Category Archives: Government Waste

Richard Posner — The Bailout Saved The Economy!

Well, in my own mind, only until this bear market rally tanks, but I’ll get to that later. But here he goes:

The bailout worked. At a relatively modest, though by ordinary standards very large ($17 billion), cost to the government, the auto companies were kept out of bankruptcy until the acute psychological phase of the economic crisis had passed. Last December, and indeed until sometime in March, government officials, the media, and the public were understandably fearful that the economy was in free fall and might land somewhere near where the economy had landed in March 1933 (25 percent unemployment, output 34 percent below the GDP trend line, 18 percent deflation). Such a fear can constitute a self-fulfilling prophecy, because by causing consumers and producers to hoard cash rather than to spend, it can push the economy into a very deep downward spiral. That fear has now abated.

He’s following what some might call the “voodoo magick” economics, what Reason is alluding to is the “animal spirits” economics, and the general world knows as Keynesian economics. Centering around the understanding that we live in a credit-based economy entirely resting on fiat currencies and fractional reserve banking, the old question of MV=Py becomes very important. Posner is suggesting that because V was already in trouble, the bankruptcies in October/November of last year would have been devastating, but that today they’re much less significant.

He’s suggesting that the economy is based on confidence (as it’s been said all confidence games are), and that to allow the firms to go bankrupt when confidence is low is far worse than allowing it to happen when confidence is high. And it makes sense, if we’re in a recovery. But if we’re in a bear market rally, as I believe, and if you accept some of the negative impacts of the terms of the bankruptcy packages, I think the harm is yet to be felt.

So where are we? Do we take a DJIA that’s rallied to 8400 points from the March lows, largely on the backs of a financial sector rebound, as a sign of a recovery? I doubt the news from the Stress Test that banks need to recapitalize to the tune of $75B should be seen as good. In fact, Bill King writing for The Big Picture blog suggests that this is playing out according to Wall Street & Geithner’s plan, but that once they get a hold of that capital, the next shoe drops:

It is crystal clear that the scheme over the past two months has been to drive financial stock prices higher so banks could raise capital. Mission accomplished!

The Fed and the solons have accomplished the task of providing an environment, with ample patsies, for banks to raise needed capital. But once banks have procured that capital, watch out.

If Wells Fargo needs to raise $15B, it is far cheaper to raise it at $25 then $7. So once again solons via crony capitalism and smiley-faced fascism utilize massive rigs with taxpayer funds to bailout the elites.

Stocks are at their most overbought level since September 2007 as measured by the Commodity Channel Indicator (moment indicator). And S&P 500 stocks are at their most overbought level since 2006 as measured by percentage of stocks above 50-day moving averages (92%, 460 S&P 500 per Bloomberg).

So where are we headed from here? I can’t say, but look at something that Posner said:

…government officials, the media, and the public were understandably fearful that the economy was in free fall and might land somewhere near where the economy had landed in March 1933 (25 percent unemployment, output 34 percent below the GDP trend line, 18 percent deflation).

Now, count the months from October of 1929 to March of 1933, and then count the number of months from October of 2008 until now. If this thing is going to get worse to 1933 levels, it’s unreasonable to think it would have occurred this quickly. Oh, and while we’re at it, look at what the Dow did over the beginning of that period:

DJIA

Gee, what does that look like, starting in Nov 1929 and ending in April 1930? A bear market rally.

And despite the common narrative, all during Herbert Hoover’s administration he was desperately trying to find ways and interventions into the economy that would stop the slide. He was rewriting the rules of the game surprisingly similar to the way that Obama is today, showing all investors that their gains or losses were due to their ability to play the political markets. He was disincentivizing investment by constantly changing the rules, and thereby the odds of success in any given market play.

So Barack Obama’s policies are antithetical to investment, antithetical to sound business planning, and ensured to kneecap any attempt at recovery that our economy hopes for. If you’re looking for reasons to worry about the future of this economy — looking for justification that this is not a recovery and a bear market rally — you simply have to combine a few facts:

  1. Fundamentally, the bull market of the late 90’s and early 00’s was partly due to an extraordinary increase in financial system leverage.
  2. This bull market was pumped up by fractional reserve banking and a completely unsustainable rise in asset prices that fueled the above leverage.
  3. We are now at a point where leverage is unwinding and asset prices are still declining.
  4. Government props have supported a rise in financial sector stocks, but fundamentally the stress tests prove that banks need to raise capital based on even mild financial shocks.
  5. Any continued weakness in the economy will skewer this current rally.
  6. Asset prices, foreclosures, and jobs data show no signs of getting better, only (at best) signs of slowing their decline.
  7. Obama’s financial system meddling (auto bailout, TARP shenanigans, etc) is sure to provide more weakness than expected.

Richard Posner, and all the other cheerleaders, believe that if only they keep confidence high, all the fundamental problems in the economy will dissipate and we’ll start a recovery. But the fundamentals aren’t going away. The economy is over-leveraged just like it was in the late 1920’s and early 1930’s, and that leverage must unwind before we can reach a recovery, a recovery based on saving and investment rather than spending and debt. Posner thinks the collapse has been avoided by slowing down the decline, but in essence we’ve only delayed and extended the inevitable.

