Monthly Archives: March 2009

Alan Greenspan Says — Not My Fault

Alan Greenspan is one of the most highly respected financial minds in the world. He was Chairman of the Federal Reserve under four consecutive Presidents, and was laughed at when he uttered the words “irrational exuberance” foretelling the eventual collapse of the dot-com bubble.

But even if he was expected to be so by the Presidents he served, he’s not superman. He missed a call, and explained to Congress in Oct 2008 “that we’re not smart enough as people. We just cannot see events that far in advance.”

He’s right, and while I would have suggested some humility about his power while he was in office, I respect that he realized that he doesn’t know everything.

So I was a bit surprised to find out today that he’s got an op-ed in the Wall Street Journal about something he seems very sure of: it wasn’t his fault.

The Mises Guys Don't Believe You

The Mises Guys Don't Believe You

There are at least two broad and competing explanations of the origins of this crisis. The first is that the “easy money” policies of the Federal Reserve produced the U.S. housing bubble that is at the core of today’s financial mess.

The second, and far more credible, explanation agrees that it was indeed lower interest rates that spawned the speculative euphoria. However, the interest rate that mattered was not the federal-funds rate, but the rate on long-term, fixed-rate mortgages. Between 2002 and 2005, home mortgage rates led U.S. home price change by 11 months. This correlation between home prices and mortgage rates was highly significant, and a far better indicator of rising home prices than the fed-funds rate.

The Federal Reserve became acutely aware of the disconnect between monetary policy and mortgage rates when the latter failed to respond as expected to the Fed tightening in mid-2004. Moreover, the data show that home mortgage rates had become gradually decoupled from monetary policy even earlier — in the wake of the emergence, beginning around the turn of this century, of a well arbitraged global market for long-term debt instruments.

To some extent, I think what he is saying is correct. There were factors in the economy holding interest rates down and leading to the liquidity glut that we experienced — and some of those factors were outside of the control of the Federal Reserve. But if there were worries about what was going on as early as the middle of 2004, why wasn’t Greenspan on television talking about “irrational exuberance” again?

There were a lot of factors leading up to this. Easy money policies by the fed were one of them. Fannie and Freddie were another. Government endorsement of corrupt ratings agencies that turned crap into AAA bonds played a big part. And the natural belief of the market to believe that the bottom will never fall and keep levering up was a big part of it. Most of those issues were either direct government intervention into the market or an enabling government factor that gave investors and lenders the confidence to overreach.

The structure of our economy incentivized leverage, and I explained a while ago how dangerous excessive leverage can be. At the scale we’ve reached globally, trying to unwind it will be very, very painful. And if anything, you would be expecting the Fed to be standing athwart the trend yelling “STOP”. It’s not like there weren’t warning signs (and doomsayers predicting this eventual end), but the Fed wasn’t paying attention. The guys responsible for it didn’t see it, and if they can’t see it, you wonder what the purpose of having them is at all. For that, I place the blame at the top, on Greenspan.

The problem, as I see it, is that we expect these supposed supermen to be perfect regulators and perfect forecasters of our economy. It’s just not possible. Hayek said it best:

“The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.”

The problem isn’t that they don’t know. The problem is that we entrust them with power as if we expect them to know.

Picking at Festering Libertarian Scabs

I honestly believe that Ron Paul is a decent guy and one of the most unique spokesmen for the libertarian movement out there.  However, I’m going to write something that one year ago would have filled the comment section below with hate messages from Dr. Paul’s supporters: Ron Paul does not walk on water and he puts his pants on one leg at a time, just like the rest of us.  Additionally, many of his supporters were among the rudest of people I’ve run into in my lifetime. I’ve also made some close and probably lifelong friends because of Paul’s presidential bid.

Countless times, I’ve been accused of attempting to destroy Ron Paul for pointing out some minor area where I disagree with him or his campaign.   When doing so, I was generally accused by his supporters either of being a neocon or of trying to sabotage his campaign.  Nothing could be further from the truth on either account.  It got so bad that I nearly quit supporting Paul — and I know quite a few other people who did drop out of the Ron Paul movement because of the crude behavior of some of his fans.

As a matter of fact, I was even heavily criticized by Paul’s supporters for paying, out of my own pocket, for a limousine to take Paul to the memorial service of Hollywood-producer-turned-politican Aaron Russo.  They thought it looked bad for a presidential candidate to appear to be living a jet-setting life of luxury.  I didn’t want a presidential candidate to show up at a Hollywood gig with both reporters and movie stars looking like a homeless man.  It was a plain, black limo.

There are differences between each of us in the freedom movement.  Some are pro-life, others are pro-choice.  Some are open borders and some are closed borders.  Some think talk of dismantling the Federal Reserve sounds bat-shit crazy.  Some think we should focus on the War on Drugs, others feel it is a losing issue. Some are 9/11 Truthers, or Obama Birthers, McCain Birthers, UFO Truthers, etc. — while others try to avoid these topics.  We have differences on both issues and approaches.

Like the rest of us, Ron Paul has some political warts.  He ran a campaign which many felt was poorly managed.  He didn’t handle the newsletter issue well.  Many people felt defrauded because they thought he was running to win and later found out it was an “educational” campaign.  Others feel that while Paul is an excellent congressman, he doesn’t have the executive skills to be commander-and-chief.  Paul has also managed to put a general libertarian message on national television like nothing I’ve seen in my lifetime.

He’s not the only libertarian-leaning Republican to have some political warts, though.  Barry Goldwater lost the 1964 presidential election because of them — and the Daisy ad.  I could run through a long list of faults of libertarian-leaning Congressmen, but won’t for the sake of brevity.  And political warts aren’t reserved solely for GOP candidates, either.

