Category Archives: Fiscal Policy

Ron Paul Will Never Be President But He HAS Made a Difference

Those who support the establishment of the Republican Party tend to be irritated that Ron Paul’s supporters kept trying to put his name up for nomination against Mitt Romney at the convention in Tampa even though Paul had no realistic chance of winning. Even very early in the campaign, establishment whores such as Hugh Hewitt were arguing that Ron Paul along with Herman Cain and Gary Johnson should be “exiled” from the debates because they didn’t have “a prayer of winning” the nomination. But are political campaigns, especially presidential campaigns, only about winning the nomination and ultimately, the presidency?

As someone who supported Ron Paul in the primary, I believed his winning the nomination would be the greatest upset in political history to say nothing about becoming the next president. When Terry Moran asked Paul the question: “When you lay your head on your pillow at night, do you see yourself in the Oval Office?” Paul replied “not really.” This is not a typical response of someone who is making a serious run for president.

This isn’t to say in any way that Ron Paul was not making a serious run for president, I think he was. Paul made three unsuccessful runs for the presidency but has succeeded in changing the political conversation. He advanced the ball in ways that he otherwise would not have had he not made these runs for the White House.

The most obvious example of how Paul has changed the political debate would be his call for a full audit of the Federal Reserve. As recently as 2006, the following was written about the Federal Reserve in a book by Richard Brookhiser entitled What Would the Founders Do (Our Questions, Their Answers)*

Everyone likes the Federal Reserve System these days, partly because it seems to work so well. (Not one person in a thousand ever thinks of it, a rough definition of working well.) But suspicion of public banks could revive at any time, for the same reasons that many of the founders were suspicious of them — most people (the founders included) do not understand banks or banking, and some bankers are in fact crooks. (p.92)

Back when this paragraph was written, I don’t think the Federal Reserve was even on my radar and I don’t think I was alone. Maybe the Fed isn’t the top issue for the average voter even now but I do think it’s safe to say more people are skeptical of the Fed especially in the era of bailouts and quantitative easing (i.e. printing money out of thin air). The mere mention of Ben Bernake or the Fed, especially at Ron Paul or liberty oriented rallies bring about boos and chants of “End the Fed!” “End the Fed!” This in of itself isn’t that big of a deal; these are true believers. What is a big deal, however; is that language to audit the Fed has made its way into the 2012 Republican Party Platform. Even more importantly, Paul’s Audit the Fed bill passed the House by an overwhelming 327-98 vote margin. Every single Republican but one supported the legislation along with 89 Democrats.

The bill wasn’t brought to a vote in the Senate but pressure will mount on Harry Reid if the Democrats maintain control to schedule a vote. If the Republicans take the Senate, a vote is even more likely to happen and Audit the Fed would be more likely to pass. If it gets to the president’s desk, the president – be it Obama or Romney will sign the bill, I believe.

A bipartisan bill authored by Ron Paul – who would have thought?

Ron Paul, one man who prior to the 2008 campaign wasn’t a household name, has changed the conversation within the G.O.P. concerning the Fed, spending, constitutional government, taxation, and civil liberties. Though his delegates were mistreated in Tampa, the RNC saw fit to at least try to mollify them with this tribute to the congressman’s career.

Missing from the tribute video was Paul’s anti-war/anti-interventionist views that he has espoused throughout his political career. Paul challenged people to do their own research concerning American foreign policy, particularly in the Middle East. He openly challenged the notion that policing the world trying to “make the world safe for democracy” and nation building was in America’s national security interest. Though the Neocons and war hawks are still firmly in control of the G.O.P., more voices in the party are challenging the prevailing view and cautioning Americans about blowback – a term invented by the C.I.A. but popularized by the Texas congressman.

Most important of all, Ron Paul is leaving a legacy behind him as he retires from congress. What will become of the rEVOLution in his absence? A small but growing number of individuals are being elected to the House and the Senate who share many of Paul’s small government/pro-liberty views. Ron Paul’s son Sen. Rand Paul along with Sen. Mike Lee, Sen. Mark Kirk, Rep. Justin Amash among others will lead the movement into the future. If the Paul activists continue to fight the establishment from inside** the G.O.P., there is at least a chance that the party will actually live up to its more small government ideals it purports to stand for.

*Basic Books, New York.

**While I understand why some Paul supporters might be tempted to leave the party due to how they have been treated by the party establishment, I would advise against this. The G.O.P. is ripe for a hostile takeover BUT the establishment isn’t going to give up control so easy. If you drop out, you are allowing them to win; this is precisely what they want you to do. Don’t give them the satisfaction. Focus on the Senate, House, and races at the state and local levels and vote your conscience for president (the wonderful thing about voting is that you don’t have to tell anyone who you voted for). After this election, regroup and continue to fight for liberty.

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Recovered from the Memory Hole: Rep. Paul Ryan Urges Congress to Pass TARP

Mitt Romney has selected Rep. Paul Ryan (R-WI) as his running mate with great fanfare among conservatives. Paul Ryan, someone with some fiscal sanity on a major political ticket who can offer an alternative to President Obama and his big government, big spending ways.