Colorado Senate Defeats Death Penalty Repeal by 1 Vote

Like déjà vu but this time in reverse, the Colorado Senate voted down the bill which would repeal the death penalty and use the savings to fund cold case homicide investigations by a single vote*. Though the Senate stripped out the death penalty provision just 15 minutes before the scheduled vote on Monday, the conference committee decided to put the death penalty back on the table to force each Senator to directly say “yea” or “nay” on the controversial issue. All 14 Republicans (mostly “pro-life” Republicans to be sure) plus 4 Democrats decided once again that its perfectly okay for the State of Colorado to kill.

Of the 4 Democrats who joined the majority, Mary Hodge who is opposed to the death penalty was quoted in The Denver Post as saying “It’s the hardest vote I’ve ever taken.” She went on to explain that she voted against the bill because she didn’t like how it conflated the issues of the death penalty and cold case funding.

Well congratulations Mary, Mary, quite contrary! Thanks to your vote the death penalty will remain. I hope you can sleep well at night knowing that you missed an opportunity to repeal this repugnant punishment because you felt the issues of the death penalty and cold case funding “are not connected.”

I beg to differ.

Colorado has limited resources to dedicate to criminal justice; the death penalty consumes nearly $1 million of those resources annually**. The victims of unsolved homicides have just as much right to bring their killers to justice as those whose killers have been convicted.

Most disappointing of all is the idea that far too many people have far too much faith in their government and their criminal justice system despite its many flaws.

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Last Minute Senate Rewrite Jeopardizes Colorado Death Penalty Repeal

Only 2 weeks ago the Colorado House passed H.B. 1274, a bill which would repeal the death penalty and use the savings to solve homicide cold cases, by a single vote. Foes of the bill in the Senate stripped out the death penalty repeal provisions and added an alternative source of funding to satisfy those who support additional cold case spending: a $2.50 surcharge on individuals convicted of a crime. According to The Denver Post, the rewrite happened a full 15 minutes before the Senate was scheduled to vote and with only a few days left in the current legislative session.

The Denver Post article goes on to explain how the rewrite puts the death penalty repeal in doubt:

Sponsor Sen. Morgan Carroll, D-Aurora, blamed the amendment on some colleagues’ anxieties over the controversial topic of repealing the death penalty and said the maneuver leaves little time to work out compromises and no time for public hearings or fiscal analysis of the new draft.

“Some people are looking for ways to avoid voting on the core issue,” Carroll said. “This is a totally different bill that’s not had a public hearing. It’s gamesmanship that makes a mess of public policy.”

Carroll had the backing of a broad coalition of groups — including the families of victims of unsolved murders, whose painful stories helped push the idea that ending the death penalty could be used as a funding source for cold-case investigations.

With their needs potentially met, however, the remaining death-penalty foes in the coalition could lose one of their most poignant and persuasive voices.

I think Sen. Carroll is mostly right. Her colleagues in the Senate are probably thinking more about the 2010 election than any principle regarding the death penalty. With the rewritten provisions to fund the cold case unit and taking the death penalty off the table, her friends in the Senate can avoid making a controversial vote and not have to worry about angering voters.

I’m sure that Gov. Bill Ritter (D) who is also up for re-election in 2010 is most relieved of all about these developments. So far, Gov. Ritter has managed to remain on the fence on the issue with his finger firmly in the air to determine which way the political winds are blowing. Perhaps the only clue as to where he stands – when Ritter was the Denver D.A. he unsuccessfully pursued the death penalty in 7 cases.

Perhaps the “limited resources” and economic arguments was not the best strategy to pursue after all. While these are, in my view, persuasive arguments they should be secondary considerations to the real moral and legal question: should the state have the right to kill? This is the question that far too many politicians do not have the courage to answer.

The article continues:

Carroll said there is too great a risk of wrongful conviction to chance an irreversible penalty such as death.

“How many colleagues do we have in the Senate who believe the state or the government is infallible?” she asked.

As I have written on many occasions, infallible the government is not. This is especially true for our broken criminal justice system.

Colorado One Step Closer to Abolishing the Death Penalty

20090422_013500_deathpenalty
The Colorado House passed the bill which would eliminate the death penalty by 1 vote.

The Denver Post reports on the dramatic moment:

In the hushed state House chamber, all eyes Tuesday stared up at the vote board, which showed lawmakers deadlocked 32-32 on whether to repeal the death penalty in Colorado.

All but Rep. Edward Vigil’s eyes, that is.

The Fort Garland Democrat sat at his desk with a hand held to his forehead, contemplating his suddenly crucial decision.

Heads swiveled in his direction. Whispers filled the silence. Seconds passed.

After nearly a minute, Vigil pushed a green button and, in doing so, pushed House Bill 1274 on to the state Senate in a dramatic 33-32 victory for death-penalty foes at the Capitol.

“Hopefully this will make us a better society in Colorado by not having a death penalty,” Vigil said afterward, “though I have my reservations.”

