Every Bubble Bursts

Paper money (“fiat money”) endorsed by John Law. Photograph is in the public domain.

I grew up in south Mississippi as a twelve-year student of the Ocean Springs School District. I’m grateful for the excellent education given to me there. As early as third grade I was required to study a foreign language (I chose Spanish); at some point I was also introduced to the formal study of Mississippi history, which fascinated me. There I learned one of my earliest lessons in economics–in addition to those being taught to me at home by my father who was a banker. I remember to this day the lessons learned in history class while studying an event known as “the Mississippi Bubble.”

With the arrival in “Biloxey” (now spelled “Biloxi“) of the explorer Pierre LeMoyne d’Iberville in 1699, the French laid claim to a massive amount of land in what would one day be called the United States of America. It stretched from Louisiana to Newfoundland and included territory on both sides of the Mississippi River. You don’t need much creativity to imagine the financial steam that this discovery brought to France. Powerful people with connections to the French monarchy were quick to line up for a piece of the economic pie. You see, some things in history are fairly constant. One of those constants is the sycophancy of influential people who make a better-than-average living from their relations with powerful people in government.

It’s an incredible tale that includes many of the same elements being debated today: fiat paper money, greed, monopolies, Keynesian economics, powerful government, and little benefit to most citizens. If you want to read all the interesting details for yourself (and I certainly recommend that you do so), read the 2012 article by Forbes economist Jesse Colombo, located HERE.

To keep the story to essentials, let me give you a quick review. It seems that a powerful Frenchman of the early 18th century was in dire need of cash. To remedy the situation he turned to a Scottish financier then visiting France, a man named John Law, who introduced the French to a new concept. Rather than trading with precious metals like gold and silver, he suggested to them that a bank should be established by royal decree and that this bank should issue money made of paper. The paper, of course, was of no value except for the promise it carried to its bearer. We now know such money by the name of “fiat” currency, from the Latin word fiat, meaning “let it be done” (the “it” in this case is the assignment of monetary value to something that has no such value except by way of promise and expectation).

A tremendous rush of money began as people sought to capitalize on land in the New World. Law became amazingly wealthy, in cash and in power. He had the power to mint coinage and collect taxes. He had the trust of some of Europe’s most powerful people. He purchased an ailing institution known as the Mississippi Company, gave it a new name and sold shares that expanded in price at an unsustainable rate. The French crown pumped money into his scheme and so many people profited that the French term millionnaire came into vogue.

Eventually, cooler minds began to wonder about the wisdom of investments that skyrocket at such impressive levels while fueled by government-approved fiat money. Confidence faded. Investors demanded gold rather than paper and the entire scheme began to collapse. Company shares were drastically reduced and the millions earned became millions lost. The so-called “bubble” (Colombo says it’s better described as a series of “failed monetary policies“) was a product of excessive monetary growth. In other words, there was an explosion of money but not necessarily of value. In the end, the value of the money declined and inflation set it.

I’ll leave it to my dear readers to discover parallels to today’s world. In the last few months there has been an increase of voices reminding us that all bubbles eventually burst. And economic bubbles always rise higher and faster when inflated with easy government money. Time will tell.

Obama’s Audacity: Using the Shutdown to Punish Some, Reward Others

Barack Obama is nothing if not audacious. The title of his now-famous book seems to confirm it–The Audacity of Hope. His style of political campaigning confirms it, and although he did his best to hide the most extreme portions of his agenda, hints of it emerged during his original presidential campaign. He and Michelle want to leave a vastly different America in their wake when they leave the White House. “We’re going to have to move into a new place as a nation,” Michelle Obama promised. “We’re going to have to change our history, our traditions.”

When your agenda is that audacious, you have to destroy anyone who gets in the way. What better way is there for an community organizer to do that than to agitate all those who agree with him so that his political opponents are demonized? Let’s look at how community organizers do their work. Three methods are particularly effective: they inform their constituents of the government assistance to which they are entitled, they get them fired up and energetic about securing those entitlements while clamoring for more, and then they scapegoat any politician or political group that stands in their way.