When Aaron Russo attempted to win the Libertarian Party presidential nomination, he said he didn’t wish to push for a radical drug legalization platform, preferring to focus on medical marijuana.   Then he went just as radical as Paul with respect to the Federal Reserve during his campaign and followed this up with America: Freedom to Fascism.

Bob Barr certainly didn’t appeal to the more radical elements of the libertarian movement and the cynical among them still thinks he’s a “neocon” who favors the Iraq War and Patriot Act, despite all that he’s done since leaving Congress to oppose these issues. However, Barr did handle racial allegations much more quickly and thoroughly than Paul did. Michael Badnarik was actually good on most of the issues from a constitutional perspective, but he seemed a bit kooky with respect to his refusal to obtain a driver’s license and for a few things he wrote in an pre-campaign publication.

The definition of neoconservative, for some libertarians, seems to be “anyone with whom I disagree.”

I’ve worked plenty of campaigns and disagreed with aspects of all of them.  Even the ones which won.  Especially the ones I managed.  Reasonable disagreement does not equate with being some sort of traitor.

Face it, folks, we are a bunch of individualists who are going to disagree — and disagree a lot. We will disagree on the issues and we will disagree on the candidates. However, the 2008 campaigns are over and perhaps it’s time to point our guns outwards, as opposed to aiming them at our closest allies.  By working together where we can and working apart where we must, we will accomplish a whole lot more than if we waste our time beating each other over the head about minor nuances.

It’s one thing to respectfully disagree or provide advice.  It’s another thing to reserve our most powerful weapons for our allies.  So long as we continue to fight each other, the oppressive power of the state will continue to increase.

UPDATE: By e-mail request, I’m linking to something I wrote some time ago dealing with the same general topic.

Afternoon Reads

Enough is too much, already: Nancy Pelosi sez another stimulus package may be required.

Over at Fr33Agents, I’ve just associated Attorney General Eric Holder with serial killer Ted Bundy in a preemptive strike against the gun-grabbers waiting to exploit recent tragedies in Alabama and Germany.

Google is going to get even more personalized personal.

Three fingers pointed back at cha: “Republicans try to blame recession on Obama while branding him a socialist.”  Uhm, Obama hasn’t been in office long enough take all the credit.  And as Obama readily admits, he used President Bush’s programs as the platform upon which to build his own.

Obama: “Mister, we could use a man like Herbert Hoover again.”  Doug Mataconis sez that’s Obama’s imitation is the sincerest form of Hoover flattery.

Diana West states that Rush Limbaugh is not the problem. Michelle Malkin blames Bush. Robert Stacy McCain would prefer to fisk David Brooks.  Personally, I’ll blame post-Republican-Revolution-Big-Government Conservatism on two primary factors: a Rovian win-at-all-costs strategery and what Bob Barr once described to me as “more discussion of substantive and constitutional issues in a few weeks of working with Libertarians than in thirty years of working with that other party.”

Camile Paglia: “Heads should be rolling at the White House for the embarrassing series of flubs that have overshadowed President Obama’s first seven weeks in office and given the scattered, demoralized Republicans a huge boost toward regrouping and resurrection.”

Mitch McConnell: “In just 50 days, Congress has voted to spend about $1.2 trillion between the Stimulus and the Omnibus,” McConnell says. “To put that in perspective, that’s about $24 billion a day, or about $1 billion an hour—most of it borrowed. There’s simply no question: government spending has spun out of control.”

Glenn Reynolds provides yet another reason why the tree-pulp press continues to suffer financially.  In this example, California Editor of the Los Angeles Times David Lauter fills a blog posting with pablum about why the LA Times chose not to cover tax protest activities in California.  Somehow the Times managed to inform us of “The colorful saga of Los Angeles’ first subway tunnel,” rather than waste ink on the local angle of a very serious issue which dominates the headlines every day.

Andrew Sullivan throws a link to a YouTube about Ron Paul the Porker.

NY Post via Drudge: “If the US government assumes greater control over US bank Citigroup or automaker General Motors, that might ‘trigger’ their removal from the Dow index, the Dow Jones Indexes said yesterday.”

What’s a few hundred billion when we’ve been talking about trillions so much lately?: The U.S. Senate approves a “$410 billion measure to fund the government.”  The earmark-laden bill now goes to “no-more-pork” President Obama for his signature.

In a moment perhaps better suited for Schoolhouse Rock*, Markos Moulitsas scribes: “It’s really funny how some in the media — and even in Congress! — don’t know the Constitutional roles of the legislative and executive branches.”  An additional point of education should be that pesky little portion of the Constitution which requires that “All bills for raising revenue shall originate in the House of Representatives,” something which certainly didn’t occur in the constitutional reach around leading up to the Emergency Economic Stabilization Act of 2008.

* For those not familiar with the Schoolhouse Rock description, or who wish to relive a moment of their not-so-wasted youth:

How Effective Would Reduced Withholding Be?

In my post two days ago, I suggested that as many Americans as possible reduce their withholding to the minimum allowable levels. It’s a new type of tax protest, one that might actually hit the feds in the pocketbook:

So here’s my suggestion. April 15th, go to your HR department and change your W-4 claimed exemptions. Go with the maximum exemptions that you calculate will keep you from over-withholding, but small enough to avoid penalties. Budget (save or invest) the difference, so that you can pay the necessary tax next April, and don’t dare postmark the check to them before April 14, 2010.

Two folks (including my old blogging friend Perry Eidelbus and regular commenter jpm100 at QandO) suggest that it wouldn’t be as effective as advertised.