The bill would eliminate the death penalty as a sentencing option going forward and would use the projected cost savings to fund a cold-case unit in the Colorado Bureau of Investigation.

Only 1 Republican voted in favor of repealing the death penalty on pro life grounds: Rep. Don Marostica of Loveland.

As evident from the article, Coloradans are very divided on the question of the death penalty, despite the fact that only 1 person has been executed in Colorado since 1976. How the vote will go down in the Senate and whether or not former prosecutor Gov. Bill Ritter (D) will sign the bill into law is anyone’s guess.

It’s my hope that Colorado will ultimately make the right decision and follow New Mexico’s lead.

Comment Of The Day

Yesterday, I linked an article about Obama “challenging” his cabinet to find $100M to cut from the budget. I suggested it would have to grow considerably to even be a drop in the bucket. One commenter named John suggested that he should do that every day for the rest of his term, and we might get somewhere. Akston suggested that might still not get us very far:

Actually at that rate (100 million a day), it’d take well over 100 years to compensate the recent 4 trillion in new spending. And that would only account for principal, not interest.

It’s one more point that shows just how foreign the entire concept of a trillion is.

I think it’s time to listen to some tunes

Obamessiah Pisses Away More of Your Money

In news that shocks absolutely no one, the Obamessiah found yet another way to piss away some more American taxpayer dollars, this time on a “national service” bill.

President Obama on Tuesday signed a bill authorizing a major expansion of funding to federal community-service programs, marking a rare example of Washington bipartisanship.

The legislation reauthorizes the Corporation for National and Community Service – the government agency that runs AmeriCorps and other service programs – for the first time since 1996. It calls for a 25 percent increase in funding, giving the CNCS $1.1 billion for next year and almost $6 billion through 2014, if the money is appropriated by Congress.

The legislation is named for Sen. Edward Kennedy (D) of Massachusetts, and it passed with strong support from both sides of the aisle – moving from proposal to passage in little more than a month.

“Programs like these are a force multiplier,” Mr. Obama said at the signing. “They leverage small numbers of members into thousands of volunteers.”

Currently, 75,000 Americans serve in AmeriCorps annually, and they train and manage some 2 million community volunteers. The legislation authorizes an expansion of the program over eight years to 250,000 people, which in turn will allow millions more Americans to volunteer.

There went the $100 million the Obamessiah saved.

Seriously, I thought the point of volunteering was doing something good while not expecting something in return. The United States government has no business paying “volunteers” to serve the volk.

What about those “fiscally-conservative” Republicans, well, they generally supported it. More than half the Senate Republicans and 70 GOP Congressmen supported this bailout of the Americorps, the remnants of Bush’s “compassionate conservatism”, and big government in general.

Remember these folks around election time.

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 Review.com and Rare. You can also find me over at the R Street Institute.

An Open Letter To Jan Schakowsky

Dear Representative Schakowsky –

I’m a taxpayer.  The Tea Partiers are also taxpayers.  We are the people who make the enterprise of government possible.

People in government would object to that statement.  They would say that the US Government has multiple revenue streams:  the income tax, other federal taxes, the Social Security Trust Fund, other intergovernmental funds, external bond sales, bond sales to the Federal Reserve.  They’re right, on a technical level.  Year to year, the full burden of federal spending doesn’t rest on the taxpayers.

There’s more to the story, though.  Any money borrowed by the US Government is borrowed in the name of its taxpayers.  The more than $2 trillion that will be borrowed to close the deficit in Obama’s first budget is being borrowed in our name.  The same goes with the undisclosed billions borrowed to pay for the Bush bailout plan.  We currently have a national debt of $11,194,472,663,030 that the Congressional Budget Office projects will grow to over $20 trillion under the Obama spending plan.  As one of the approximately 138 million Americans who paid taxes last year, I look at the Obama deficit of $2 trillion and realize that almost $15,000 was borrowed in my name alone, just this year.  Over 10 years, the Obama plan will borrow over $65,000 in my name.  As scary as those numbers are in the aggregate, they are frightening when made personal.

I imagine it must be a pretty amazing job, being one of the 536 people that direct an enterprise with a limitless credit card that will be paid off by others.  Unlike every corporation and citizen in the country, Congress and the President don’t have to worry about where the money’s going to come from.  You have the authority to fund anything you want by pretty much any means you want.  Max out the credit card?  Just write a bill that increases the credit line!

From the perspective of this ordinary, hard-working taxpayer, that authority has gone to your heads.  You never bother to stop and ask us whether we want your spending anymore.  When Obama debuted his budget, it faced severe opposition from the taxpayers of this country.  Instead of wielding the power granted to him responsibly and reconsidering based on that opposition, he began moving to ram his budget down our throats without even a moments pause.  He tried to sic his campaign machine on us to “persuade” us that the irresponsible borrowing and spending was for our own good and that we should take it with a smile.

Between that and Bush’s TARP debacle, it became clear to ordinary taxpayers all across the country that we had no voice in Washington anymore.  Democrats and Republicans were spending all their time pandering to core constituencies and special interests while ignoring the people who pay the freight.  In fact, it’s gotten so bad that we taxpayers are not even perceived as an independent group anymore.  This is shown so clearly in your own comments on the Tea Party protests:

Rep. Jan Schakowsky (D-Ill.) blasted “tea party” protests yesterday, labeling the activities “despicable” and “shameful.”