Well, not so fast. Not too long after the news of Ryan being selected as Romney’s running mate hit the wires, this little gem was recovered from the memory hole:

Well, maybe this is an anomaly. I wish it were. In addition to supporting TARP, Ryan supported the auto bailout, Medicare Part D, and voted against repealing Davis-Bacon. Ryan is also a war hawk and his record on civil liberties isn’t any better. Extending the Patriot Act, supporting the indefinite detention of American citizens provisions of the NDAA, and voting to create the Department of Homeland Security are but a few examples.

To put it another way, Paul Ryan is no Ron Paul, or even Rand Paul for that matter.

The rEVOLution After Paul

With Congressman Ron Paul’s third presidential run and career coming to an end, what will become of his rEVOLution he inspired? Prior to the 2012 campaign, some suggested that former New Mexico Gov. Gary Johnson would be the “next” Ron Paul but with Johnson running as the Libertarian Party nominee after being mistreated by the GOP establishment in the primaries, it appears to me that that bridge has been burned and will likely never be rebuilt. Johnson’s activities in furthering the liberty movement will be done outside the Republican Party.

The new heir apparent to lead the rEVOLution appears to be the congressman’s son Sen. Rand Paul. Rand Paul has been one of a handful of voices of reason in the senate voting against renewing the Patriot Act, the NDAA*, standing up to the TSA, and speaking out against President Obama’s unconstitutional “kinetic military actions” in Libya and elsewhere to name a few. For the most part**, Sen. Rand Paul has been a consistent champion of liberty much like his father. Speculation abounds that Sen. Paul will make a presidential run of his own in 2016.

The rEVOLution and the greater liberty movement must be much larger than one person***, however. According to Brian Doherty, author of his new book Ron Paul’s rEVOLution: The Man and the Movement He Inspired, Paul’s movement will continue long after Paul himself has left the political stage. Doherty summarizes the thesis of his book in the Cato forum (video below); David Boaz and Sen. Rand Paul also offer their thoughts on the future of the liberty movement after Ron Paul.


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Milton Friedman on Libertarianism and Humility

On August 14, 1990, Milton Friedman gave a speech at the International Society for Individual Liberty’s 5th World Libertarian Conference on the subject of libertarianism and humility. There are many adjectives which can be ascribed to libertarians but “humble” usually isn’t one of them. Among the quotable parts of the speech, Friedman said the following:

On the one hand, I regard the basic human value that underlies my own beliefs as tolerance based on humility. I have no right to coerce someone else because I cannot be sure that I am right and he is wrong. On the other hand, some of our heros…people who have, in fact, done the most to promote libertarian ideas, who have been enormously influential, have been highly intolerant as human beings and have justified their views, with which I largely agree, in ways that I regard as promoting intolerance.

In searching for the above transcription of what I thought was very profound and wise, I found a couple of bloggers who thought this particular quotation as “an inadequate defense of liberty” or one of the “failures” of Milton Friedman.

I happen to disagree with these notions.

Maybe because I have been humbled in realizing that I had been wrong on some issues of great importance. By far the most difficult (yet ultimately liberating) post I have ever written was the post in which I declared that I was wrong about my support for the war in Iraq. I was so certain that regime change in Iraq would bring about peace in the Middle East and freedom would take hold. I thought the Ron Paul and big “L” Libertarian position on preemptive war was naïve and dangerous but now I believe the opposite to be true (for reasons I stated in the aforementioned post).

Having experiencing this, I can’t help but think that Friedman was right to say that each of us should be open to the possibility we may be wrong. If we aren’t open to this possibility, what is the point of debating an issue? Obviously, if I argue that X is correct and my opponent says Y is correct, I’m going to do my best to convince my opponent that I am right and s/he is wrong (meanwhile, my opponent is doing the same).

But what if I realize in the course of the debate that my opponent is at least partially right about Y being correct and/or that my reasoning is flawed or the facts do not support X? As a normal human being, I might not concede right away but if I am being intellectually honest, I’ll revise my thinking based on new information or new reasoning I hadn’t considered.

If Milton Friedman was willing to be open to the possibility of being wrong, how could I, someone whose mind will never in the same league as his, be so stubborn?

One thing I notice in watching Friedman debate people who are diametrically opposed to his positions was how patient he was with them. Something that many of us libertarians seem to forget is that much of what we believe to be true is counterintuitive to at least half of the people we encounter on a daily basis because many of these people have not been exposed to our philosophy. Friedman understood this. He knew that much of what he was saying was new territory for many who would hear his lectures or read his books.

Before he could make the case about any of his ideas to others, he had to be satisfied that the facts backed up his theory. These two sentences from the NPR obituary for Friedman summed up his approach beautifully:

Friedman was an empiricist, whose theories emerged from his study of the evidence, not the other way around. He also was a champion of the free market and small government.

We are supposed to believe this to be a weakness? I find this to be so refreshing!

Ron Paul at His Very Best Confronting Ben Bernake

If Rep. Ron Paul has accomplished anything in his 2008 and 2012 presidential campaigns it would be the way he has educated the American public about monetary policy and the Federal Reserve. I’ve listened to on line lectures from the Cato Institute and read about monetary policy but more often than not its either over my head or bores me to tears. Paul manages translate the Fed’s policy and put into language people like me can understand and keep it interesting.

