Celebrating Diversity

The gay marriage debate is front and center.  I posted my two cents on the matter here over four years ago and, revisiting it today I'd say certain excessive flourishes aside, I stand by what I wrote.

I am a libertarian and hold dear to the notion that behavior by one's self or between consenting adults that does not harm another person or his property is of no concern whatsoever to the state.  I don't know what's best for you, you don't know what's best for me and together we don't know what's best for the other guy.  And this applies to Michael Bloomberg, too.

To recap, I have no problem with gay marriage.  But I am willing to argue the matter with those who may not agree with me.  And I do not think opponents of gay marriage, whatever reason they may have for their opposition, are arguing in bad faith.  So you see how wonderful I am, right?

I was cruising the internet today and I saw this headline at the Huffington Post (here is the story).

I don't really care about the story, it was the headline that grabbed me.  Because places like the Huffington Post (among many other sources) not too long ago bemoaned the "epistemic closure" on the right (Julian Sanchez, libertarian and Cato research fellow, got the ball rolling here and here).  If you don't feel like wading through the morass, it boils down to the fact that conservatives are closed-minded.  Sanchez was making, to my mind, a legitimate critique on contemporary political philosophy. Contemporary in the sense that he was using examples from the (then) current headlines.  The liberals went nuts and ran with the meme, missing the point that this is an issue of contemporary political philosophy, not merely conservatism.

Anyway, the headline reminded me of all this because if you are a Republican who agrees that gays should be allowed to get married, you are either related to someone who is gay or you are truly open-minded.  But if you are a Democrat who opposes either gay marriage or federal intervention into state matters or what have you, you are an embarrassment.  Open-mindedness has nothing to do with considering opinions that you may not necessarily agree with, it means agreeing with liberals (n.b.- Jonathan Chait makes the point that fans of Rush Limbaugh or Glenn Beck would be well-served to read the Huffington Post or other liberal sources, because the practice of listening to opposing view is essential to good citizenship; he does not provide the same advise to devotees of the New Republic or MSNBC, which is surprising).

Diversity of thinking is a beautiful thing, so long as you agree with me.

Back to Work

Anyone miss me?

I want to start by saying I don't care for Mitt Romney, nor do I particular care for Paul Ryan.  And if time allows I will expand on that further at some other time.  They may be fine human beings, but since the odds of our crossing in any meaningful way is nil I don't care.  I don't care for them as politicians and I don't want them to win the election.  I don't care for Obama either and the same corollaries apply. Biden, however, I think is a snake and is the main reason I hope Obama remains healthy so long as he is in office.

So I don't care for any of the principals

But what I really don't like are asinine, hackneyed, ad hominem attacks by alleged journalists.  I don't care who the attacker is and I don't care who the target is.  If you wish to attack a politician's policies or an economist's analysis, a court's opinion or a coach's strategy, fine.  Do so with gusto.  But you are obligated to stick to facts and stick to the policy or analysis or opinion or strategy, at least if you are to be taken seriously.  Some consistency can be helpful as well, but isn't necessary.  See Emerson if you need to learn the dangers of foolish consistency.

And this brings us to Matt Taibbi, a writer for Rolling Stone, among other publications, a frequent guest on Bill Maher's HBO show and he looks, acts, talks and writes like a douche.  Sure, it's ad hominem but he's earned it.

He wrote an article for Rolling Stone.  I read Rolling Stone not too long ago when Howard Stern was on the cover and rather enjoyed the issue.  The writing wasn't half bad.  Beyond that, I hadn't seen the magazine in well over a decade and haven't picked one up since.  I get the feeling that the Stern issue was an exception and the muck Taibbi rakes is the rule.  Regardless, a friend posted the article on facebook, so that's how I came across it.

I didn't finish the article.  I gave it the old college try and slogged through the first eleven paragraphs.  Some tidbits (emphasis added for added emphasis):
 

·      the drama of this rhetorical high-wire act was ratcheted up even further when Romney chose his running mate, Rep. Paul Ryan of Wisconsin – like himself, a self-righteously anal, thin-lipped, Whitest Kids U Know penny pincher who'd be honored to tell Oliver Twist there's no more soup left.

·      He said as much when he unveiled his choice of Ryan, the author of a hair-raising budget-cutting plan best known for its willingness to slash the sacred cows of Medicare and Medicaid. "Paul Ryan has become an intellectual leader of the Republican Party," Romney told frenzied Republican supporters in Norfolk, Virginia, standing before the reliably jingoistic backdrop of a floating warship.

·      Our collective debt is no ordinary problem: According to Mitt, it's going to burn our children alive (italics in original).

·      But what most voters don't know is the way Mitt Romney actually made his fortune: by borrowing vast sums of money that other people were forced to pay back. (Italics in original, this isn't necessarily inflammatory, but do keep this in the back of your head).

·      By making debt the centerpiece of his campaign, Romney was making a calculated bluff of historic dimensions – placing a massive all-in bet on the rank incompetence of the American press corps.  (I would take that bet).

·      choosing as his running mate perhaps the only politician in America more pompous and self-righteous on the subject of the evils of borrowed money than the candidate himself.

·      No one in history has ever successfully run for president riding this big of a lie. It's almost enough to make you think he really is qualified for the White House.

·     it stands as an emblem for the resiliency of the entire sociopathic Wall Street set he represents

·      Mitt Romney, it turns out, is the perfect frontman for Wall Street's greed revolution
 

·      A takeover artist all his life, Romney is now trying to take over America itself. And if his own history is any guide, we'll all end up paying for the acquisition.  (Again, please keep this last clause in mind).

These are all just from the first eleven paragraphs, mind you, of a 7,800 word article with 79 paragraphs.  One might get the idea that Taibbi not only doesn’t like Mitt Romney personally, but that he might have some sort of axe to grind.

I made some snide comment to the friend who posted the story about having wasted my time and though that would be it.  Then I saw this:

And then I got pissed.

Because Matt Taibbi doesn’t know what he’s talking about.  Personal attacks aside, when you go to such lengths and make so many personal attacks while demonstrating an extraordinary ignorance of fundamental concepts you deserved to be called out.