“The ‘tea parties’ being held today by groups of right-wing activists, and fueled by FOX News Channel, are an effort to mislead the public about the Obama economic plan that cuts taxes for 95 percent of Americans and creates 3.5 million jobs,” Schakowsky said in a statement.

“It’s despicable that right-wing Republicans would attempt to cheapen a significant, honorable moment of American history with a shameful political stunt,” she added. “Not a single American household or business will be taxed at a higher rate this year. Made to look like a grassroots uprising, this is an Obama bashing party promoted by corporate interests, as well as Republican lobbyists and politicians.”

We are in an age of taxation without representation. The taxpayer has no voice in Washington. The charade of democracy fostered by the two major parties has no place at the table for ordinary, hard-working Americans.  If you’re a Wall Street executive or an ACORN organizer, you have a say in how much money is borrowed and spent in America.  If you’re a simple plumber, electrician, or office worker, you have none.

You and the rest of Congress are gambling with our futures and you couldn’t care less what we have to say about it.  That’s why the Tea Parties are happening.  You want to deny us our voice?  Our place at the table?  Fine.  We’ll take it back from you.  Tea Party after Tea Party, letter after letter, column after column, we will make ourselves heard again.

The only shameful and despicable thing here is the fact that we have to take back our voice at all.  You and the rest of the ruling class have ignored the people who make your existence possible for far too long.  I’m sure your comments will be the first in a long line of bleating on the part of the ruling class, that we will have to endure rhetorical slings and arrows far worse than yours before we are heard again, but it doesn’t matter.  We WILL be heard, whether you like it or not.

No more irresponsibility.  Not in our name.  Not without a fight.

Sincerely,

A Taxpayer

A Tea-Party Postscript

According to Nate Silver’s estimate, something approaching a quarter million people took part in the tea party protests that took place around the country yesterday. That seems like a large number, and maybe even the start of something big, right ?

Ross Douthat thinks not, and doubts that they’ll have any more impact on the growth of the state than the protests against the Iraq War did in stopping that conflict:

They resemble nothing so much as the anti-war protests during Bush’s first term.

(…)

But they do have all of the weaknesses of the anti-war marches: Their message is intertwined with a sense of disenfranchisement and all kinds of inchoate cultural resentments, they’ve brought various wacky extremists out of the woodwork (you know, like Glenn Beck), and just as George W. Bush benefited from having opposition to his policies identified with peacenik marchers in Berkeley and Ann Arbor, so Barack Obama probably benefits from having the opposition (such as it is) associated with a bunch of Fox News fans marching through the streets on Tax Day, parroting talk radio tropes and shouting about socialism.

(…)

Still, here we are in the sixth year of the Iraq War, and all those anti-war protests, their excesses and stupidities notwithstanding, look a lot more prescient in hindsight than they did (to me, at least) when they were going on. So if you’re inclined to sneer and giggle at the Tea Parties, keep in mind that just because a group of protesters looks ragged, resentful, and naive, that doesn’t necessarily mean they’re wrong to be alarmed:

Alarmed, yes, just as the anti-war protesters were alarmed at the idea of their country engaging in pre-emptive war based on dubious intelligence that latter proved to be entirely wrong, and fought a war without any idea of how to end it or what would follow in the wake of Saddam Hussein’s removal from power.

In hindsight, it seems clear that the anti-war protesters were more right than wrong but, despite their vocal opposition, we’ve lost thousands of troops and hundred of billions of dollars and have very little to show for it.

Along the same lines as Douthat, and echoing a question I raised yesterday, Alex Knapp believes that the movement’s biggest mistake is not figuring out what it’s for:

[I]ncreasing government spending is alarming. There’s no question about that. The higher deficits being predicted under an Obama Administration should be a cause for concern. But you can’t argue against higher deficits and for cutting taxes at the same time. Real life doesn’t work that way. You can’t simply wish federal revenue into being.

By the same token, you can’t just go around saying we need to “cut spending.” That’s just mindless handwaving. Let’s put this simply. 80% of the budget falls into five categories: Social Security, Medicare/Medicaid, Defense, Veteran’s Benefits, and Interest on the Debt. EIGHTY PERCENT. So if you don’t tell me what you’re going to be able to feasibly cut in those categories, you are not approaching the problem seriously.

Knapp is, of course, entirely correct.

The problems that we face are far bigger, and far more serious, than the relatively paltry sums that most people point to when they talk about government waste (earmarks, for example, account for less than 1 percent of the total Federal Budget). We aren’t going to solve are problems by nibbling at the margins, it’s going to take real sacrifice, it’s going to cause real pain, and it’s something we need to be talking about now.

Standing around calling Obama a socialist, or wearing a t-shirt that says “Who is John Galt ?” accomplishes nothing.

A Question For The Tea Partyers

It’s fairly clear what your against and, by and large I agree, but what, exactly, are you for:

Protesting government spending is meaningless unless you say what you’d cut.