After all, it just defers the time at which the government gets paid, it doesn’t actually stop them from getting the funds.

But that’s not how the government operates. They’re expecting to get the money up front, and when the inflow drops, it is noticed:

Lower tax revenue and massive government spending on the bank bailout pushed the federal deficit to $765 billion in the first five months of the budget year, well on its way to hitting the Obama administration’s projection of a record annual imbalance of $1.75 trillion.

The Treasury Department also said Wednesday that the February deficit reached $192.8 billion. That’s a record for the month and up 10 percent from a year ago, but below analysts’ expectations of $205.7 billion.

The slow economy sharply reduced the government’s tax revenue last month to $87.3 billion, 17 percent below the previous year. The government has collected $860.8 billion in revenue through February, 11 percent below the year-ago period.

When government has to borrow the money up front, instead of simply having it withheld from your paycheck, it functionally increases the cost of their activity. It doesn’t mean that they won’t continue spending, but it certainly doesn’t make it as easy to increase it.

Of course, the question is still there of what to do with the extra money. I suggested to save or invest it, and my old college buddy Jim laughed at the investment idea. Considering the market over the last 6 months, I don’t blame him.

So here’s an idea. Take the extra money in your paycheck. Invest it in short-term T-bills. Instead of the Feds paying interest in China for use of their money, or getting yours interest-free, or hitting the printing press, they’ll be paying you interest on the use of your money. Obviously, if you’re an investment whiz, you can find ways to make a better return than what you get from T-bills. But if not, at least you’re earning SOME return for lending your money to the feds before they seize it next April.

Keep your money as long as you can, folks. Put it to use for yourself!

Nader Scores Big Court Victory for Third Party Candidates

It’s not often that I sing the praises of unsafe-at-any-speed Ralph Nader, but his recent legal victory is worthy of such praises.

LOS ANGELES, March 9 /PRNewswire/ — In a significant move for open-election laws, the U.S. Supreme Court today rejected an attempt to overturn a federal Ninth Circuit Court of Appeals’ decision that the state of Arizona could not require independent presidential candidates to register earlier than candidates affiliated with major political parties.

Arizona’s petition for certiorari to the Supreme Court had been closely watched after 13 other states supported Arizona’s bid to have the High Court hear the case. The federal civil rights case, originally filed in Arizona federal district court, stems from Nader’s 2004 presidency bid.

Ralph Nader had challenged the deadline, contending it violated his First Amendment rights to free speech and political association. Lead Attorney Robert Barnes of the Bernhoft Law Firm represented Nader before the Ninth Circuit, which overturned the district court and unanimously declared the Arizona law unconstitutional. Nader’s Bernhoft Law legal team successfully argued that requiring independent candidates to register by June was unfair when the two major political parties did not hold their conventions until the fall.

Perhaps as just as important was the other aspect of Nader’s challenge was the lower court striking down the provision in Arizona law which required petition circulators to be registered to vote within the state. Paul Jacob and others can now circulate petitions to any state government without fear of being put in jail. What a concept!

Is Ron Paul Right About Earmarks ?

The Club for Growth calls his thinking backwards and alleges that he’s enabling more and more spending, Don Surber just calls him daft, but Ron Paul has an argument in favor of earmarks that does make sense:

NEIL CAVUTO, HOST: Speaking of a lot of money, the battle about the money they’re spending on Capitol Hill and, ironically, this guy is being targeted as maybe spending the most or at least earmarking the most for his constituents. He says it isn’t fair.

But we thought it only fair to give him his due and explain what is going on. I’m talking about Texas congressman and former presidential candidate, Ron Paul.

Congressman, the rap is that you’re a porker, that — that a lot of pork, $73 million-plus, went to your district. Is that true?

REP. RON PAUL, R-TEXAS: Well, it might be.

But I think you’re missing the whole point. I have never voted for an earmark. I voted against all appropriation bills. So, this whole thing about earmarks is totally misunderstood.

Earmarks is the responsibility of the Congress. We should earmark even more. We should earmark every penny. So, that’s the principle that we have to follow and the — and the responsibility of the Congress. The whole idea that you vote against an earmark, you don’t save a penny. That just goes to the administration and they get to allocate the funds.


The principle of the earmark is our responsibility. We’re supposed to — it’s like a — a tax credit. And I vote for all tax credits, no matter how silly they might seem. If I can give you any of you of your money back, I vote for it. So, if I can give my district any money back, I encourage that. But, because the budget is out of control, I haven’t voted for an appropriation in years — if ever. …

I don’t think the federal government should be doing it. But, if they’re going to allot the money, I have a responsibility to represent my people. If they say, hey, look, put in a highway for the district, I put it in. I put in all their requests, because I’m their representative.

Here’s Paul’s full interview with Cavuto:

Paul also made a similar defense of earmarking on the House floor:

I think Paul has a point here and that much of the attention that is paid to earmarks is either (1) a waste of time or (2) a diversionary tactic that keeps people from paying attention to the things that really cause government spending to increase.

Let’s take the recently passed Omnibus Spending Bill as an example. Out of the approximately $ 400 billion in spending that the bill authorized, only $ 8 billion constituted “earmarks” — that’s a mere 2% of the entire bill. For the Federal Budget as a whole, the number is close to 1 %. Eliminate earmarks and the Omnibus Bill would’ve been $ 392 Billion; and eliminating earmarks would have no real impact on a $ 3.6 trillion Federal Budget.