What do private equity firms do?  Here is a great piece by the Planet Money guys at NPR that actually gives a case study on a Bain Capital investment:

(Also, a very insightful podcast from Russ Roberts with Steven Kaplan on EconTalk here.  And a paper by Roberts here.)

Basically they will raise funds and take over a company (the investors’ money is the “borrowed money” Taibbi is referencing when not knowing what he is talking about).  They will either make the firm profitable or, failing that, liquidate the assets.  They get a management fee and an share of the profits, usually 20%.  So the Private equity firm wants profits.  The investors want return on their investment.  Profits and returns on investment are known, in the fields of finance, accounting and economics as “good.”  Let me know if I get too technical here.

The added benefit is that if the company that is taken over runs more efficiently, delivers more profits, the investors and the equity partners aren’t the only winners.  Everyone is.  And if the firm ends up being liquidated, that means that there are more effective uses of the capital that the firm employs.  All of the capital: the land, the machines and the people, those resources will get reallocated to more efficient uses.  And that benefits everybody.  Yes, those who lose a job may not appreciate the macroeconomic benefits, and that’s why I am a supporter of unemployment compensation.  Not the way that it is currently funded and managed, but that is another matter.

And if the firm fails?  They don’t get paid and the investors lose their money.  Society may or may not be better off by the reallocation of resources, because they may have been best used where they were.  So it is good for everyone when private equity firms do well, not just for the members.  And if the private equity firm continues to make bad investments, they won’t be a private equity firm for long.  Investors typically don’t like to lose money.

So when Taibbi says, “How is it that no one is bringing up that the fact this guy was a leveraged buyout expert.  I mean, this is how he made his fortune.  And what is leverage?  Leverage is debt.  What this guy did for a living is he borrowed money that other people had to pay back,” it becomes painfully obvious that he’s an idiot.

But this is also a nice segue to idiotic point number 2: “They’re (Romney, Ryan, Republicans, conservatives, infant eating monsters all) trying to make this a referendum on the irresponsibility of the Obama administration borrowing tons of money, pouring it into stimulus, to a lesser degree the bailouts, though they complain a lot less about that for some reason.  But it’s this massive national debt that they’re focusing on and I think that this really strikes a chord with a lot of ordinary Americans despite the fact that I think that a lot of people don’t really don’t understand how deficit spending works and whether it’s always dangerous which is an open question, I think, um, but ordinary people respond negatively to the idea of spending beyond their means.”

In honor of the late, great Ron Palillo

I know how deficit spending works.

And Matt Taibbi may think it’s an open question, but it isn’t.  It’s always bad.  Because the government doesn’t create capital when it gets something right.  It destroys capital.  Now there are trade-offs.  Let’s take the roads that the Democrats just seem to love talking about.  Yes, we need roads.  And police.  So we need taxes to pay for these things.  And when legislators, or despots for that matter, want to spend more than they take in in taxes they can issue debt.  And right now, it doesn’t cost a lot of money at all for the United States to issue debt.  Interest rates are incredibly low.  But low interest isn’t no interest, so there is a cost.  Government borrowing also increases interest rates (long story, but the short answer is “market for loanable funds” and "the quantity of loanable funds"; negative government spending reduces the quantity of loanable funds, interest rates go up*).  The Federal Reserve can do some things to mitigate these factors, and boy howdy have they been doing them.  It also helps to have the rest of the world doing far worse than we are, making our bonds seem the only safe form of sovereign debt out there.  Suffice to say that without Federal Reserve tinkering, interest rates would be (marginally) higher than they are due to the deficit spending.  And the credit downgrade that the US earned would have also hurt much more were it not for the Europeans.  But we can’t count on the Europeans being worse off than we are forever, because we’re going to pass them and become less attractive.  And the Fed keeping rates even marginally lower than they otherwise should be means more capital is borrowed and poured into housing and other long-range investments rather than saved.  Which is what caused the current financial crisis.

But Taibbi’s fatal flaw is his inability to see the difference between private and public finance.  If Mitt Romney makes a bad investment, yes, he may still make money and a firm may end up in ruins, but if the investors don’t make their nut, he won’t have investors.  If banks are left holding the bag, banks won’t work with him.  There are repercussions, consequences that will force the capital (money and otherwise) to its most (more) efficient allocation.  These repercussions and consequences don’t exist when the government spends other people’s money.  For our “investment” in GM to break even, GM shares need to be worth about $53/share.  It closed today at $23.37, so we’ve lost half that money.  And all of the money in Solyndra, after the government insisted on not having lien position in case of liquidation.  These are not the sort of stupid investments that private firms make because they are stupid investments.  But governments do, because Matt Taibbi, the readers of Rolling Stone, the Huffington Post are the ones who don’t understand how deficit spending works.

But keep attacking Mitt Romney personally, for the things he actually did well.

* This is no Austrian theory, this is no Friedman-esque monetarist theory, this is Keynesian economics and is Econ101 stuff.  Yes, Lord Keynes thought, other things equal, deficits are bad.  Short-term deficits during a recession are not to be worried about.  I can agree with Keynesians on this.  I don't think there needs to be concern about cutting government spending, when it comes to government spending on legitimate functions of government (see here for a handy list of what those functions are).  But those arguments go out the window when you're accumulated debt is >$16,000,000,000,000; annual GDP is about $14,500,000,000,000 and annual deficits are >$1,000,000,000,000.  What this means is that if all of the country's production for one year went not to wages, not to firms, not to revenues or profits, but if everything produced in one year were able to be liquidated and that money sent to Washington, we'd still have over $2,000,000,000,000 in debt and it would still be growing.  Oh, and you'd have not the United States but a country poorer than Congo.  The ability to print money to dodge the consequences of this profligacy is no solution.  As Hayek noted, "A government which uses inflation as an instrument of policy but wants it to produce only the desired effects is soon driven to control ever increasing parts of the economy."

Michael Moore on Capitalism

Ok, I was getting a case of the vapors because at one point early in this Q & A I found myself almost (almost) agreeing with Michael Moore. He starts making some good points, I get my hopes up that he'll see the light and draw the correct and proper conclusions and then...

Piff

Gone. He is Michael Moore, after all.