(…)

All protests against spending that do not tell us how to reduce it are fatuous pieces of theater, not constructive acts of politics. And until the right is able to make a constructive and specific argument about how they intend to reduce spending and debt and borrowing, they deserve to be dismissed as performance artists in a desperate search for coherence in an age that has left them bewilderingly behind.

It is, I think, an entirely fair question.

C/P: Below The Beltway

Debts, Deficits, Taxes, and Tea Parties

In watching the MSM coverage of the Tea Party protests, the following arguments are used to try and debase the factual arguments of the protests:

  1. Obama plans to lower taxes on the majority of Americans while raising them on the rich.
  2. Obama’s budget cuts the deficit in half over the next 10 years.
  3. Right now tax rates are the same as they were when Obama took office.
  4. Most Americans are OK with their taxes.

These are all true, but none invalidate the point of the protests.  The protests are not talking about current taxes, they are talking about future taxes.  Each and every dollar borrowed today is a dollar taxed out of the economy at some point within the next 30 years.  This is a simple, undeniable fact.

When trying to figure out bad our future tax burden is, one number concerns us:  The National Debt.  This number is staggering, standing at $11,176,642,012,673 at the moment I type this.  According to the CBO, Obama’s budget will increase this debt by over $1,800,000,000,000 in just the next year.   So, while Obama is correct that his budget cuts the yearly budget deficit in half by 2019, that means that his spending plan will add a mere $900,000,000,000 to the national debt that year.  If the CBO estimate holds, the debt will top $20,000,000,000,000 in 2019.  This means that between 2009-2019, the amount of money borrowed against the full faith and credit of the US taxpayer will almost have doubled.

Say it to yourself… twenty trillion dollars.  That’s the massive future tax liability for the citizens of the United States being protested today.  The anger about this future tax liability is very real among those who see it.  While the tea party movement might get co-opted by big-spending Republicans and fade away, the sentiment that started it is as genuine, grassroots, and truthful as any protest movement in American history.

Reforming America’s Prison System: The Time Has Come

Sen. Jim Webb (D-VA) in his recent article calling for a major reform of America’s prisons in Parade Magazine brought some very disturbing, eye opening, statistics about America’s prison system to light. In summary this is some of what he found:

-Since 1984, America’s prison population has quadrupled from 580,000 to 2.3 million

-Though the U.S. accounts for 5% of the world’s population, the U.S. accounts for 25% of the world’s reported prisoners

-Local, state, and federal spending on corrections costs the U.S. taxpayer about $68 billion annually* (California spent nearly $10 million on corrections last year by itself!)

-16% (350,000) adults in prison or jail are mentally ill

-3/4 of drug offenders in state prisons are non-violent offenders or in prison solely for drug offenses

-47.5% of all drug arrests in the U.S. were fore marijuana offenses

-Despite insignificant statistical differences regarding drug use among races, Blacks (accounting for 12% of the U.S. population) account for 37% of all drug arrests, 59% of which are convicted and account for 74% of all drug offenders sentenced to prison

Perhaps for the “tough on crime” types, this is all good news but for anyone else who thinks critically of these statistics, I would expect that most would be concerned if not horrified. In response to these statistics, Sen. Webb makes the following observation:

“With so many of our citizens in prison compared with the rest of the world, there are only two possibilities: Either we are home to the most evil people on earth or we are doing something different–and vastly counterproductive.”

For regular consumers of the evening news, it may seem that the first possibility could be true. Without fail, the evening news reports stories of violence, vandalism, kidnapping, rape, child molestation, and murder both locally and nationally. There is also no shortage of true crime programs** detailing the most heinous crimes one could imagine being committed against other human beings; it’s all very disturbing. Our jails and prisons surely must be overflowing from these creeps!

One would think that roving bands of murderous thugs are on every street in America, yet we each almost always make it to and from work, to and from running errands and eating out unmolested. Our odds of being killed in an auto accident*** are many times greater than being victim to this roving band of murderous thugs. How can this be?

While we should each be vigilant and aware of our surroundings and always use common sense, the perception that our prisoners are overflowing with mostly violent criminals just isn’t true. Figure 1 shows the U.S. prison population under the purview of the U.S. Bureau of Prisons. The BOP population accounts for 202,493 of America’s 2.3 million prisoners.

Figure 1

Source: Bureau of Prisons as of February 2009

Source: Bureau of Prisons as of February 2009


» Read more

Action item for libertarians and small-government conservatives

20080925_wallst_protest_33For years, believers in small government have been fuming at egregious Republican spending. All of a sudden, more mainstream Republicans are livid about bailouts. Even elected Republicans who supported bailouts are suddenly jumping on the anti-bailout bandwagon because they’ve been popped upside the head by their own supporters. Even Republican governors accepting bailout money are at increased political risk. If we want legislators and other political leaders to respond to the small-government message we wish to promote, it’s necessary to kick them where it counts. What better way than to hurt them with their own fundraising, activist and voting bases?

Here’s the mission for the small-government crew: Every time a Republican politician promotes or supports a plan which expands government spending, it’s up to us to call them on it with terminology which will hurt their political career.