So, why all the attention paid to such an insignificant part of the budget ? Personally, I’ve got to believe that there’s no small degree of political opportunism going on here. Earmarking is easy to criticize because it seems like pork-barrel politics at it’s most petty level. And, for an up-and-coming Congressman, or a Senator with dreams of moving down Pennsylvania Avenue to a larger, more oval, office, it’s an easy target to pick and claim that you’re “fighting government waste.” In reality, of course, you’re

There’s another aspect to the earmarking debate that I touched upon in this comment to a post over at Jason Pye’s blog which discussed this post by a liberal blogger on the issue:

The other argument that Flack doesn’t really mention is the idea that if Congress wasn’t earmarking these appropriations, then it would be faceless bureaucrats in the Executive Branch who would be deciding which money went where.

Viewed that way, one could say that earmarks are a weapon Congress is using to assert it’s authority over the Executive Branch.

I don’t know. Personally, I’ve never been able to get myself as excited about earmarks as some others. The problems we face are far bigger than whether some fruit fly researcher in Iowa gets a grant.

That’s the reality of the situation; if Congress weren’t earmarking the appropriations bills, then all of the decisions about where the money would go would be left to the Executive Branch.

When you look at it that way, it really becomes a question of whether you want that decision in the hands of democratically elected legislators who will, at some point, stand for election, or by faceless bureaucrats in the Executive Branch doing the President’s bidding. As little regard as I have for Congress, I’d rather have that decision in their hands.

On the whole, though, I just can’t help thing that all this angst over earmarks is much ado about very little. If you’re really serious about cutting spending and stopping (and reversing) the growth of government, it’s time to start talking about the things that really matter.

Ruining Our Economy Is A Domestic Matter — No Foreigners Allowed

From a NYT story about new banking regulations attached to the bailout funds (and the desire for some of these banks to now return the money):

The list of demands keeps getting longer.

Financial institutions that are getting government bailout funds have been told to put off evictions and modify mortgages for distressed homeowners. They must let shareholders vote on executive pay packages. They must slash dividends, cancel employee training and morale-building exercises, and withdraw job offers to foreign citizens.

As public outrage swells over the rapidly growing cost of bailing out financial institutions, the Obama administration and lawmakers are attaching more and more strings to rescue funds.

Now, I understand canceling employee training. After all, you wouldn’t want to teach the people who got us into this mess to change their behavior. When nationalization is complete, they’ll be government employees, so no accountability is necessary! And morale-building is also out — they should be happy following the dictates of Dear Leader, and no morale building should be necessary for our properly conditioned citizens subjects.

But withdrawing job offers to foreign citizens? Do we really need another protectionist dictate coming out of this administration? Don’t we want to extend jobs to the most qualified of anyone who applies, not limit this to only Americans? This sounds like exactly the sort of provision I’d expect from the Bush administration and Republicans, and we’re supposed to believe that this is Change&#153?!

Hat Tip: Economist Free Exchange Blog

Name That Socialist

Today, a news story came out where a company planned on purchasing chicken processing plants and the government was going to match the private company’s bid dollar for dollar. This plan is proposed under the guise of saving jobs. Now let me give you a hint who this socialist leader is; he’s a national leader.

Is it Barack Obama’s latest “stimulus” plan? Is it Harry Reid? Is this Ed Rendell or some other big state Democratic governor? Could it be even Charlie Crist or Arnold Schwarzenegger?

If you guessed any of the above, you’re wrong. The person proposing to give the government 50% ownership of certain chicken processing plants is none other the guy who came in second in the CPAC straw poll, Louisiana Governor and Republican Party savior, Bobby Jindal.

From the Monroe News Star

Gov. Bobby Jindal’s chief of staff said the state has found a buyer for Pilgrim’s Pride’s northeastern Louisiana operations and that an offer was expected to be made to the bankrupt company Tuesday night.

Timmy Teepell said the buyer will put up $20 million and the state will match it for a $40 million offer.

“(Jindal) has agreed to match it dollar for dollar with the stipulation that the company must keep the work force intact for five years,” Teepell said.

Pilgrim’s chief executive Don Jackson said at 7 p.m. Tuesday that he had not yet received an offer.

“I stated from the beginning that we would be receptive to any meaningful offer,” Jackson said.

The company announced Feb. 27 that it will close the Farmerville processing plants and the support infrastructure in April because of a glut of chicken on the market.

So the man who railed in a boring, self-centered speech against Barack Obama’s big government agenda plans to have the State of Louisiana own 50% of chicken processing plants. At least Obama in his takeover of Citigroup is only buying 36% of it. Maybe Rush Limbaugh can see if this is what Reagan would’ve done.

One other disturbing aspect of this proposal:

Teepell would not identify the company that made the offer to Pilgrim’s Pride, but he did say the company’s chief executive contacted Jackson before deciding to make the offer.

Bobby Jindal likes to talk about he cleaned up the most corrupt state in the country and how he reformed Louisiana’s ethics laws and improved transparency. Well, he passed some unenforceable new ethics laws while at the same time fought any attempts to bring transparency to the governor’s office. This secretive way of conducting business is the norm for the Jindal regime.

America, if you elect Bobby Jindal president in 2012, you can expect more socialism and more of the shadow government. If this is what the Republican Party has to offer, they won’t be returning to power anytime soon.

UPDATE:Pilgrim’s Pride rejected the offer from the State of Louisiana to buy the plant.

“Gov. Jindal and (Pilgrim’s chief executive Don) Jackson spoke by phone (on Tuesday night),” Pilgrim’s spokesman Ray Atkinson said in a written statement. “Dr. Jackson explained to the governor that the offer for the Farmerville complex was below our requirements.

“It would essentially put Foster (Farms) in business at a cost of entry of $20 million, well below the real cost and at a level with which neither Pilgrim’s Pride nor the rest of the industry could effectively compete.