He is right to agree with the student that what we have here is Corporatism as opposed to capitalism and he is right that many of the "capitalists" running some of our larger firms would like nothing more than to monopolize rather than compete. That is their nature. It is government's job to ensure competition (level-playing fields, easy entry and exit from markets, prohibition on market power, acting as a referee). The failure here is of the government.

The government long ago (New Deal) left its moorings and began to get actively involved in a whole bunch of things that it has no right or reason to get involved in. All in the name of equanimity and egalitarianism--also none of its business. His problem is with republicanism and not democracy. We are not a democracy and never have been. There hasn't been a "democratic" system in this country since the town councils of some of the New England colonies in the 17th/18th century. The representatives have become tools of the corporatists, that is not the fault of the corporatists but the failure of the representatives. They are responsible for their actions. Some of the reasons for this may be under-representation. The number of representatives has been 435 since 1911. The population then was ≈ 92 million (about 1 for every 211,000). Current US population is about 300 million and we have the same number of representatives (about 1 for every 689,000). Your representative cannot adequately represent a pool that large. The interest of the district is too diluted. Special interests of all stripes (including the corporatists) like and benefit from a concentrated pool of power brokers.

Another factor is the direct election of senators. The senators are beholden to their constituents directly, or so the story goes. When senators were elected by the state legislators they were much more in tune with that which directly affected their state. Now we have senators who act as if (and seem to believe) they work on behalf of the country. 300 million constituents!

But I digress.

Moore makes the point that things used to be much simpler, and uses college as his example. When he was in school banks didn't give student loans. You got financial aid from the school itself. What he fails to see was it was the governments involvement in education that has led to the runaway costs (completely out of line with inflation as measured by CPI). When the government started to feel as if everyone who wants to should be allowed to go to college, they started Sallie Mae to act as an underwriter to private lenders in an effort to get these lenders to provide loans to young people who have demonstrated exactly no credit worthiness (this being why banks didn't offer loans of their own volition).

This effort to equalize access to higher ed directly led to higher costs. Let's say you run a college. A certain per cent of the population can afford your tuition. If your tuition is too high you limit access to your product. The market works well to let you know what you should charge (supply, demand, price elasticity, substitutes, &c, &c). Then, all of a sudden the demand curve shifts to the right. Extraordinarily so. As did the financial resources of your pool of buyers. When all of your potential customers have lots of money at their disposal, prices tend to rise. I have mentioned here earlier that if Obama's plan to give every college applicant $4000 in return for community service (that he was thinking of making mandatory) there is a possible effect that the world would be a better place and we'd all get along much better. Possible. The definite effect would be that average tuition would go up no less than $4000 over CPI in less than four years. Definite.

Government invlovement in that which is beyond the purview of the government, no matter how well intentioned, always has unintended consequences. These consequences can sometimes be hard to see. Government involvement in healthcare has contributed to its excessive costs (also not allowing free access across state lines, not allowing individuals to deduct their health insurance costs as those who are insured through their employers can, and making portability far too difficult). Responding to the "crisis" of about 3.6% of the population chronically uninsured or uninsurable by socializing an an entire industry, or "competing" with this industry by creating a firm that has no need to concern itself with profits, consumer relations (have you ever called the Social Security Administration?), and that has the force of law behind it doesn't sound like competition to me.

Capitalism is democratic. Outside of monopolies (and perhaps oligarchies which we do have as well), firms must respond to consumers. Much more effectively than their elected ones can. Coke or Pepsi? Bud or Coors? That new car too expensive? Don't buy it. That new dish detergent has a pretty package and is a few cents less than the one you currently use? Buy it. That new McRib sandwich sucks? McDonalds won't be making them for long.

When the firms can get the legislators to enact legislation that makes it tougher for new firms to enter the market, they don't have to respond as efficiently as they would have to otherwise and can allocate their resources differently (say, bigger dividends). The legislators caving and writing and passing the legislation is their failure.

Capitalism is not the problem. Corporatism and the weakened republic is. The republic has been weakened by over-expansion (beyond Article I, Section 8) and under-representation.

I would like the free-market to be tried before we consider it a failure.

Newspapers

There's been lots of ink spilt over the impending doom of the newspaper industry--here is an example of the genre, filled with nonsense from an otherwise sensible writer. I have very hard and definite feelings about the newspaper industry and if the doomsayers are right, I say good riddance. They are anachronisms that have outlived their usefulness; they have failed to adapt to changing times and technology; the quality of writing, generally, has decayed at a far greater rate than society's as a whole (which is saying quite a bit) and they are run and staffed, again, generally, by morons.
A few years ago I signed up for a subscription to the Philadelphia Inquirer. I was to get the paper Thursday through Sunday. The story is too long, too ponderous and too far gone to repeat here, but the service was terrible and I realized that the writing had deteriorated significantly since I last let my subscription expire (for an example, read anything written by Stephen A. Smith, ever). The end of the road came with me discussing the lack of delivery with a senior supervisor of some sort. "If the delivery person continually refuses to deliver the paper and respond to pleadings from you and his direct supervisor to deliver the paper, and since his job is to, you know, deliver the paper to subscribers, why don't you replace him?"
His response was a guffaw or a snort, I can't recall exactly just now, and then he said, "I can't do that."
And there you have it. If the firm has grown so sclerotic that it can't remove or replace a front line employee that fails to perform the bare minimum of what he is paid to do over several months, then you deserve to rot.
I could go on and on about the Inquirer, but this is about more than just that paper. This is about the industry as a whole and people at large finding a better use for their own money and time. And Michael Kinsley does a fantastic job analyzing the situation and refuting the absurd notion (mentioned by Mr. Whitlock, above) that any public funds or government intrusion is warranted to "save" the industry.
Neither "democracy" nor our republic require broadsheet or tabloid papers to function properly. It requires the diligence of the sovereign, and in the US, that's us. The papers were filters, not examiners. They served "the truth" no more than any other industry in this country and were interested only in increasing their subscriber base and ad sales. Which is their right and their duty, but when you fail at that, you are to go away. They neither earned, nor should they be granted, any honorific or esteem by those who are sensibly directing their time, energy and resources elsewhere.
AMF

Questions

If AIG needs to be bailed out because it was over-leveraged on its insurance policies and, with our money, paid on those policies due to losses the financial industries hedged against, why do the financial institutions also require our money? Their losses, on the riskier investments, were covered by the insurance they bought. Their other losses should have been covered by reserve requirements. Why haven't I heard this question asked?