As an obvious example, if a Republican presidential and vice presidential candidate team up to bail out Fannie Mae and Freddie Mac, we need to call them out on it. It this case, it probably cost McCain and Palin the election.

Again, on the obvious side, Republicans should be aware of whether their congressman voted to bail out auto manufacturers or not.

Regular old pork counts, too. If a Republican wants to spend a couple of million dollars on fish, we need to call him out on it. “Senator Shelby bails out out Catfish Genome Project” would be a good one. Or course, such fishy-smelling pork isn’t limited to Alabama senators. Maine Senators Susan Collins and Olympia Snowe just love bailing out the Lobster Institute.

When a Republican governor wishes to increase taxes, let’s make sure folks know that Governor Riley wanted to bail out the Alabama Education Association or that Governor Huckabee taxes the elderly at the old folks’ home to bail out failed government programs.

Senator Hatch not only supports slavery, but he wants to bail out organizations which can’t obtain enough “volunteers.”

Of course, if it’s an omnibus spending bill, one omnibus target is lobbyists. For example, Congressman Smith and Jones vote “yes” on Obama budget bill to bail out DC lobbyists.

If it’s legislation aimed at lowering the amount of smokers in the country, it’s now a bail out for people too stupid (myself included) to quit.  The same general logic could be applied to about any nanny-state legislation. Even anti-Second Amendment legislation could be considered a bailout to the mortuary industry.

As bailouts are viewed very negatively by most Republicans I know, we need to change the rhetoric in a way that is meaningful to them.  I’ll predict that it will be tough for a Republican constantly tagged with the word “bailout” to win a primary election for the next couple of years, at least.

Pretty much every spending bill coming out of Washington contains the transfer of money from the producer of the money to someone who didn’t earn it.  The formula is simple:

(Insert politician name) (votes, supports, promotes, as appropriate) the bailout of  (beneficiary of government largesse).

Obama’s Policy to Fight Mexican Drug Cartels is Doomed to Fail

The Obama administration, rather than dealing with the root cause of the violence along the Mexican border, has decided to adopt a policy to deal with the symptoms. The problem is that this policy will neither alleviate the symptoms nor come close to treating the problem.

WASHINGTON – The Obama administration promised Tuesday to help Mexico fight its drug war by cutting off the cartels’ supply of guns and profits, while resisting the Texas governor’s call for a troop surge at the border to ward off spillover violence.

Let’s assume for a moment that Obama’s policy to prevent Mexico bound firearms from leaving the U.S. 100% successful. Given the fact that the drug cartels can acquire firearms from other sources (such as corrupt Mexican government agents with access to firearms among other sources) the only difference would be that the firearms are no longer coming from the U.S.

The Obama administration correctly identifies that the drug cartels are so powerful because of the profitability of the illicit drug trade. It’s this ability to make enormous profits, particularly in an impoverished country as Mexico, that attracts players into the business and makes corruption on the part of government officials almost irresistible. Unfortunately, though the Obama administration has identified the profitability of the drug trade as the source of the drug cartels’ power, there is clearly a profound misunderstanding of the way basic economics work (as if the bailouts, handouts, and myriad of other government programs were not proof enough).

The steps announced by Homeland Security Secretary Janet Napolitano – 450 federal agents shifted to border duty, supplied with dogs trained to detect both drugs and cash, and scanners to check vehicles and railcars heading into Mexico – amount to a subtle but important shift:

The blockade of contraband will now be a two-way effort. The fence begun under the Bush administration will be completed, to deter smugglers of drugs and workers. But the new emphasis will be on disrupting the southbound flow of profits and weapons that fuel the cartels.

At his televised news conference Tuesday, President Barack Obama said that for now, it’s more important to disrupt the cartels’ access to profits and weapons than to fortify the border with soldiers.

“That’s what makes them so dangerous,” he said. “The steps that we’ve taken are designed to make sure that the border communities in the United States are protected and you’re not seeing a spillover of violence. … If the steps that we’ve taken do not get the job done, then we will do more.”

So what’s wrong with this approach? The basic economic law of supply and demand tells us that whenever a product is in high demand (drugs in this case) and the supply is lower (in this case by successful drug interdiction by the U.S. governemnt), those who supply the given demand stand to profit more NOT LESS! Whether Obama’s policy results in a decrease in the supply of drugs of 1% or 99%, those drugs which do make it to the end customer will pay even more to get them.

I would even go as far as to say that the Mexican drug cartels would cheer this policy. Sure, the cartels might have more difficulty moving their product into the U.S. and their profit and firearms out of the U.S. but for the most clever smugglers, these enhanced drug interdiction efforts would filter out the competition! (And we know how black market operators hate competition).

On some level, I do believe that even the political class understand this but somewhere, there is a disconnect. Just yesterday in her visit to Mexico, Secretary of State Hillary Clinton admitted that the war on (some) drugs over the past 30+ years “has not worked.”

“Our insatiable demand for illegal drugs fuels the drug trade.”