This is exactly what Barack Obama and the Democrat party are doing at this moment with the government shutdown. Of course, “shutdown” is too strong a word. About 17% of the government has been turned off, and in some cases even furloughed workers are having to put in extra time to put up signs and ticket those brave citizens who dare trespass upon federal lands during a shutdown. It’s a selective shutdown.

The Obama administration is engaged in a calculated effort to punish some while rewarding others. As long as the political payoff is estimated to help the Democrat cause, it doesn’t matter who is harmed or what victims are made to suffer. Exemptions are gladly given, however, to those groups that support the cause.

Families of our military who have died in war since the shutdown began have been denied the death and burial benefits promised them. Chaplains have been threated with punitive action if they offer religious services to their congregations. Cancer trials for children have been halted. Parks, turnarounds, and scenic vistas–some of them nothing more than a patch of grass or concrete–have unnecessarily been blocked in order to make a point. In one case, a jogger was ticketed for being on federal land while it was declared to be closed. Private businesses that receive no federal funds are forced to close needlessly, simply because they are on federally-controlled land.

Is the average citizen so dangerous that he or she cannot even be present on federal property without supervision? Supposedly, the federal government maintains these lands on our behalf. Then why do we cower in fear when we imagine taking a stroll on “our” property?

Disgusted by the charade, a park ranger in DC explained the end game: “We’ve been told to make life as difficult for people as we can.”

Yet it is not so for all. Just two days ago a massive immigration rally was held on the National Mall in Washington, DC. That mall is officially closed due to the shutdown. The reason is simple enough. The rally was sponsored by the AFL-CIO and SEIU, two important unions serving as intimate allies to the Obama agenda.

To put it bluntly, while blaming the Republicans for the shutdown, the Democrats are refusing to budge on the issue of funding Obamacare. As long as they believe they have the upper hand they will not blink. They will cause inconvenience and even suffering–perhaps to the point of death from cancer–just to stand their ideological ground.

Harry Reid has exposed this nasty agenda on at least two occasions. He recently refused to consider a continuing resolution to fund NIH cancer trials for kids, as covered in my blog post from earlier this week. In addition, when publicly harassed by the mayor of Washington, DC for refusing to vote for funds needed by that city, Reid was inadvertently caught by cameras as telling him to quiet down. “I’m on your side,” he warned Mayor Vincent Gray, “don’t screw it up.”

As a political gamble this strategy may work. But there are hints that it may backfire. Obama’s approval rating is down to 37%, the lowest yet of his presidency. His pals in the media won’t talk much about it–and when they do, they’ll hide it someplace innocuous. A recent article from the Associated Press was headed by the announcement that the GOP is getting the blame for the shutdown, while hiding Obama’s low approval rating in the body of the article. There’s not much objectivity to be found there, as you can see. For an interesting Canadian analysis, click HERE.

This is the same government that kills American citizens overseas without benefit of arrest and trial. It is the same government that illegally passes personal data from IRS to White House. It’s the same government that places a harmful tax on medical equipment, refuses to enforce immigration law, and told us that Obamacare penalties aren’t a tax–until it argued before the Supreme Court and said that they are a tax. This audacious government will say almost anything, blame almost anyone, and give breaks and benefits to its friends and cronies. While blaming capitalism for our nation’s economic woes it engages in the worst form of crony capitalism and favoritism. We who recognize it are labeled as angry extremists.

It’s time to be angry. It’s past time. Audacity is a two-way street.

Single Payer: Harry Reid Admits the Truth

Why not start by scanning the attached photograph of prominent Democrat leadership? It includes from left to right, Pres. Barack Obama, Sen. Harry Reid, and Rep. Nancy Pelosi as they proclaim their commitment to “honest leadership and open government.” Now perhaps you’ll allow me to engage in some light-hearted, linguistic detective work.