“Dr. Jackson did not rule out a possible sale, but noted that it would have to be at a price well beyond $40 million. He also reiterated that selling the facility would not address the fundamental problem facing our industry: an oversupply of low-value commodity chicken.”

I’m one of the original co-founders of The Liberty Papers all the way back in 2005. Since then, I wound up doing this blogging thing professionally. Now I’m running the site now. You can find my other work at IJ and Rare. You can also find me over at the R Street Institute.

Obama Talking About Making The Same Mistake Herbert Hoover Did

It’s still widely believed that Herbert Hoover did nothing to stop the economic downturn that began when the stock market crashed in October 1929, leading eventually to the Great Depression. The truth, however, is quite different.

During the period from 1929 to the time he left office in 1933, Hoover was a strong proponent of using the government to move the economy forward, in sharp contrast to his Secretary of the Treasury, Andrew Mellon, who advocated the laissez faire approach that popular versions of history falsely attribute to Hoover. Of course, none of the policies that Hoover proposed or saw enacted had any significant impact on the economic collapse, and some made it worse.

Among those in the latter category was the Smoot-Hawley Tarriff, which Hoover signed into law in 1930:

[R]aised U.S. tariffs on over 20,000 imported goods to record levels. In the United States 1,028 economists signed a petition against this legislation, and after it was passed, many countries retaliated with their own increased tariffs on U.S. goods, and American exports and imports plunged by more than half.

The impact of increasing trade barriers at a time of economic crisis was quite severe:

U.S. Imports plunged 66% from US$4.4 billion (1929) to US$1.5 billion (1933), and exports fell 61% from US$5.4 billion to US$2.1 billion, both drops far more than the 50% fall in the GDP.

According to government statistics, U.S. imports from Europe declined from a 1929 high of $1,334 million to just $390 million in 1932, while U.S. exports to Europe fell from $2,341 million in 1929 to $784 million in 1932. Overall, world trade declined by some 66% between 1929 and 1934

So, we’re all in agreement, right ? Starting a trade war in the middle of a deep recession is a really, really bad idea.

Well, somebody needs to tell Barack Obama:

The Obama administration is aggressively reworking U.S. trade policy to more strongly emphasize domestic and social issues, from the displacement of American workers to climate change.

Even as world trade takes its steepest drop in 80 years amid the global economic crisis, the administration is preparing to take a harder line with America’s trading partners. It will seek new benchmarks before supporting already-written trade agreements with Colombia and South Korea and is suggesting that it will dig in its heels on global trade talks, demanding that other countries make broader concessions first.

“I believe in trade and will work to expand it, but I also know that not all Americans are winning from it and that our trading partners are not always playing by the rules,” Ron Kirk, President Obama’s nominee as U.S. trade representative, said in confirmation hearing testimony last night before the Senate Finance Committee.

This move toward protectionist policies (and, whatever they might call it, that’s exactly what it is) mirrors what appears to be a worldwide decline in support for free trade:

The shift underscores the mounting pressures confronting any effort to expand trade during the economic crisis. Even before the global economy went code red late last year, talks aimed at expanding global trade stalled as Western countries warred with emerging giants like China and India over how to further open markets.

Those divides appear to be more unbreachable than ever as world leaders move to protect their domestic industries from the ravages of the financial crisis, embracing new trade barriers aimed at imported goods and other measures meant to restrict the flow of capital outside their borders. In the United States, more Americans are blaming cheap imports for job losses at home and congressional leaders pressed successfully to include a “buy American” provision in the $787 billion stimulus program to give an edge to U.S.-made products.

“Our consensus to advance international trade is frayed,” Sen. Max Baucus (D-Mont.) said at Kirk’s hearing yesterday. “Our faith in the international trading system is badly shaken.”

The stupidity of the Administration’s position — and it’s a stupidity that seems to be shared by many of the world’s leaders right now — is mind-boggling.

Here we are in the middle of a massive economic downturn, and their solution to the crisis is to put forward policies guaranteed to restrict exports and imports. There isn’t a surer way to guarantee that it will take longer to get out of the situation we’re in, and that things will get worse before they get better.

And, yet, it looks like the 44th President is intent on making the same mistake that the 31st President did.

Cross-Posted from Below The Beltway

E-mail to GM President: “It’s time to pay for your [own] sins, Detroit”

My apologies to those who have already read this, but for those who haven’t this is just too good not to share. Since December 2008, the Knox e-mail to GM has been making its way to inboxes all over the world; I learned of it only yesterday when listening to Neal Boortz yesterday. Within an hour of Boortz reading the now infamous e-mail, Knox himself called the show to verify the authenticity of the letter. The letter has also been verified to be “correctly attributed” to Mr. Knox by Snopes.

First, the abridged letter from Troy Clarke, President of General Motors North America

Dear Employees & Suppliers,

Congress and the current Administration will soon determine whether to provide immediate support to the domestic auto industry to help it through one of the most difficult economic times in our nation’s history. Your elected officials must hear from all of us now on why this support is critical to our continuing the progress we began prior to the global financial crisis […] As an employee or supplier, you have a lot at stake and continue to be one of our most effective and passionate voices. I know GM can count on you to have your voice heard.

Thank you for your urgent action and ongoing support.

Troy Clarke
President General Motors North America

Knox wrote the following e-mail in response and had originally sent a cc to his mother who then asked if she could forward it to her friends. Shortly thereafter, the e-mail went viral (and after reading it, you’ll understand why).


In response to your request to contact legislators and ask for a bailout for the Big Three automakers please consider the following, and please pass my thoughts on to Troy Clark, President of General Motors North America.