Also, as to the notion of "too big to fail," doesn't that point to a direct failure of the Federal Trade Commission, whose mission, among other things, is to protect consumers against any one firm accumulating too much market power and thus jeopardizing the open market? Prevention of market failure is one of the (few) legitimate roles of the government in the free market.

Here is a good opinion piece from the Wall Street Journal that describes well the role of the Federal Reserve in creating the current mess.

Fascism Redux

Here is a good article by Michael Ledeen saying that America is becoming a fascist society. Apropos Jonah Goldberg's fantastic book, many people hold a poor definition of what fascism is. Everyone seems to have a mental image (jack-booted, goose-stepping soldiers) and equates it with Hitler or Mussolini. And it has a very poor connotation, which is well-deserved.
Are we becoming fascists?
We aren't really socialists because, despite Maxine Waters desires*, the government isn't going to take over the means of production.
But the government is going into partnerships. And government partnerships with specific firms distorts the marketplace more than any tax or mere regulation could and is, perhaps, only a little tiny step above the bottom-rung of socialism on the ladder of Really Bad Ideas.
Let's consider Citigroup. A company that didn't have enough money to survive the recent credit crunch and deemed too big to fail by our legislative overlords crawling about Washington. Citi received bail-out money in order to, you know, survive. And thankfully it was able to continue its investment in the Rose Bowl, because sponsoring football games is also just too important not to happen in this day and age.
The market system is kept strong by the introduction of new players. New players bring about the "creative destruction" that Joseph Schumpeter wrote about and that we all take for granted. Think about it this way: Clover and Sears used to be the big stores where most of anything a household would want, they could get. Sears has fallen off in recent years and Clover is no more. K*Mart became a major force in retailing, but a little shine is off its luster, too. Wal*Mart is the 700# gorilla, and many people may not like that for myriad reasons, but generally, that is good for consumers. What is better for consumers are the thousands of small stores that exist across the country (& online) that hope to knock Wal*Mart off its perch.
Thinking it can't happen doesn't make sense. Orwell wrote that people tend to think the way things are now, that's the way they're going to continue. He was writing of political culture, but it holds for business as well. Sixty or seventy years ago, many people probably couldn't image a world without Woolworth's. There is no reason to think that Wal*Mart may not be around in 2075.
But the government shouldn't do a damn thing to make it stick around or to go away, especially since it holds the police power.
Back to new players. The US government now has a vested interest in the success of Citigroup, GM, Chrysler and so many others. When the need arises for better regulation, as it always seems to, to whose benefit do you think these new regulations will fall?
Cui bono?
The new guy on the block trying to take the market-share of Citi? Or to Citi, which is 40% owned by Uncle Sam?
Government interest in and working with private industry, and the co-ordination of government & private resources which is a natural outgrowth of this cooperation, is bad for business and really bad for liberty. QED one would hope.
Now I don't think Obama is a fascist dictator and I think calling Bush one was also silly and misguided. And the lack of central control in the body of one person is what is keeping us from becoming a truly fascist state. But our legislators now have significant corporate interests outside of their constituencies, and I would think most people would see what a bad idea that is, as well.
Are we all fascists? No, I don't think so.
But we're closer today than we've been in a while. And I don't like it.

*=I wish I could find just a cut of Maxine Waters saying her idiotic, socialistic Maxine Waters things without the editing of the geniuses on youtube. This one was such a monumental brain cramp that no editorializing was necessary.

Should've Seen This Coming

Congressman Barney Frank thinks executive pay is too high, across the board, and thinks the government should get into the act of curbing the compensation received by executives.

Congress will consider legislation to extend some of the curbs on executive pay that now apply only to those banks receiving federal assistance, House Financial Services Committee Chairman Barney Frank said.

“There’s deeply rooted anger on the part of the average American,” the Massachusetts Democrat said at a Washington news conference today.

He said the compensation restrictions would apply to all financial institutions and might be extended to include all U.S. companies.

Now I think anyone getting paid $35 million dollars for running a company into the ground is just as stupid as the next guy, but it doesn't affect me. And it doesn't affect you.
Yes, a small argument could be made that these wages could probably be better served being disbursed to the shareholders or among many employees instead of one bad one, but that is for the directors (and, by proxy, the shareholders) of the company to decide. Not me, not you, and certainly not the federal government.
As to those companies that managed their finances poorly and foolishly accepted federal money, the government has every right to attach strings. If theses companies are going to be allowed only to pay their chief executives what the president earns or less, a pox on them and their grubby hands for making Faustian bargains.
Wage and price controls are always a bad idea. Decisions cannot be made by central planning. Information is just as scarce a resource as any other and bad decisions by corporate boards are much easier to take than federal control of pay scales. Also there's that minor issue of personal liberty and the government having no authority whatsoever to implement such a bad idea.

Why Some People Can't Be Taken Seriously

"Conservative" "economist" talking head Larry Kudlow, he of the gruff-voice, staccato non sequiturs (the financial Larry King, HELLO!) on CNBC wrote the following in December 2007:

Bush Boom Continues [Larry Kudlow]
There is no recession.
Despite all the doom and gloom from the economic pessimistas (me: I can't tell you how much I loathe the nonsensical practice, usually by conservatives, of adding "istas" as a suffix as a method of belittling or demeaning those with the temerity to disagree with them), the resilient U.S economy continues moving ahead—quarter after quarter, year after year—defying dire forecasts and delivering positive growth. In fact, we are about to enter the seventh consecutive year of the Bush boom.
The pessimistas are a persistent bunch. In 2006, they were certain a
recession was just around the corner. They were wrong. Instead, the
economy posted two consecutive quarters of near or above four-percent
growth.
Earlier today, a doom and gloom economic forecast from Macro Economic Advisors was released predicting zero percent growth in the fourth quarter. This report is off by at least two percentage points. These guys are going to wind up with egg on their faces.
Here are the facts: Americans are working. The 4.7 percent unemployment number remains at an historical low. On a three-month rolling basis, the U.S. economy has added over 100,000 jobs. Meanwhile, the household job count shows that an average of 303,000 jobs have been added in the last three months. This is noteworthy because it suggests that the job market is turning around.
Hours worked are growing more than 1-percent annually, while workers' wages are running 3.8 percent, a full percentage point ahead of inflation. As for this week's productivity report, it was nothing short of spectacular: the 6.3 percent productivity gain was the best in four years. A rise in productivity is good for growth. It's good for profits. And it's good for low inflation.
Speaking of inflation, business inflation is down from 3.5 percent just
over a year ago to 1.5 percent today. Meanwhile, oil prices have retreated to $88. And, to top it all off, last night we received a tremendous new number showing household net wealth has headed even higher. It stands at a record $59 trillion dollars. That's more than seven percent above a year ago.
Another factoid worth considering is that mortgage refinancings are soaring at lower rates. Since June, they are up nearly 70 percent, while mortgage rates on 15 and 30-year loans are down nearly a 100 basis points. That is a very positive, very welcome development that ought to cushion the plunge in home sales, and maybe even prices.
Down in Washington, Democrats are stuck with a Keynesian message of
economic pessimism, spending increases, and tax hikes to finance their big government proposals. Unfortunately, they still refuse to acknowledge that tax rates have a profound effect on behavior. This kind of tax and spend, big government, Walter Mondale approach may come back to haunt them at the polls next year.
The GOP, on the other hand, has a positive supply-side message
of limited government, lower spending, and lower tax rates. And while it's true that the recent Republican-led Congress failed to adhere to its fiscal lodestars, the statute of limitations is quickly running out on that score.
Incidentally, Democrats have not offered a single spending cut proposal
during their time at the helm. Not one. That's just one reason why—not to mention what I expect to be continuing growth in 2008— I believe the economic pendulum will soon swing in favor of the GOP.
There's no recession coming.
The pessimistas were wrong. It's not going to happen. At a bare minimum, we are looking at Goldilocks 2.0. (And that's a minimum). Goldilocks is alive and well. The Bush boom is alive and well. It's finishing up its sixth consecutive year with more to come. Yes, it's still the greatest story never told.
12/07 08:18 PM

All emphasis added by me. This is the problem when you have someone with an agenda, or rather a humongous axe to grind, playing at analysis. His desire to present the Republicans in the best light possible, instead of objectively analyzing the economic trends, blinds Mr. Kudlow to reality.
Dismissing the Democrats as Keynesians, when the biggest Keynsian presidents we've had in the last fifty years were Nixon & W, is laughable in its disregard of simple facts and recent history.
Also his attempt to give Republicans a pass for their profligacy (And while it's true that the recent Republican-led Congress failed to adhere to its fiscal lodestars, the statute of limitations is quickly running out on that score.) is equally laughable. So when Republicans are in the minority, they are staunch defenders of their fiscal lodestars, yet for the fourteen years while they were in the majority, six of which they shared with the Executive branch, is when they strayed off the reservation. What the hell good is it to have "fiscal lodestars" if you drop the ball at exactly the moment it matters?
And why is the statute of limitations running out on that score? Where is that statute? I'm going to remember it for the rest of my life. At least Democrats say they're going to spend like crazy. No, the Democrats have not offered a single spending cut proposal. That's not what they do. Republicans are the one's who are supposed to do that. But when neither party will, you may as well elect the people who are going to be honest about it.
The most important lesson of all, especially when getting economic or fiscal advice: consider the source and consider his grudge.
It's amazing how much can be gotten wrong in such a brief post.

"Achievement"

I really shouldn't be surprised, but the dim-witted soul who described and celebrated "Big-Government Conservatism" has penned an homage to our 43rd, and thankfully former, president, praising his achievements.
I haven't the energy or time to discuss this fully. I'll let the sheer lunacy of the piece speak for itself.

Glutton for Punishment

I thought Sean Penn was bad.

Then I had the misfortune of stumbling upon this dyspepsia-inducing person on msnbc



I had never heard of this woman before and I won't soon watch this show again, but just to recap...

Hoover did mishandle the Depression. His backing of Smoot-Hawley was a bad idea. His support of wage increases didn't help. His tax hikes were a bad idea.
In other words, when he decided to try government intervention, the Depression worsened.
But it took Roosevelt to make the Depression Great.
Keynes was right, in the short-term. Government spending, especially on things like roads and bridges, can spur growth and help people. This is one of the things I have no problem with in Obama's policies. And deficit spending on these projects can be helpful in the short-run and long-run, so long as the government isn't in severe deficit spending to begin with.
Negative government spending (revenue from taxes less than government spending) reduces productivity (GDP)*. Going into deficit spending when the government is running even or surpluses is fine, due to the money multiplier. But the multiplier isn't as effective when the government is in severe debt (and disagreement there?), and may lead to unforseen consequences as well.
Also it increases state and local dependency on the federal tete for things the feds have no business to be involved in.
It also furthers the paternalistic relationship between the state and the citizen, whereas the proper role of government is an instrument.
And no amount of history-revising, smarmy, cringe-inducing logorrhea can change that.

*=and raising taxes also decreases GDP, especially when things are slow--this is why Obama has, wisely, backed off his plan to increase taxes on the rich SOBs who've earned it (for now). In other words, government should collect exactly that which is needed to perfom its proper function, not stray or spend beyond that limit and then otherwise remain out of our lives. Wouldn't that be neat? Just to try...once.

There is Bad, There is Awful

and there is Sean Penn. An otherwise talented actor who seemingly cannot be expected to have mature, adult-like thoughts crafted in that hollow 'neath his eyes. I haven't read this dreck all the way through and am not too proud to say that I don't think I can.
Some quick thoughts, starting with this:

Earlier that year, in August 2005, Pat Robertson, on his televised 700 Club,
actually voiced his will that the U.S. should assassinate a democratically
elected head of state in Hugo Chavez Frias of Venezuela.