Today’s hearing where Paul questioned Federal Reserve Chairman Ben Bernake is a case-in-point. My favorite part is when he asks Bernake if he does his own grocery shopping driving home the point about how his inflationary policies impact average people where it matters most (cost of groceries and fuel doesn’t go into determining the rate of inflation).

National Defense Authorization Act Passes Complete With Indefinite Detention Provisions

Despite some valiant efforts of a handful of senators, the National Defense Authorization Act for FY 2012 passed by an astonishing 93-7 vote. Earlier today, Sen. Dianne Feinstein offered yet another amendment to the bill that would have limited the military’s jurisdiction to detain suspects captured outside the U.S.; the amendment failed by a narrower 55-45 margin.

In the first video below, Mark Kirk (R-IL) in his floor speech explains how Sections 1031 and 1032 violate the principles of the Bill of Rights by reading the applicable amendments. Sen. Kirk makes some geography based distinctions in determining whether U.S. citizens have due process rights (which I disagree with; geography should not matter) but otherwise does a great job of explaining to his fellow senators why keeping these sections in the bill is a terrible mistake.

Though he voted against the offending sections of the bill, Sen. Kirk ultimately voted with the majority in supporting the overall legislation.

Sen. Rand Paul (R-KY) on the other hand supported neither. Paul’s floor speech is equally compelling and perhaps even more chilling than that of Kirk’s. Could you find yourself an innocent victim of this bill? Do you have any missing fingers? Do you have more than a seven day supply of food? How many firearms do you own and if so what kind of ammunition do you use? Depending on your answers to these questions, it’s possible that you could find yourself detained, perhaps at Guantanamo Bay or elsewhere, indefinitely with very little legal recourse according to Sen. Paul.

Related Posts:

The Late David Nolan’s Indefinite Detention of U.S. Citizens Fears One Step Closer to Being Realized

Are You or Someone You Know a Victim of the Drone Mentality?

Nolan Exposes McCain’s Antipathy for Civil Liberties in Arizona Senate Debate

Quote of the Day: Americans Cheer the Assassination of the Fifth Amendment Edition

Obama: Judge, Jury, and Executioner in Chief

Book Review: Slackernomics, by Dale Franks

Those of you that have been around the libertarian blogosphere for any length of time will recognize the name Dale Franks. His main writing gig is over at QandO, where he spends the bulk of his time writing about the economy. In addition, he’s a bit of a gunblogger, and runs a separate blog for motorcycles.

At one point a few years ago I had noticed a link to a book Dale has written called Slackernomics: Basic Economics for People Who Think Economics is Boring. Given that I’m not the type who thinks economics is boring, but had enjoyed his blogging, I wanted to get a chance to read it. At that time, the book was only available in print at a price above $20. It took a spot on my “buy when I get around to it list”, and sat there for quite some time, but I never pulled the trigger. Then, more recently, it became avaiable for the Kindle at only $2.99 — I no longer had an excuse not to buy it. So onto the Kindle it went, and after several long months of sitting there taking up space, I’ve finally gotten around to reading it.

Slackernomics is a primer on basic economic theory that, as the title suggests, is written for people who think economics is boring. It’s written in a convivial tone, and the illustrative examples that Dale uses reminds one more of Freakonomics than of Adam Smith. Don’t let that fool you, though — the book is not a “sideshow” like Freakonomics — it gets to the heart of the matter. I liken it to be similar to Henry Hazlitt’s “Economics in one Lesson”, but written for people who may not be interested in the more formal writing style of Hazlitt. In addition, having been written many decades after Hazlitt’s book, it’s obviously much more up to date.

The book covers everything from price theory, minimum wage & rent control to monetary theory and the business cycle, Keynesianism, taxes / deficit spending, savings & investment, and economic statistics. He continues with a great defense of free trade and a bit of entrance into politics (touching a tad on public choice theory). In all, for being a relatively short book, he hits all the major notes that anyone looking for an introduction to economic thought would need to learn.

But the big question, for readers of this blog, is whether it’s worth it to buy. “Am I going to learn anything new?” And I can honestly say that despite the fact that I read economic books & blogs for leisure, and that I’ve blogged a fair bit about economics myself, I learned some new things from Slackernomics. Dale’s fourth chapter, unwinding the mess of the myriad of economic reports and statistics he’s constantly posting on Twitter, Google+, and at QandO, was wonderful. I’ve looked at many of these reports merely reading analysts *reaction* to the numbers (Higher jobless claims? How unexpected!), but rarely understood which group (public or private) was putting out certain reports nor how they all fit together. For me, a layman who is conversant on a lot of economic theory but not as perhaps on the technical reports, I have never seen an explanation of the reports that come out each week and each month as simple and readable as that chapter. That was more than worth it for my $2.99.

So my recommendation is simple: at $2.99, if you have a Kindle (or a device with a Kindle app), it’s hard to pass it up. You’re almost assured to get your money’s worth from the book. Even further, if you know someone in high school or college that may not have received good schooling in economics (which is, unfortunately, most of them), and who isn’t exactly about to tackle The Wealth of Nations, find a way to get them a copy of Slackernomics. Dale’s writing style will keep them interested.

All in all, it’s a book that lives up to its title, and goes well beyond.