Politicians and Management of the Big 3 are both infected with the same entitlement mentality that has spread like cancerous germs in UAW halls for the last countless decades, and whose plague is now sweeping this nation, awaiting our new “messiah”, Pres-elect Obama, to wave his magic wand and make all our problems go away, while at the same time allowing our once great nation to keep “living the dream”… Believe me folks, The dream is over!

This dream where we can ignore the consumer for years while management myopically focuses on its personal rewards packages at the same time that our factories have been filled with the worlds most overpaid, arrogant, ignorant and laziest entitlement minded “laborers” without paying the price for these atrocities…this dream where you still think the masses will line up to buy our products for ever and ever.
» Read more

Another Ridiculous Gun Regulation Challenged In Washington, D.C.

Last year’s Supreme Court case hasn’t stopped the District of Columbia from passing arbitrary gun laws clearly designed to restrict it’s citizens’ Second Amendment rights:

A D.C. woman filed suit in U.S. District Court yesterday, claiming that the city would not let her register a pistol because of its color.

Tracey A. Hanson argued that her application to register a .45-caliber semiautomatic was denied because the gun is not on the California Safe Handgun Roster, which is the standard in the city.

Hanson tried to register a two-tone, stainless steel/black pistol, according to the suit. But the list has that model in olive drab green, dark earth or black, not in two-tone, stainless/black, the suit asserts. Hanson said rejection for that reason “seemed so arbitrary.”


Peter Nickles, the city’s attorney general, said he had not seen the lawsuit and could not discuss its details.

But he said he is confident that the D.C. regulations are “completely appropriate” under the Second Amendment.

Of course he does.

Hanson’s lawsuit joins one filed by Dick Heller, the main Plaintiff in the original lawsuit, back in July which challenges new gun laws passed by the city as too restrictive.

How To Shrug — A Legal Tax Protest That Might Make A Difference

By now, a few regular readers have seen my post from last week, and many thousands have seen Stephen Gordon’s compilation of “Going Galt” commentary.

I say it’s time for some folks to put their money where their mouths are.

One of the links in the compilation is to a post of Bryan Pick @ QandO:

“I’d be more impressed if they fired a shot across the bow and coordinated a national day for cranking up their withholding allowances, just as high as they can. They’re planning their next party on Tax Day, right? One might think they’d be interested in ceasing to lend their earnings interest-free to the government. They might take some satisfaction in doing something that actually shows up on the government’s ledger.”

I think that’s a damn good idea. There’s only one problem with it:

While the feds don’t mind if you over-withhold your taxes, giving them an interest-free loan all year long, they tend to get a bit upset if you under-withhold. They tend to assess penalties, charge interest, and if they think it’s an egregious enough offense, jail time can be involved. But it’s relatively easy to get around the penalties. You can under-withhold and get away with it, as long as you keep it reasonable. The general rule I’ve seen quoted is that as long as you withhold 90% of your tax liability, you’re pretty safe.

Tax day is coming up. Assuming your earnings are pretty similar to the previous year, it’s pretty simple to estimate your tax liability. It’s also pretty simple to estimate your withholding. There are several free calculators online to do it for you, including one from the IRS. How handy!

But I’ll make it even easier. I consulted a tax preparer that I’ve known for years, and he’s provide a relatively simple rule of thumb that should serve you well. When it comes time to fill out your W-4, assuming you’re a salaried employee, here’s what you do:

  • Count yourself: Me
  • Count yourself again: Myself
  • Count yourself again: I
  • Count your spouse (if you have one)
  • Count each of your dependents (if you have them)

Me, Myself, and I, then one for your spouse and one for each dependent.

For me, I have me, myself, and I, which is three. I have a wife, making four. And I have one child and one on the way (who will arrive in 2009), so there’s two more, giving me a total of 6. This is 1-2 more than the standard W-4 form suggests that I claim, so I’ll under-withhold, but should be close enough to my actual tax burden to avoid penalties.

So here’s my suggestion. April 15th, go to your HR department and change your W-4 claimed exemptions. Go with the maximum exemptions that you calculate will keep you from over-withholding, but small enough to avoid penalties. Budget (save or invest) the difference, so that you can pay the necessary tax next April, and don’t dare postmark the check to them before April 14, 2010.

It’s not a big difference. But if enough people do this, it will be big enough to be noticed. The federal government is expecting to spend your money as soon as it comes in; they’re not expecting to wait until next April to get your money. In fact, if they have to wait, they’re likely to get angry. That’s more money they have to borrow today. That’s more of a functional deficit on their books. In short, if you want to get noticed, a far more effective way than getting some friends together for a group protest is to hit them where it hurts: the balance sheet.

Fellow Americans, it’s time to stop being doormats. If you really want to show the government that you’re angry, it’s far better to show them than to tell them.

Tell your family, tell your friends, tell your blog readers, tell your coworkers. April 15th is the American W-4 Party.

The $30 Billion Stack of Paper

Steve's Stimulus Request21 pages of paper is apparently worth $30 billion taxpayer dollars — if you are too big to fail, that is. That’s 1,428,571,428.57 bucks per page. Here’s how ABC reports the story:

An AIG report to the Treasury Department last month warned that if the government didn’t come to its rescue again, its collapse would trigger a “chain reaction of enormous proportion” that would “potentially bankrupt or bring down the entire system” and make it impossible for AIG to repay the billions it already owed the U.S. government.

Four days later, AIG was given $30 billion in federal aid on top of the $130 billion it had already received.

Read the AIG Report to the Treasury Department here.

A draft of the report, obtained by ABC News, was marked “strictly confidential.” It said, “The failure of AIG would cause turmoil in the U.S. economy and global markets and have multiple and potentially catastrophic unforeseen consequences.”