Now, I'll grant you that Pat Robertson was a horse's ass of staggering proportions, but if you think for a second that Hugo Chavez Frias of Venezuela was democratically elected, I have a bridge in Brooklyn to sell you after I introduce some people I know that live under that dictatorial bastard.
I'll also grant that America's embargo of Cuba is foolish and misguided, not to mention unsuccessful. That doesn't change the fact that Castro is also a blood-thirsty, dictatorial thug. But to Penn he is grandfatherly.
He writes, "I'm enthusiastic about exploring socialism. Personal achievement. Well, in this case, I hope to achieve the reader's continued interest."
For amusement purposes only, I would hope. But before he writes, before he shares his enthusiasm for socialism, he should become more familiar with the economic, political and practical implications of such enthusiasm. Enthusiastic socialists in history have been Lenin, Stalin, Hitler, Mao and his buddy Castro. Where is the reconcilliation with these facts?
I agree that capitalism has its problems. I agree that the problem with capitalism is capitalists. But the problem with socialism is socialism. And I can't believe that at the beginning of the 21st century some people haven't gotten this.
I was drawn to this piece by this post by Mark Hemingway on the Corner. I dare you to read it and take it seriously:

From the sublime to the ridiculous, it was now 2am. I lit a cigarette, took a couple of drags, flicked it into the alley and entered the bar. Downstairs the music was loud. Some quasi-combo of house and salsa. Thump! Thump! Thump! The downbeats shook the floor and tickled my feet. I headed up the back stairs, and waiting for me at a table in the upper deck were the two contractors I had arranged to meet the night before. Full disclosure: I'm not a big "contractor" guy. I'd been jacked up by DynCorp-employed Iraqis on a dark night in a Baghdad alley, and slept beside Blackwater boys and their guns on a floor in the floods of New Orleans. It's just this little thing I have about apolitical military might for profit. Call it irksome. Call it what you will, but a source is a source. We exchanged greetings by way of grunts. I took a seat and ordered Johnny Walker Black. It had been years since I ordered Johnny Walker Black. Pathetically I might have wanted to be one of the boys for a moment. They ordered a bubbly water a piece, and it was on. I was Al Capone, m——-f——-, and they were a pair of Perrier pansy John Wayne's. "Whatcha got for me?"
Uninterestingly, they turned out to be a couple of gents, South African though
they were. In practice, their job in Venezuela was logistical. One, organized the patrolling of waterways by their company, contracted by the Venezuelan government to aid in drug interdiction. The other strategized jungle patrols on the Colombian border. We talked about a lot of things, and a lot of parts of the world, as I tend to do when indulging Johnny Walker Black. But here are the highlights: Neither one of them liked Chavez a bit. Whatever personal politics they might have had were far to the right of my peripheral vision. Chavez just wasn't their kind of fellow. But the jungle patrolled said straight out, "I'll tell you this about Chavez though. Of all the countries we've worked for, this government is by far, the most serious about drug interdiction." I said, "What's the bad news?" He said, "Chavez won't last a year." "What do you mean?" I said. "He's too radical. We've seen it before." "Seen what before? I said. "They'll kill him." "They?" I said. He reached across the table, took a sip of my Johnny Walker Black, smiled, and pointed directly at me, the Americano at the table.

Thoughts on Palin

I keep hearing and reading that Sarah Palin is one of the bright young stars of the Republican Party. I also was struck by the fierce defenses of her, especially in the realm of "conservative" radio and print. And I've come to the question, "why?"
What are her bona fides of conservatism? What in her record shows she has any concept of traditional conservative thought?
She fought corruption in Alaska, or so the narrative goes. Good for her. Good for Alaska. Being against corruption doesn't make you a conservative.
She has also brokered higher tax rates for the oil companies that end up being tax rebates to the brave souls who live in Alaska. There are no state income or sales taxes and only a few municipalities collect property taxes. So the residents get state tax rebates without paying taxes. On tax policy, she is in league with Obama.
To her credit, after it became unpopular, she abandoned the bridge to nowhere. But the state kept the money. I assume that the money was used for more legitimate ends, but as one who has significant problems with the federal government giving states any money for anything, I doubt it.
Some of the same nonsense was blathered about Lynn Swann when he ran for governor of Pennsylvania. Idiots like Sean Hannity were saying how important it is to get conservatives like Swann elected. When Swann was on Hannity's show he was asked what he saw as a shortcoming of congress, my guess is so that he could show that he could be an objective critic of his own party. His complaint was that the feds weren't giving the states enough money for No Child Left Behind.
Now anyone with the slightest idea of what conservatism is or stands for, especially apropos federalism, can spot the obvious conflicts above. But nary a word is said.
The same can be said of the treatment of Bush. Whenever there was legitimate criticism of Bush from the right, it was promptly quashed. After writing the excellent book Impostor, Bruce Bartlett was fired from the think-tank he worked at and has become almost invisible at National Review Online. Here's the test I give to Republicans who say they've been critical of Bush (or, "I haven't agreed with all of his policies,"): if a Democrat were to sign McCain-Feingold or either of the last two farm bills or impose steel tariffs or textile restrictions or have spending increase as much as it has over the past eight years, how would you react. The answer is that they would blow their stacks. As well they should, these are idiotic policies no matter who proposes or endorses them. But they didn't and thus have no standing, with me, for when they criticize a Democrat for doing what he believes in. According to Jonah Goldberg:

Dissent from Bush was muted for years, in large part because of 9/11 and the Iraq war. Conservatives, right or wrong, rallied to support their president, particularly in the face of shrill partisan attacks from Democrats who seemed more interested in tearing down the commander in chief than winning a war. But the Bush chapter is closing, and the fight to write the next one has begun.

He wasn't "their" president, and continued defense of Bush or his policies will only erode whatever intellectual integrity remains. I will leave for another time and place (and have mentioned elsewhere already) the absurd notion that objection to Bush's views on the role and scope of presidential authority can be construed as "tearing down the commander in chief" or was limited to Democrats.
Back to Palin, if you can't handle an interview with lightweights like Couric and Gibson at 44 years old, you'll probably never be fit to be president. If she's on the ticket in 2012, Obama won't even have to campaign.
Anyway, I'm more and more into the Libertarian camp. Just finished What it Means to be a Libertarian and am moving on to Libertarianism: a Primer. Also I've picked up a bunch of stuff by Ludwig von Mises. Good times.

Prices

Price of oil, below $60/barrel, has fallen more than 60% in four months.