And now the disconnect:

“Our inability to prevent weapons from being illegally smuggled across the border to arm these criminals causes the deaths of police officers, soldiers and civilians…”

Mrs. Clinton apparently recognizes how the war on (some) drugs has been an abject failure fails to realize that the Chosen One’s policies will do little to reverse this trend. If she truly wants to do something productive, something has to be done about what she (correctly) describes as this “insatiable demand” for these drugs. She seems to understand that the “Just say No” campaign didn’t work but does she and others within the Obama administration really believe that more drug hysteria PSA’s will do anything to curb this demand?

Given how the Obama administration has decided to deal with the drug war related violence along the border, I’m not optimistic. If spending billions of dollars annually on this insane war on (some) drugs which has contributed to leading the world in the number of people in prison (imprisoning 1 out of every 100 adults; more than half of the U.S. prison population is there because of drug related offenses) has failed to curb the demand, then perhaps it’s time to try a different approach.

Nothing short of legalizing the drug trade will stop the violence, so why does the politicos, law enforcement, and government bureaucrats at almost every level continue the same “get tough” policy which clearly has not worked? The only conclusion I can come to: they must be high.

I WILL NOT OBEY

As I have said here before, I am a senior technical executive at a large bank.

As it happens, a bank that was forced at gunpoint, by the secretary of the treasury and chairman of the federal reserve, to accept TARP funds (as all the top surviving banks in the U.S were).

Let me be clear: We did not want TARP funds, or need them; but we, and all the other major banks, were told in no uncertain terms that we WOULD take them.

As obscene as that is, it is irrelevant to what follows; excepting that we did take TARP funds.

The United States House of Representatives recently passed a blatantly unconstitutional bill, placing confiscatory tax burdens on anyone making more than $250,000 and working for an institution that received more than 5 billion of TARP funds.

The bill was in theory specifically addressed at the false outrage over retention bonuses paid to AIG executives; and is targeted only to their bonuses.

In theory.

Of course, this would be an unconstitutional bill of attainder, which wouldn’t pass even the most cursory constitutional challenge; so it was re-written to be broader.

Broader of course means more people would be affected, and congress would be given more power to steal more money.

In fact, if you read into the implications of the bill; it could be used to levy a 90% tax on any income over $250,000, earned by any family making more than $250,000 per year, where either spouse is employed by an institution that received federal “bailout” funds.

It appears that the Senate, and the Obama administration are cold on the bill and that it will not pass, or be signed into law if it did.

I do not earn that much money; nor do my wife and I earn that much together (though in the next few years it is entirely possible that we will).

However, I have something important to say.

If congress should pass any such bill, and the president sign any such law, I WILL NOT OBEY IT.

I will not allow congress to tell me how much I can earn. I will not allow them to take my income because of the actions of others. If they attempt to make me do so by force, I will resist with force.

I will most likely die in the process, which I regret; but at some point a line must be drawn. The constitution must be respected, or it is meaningless.

Congress can make no law that is unconstitutional on it’s face. If such a law be passed, it is the duty of the president to repudiate it; and it must not be signed. If such a law is signed, it is the duty of the agents of the government to refuse to enforce it. If the agents of the state attempt to enforce it, then they must be resisted with force, at all costs.

Anything less is submission to tyranny, and the diminution of citizens, to subjects; or worse.

I have made clear in the past that I would resist police abuse of the constitution. I will resist congresses abuses no less. I will resist the presidents abuses no less.

Agents of the state cannot exceed the legitimate authority of the state. When they do so, they are criminals, and they must be resisted as criminals.

Normally I do not advertise where my lines are; but congress is now in the midst of a tantrum of self indulgence, overconfidence, and hubris not seen since reconstruction.

Nancy Pelosi, Harry Reid, and Barack Obama, are pushing our nation headlong into tyranny and ruin; and decrying those who resist as racists, or reactionaries; simply for not wanting to be serfs.

I would suggest that we petition for the impeachment and prosecution (for conspiracy to deprive every resident of the United States of their civil rights) of any congressman who voted for such a bill; but I know it would do no good.

Government must be made to understand, WE WILL NOT TOLERATE SUCH ABUSE.

We will resist.

We will revolt.

We will not be made subjects, serfs, or slaves.

I am a cynically romantic optimistic pessimist. I am neither liberal, nor conservative. I am a (somewhat disgruntled) muscular minarchist… something like a constructive anarchist.

Basically what that means, is that I believe, all things being equal, responsible adults should be able to do whatever the hell they want to do, so long as nobody’s getting hurt, who isn’t paying extra

Leave it to Munro…

I am a cynically romantic optimistic pessimist. I am neither liberal, nor conservative. I am a (somewhat disgruntled) muscular minarchist… something like a constructive anarchist.

Basically what that means, is that I believe, all things being equal, responsible adults should be able to do whatever the hell they want to do, so long as nobody’s getting hurt, who isn’t paying extra

The Dastardly Bonuses: AIG, Fannie, and Freddie

Those eeevvviiilll capitalists at AIG have been taking quite a beating. Now it’s time to spread the “wealth”:

Fannie Mae plans to pay retention bonuses of at least $1 million to four key executives as part of a plan to keep hundreds of employees from leaving the government-controlled company.