The draft was dated Feb. 26. On March 2, the Treasury Department and the Federal Reserve system announced that AIG, which lost $61.7 billion in the fourth quarter of 2008, would receive $30 billion in new government help.

AIG warns in its report of the “systemic risk” that a potential collapse posed. It describes a “systemic risk” as one that “could potentially bankrupt or bring down the entire system or market.

Considering how easy it is to come with $30 billion of other people’s money, I thought I’d try the same approach.  Of course, I’m not as greedy as AIG — I only need a million bucks to stimulate the parts of the economy in which I’m interested.

I also think my request deserves special consideration for two reasons.  The first is that it was very difficult to write on toilet paper with a magic marker.  Have you ever tried it?

The more important reason is that I only used four squares of singly-ply toilet paper for my request.  Not only are my sheets smaller than those used by AIG, but the total cost to the taxpayer will only be $250,000 per sheet.  Considering that I’m saving everyone $1,428,321,428.57 per sheet as well as saving the rain forest, I’m certain my request won’t be denied.

Instead of TARP funds, perhaps we could call them CRAP funds, instituting a new Crappy and Reckless Assets Program.  For a few extra trillion dollars,  I could also be appointed the Crap Czar, so I can mismanage toxic assets as well as the fine folks in D.C.

The bottom line is that if I don’t get the money, millions of people will lose their jobs, it will impact countries around the world and every bank in America will go under.  And, as evidenced by my request for stimulus largesse, it’s obvious that I’m way too big to fail.

A tip of the hat to Andrew Sullivan.

Outlawed in Alabama: A Tale of Two Videos

What do sex toys and microbrewed beers have in common?  In Alabama, they are both more-or-less outlawed.

What’s that, you say?  They don’t have statewide prohibition in Alabama, do they?

Before I respond, here’s an interesting video just produced by reason which celebrates the “American beer revolution.”

Of Alabama’s 67 counties, 14 are completely dry counties and 12 are partially dry.   While the rest of the country repealed prohibition in 1933, Alabama is still stuck in the previous century.

For those fortunate enough to live in a place where drinking is allowed, one still can’t consume many of the better beers in world.  That’s because “Alabama is one of only three states in the country that limits alcohol by volume (ABV) for beer to only 6%, and the only state that limits beer containers to a size of no more than 1 pint (16 ounces).” Fortunately, an organization called Free the Hops is working hard to change the law.

Additionally, homebrewing is outlawed in the state. Even if you happen live in one of the 41 wet counties in the state, there’s still no way to get many decent beers — unless you happen to like the choice of Bud or Bud Light.

Some might say that if you can’t have a good beer, at least you can have good sex in Alabama.  Well, that depends on whether you enjoy using one of the toys described in the not-safe-for-work video below.

It’s against the law to sell sex toys in Alabama. People have tried to challenge the case in court, but to no avail. In 2007, the U.S. Supreme Court refused to hear the Alabama sex toy case.  Here’s how the AP reported it:

The U.S. Supreme Court declined today to hear a challenge to Alabama’s ban on the sale of sex toys, ending a nine-year legal battle and sending a warning to store owners to clean off their shelves.

An adult-store owner had asked the justices to throw out the law as an unconstitutional intrusion into the privacy of the bedroom. But the Supreme Court declined to hear the appeal, leaving intact a lower court ruling that upheld the law.

Sherri Williams, owner of Pleasures stores in Huntsville and Decatur, said she was disappointed, but plans to sue again on First Amendment free speech grounds.

“My motto has been they are going to have to pry this vibrator from my cold, dead hand. I refuse to give up,” she said.

Alabama’s anti-obscenity law, enacted in 1998, bans the distribution of “any device designed or marketed as useful primarily for the stimulation of human genital organs for anything of pecuniary value.”

This isn’t a case of one of those archaic laws ignored by law enforcement, either.  Alabama’s Attorney General Troy King wants to throw people in the pokey for engaging in such activities.  Fortunately, this led libertarian activist Loretta Nall to start a campaign to mail in “Sex Toys 4 Troy.” Nall personally mailed the Attorney General an inflatable pig, which led to this editorial cartoon in the Mobile newspaper.

The bottom line is, when planning your next vacation, be sure to consider Alabama.  It’s a whole lot of fun here and at least our women aren’t running around willy-nilly having orgasms all over the place.

<snark>This blog posting was brought to you by the Alabamastan Department of Tourism and Travel.</snark>

Daylight Saving Time Is A Waste Of Time

If it wasn’t bad enough that Congress totally threw off my sleep schedule, it turns out that the entire idea of Daylight Saving Time being an energy-saver is a hoax:

The history of Daylight Saving Time (DST) has been long and controversial. Throughout its implementation during World Wars I and II, the oil embargo of the 1970s, consistent practice today, and recent extensions, the primary rationale for DST has always been to promote energy conservation. Nevertheless, there is surprisingly little evidence that DST actually saves energy. This paper takes advantage of a natural experiment in the state of Indiana to provide the first empirical estimates of DST effects on electricity consumption in the United States since the mid-1970s. Focusing on residential electricity demand, we conduct the first-ever study that uses micro-data on households to estimate an overall DST effect. The dataset consists of more than 7 million observations on monthly billing data for the vast majority of households in southern Indiana for three years. Our main finding is that—contrary to the policy’s intent—DST increases residential electricity demand. Estimates of the overall increase are approximately 1 percent, but we find that the effect is not constant throughout the DST period. DST causes the greatest increase in electricity consumption in the fall, when estimates range between 2 and 4 percent. These findings are consistent with simulation results that point to a tradeoff between reducing demand for lighting and increasing demand for heating and cooling. We estimate a cost of increased electricity bills to Indiana households of $9 million per year. We also estimate social costs of increased pollution emissions that range from $1.7 to $5.5 million per year. Finally, we argue that the effect is likely to be even stronger in other regions of the United States.

