doesn’t mean that we can’t give the higher brackets a tax cut. They would still be in the higher brackets, therby maintaining our “progressive” system.

A word on class warfare: the Democrats, for years, have couched their economic views in terms of the middle/working class versus the rich.  The unfortunate part about this is that, at a time when the best course of action would be to cut corporate income tax rates (as well as personal income tax rates), there is no way in h-e-double hockey sticks that Obama (or anyone else that pays dues to the DNC) could mention that without a veritable fire storm of criticism. Can you imagine the moveon.org types? Why, the New York Times might even have a critical word or two to say about Obama. Here is a word of advice for my Democrat bretheren – go to your bookshelves, take out your copies of Marx, and throw that crap away! Marx’s theories have been proven for what they are, and have done little in the West but help to engender an adversarial relationship between labor and capital, which has done little but hurt those on the labor side of the equation.

Okay, this post now has the potential to be long, which is saying something on this blog. So I will continue this conversation on another post…

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Filed under Economy, Politics