According to the good folks at one popular online dictionary, the definition of “honest” includes not only the intention of being honorable, but also the practice of being genuine, sincere, and frank.  “Open” is defined, in part, as having interior intentions immediately accessible, free from obstruction.  I don’t intend to put words into the mouths of the online editors, but I believe it’s reasonable to suggest that “honest leadership and open government,” as a slogan, must clearly suggest that the leaders in question deal with the public in a way that is forthright: in other words, honest leaders speak truthfully. Listening to the electorate, they work in a way that is clear, without guile, and following a path that is not clouded by falsehoods and partial truths.  One might assume that “open government” means that voters can clearly see and understand the goals toward which governmental leaders are working.

To go one step further in our detective work, let’s take a look at the White House webpage concerning the so-called “Open Government Initiative.” That webpage is still accessible despite the government “shutdown.” Political regimes rarely shut down the organs of their propaganda, so while all sorts of other government websites have been curtailed at this time, mediums that pound the public with acceptable program messages continue to run. No use wasting a crisis, especially when it’s a crisis that has been manufactured for maximum political capital.

Note the emphasis on the said webpage dedicated to open government. According to the direct quotation from President Obama, we are in for quite a treat: nothing less than an “unprecedented level of openness in Government” (the capital “G” isn’t my idea–that’s how it’s done on the website, just like the capital “G” in “God”). The page is marked with another lovely idea about government: transparency.

I like the idea of honesty, openness, and transparency–especially in government. But I wonder what happened back in 2009 and 2010 when so many constitutionalists like me were engaged in debate with supporters of the so-called Affordable Care Act (ACA), Obamacare. From nearly the beginning, I argued that the intention of this law was to move us firmly and energetically toward a single-payer health system where the federal government is responsible for the healthcare of all citizens. To review my posts on the subject, click “Healthcare” on the categories list to the right. Those of us who pointed out this fact were called by the vilest of names. They said we were out of touch, we were misrepresenting the facts, we had no clue. When I and others insisted that the long-term intention of Obamacare was to so debilitate the free market so that the only remaining option would be single-payer, we were called conspiracy nuts and fringe lunatics.

Remember those days? I hope so, because Harry Reid has confirmed that we were correct. You haven’t heard about that in the “mainstream” press, have you? It happened in early August. Reid was back in his home state of Nevada during the congressional recess. As reported by the Las Vegas Sun, the shifty senator finally revealed the truth that inspired him and the Democrat majority during the debate over healthcare. Not surprisingly, he made his comments on a PBS program known as Nevada Week in Review. It must surely have delighted his viewers.

In the interview Reid made it clear that the new healthcare exchanges are only temporary. Like public opposition to the healthcare bill itself, the exchanges are something that he said “we must work our way past.”  As it presently exists, Obamacare is simply “a step in the right direction.” It won’t work forever, he said, so we’ll need something more. When questioned by a panelist on the PBS show about whether that meant the country must abandon the free-market health insurance model, Reid was emphatic: “Yes, yes. Absolutely, yes.” He then went on to make it clear that he knew the single-payer system was too unpopular in 2009 and 2010. An intermediate step was necessary.

In others words, dear reader, the Democrat leadership, while falsely claiming to be “honest” and “open,” played loose with the truth. While calling everyone else liars they themselves engaged in a full-court press of misrepresentation and falsehood. In short, we’ve been had. And I’m sure they justified it to themselves by saying that they were giving us what’s best–even against our wills. Some of us saw it for what it was at the time. Now we are vindicated by none other than the two-tongued senior senator from Nevada.

What other misrepresentations were made knowingly? What other falsehoods were foisted upon us? How many other times were truth-tellers labeled as extremists and out-of-touch partisans? How much further will US politics deteriorate before we realize that the liars are the ones pointing out everyone else and accusing them of lying?