The Challenge of Creating an Economically Sound, Simpler, and More Just Tax Code (Part 3 of 3)

Part 1
Part 2

The challenge of creating an economically sound, simpler, and more just tax code, be it the existing code, 9-9-9, a flat tax, or a sales tax will remain an impossibility if tax revenues is the only focus of any reform. The problem that dwarfs any notion of how tax policy is implemented is how the money is spent by the government.

As I write this, the national debt is approaching $15 trillion. That’s $47,810 per citizen or $132,927 per tax payer.

Even more staggering, the sum total unfunded liabilities for Social Security and Medicare is just over $116 trillion. The prescription drug part of Medicare is over $20 trillion by itself!

Other than the Federal Reserve creating money out of thin air, what tax policy can possibly begin to support this kind of spending? It seems stupid to even pose the question.

Yet the only answer the Obama administration seems to have to pay down the debt or turn the economy around is to raise taxes on the wealthy and continue the reckless spending. The Republicans for their part offer modest tax cuts and modest spending cuts that will have no noticeable impact on the debt.

It’s high time that we as citizens tell our public servants that the out of control spending has to stop. We must demand serious structural reforms to entitlement programs or phase them out over time.

We must also recognize the difference between military spending and true national defense spending. We can no longer afford to police the world. It’s time to tell Iraq, Afghanistan, South Korea, Japan, and others that they are now responsible for their own national defense and domestic security.

That’s just a start; there’s a great deal more spending that should be cut. But before any significant cuts can be made, we need to decide just how much government we want in our lives and what we are each willing to pay. For those who believe that individuals who make under a certain income level should be spared from paying any taxes at all (i.e. too small to tax) maybe it is you who should be out front in demanding a whole lot less government.

The Challenge of Creating an Economically Sound, Simpler, and More Just Tax Code (Part 2 of 3)

Part 1

Is an economically sound, simpler, and more just tax code even possible?

The truth of the matter is that there are too many people on the Left and the Right who do not want a simpler tax code that treats everyone equally.
It’s probably not because the defenders of the existing system necessarily think the existing code is good economic policy nor does a better job funding the federal government. The most likely reasons why there is so much resistance have to do with political pandering, vote buying/special interests, and social engineering.

It’s not too difficult to figure out why the Left panders to the working poor because the poor always outnumber the wealthy regardless of how well the economy is doing overall. What would happen if there was such a tax code where everyone paid the same rate without any tax credits or loopholes and without any hidden or embedded taxes? I’m guessing it would be more difficult to raise taxes on the evil rich if it meant that everyone received the same percentage tax hike. When it comes to the tax code, equality is the very last thing the Left wants.

If there is anything I agree with the Occupy Wall Street crowd or the Left more generally it’s the special treatment politically connected individuals and businesses receive via the tax code and/or subsidies. So you say you want to get money out of politics or do something about the role of corporate lobbyists in Washington?

I do too.

The simple answer IMO is to eliminate all taxes on business and all subsidies that benefit business. If there are no taxes or subsidies, there is no reason for businesses to lobby for special tax treatment or subsidies; the main reason most industries send lobbyists to Washington in the first place. If we would like to go any further in limiting influence of special business interests, maybe just maybe we should get the government out of regulating just about every aspect of business* and restrict the government to its limited constitutional powers. What a novel concept!

Finally there’s the social engineering aspect of the tax code. Frankly, I’m not sure if those on the Left or the Right are worse when it comes to using the tax code as a tool to encourage the American people to engage in particular activities. Even with Perry’s flat tax plans, there are a handful of deductions that are sacred cows. The home interest, charitable giving, and state and local taxes are preserved for those who earn up to $500K. Those who earn under $50K can choose not to file under the 20% rate with a $12,500 per family member deduction (which would eliminate all if not most tax liability under the existing rate for those in this tax bracket). With these deductions as part of the plan, the Perry plan can hardly be called a flat tax.

While I’m critical of keeping these deductions in place (he probably could get by with a smaller rate without the deductions), it’s not difficult to figure out why Gov. Perry keeps them in place. Voters would raise all sorts of hell at the thought these deductions would go away. Maybe there’s a good argument to make that charitable giving should be deducted since these funds help people who might otherwise be on government assistance.

But the home interest deduction? Why is that held sacred? Is there some sort of right for homeowners to get a break because they choose to buy a home rather than rent? I suspect that the realtor and home building lobbies and those in government who truly believe that every person should buy a home perpetuate this notion to a point to where now home owners think they are entitled to this special treatment.

Perhaps the most sacred cow of all of the deductions is the child tax credit. This deduction is a feature of every tax reform I mentioned in part 1 (even the Fair Tax prebate is based on family size). In the last presidential debate, Rick Santorum said in so many words that the federal government should promote families via the tax code.

Is this really the sort of thing the government should be concerned with? Should the amount of taxes an individual pays have anything to do with marital status or number of dependents s/he is supporting? Is it fair to make a single person pay more taxes because s/he doesn’t have dependents?

I don’t think there is an answer that will satisfy everyone.

Part 3
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Peter Schiff to OWS: “I Am the 1% Let’s Talk”

Here’s a very fascinating video taken at New York’s Zuccotti Park where Peter Schiff has a dialogue with some of the Occupy Wall Street protesters. Schiff brought a sign that read “I Am the 1% Let’s Talk,” and talk they did.