Rival mortgage finance company Freddie Mac is planning similar awards, but has not yet reported on which executives will benefit.

The two companies, which together own or back more than half of the home mortgages in the country, have been hobbled by skyrocketing loan defaults. Fannie recently requested $15 billion in federal aid, while Freddie has sought a total of almost $45 billion.

Fannie Mae disclosed its “broad-based” retention program in a recent regulatory filing with the Securities and Exchange Commission. The company was only required to disclose the amounts for the top-paid executives, who will pocket at least $470,000 on top of their base salaries.

The bonuses are more than double last year’s, which ranged from $200,000 to $260,000. Another round of bonuses ranging from $330,000 to $429,000 are planned for next February.

Hubris.

What’s the over/under on how soon Barney Frank calls for the heads of the top folks at Fannie and Freddie?

Hat Tip: Cafe Hayek

Who is John Galt?

This question is asked repeatedly in Ayn Rand’s Atlas Shrugged until Galt himself introduces himself to a world in crisis. In light of this new phenomenon of “Going Galt” being encouraged by Michelle Malkin, Rush Limbaugh, Glenn Beck, and many others (particularly on the Right), this question deserves a serious answer. How else would it be possible for individuals to “Go Galt” without answering the question: Who is John Galt?

I would begin answering the question by explain who Galt is not. John Galt is not someone who merely caps the limits on his productivity to avoid being pushed into a higher tax bracket. What Galt does in Atlas Shrugged is much more radical: going on strike by refusing to produce anything for the benefit of society. Galt seeks out other high achievers and convinces them to do the same and help him build a society of their own.

Are these folks who claim to be “Going Galt” prepared to do this? Would Michelle Malkin et. al even be considered by Galt to be invited into his society?

Hardly.

To be invited to Galt’s Gulch one has to demonstrate that s/he has rejected the false virtues of altruism, collectivism, and mysticism (religion) and embrace his virtues of selfishness, reason, objective reality, and capitalism. While Malkin and Co. pay lip service to capitalism (especially when their people are not in control of the levers of power), their remaining values run counter to that of Galt’s. Is it not these very people who wish to erect religious monuments on government property, demand that Intelligent Design (Creationism) be taught alongside evolution in government schools, encourage individual sacrifice for the “greater good,” and wish to ratchet up the War on (Some) Drugs despite the evidence that the policy is completely counterproductive?

Now that I have pointed out what John Galt is not, perhaps I should allow the man to speak for himself in this modern dramatization* from the novel:

How many of those who say they are “Going Galt” prepared to embrace this philosophy by taking the following pledge:

“I swear, by my life and my love of it, that I will never live for the sake of another man, nor ask another man to live for mine.”

While I am pleased that the Galt trend is bringing some much needed attention to Atlas Shrugged, it’s my hope that more individuals will actually read the book and learn exactly what Going Galt is all about. That way when someone says “I am John Galt,” those who have been educated can respond by saying: “I know John Galt and you sir are no John Galt!”

UPDATE: XCowboy2 has released a newer version called “This is John Galt Speaking 2.0.” Enjoy!

» Read more

Fixing The Hidden Homeless Problem? No, Throwing Money At The Non-Existent Homeless Problem

Maybe, in the fury over federal bailout dollars spent on AIG bonuses, someone should stand up and ask whether this $600K in stimulus money is well spent:

The Town of Union is getting $578,661 in federal Recovery Act funding for a homeless problem that may not exist within its borders.

The money is coming from the federal Housing and Urban Development program to pay for homeless prevention and emergency shelter programs.

Union did not request the money and does not currently have homeless programs in place in the town to administer such funds, said town Supervisor John Bernardo.

“We were surprised,” Bernardo said. “We’ve never been a recipient before.”

Bernardo said he isn’t aware of any homeless issue in the largely suburban town.

This illustrates a major problem with the way that any ultra-large organization accomplishes tasks. The organization has far too many levels, departments, subsidiaries (if you can define the local-state-federal governments as a subsidiary relationship — I’m stretching slightly here), and egos. You have people who have mandates that certain things get done, but if there’s not adequate communication between all the players, the wrong things will be done.

The act of trying to unwind this money will be gargantuan. Is it some Congressman’s earmark? Maybe, but since we don’t have any real way to track earmarks, it may never be proven. Is it some mid-level HUD bureaucrat who “had to spend his money” and said that Union, NY sounded like a worthwhile recipient? Did someone within Union put in this request without telling anyone?

Which is why, of course, they aren’t going to try to unwind the slime trail. It’s only $600,000, after all. HUD, even though the town doesn’t have any programs designed to alleviate the nonexistent homeless problem, suggests that they find a way to spend the money:

“We hope and encourage these new grantees to develop creative strategies for the funding,” Glantz said of Union’s homeless grant.

Funny how cavalier they are about wasting other peoples’ money.

If I accidentally give myself an extra $10,000 on my tax return, will the IRS suggest I come up with creative strategies to use the improper funding? Didn’t think so…

I guess it’s only the spending that they’re willing to waste, they want to make sure the get every penny of revenue out of us.

Hat Tip: Paul Jacob

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.

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