If oil companies were run by farmers, they be getting more subsidies by now.

Looks like the oil companies need better lobbyists.

Represent

My congressman is a horse's ass. The bigger shame is that no one seriously challenged his seat.

I wonder if a man committed to fiscal discipline will vote in favor of the auto industry bailout (no not that one, the new one--another colossally bad idea brought to you by the US Government), and if he does (which he will) how he will justify it.

Can anyone provide an economically sound reason why congress should provide more money to failing companies?

I think the good tidings from the Phillies win have subsided.

Well Said

This article in the Wall Street Journal from Wednesday (29 October) is excellent. My favorite part:

The truth is that the Constitution grants Congress 17 specific (or "delegated") powers. And it commands in the Ninth and 10th Amendments that the powers not articulated and thus not delegated by the Constitution to Congress be
reserved to the states and the people.

This is why I get frustrated when I hear presidential candidates, to take one small example, talking about the need "to pay our teachers more." If the teachers in your school district are working three jobs and eating cat food, then by all means, increase your local taxes and pay them more. Godspeed.

How much teachers get paid or what or how they teach is of no concern whatever to the federal government. If you think it is, why then propose an amendment to the constitution changing Article I, Section 8 to include "...to provide education standards and funding," or some such language. Absent this, any money given by the federal government to local school districts (or to states to provide to local school districts) is an abrogation of the constitution without the niceties of the formal amendment process.

Further:

Unfortunately, these presidential attitudes about the Constitution are par for the course. Beginning with John Adams, and proceeding to Abraham Lincoln,
Woodrow Wilson and George W. Bush, Congress has enacted and the president has signed laws that criminalized political speech, suspended habeas corpus, compelled support for war, forbade freedom of contract, allowed the government to spy on Americans without a search warrant, and used taxpayer dollars to shore up failing private banks.

The courts have also been complicit. The Supreme Court decision in Wickard v. Filburn (1942) reinforced the federal arrogance that pervades current society. FDR felt that his administration had the authority to tell a farmer that he could only grow wheat on 11.1 acres of his land in 1941. Appellee Filburn, being an American, grew wheat on 23 acres harvesting an additional 239 bushels of wheat. These were to be used for consumption and production on his own farm. None of it was to affect interstate commerce, the only concern of the congress.

Well, poor Farmer Filburn lost his case and now most people wouldn't raise an eyebrow if you said to them that there may be a federal law restricting the use this or production of that. No one seems to ask, "Why" or "Under what authority?"

Why are teachers or farmers (farm subsidies) or automakers (see here) entitled to extra-constitutional care? What separates them from, say, motel operators? Why isn't it the concern of Barack Obama that a motel operator might have to work a second job? Or doesn't spend enough time with his children? Why doesn't the congress subsidize motel operators and pay them to keep their rooms unoccupied so that all motel operators can charge consumers (that is, us) more money? Why shouldn't motel operators be given huge sums of federal money to insure that they continue to produce inefficient rooms that many people don't seem to want to rent and encourage them to enter into fiscally irresponsible labor agreements with their staff?

Since we seem to disregard completely the fact that none of the above mentioned examples are of any federal concern, why not include everyone? We'll just tax rich people, like 70% of everything they make and 90% of their estates, you know, to spread everything around. To make life "fair."

The federal government was designed ambitiously and humbly. Not every possible scenario was capable of being foreseen. No one knew this more than the collection of genius that wrote the constitution. That's why there are "gaps," as it were. That's why they left it open to amendment. There was disagreement then of what the thing meant. Hamilton regarding the congress' authority to regulate interstate commerce and to coin money and regulate its value as a sound basis for the establishment of a national bank--he also saw the bank as integral to the nation's survival and growth. Madison looked at the lack of the explicit authority to establish the bank and fought Hamilton on this.

Both men looked to the constitution and were able to make strong, informed cases. The nation is the poorer that no one seems to know what the thing says anymore. It is regarded as an anachronistic afterthought. Its beauty is unappreciated.

We act now because it is the "right" thing to do; or it's "for the children," or it's "compassionate," or "when someone hurts, the government has to move," or it "will grow (sic) the economy." A pox on all of it. The majority of people are unworthy of our constitution. Sadly, we all deserve the government we have and the people we send to run it.

There is no correlation between the government and its charter. And no one cares.

Redistribution and Envy not Fairness

Where to begin? I'll try with this, Barack Obama discussing his tax plan with a plumber:

"Your new tax plan is going to tax me more, isn't it?" the plumber asked,
complaining that he was being taxed "more and more for fulfilling the American
dream."
"It's not that I want to punish your success. I just want to make sure that everybody who is behind you, that they've got a chance for success too," Obama responded. "My attitude is that if the economy's good for folks from the bottom up, it's gonna be good for everybody ... I think when you spread the wealth around, it's good for everybody."

Let's follow that up with this colloquy with Charles Gibson:

GIBSON: All right. You have, however, said you would favor an increase in the
capital gains tax. As a matter of fact, you said on CNBC, and I quote, "I
certainly would not go above what existed under Bill Clinton," which was 28
percent. It's now 15 percent. That's almost a doubling, if you went to 28
percent. But actually, Bill Clinton, in 1997, signed legislation that
dropped the capital gains tax to 20 percent.
OBAMA: Right.
GIBSON: And George Bush has taken it down to 15 percent.
OBAMA: Right.
GIBSON: And in each instance, when the rate dropped, revenues from the tax increased; the government took in more money. And in the 1980s, when the tax was
increased to 28 percent, the revenues went down.
So why raise it at all, especially given the fact that 100 million people in this country own stock and would be affected?
OBAMA: Well, Charlie, what I've said is that I would look at raising the capital gains tax for purposes of fairness.

Aside: let's give Charles Gibson a big round of applause for understanding part of the deleterious effect of tax increases and his historic accuracy.

Then there's this description of Obama's tax plan by the Wall Street Journal. His plan will, according to him, cut taxes on 95% of "working families," (n.b.--he does not say "taxpayers"). He will raise taxes on the other 5%, no doubt in the name of fairness (above) and patriotism* (here, I know I've already posted this but something this asinine needs to be aired fully). Let's put aside the "fairness" of 95% of the populace penalizing the other 5% for being, what? good at whet they do? Or just for the sin of being rich or wealthy. They didn't earn it, so it's "fair" to take it from them, eh?