One of the things that occurred to me watching this was how little true discussion is going on between the OWS movement and their critics. Notice how some of the protesters say things like “you rich people” or “you Republicans” etc. Just as its unfair for these protesters to lump everyone into these groups is a mistake, I think it’s also a mistake to assume that all of these protesters are clueless and don’t have some legitimate grievances.

Kudos to Peter Schiff for going out among the protesters and having this much needed conversation. There seems to be some common ground concerning these grievances; the real differences are what the solutions should be.

The Challenge of Creating an Economically Sound, Simpler, and More Just Tax Code (Part 1 of 3)

If there is one positive thing Herman Cain has contributed to the national debate it would be this renewed discussion about tax reform. While I am skeptical of some of the specifics of his 9-9-9 plan, if nothing else, Cain has forced the other candidates to come out with proposals of their own. Gov. Rick Perry in a seemingly desperate move to remain relevant proposed an alternative 20% flat tax – a single rate that’s less than the sum of all of Cain’s 9’s.

Before I was aware of and became a supporter of the Fair Tax (a 23% consumption tax that would replace the income tax, payroll tax and all other federal taxes; Gary Johnson and Herman Cain* both support the Fair Tax) I was a supporter of the Flat Tax as proposed by Steve Forbes in his 2000 presidential bid. If we must be subject to an income tax, it seems only fair that everyone pay the same tax rate. None of these proposed plans are perfect but at least everyone is subject to the same rates.

But apparently my definition of “fair” differs quite a bit from those who think a “progressive” tax (i.e. the more you make, the more the government will take) is fair. Take this article from Politico for example:

Taxing the poor has become a badge of honor among conservatives. When Occupy Wall Street protesters launched their cry of “We are the 99 percent,” the right-wing blogosphere responded, “We are the 53 percent,” meaning the 53 percent of American households that they say pay federal income taxes.

Conservatives have become fixated on the notion that largely because of the Earned Income Tax Credit — passed under Ronald Reagan and expanded under Bill Clinton — almost half of all Americans pay no income taxes.

Perry launched his presidential campaign expressing dismay at the “injustice that nearly half of all Americans don’t even pay any income tax.” And he was not alone. Every major candidate — Rep. Michele Bachmann (R-Minn.), Mitt Romney and Cain — has suggested that too many of the working poor aren’t paying income taxes, a position The Wall Street Journal describes as “GOP doctrine.”

[…]

The argument is disingenuous. Working poor people do pay taxes. They pay a larger portion of their incomes in payroll taxes and sales taxes than the wealthy. And they pay property taxes indirectly in their rental costs. Poor workers pay about one-eighth of their incomes in taxes, on average.

For the sake of argument, I will assume that the author’s assertion is correct that the working poor pay a greater share of their incomes than the wealthy counting both direct and indirect taxes. Indeed there are all sorts of hidden taxes that are embedded in every good or service we all buy.

Regulations on business (which the author of this article undoubtedly supports) that contributes to the overall cost of employing a worker** are potential earnings the worker might otherwise be paid. » Read more

Ron Paul Unveils “Restore America” Plan

LAS VEGAS – Republican presidential candidate Rep. Ron Paul unveiled his economic “Plan to Restore America” in Las Vegas Monday afternoon, calling for a lower corporate tax rate, a cut in spending by $1 trillion during his first year in office and the elimination of five cabinet-level agencies.”

[…]

Paul does get specific when he calls for a 10 percent reduction in the federal work force, while pledging to limit his presidential salary to $39,336, which his campaign says is “approximately equal to the median personal income of the American worker.” The current pay rate for commander in chief is $400,000 a year.

Based on Dr. Paul’s speech, there’s not a whole lot not to like. Cutting $1 trillion of government spending in the first year would be a very good thing IMO.

As a Gary Johnson supporter, I can’t help but get more than a little annoyed each time one of Paul’s supporters, member of his campaign staff, or the congressman himself makes the claim that Dr. Paul is the only candidate in the race who would balance the budget. Gov. Johnson has promised a balanced budget, not merely in his first term but in his first budget in virtually every debate, interview, and speech he has given since he announced his candidacy.

That criticism aside, I hope this plan is given serious consideration by the primary voters and debated among the candidates.

Herman Cain is Either a Liar or Has a Very Short Memory

Just when I was starting to give Herman Cain another look, he lies to Rep. Paul’s face in last night’s debate concerning comments he made concerning the need to audit the Federal Reserve.

Yeah, there goes crazy Uncle Ron again with these crazy misquotes he picked up off the internet!

I’m not sure if the crowd was laughing at Cain or Paul at this point but it wasn’t that difficult to find audio of his “misquotes” on YouTube from when he was guest hosting The Neal Boortz Show.

But this wasn’t the first time Cain has been busted on a flip-flop followed by an accusation that he was misquoted or received “misinformation”. The next example: Cain changes his mind as to whether the president can target an American citizen for assassination without due process.

The Flip:

The Flop:

I never said that [President Obama] should not have ordered [the killing]. I don’t recall saying that. I think you’ve got some misinformation. Keep in mind that there are a lot of people out there trying to make me sound as if I am indecisive.