Then let’s get rid of it, right ?

So, What The Heck’s Up The Economy ? A Roundup Of Mostly Contradictory Opinions

Over the weekend, we learned that the current recession is on the verge of becoming the longest since the Second World War ended:

WASHINGTON – Factory jobs disappeared. Inflation soared. Unemployment climbed to alarming levels. The hungry lined up at soup kitchens.

It wasn’t the Great Depression. It was the 1981-82 recession, widely considered America’s worst since the depression.

That painful time during Ronald Reagan’s presidency is a grim marker of how bad things can get. Yet the current recession could slice deeper into the U.S. economy.

If it lasts into April — as it almost surely will — this one will go on record as the longest in the postwar era. The 1981-82 and 1973-75 recessions each lasted 16 months.

Unemployment hasn’t reached 1982 levels and the gross domestic product hasn’t fallen quite as far. But the hurt from this recession is spread more widely and uncertainty about the country’s economic health is worse today than it was in 1982.

And yet, I don’t think there’s anyone out there who is seriously arguing that the current round of unemployment, negative growth and tight credit is going to end anytime soon. In fact, the general consensus seem to be that it’s going to get worse:

“This recession is broader, deeper and more complicated than virtually anything we have ever seen,” Wachovia Corp. economist Mark Vitner said. “The whole evolution of the credit markets resulted in all sorts of complex financial instruments that are difficult to unwind. It’s like trying to unscramble scrambled eggs. It just can’t be done that easily. I don’t know if it can be done at all.”

He said he sees fear in the eyes of his clients.

“I’ve had people come up and hug me after a presentation, which is unusual,” he said. “I haven’t told them anything about how it’s going to be better, but they just feel better having a better understanding of what’s happening.”

Along the same lines, the World Bank reported today that the current recession in the U.S. is poised to go worldwide:

WASHINGTON — In one of the bleakest assessments yet, economists at the World Bank predicted on Sunday that the global economy and the volume of global trade would both shrink this year for the first time since World War II.

The World Bank said in a new report that the crisis that began with junk mortgages in the United States was causing havoc for poorer countries that had nothing to do with the original problem.

As a result, it said, nations in Latin America, Africa and East Asia have had not only their growth stifled but their access to credit as well.

The bank’s assessment for 2009 was grimmer than those of most private forecasters. It did not provide a specific estimate, but bank officials said its economists would be publishing one in the next several weeks.

Of course, you can’t gather two economists together without getting four different opinions, so there are some differing opinions out there:

The global economy is “approaching” a pick-up point as positive elements that could fuel growth have yet to be priced in, G10 central bankers said Monday.

“We have a number of elements that are suggesting that we are approaching the moment where you would have a pick up,” European Central Bank head Jean-Claude Trichet said in his capacity as spokesman for the G10 central bankers meeting at the Bank for International Settlements (BIS).

Along the same lines, Mark Perry, an economics professor at the University of Michigan, has been spending a lot of time on his blog Carpe Diem cataloging evidence that things aren’t nearly as bad as the screaming headlines would have you believe. Just in the past two weeks, for example, Perry has highlighted economics statistics which:

  1. Seem to indicate that planned layoffs started to decrease in January;
  2. Show that February layoffs were far lower than those in January;
  3. Indicate that the dollar has reached a 4 1/2 high;
  4. Evidence that home sales in Florida and California, two states hardest hit by foreclosures, are increasing; and,
  5. That, according to the New York Federal Reserve Bank’s economic model, the recession could very well end in 2009.

So, who’s right ?

Well, I’m not an economist, I only play one on the Interwebs, but it seems to me that it may be time for a bit of a contrarian approach here.

Last year, before the credit crisis hit, the general consensus among economists was that the economy was in generally good shape despite all the evidence to the contrary. Now, led by the White House, it doom-and-gloom chorus is pretty much all that you hear. Now, it may turn out that these pessimistic assessments are accurate (in which case, the GDP and deficit projections in President Obama’s recently released budget will be revealed to be the nonsense that they are), but the truth of the matter is that they don’t really know what’s going to happen.

Economic forecasting is basically educated guesswork that isn’t all that more accurate than the weather forecast.

So, you know, take what you hear with a grain of salt.

Cross-posted at Below The Beltway

A Tax By Any Other Name Is Still A Tax

Obama says those of us making less than $250K/year will not see our taxes increased “one dime”. Does he actually believe that user fees aren’t taxes? Because he’s gonna raise them:

Extra fees get under the skin of all but the most zen travellers. First you pay one price for your ticket, and then they tack on a bunch more in taxes and fees? Outrageous! But if the American government’s “Aviation Passenger Security Fee”, currently at $2.50 for each leg of travel, is already annoying you, the Obama administration has some bad news: it won’t be staying at $2.50 for long.

The Homeland Security portion of Obama’s proposed 2010 budget (PDF) includes a plan to raise the fees by an as-yet-undisclosed amount in 2012.

They want to raise the fees because the fees themselves don’t cover the cost of those friendly effective TSA security checkpoints (after all, having a bunch of people standing around doing nothing — a feature I see every time I fly — gets expensive). And I don’t suppose they’ve considered re-privatizing the checkpoints; no, the unions won’t accept that.

So what does this mean? Any of us who fly are going to get soaked here. And I’m sure it will be by a lot more than a dime.

But hey, I’m sure the tourism industry will appreciate Obama’s increased cost of air travel!

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