His plan moves pretty far away from the argument of whether a progressive tax system is more "fair" than a flat tax system. The majority of the "working families" that will receive the "tax cut" don't pay income tax. As the Journal piece has it:

Here's the political catch. All but the clean car credit would be "refundable,"
which is Washington-speak for the fact that you can receive these
checks even if you have no income-tax liability. In other words, they are an
income transfer --a federal check -- from taxpayers to nontaxpayers.
Once upon a time we called this "welfare," or in George McGovern's 1972 campaign
a "Demogrant." Mr. Obama's genius is to call it a tax cut.

So let's give Obama credit for diligent lexicography, but I still can't seem to find where it is the responsibility of the federal government to play the role of Robin Hood. Nor where the people ever gave the government the authority to do this stuff.

Let's say, for the sake of argument, that it is a concern of the federal government to provide some welfare services for people (it isn't, but I grant it here for giggles), it is now the explicit policy of would-be President Obama to forgo mere welfare services (or add onto them) by just giving people cash for lack of productivity.

And the fact that Obama acknowledges that the Capital Gains tax increase will decrease federal revenues when he is planning to give more federal money away to people who didn't earn it that was taken from people who did.

This is offensive on just so many different levels.

First of all, increasing taxes on the most productive members of society (and believe me, it pains me to know that Paris Hilton, Brittney Spears and Bill O'Reilly fit into this category) necessarily leads to less productivity. This is to be avoided in the best of times. It is spectacularly dense when the economy is in the shitter.

This isn't some supply-side theory, or my desire to see Bill O'Reilly have more money. It is economic fact. And it is no right of mine to pretend to know when someone else has "too much money" (or even enough money) or to imagine that taking some of your money, under the authority of the government's police power, to give to them increases the amount of "fairness" in the world one bit.

Which brings us to giving people money for not earning a lot of money. This, too, will result in less productivity. It is so self-evident I really can't see how this entire proposal is taken seriously.

If the only effect of the tax hike would mean fewer Spears' albums, no Factor and less of whatever it is Paris actually does, then I'd be all for it. But this group includes people that are really fabulously productive and smart and like to invest their money so as to earn more. Sometimes it does; sometimes it doesn't, but all that investing leads to production and growth.

The only thing that will grow under Obama's proposal is the government, and government doesn't produce anything. Except garbage like this.

One would hope that, if elected, a grown-up with a lick of sense will take charge of Obama's economic policies. But if you hope in one hand and crap in the other, guess which one fills up first?
I think that's what we're going to be getting come January.

Perhaps if this is who we continue to appoint to elected office, we shouldn't be surprised at the results. This may be the best that they can give. As with a slow child, we should be encouraged by their effort.

I don't even know why I get surprised anymore. I look forward to next month when I can put away all of the italics and bolds.

Go Phillies.

*"Towards the government I feel no scruples and would dodge paying the tax if I could. Yet I would give my life readily enough for England, if I thought it necessary. No one is patriotc about taxes."
--George Orwell, War Time Diary, 09 August 1940

Good Line

by Victor Davis Hanson at National Review:

Then Fightin' Joe Biden was on the stump, veins bulging, hands pumping,
screaming that "John McCain could not bring himself to look Barack Obama in the
eye and say the same things to him (regarding Bill Ayers). In my neighborhood, you got something to say to a guy, you look him in the eye and you say it to him." So here we are in fantasyland where Biden with hairplugs and teeth whitener evokes his supposed blue-collar fides to suggest the veteran who was tortured and held for over five years by the communists is now scared of facing down the arugula-eating Obama.

I love this notion that Biden was or is some kind of neighborhood tough.

Regarding Ayers, I think he is a despicable, disgusting, dishonorable simpleton. If Obama agrees with just about anything this asshole has said or done in his life (not just the sixties) it shows a distinct lack of judgment on Obama's part.
Yet nothing has been shown by those who've looked (especially Stanley Kurtz at National Review) that Obama's ever sought or received consel from this cretin.

1984

I was re-reading 1984 (or at lease skimming it) and I was struck by the fact that no one knew, or remembered, how things got to be in the state they were in. Winston, our hero, was born in or around 1949 yet he didn't know how Big Brother came to be.
I think one of Orwell's many lessons is that horrifying dystopias don't necessarily come about in violent revolution. Liberty taken piecemeal is still liberty taken.
A good example of this is the FISA revision that Bush promulagted and was granted by congress. Leave aside the fact that if Bush's interpretation of executive, unitary authority that gave him the power to demand of the telecommunications industry without recourse was correct, no provision in the law granting the telecom providers immunity for cooperating with the president would be required. If Bush's supporters were correct that these changes were necessary to protect national security (an unprovable claim), it doesn't change the fact that the American people are less free and the government is more powerful.

In order to keep us safe.

WAR IS PEACE
FREEDOM IS SLAVERY
IGNORANCE IS STRENGTH

I should also point out here that both major political condidates at one point or another said the FISA revisions were a bad idea and both of them voted for it. And we are less free thanks to this $700 billion bailout. And every single time congress tries to help one person, the remainder are less free.

Stop trying to help. Carry out your Article I functions. Go home.

More stuff

A good overview here and a terrible idea here.
The second article's thesis is that the root of the problem is the falling of housing prices and that the current proposal will not do enough to address this.
The current proposal will fail because the federal government getting in the way of the natural allocation of resources always has negative consequences. This guy's proposal leaves out the fact that propping up housing prices to artificially high levels keeps an artifical shortage of housing supply, leading to new housing construction that isn't necessary that is built by companies on credit with the whole thing fueled by government backed financing because everybody deserves a home regardless of credit worthiness and we're right back where we started.
Markets are a good way to organize economic activity. Governments are a bad way.
And if anyone needs a reminder of how fucking stupid socialists are, please see here.

Inflation

The bill that the House wisely rejected the other day read 110 pages. The bill that the Senate foolishly passed reads at 345 pages.

Show of hands from everyone who thinks that extra 235 pages contains anything other than more government spending and expansion...

Hello...