I don’t know all of the compelling evidence that the intelligence agencies and the military had. I’m convinced — I’m convinced that they have enough intelligence information that said he’s a threat to the United States of America. You don’t try to prosecute or capture him simply because he’s a United States citizen.

What will he say when he is confronted with these audio and video clips? Would he have us believe that these were imposters?

If Cain would have said on either of these issues “You know, I after thinking about it a little more, I was wrong…” I might be able to respect that. But to accuse people who challenge him of misquoting him when it’s so easy to prove otherwise is disturbing to say the least.

Solyndra: Delusions Of Grandeur, Or Just Colossal Balls?

Wow. It’s one thing to carry the necessary delusion that comes with most people in a startup… That self-delusion, the belief that you can’t fail (despite the high proportions of startups that fail), is what is required to overcome the often monumental odds most startups face. But is it merely delusion to submit THIS* to the House Energy & Commerce Committee’s Oversight and Investigations Subcommittee on June 23, 2011? No, I can’t think so. This is balls. Pure, shiny brass ones:

Solyndra does not publicly release quarterly results but is on track for this year. The ability to command a slight pricing premium as a result of substantial differentiation and product benefits continues and our cash production cost per watt is dropping rapidly at pace with the industry. In a highly competitive global marketplace Solyndra continues to win large projects on commercial rooftops around the world and we are confident we are competitive on the merits of our differentiated, lightweight, simple to install cylindrical rooftop and greenhouse products.

Evidence of Strong Momentum

  • 1166 employees and growing, 49 open jobs on website
  • Exporting more >50% of product
  • Over 1000 installations >20 countries
  • Over 100MW shipped
  • 2010 revenue ~$140M
  • 2011 shipments expected to double over 2010
  • Fab ramp to 300MW on target
  • 14th largest shipper from the Port of Oakland, more than 1000 containers this year
  • Doubled U.S. sales and marketing team in past 6 months

I can imagine Solyndra issuing mindless press releases like this — maybe in 2010 or 2009. I can even imagine them issuing such optimistic letters to the US Congress at that time — they still had enough free gov’t money in the coffers to at least try to justify themselves as an ongoing concern. But to do so in the middle of 2011, when you know you’re headed for the skids? That’s just asking for trouble! You have to think they’re going to wonder where all this optimism came from when the excrement hits the air circulation device.

Of course, there is no mention of profitability. Startups, when they have at least a hint of a viable road to profitability, would undoubtedly at least claim such. I have to think that whoever wrote this letter was deliberately focusing on revenue & jobs created, and not on profitability [not altogether unusual for a startup, to be sure] to deflect attention from the entity who had just loaned them $535M regarding when it might get paid back.

I note it’s titled “Exceeding Expectations”. I agree: I had no idea someone with barely money to keep the lights on would be capable of spewing out this much bullshit.

Hat Tip: Reason, who has a lot more of the timeline of the Solyndra saga at this link.
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Gary Johnson and Ron Paul CPAC Speeches

The 2012 G.O.P. candidates each gave speeches at CPAC following the debates. Below are the speeches from Gary Johnson and Ron Paul. The first video is Johnson’s presentation before perhaps the largest audience he has had in awhile. Johnson spends a good part of his presentation introducing himself before giving an overview of his proposals. In the second video, Dr. Paul who is no stranger to CPAC, gets right into his prescriptions for fixing the economy and restoring lost liberty.

Don’t Bother with the Fine Print, Just Pass the Bill

The title of this post ought to be a red flag no matter who the president is or what your political persuasion. President Obama is demanding that congress pass his “American Jobs Act” in front of supportive crowds of people who I am sure have taken the time to read the whole bill and understand its contents. This bill should be passed “immediately” and with “No games, no politics, no delays,” so sayeth our dear leader.

I can’t help but think of another piece of legislation that had to be passed “immediately” and “without delay” nearly ten years ago in the aftermath of the terrorist attacks of 9/11. The piece of legislation I am referring to of course was the USA PATRIOT Act. I mean what’s not to like? The bill has the words “USA” and “PATRIOT” in them and would make our country safer because the law would give law enforcement the tools needed to fight terrorism.

One of the tools the PATRIOT Act (Sec 213), a.k.a. “sneak and peek” provided law enforcement the ability to delay notification of search warrants of someone suspected of a “criminal offense.” Between 2006 and 2009, this provision must have been used many hundreds or thousands of times against suspected terrorists, right? Try 15 times. This same provision was used 122 in fraud cases and 1,618 times in drug related cases.

Is this what supporters of the PATRIOT Act had in mind when most of them didn’t even read the bill?

So we’ve been down this road before – pass a bill with a name that no one would be comfortable voting against. To vote against the PATRIOT Act might suggest to voters that you are somehow unpatriotic as voting against Obama’s jobs bill will undoubtedly be used in campaign ads to say opponents are “obstructionists” or are not willing to “put politics aside” in order to “put Americans back to work.” And don’t even get me started on all the bad laws that have been passed using names of dead children.

But who is really playing political games here? I think the answer quite clearly is President Obama in this case. He knows damn well that if the economy is still in the shape it is come Election Day he has very little chance of winning a second term unless he can find some way to successfully pin the blame his political opponents. He knows that raising taxes is a nonstarter for Republicans – particularly Tea Party Republicans. There may be some good things in his bill that should be passed (the Devil is in the details of course) that Republicans can support but if it’s all or nothing, the answer will be nothing.

President Obama is counting on the nothing so he can say it’s the House Republicans’ fault that the economy hasn’t recovered. This class warfare rhetoric plays very well on college campuses and union rallies. The worst thing that could happen from Obama’s perspective is if the Republicans call his bluff, pass the bill, and the bill fails to provide the results he claims his bill will achieve (though as a political calculation, it may be a wash as Tea Party voters in-particular would not be pleased either).

The worst thing the congress could do for this economy would be to pass this bill as hastily as the PATRIOT Act was a decade ago. The best thing congress could do is for its members to actually read the bill and have a rational discussion* and debate it line by line. Whether Obama’s intentions are for good or ill, there will be seen and unforeseen consequences if the bill does pass. A top down approach (as I think this bill is) is rarely if ever a good recipe for an economy. No one is smart enough to plan the economy, not even the brain trust of the Obama administration (this should be obvious by now).

Just because the president says his bill will create jobs doesn’t make it so.
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SP Lowers the U.S. Debt Rating

The Standards and Poor rating service has downgraded the U.S. Federal Government’s bonds to AA+ status. This action long overdue does not go far enough.

To understand the meaning of this, we should first understand the meaning of the S&P ratings.

The ratings indicate several things:
1) The likelihood of a default – the debtor failing to make interest payments owed to the people who purchased the bonds.

2) The likelihood that the bond holders will recover some of their losses after a default.

3) How quickly the debtor’s financial condition could deteriorate causing them to slide into default.

In the pdf explaining their rating system, S&P has a very interesting table showing the default rate associated with organizations based on their classification. As one would expect, in the past thirty years no AAA organization has defaulted, nor has any organization that is rated AA+.

In their press release explaining the downgrade, S&P makes the following points:

• The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the Administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government’s medium-term debt dynamics.
• More broadly, the downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges to a degree more than we envisioned when we assigned a negative outlook to the rating on April 18, 2011.
• Since then, we have changed our view of the difficulties in bridging the gulf between the political parties over fiscal policy, which makes us pessimistic about the capacity of Congress and the Administration to be able to leverage their agreement this week into a broader fiscal consolidation plan that stabilizes the government’s debt dynamics any time soon.
• The outlook on the long-term rating is negative. We could lower the long-term rating to ‘AA’ within the next two years if we see that less reduction in spending than agreed to, higher interest rates, or new fiscal pressures during the period result in a higher general government debt trajectory than we currently assume in our base case
• The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the Administration recently agreed to falls short ofwhat, in our view, would be necessary to stabilize the government’smedium-term debt dynamics.
• More broadly, the downgrade reflects our view that the effectiveness,stability, and predictability of American policy making and political institutions have weakened at a time of ongoing fiscal and economic challenges to a degree more than we envisioned when we assigned anegative outlook to the rating on April 18, 2011.
• Since then, we have changed our view of the difficulties in bridging the gulf between the political parties over fiscal policy, which makes us pessimistic about the capacity of Congress and the Administration to be able to leverage their agreement this week into a broader fiscal consolidation plan that stabilizes the government’s debt dynamics anytime soon.
• The outlook on the long-term rating is negative. We could lower thelong-term rating to ‘AA’ within the next two years if we see that lessr eduction in spending than agreed to, higher interest rates, or newfiscal pressures during the period result in a higher general governmentdebt trajectory than we currently assume in our base case.

In essence, the S&P rating agency is implying that since the recent debate about raising the debt ceiling was immaturely handled, they are now more pessimistic than they were this spring. This strikes me as and excuse to give plausible deniability to the accusation that for years they have been rating the U.S. government much more favorably than is appropriate by any objective manner.

The fact is that over the past few decades, the U.S. government’s long-term fiscal condition has been steadily eroding, and the legislature has shown no willingness to seriously tackle the issue.  Unsurprisingly any legislator who broaches the topic of reducing any of the major sources of spending, medicare, social security, millitary spending,  corporate subsidies, etc risks being voted out of office by an electorate whipped into a frenzy about an attack on the elderly, the poor, our allies, etc.

The rating agencies, having been granted a monopoly on ratings by the U.S. government, have been loath to bite the hand that feeds them, to risk the wrath of the legislature by frankly describing the terrible financial outlook for the U.S. government. At this point the AAA rating has become a joke; there is no way that the U.S. government can pay back the loans. There is no ideological chasm between the Republicans and the Democrats.  Both parties support massive welfare spending, high taxes, and massive plundering of the productive bits of the economy.  I am increasingly of the opinion that the debt fight was a kabuki theatre engaged in by the Democrats and the Republican leadership in order to end the Tea Party threat to the metastasizing state.  The Teaparty were the grownups announcing that the party has to stop, and the political parties’ leadership were the petulant teenagers plotting to keep things going a little longer.

At this point U.S. government bonds are a very bad thing to buy. The interest the U.S. government is offering is pathetically low.  Inevitably, to attract buyers, the government will have to raise the interest rate. Once they do this, prices in the secondary market for the older low-yield bonds will collapse.  The interest payments needed to service the outstanding debt will increase, and the U.S. government will be in even worse financial shape.  It’s possible that the Federal Reserve will buy the bonds itself, using newly printed dollars, much like the central bank of Zimbabwe.

Unfortunately too many retirees have invested in U.S. government bonds, expecting that the income from the bonds would provide a reliable, dependable source of income. Either they will be screwed by the inevitable default, or they will find their income’s purchasing power destroyed by inflation.

I am an anarcho-capitalist living just west of Boston Massachussetts. I am married, have two children, and am trying to start my own computer consulting company.

The 2-Minute Budget Deal Reaction: Open Thread

So I’ve had a tiny bit of time to reflect on the budget deal. Here are the key points:

  • $900B in immediate cuts [1/3 to defense], coupled to a $900B immediate debt ceiling increase.
  • Additional $1.2T-1.5T debt ceiling increase IF Congress either passes a balanced budget amendment or a bipartisan commission creates a debt reduction [tax revenue OR spending cuts] that can pass Congress by the end of the year.
  • If the above doesn’t occur, triggered spending cuts to defense and medicare [and possibly elsewhere] in the amount of $1.2T will occur along with a $1.2T debt ceiling increase. No revenue increases.

It could be better, it could be worse. I can see a few things here… First, we can throw out the BBA. That’s a non-starter. The whole reason that was added was for Tea Party buy-in, but it’s simply not going to pass. So we’re left with anywhere from $1.2T minimum in debt reduction, which is ALL cuts, to probably about $1.5T maximum (as there’s no political will for more) that can come from taxes or cuts.

With multiple paths going forward, I think we have to figure out what we’d like to see. And in my opinion, the BEST outcome is for the commission to fail and for the triggered cuts to occur. The commission has the capability to push for tax hikes, and I think in any scenario they’ll find a way for more than $300B of their package [assumed to be exactly $1.5T] to be increased tax revenues, meaning they’ll cut spending LESS than $1.2T.

Of the proposed cuts in the trigger, it’s about $600B over 10 years to defense, and a sizable chunk is expected to go into Medicare. While libertarians and Republicans may not find common ground on the defense spending, we’re talking about a total of $1T over 10 years, which should be feasible if we’re going to assume that we actually draw down in Iraq and Afghanistan. For the most part, that $1T will encompass keeping military spending roughly equal to what it is now, as those cuts are from a projected baseline which add at least $500B from what we’d spend by multiplying this year’s war-inflated spending out over 10 years.

The Medicare spending will put further pressure on reforming the program, and may give more political cover to performing drastic reforms such as the Ryan plan — voucherizing Medicare and pushing it to the Obamacare exchanges. Either way, we MUST restructure entitlements, and this is a start.

So I see a lot of danger in whatever the commission comes up with. Let’s start hoping the commission fails, and these already-planned $1.2T in cuts go into effect. Seems like the best option on the table at the moment.

This is an off-the-cuff reaction, of course. I encourage you guys to give your own thoughts on the plan in the comments.

Social Security Trust Fund: Accounting Kabuki

The looming government debt ceiling crisis has cause Obama to threaten inability to pay Social Security checks. It’s renewed the debate, which I’ve hashed out many times (here, here, here and here, for posterity’s sake), whether the Social Security “Trust Fund” is a veritable asset or merely a convenient accounting fiction used to hide deficits.

I, of course, believe it to be the latter. But M.S., writing for The Economist’s Democracy in America blog, tries to make some analogies about the trust fund’s “accounting kabuki”:

I mean, look, our bank accounts are an accounting fiction. Everyone knows exactly how much money is in anyone else’s bank account: none. There is no money “in” our bank accounts; our banks have already spent it. Our so-called bank account is just an IOU, a promise from our bank to pay us up to the amount specified in our balance.

There are two things here. The first is that the bank account is merely a promise, which is true. This is clearly analogous to the Social Security Trust Fund. The second part, though, is the problem. Making good on the promise is the bank’s responsibility, NOT MINE.

If I want to withdraw money from the bank, they have a legal and moral responsibility to give it to me. It doesn’t matter to me where they get it, but it creates no obligation on me to get that money back.

If they told me that they’d give me my money, but they’d have to garnish my wages for the next year in return, however, I’d be a little pissed off. That’s what the Social Security Trust Fund is.

The key is that American taxpayers are the ones who are being “paid back” out of the Social Security Trust Fund, while American taxpayers are also the ones doing the paying. It’s not an accounting fiction because we have two different line items on the bill, it’s an accounting fiction because the revenues ultimately come from the same place!

From the point of view of the Social Security Administration, of course, the IOU’s are an asset. They are a claim on future government revenue that is essentially on par with the debt that China or institutional investors buy from the US. I.e. from an accounting standpoint, it is a “promise” that carries some heft. However, from the point of view of the American taxpayer, it is additional debt that must be repaid through higher taxation. They’re going to get it from our paychecks, it’ll just come from the line that says “FED INC TAX” rather than the lines that says “SOC SEC TAX” or “MEDICARE TAX”. It still comes out of the same paycheck, which means whether it’s an accounting kabuki or not, it still costs us more money.

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