We were told in the healthcare debate that abortions would not be covered by taxpayer funding. To guarantee this, the Stupak-Pitts Amendment was introduced but did not become part of the ACA when Pres. Obama promised an executive order to prevent such funding. Yet an accounting gimmick now makes it inevitable that abortions will be covered. You may remember that Rep. Joe Wilson (R-SC) was roundly condemned for yelling “You lie!” when Obama insisted that ACA funds would not be used for illegal immigrants. Now we learn that ACA funds are being targeted toward centers that routinely deal with migrant workers but those centers do not check immigration status. The list goes on and on. We were told that we will be able to keep our current coverage (Obamacare is quickly demonstrating the falsehood of that statement in more and more situations). We were told that the law would be universal in scope. Not so.  Obama is granting exemptions to businesses and the political class–but not to individuals.

In short, the Obamacare we have today is not the Obamacare that was passed in 2010. It’s a moving target with exemptions and changing provisions accomplished by way of excessive power entrusted to the US presidency. It’s a frightening reality that is about to hit the American people in their wallets and pocketbooks harder than any previous legislation in history. As fast as lies are exposed new ones are manufactured. It’s enough to dizzy a circus clown, or to make him cry.

If you want to know what healthcare is going to look like in America in the near future, chat with your friends who are doctors, insurance agents, and investors. Ask what they are doing to protect themselves, their careers, and their families. To pay for Obamacare (which will necessarily become even more expensive than expected because of its creeping scope), government will be reaching even further into our wallets. The talk among the liberal political class in DC already suggests that they are planning to go after retirement funds and even the cash value of life-insurance policies. And why not? We’ve turned our fears about health into a massive federal system that monitors our personal data, combines our bank accounts and health accounts with real-time government access and uses the Internal Revenue Service to enforce its requirements.

Government is a beast forever hungry. Like an addict who will say anything to get another fix, the elected elite continue to smile and to deny what we so often know to be their true intentions. With ruthless efficiency and the determined cooperation of the mainstream press, the Democrat party has raised this practice nearly to the level of art. Machiavelli or Rasputin would be proud. They are both laughing in their graves. I can hear their side-splitting cackles. Honest leadership? Open government? Sure thing … sure thing ….

The Truth About Truth

Time Saving Truth From Falsehood and Envy, by Francois Lemoyne (1737); in retrospect, perhaps it’s a bit of political irony that the day after completing this piece, the artist tragically committed suicide

Last night, while channel surfing, I happened upon a documentary about the flooding of Venice, Italy. According to one city official interviewed on the program, about 100 times a year the tide rises higher than normal and floods the city. The waters of Venice are beautiful when they stay in their canals, but troublesome when they visit themselves upon homes, businesses, and historic cathedrals. Never mind that the Venetians have had problems with their lagoon for centuries or that their city rests atop wood pilings. The producers of this video claimed to know the cause and they proclaimed it passionately. Venice is undoubtedly flooding, they said, because of anthropogenic (human-caused) global warming. It’s worse than that, however. In their own words, “the world is sinking.”

I sympathize with the good people of Venice. But they’ll find an answer to their water problems as they always have. Their history is loaded with past examples of flooding (and taxation to pay for its remedy). In great part this is because its underwater foundation slips a bit lower every year. Even those who believe in human-caused global warming have to admit that “the greatest threat to the city” for most of its history has been “earth subsidence.” In other words, its wooden foundation is slipping deeper and deeper into the mud below.

As a popular science-fiction program once reminded us with the start of every episode, “the truth is out there.” Yes, it certainly is. But to get to it there are a few things you need to understand about the truth. In other words, there is some truth about truth that you need to know–truly!

First, let’s realize that we humans are “wired” to find explanations for things. That, along with our advanced brains, has given us a biological advantage over the other species on the planet. They may be bigger and stronger, but we’re smarter. We’re driven to find answers.

Before you become too proud of your genetic superiority, remember a second important point. We humans are also, in a sense, sociological herd animals. We move in psychological “packs.” Rather than doing the hard work of thinking for ourselves, we often accept what others believe. This can happen for any number of reasons (affection, political preference, religious belief, admiration, physical attraction, etc.). I confess to having a strong distaste for this tendency. As a child, when I did stupid things, my father wisely challenged me. His challenges stuck with me. When I see a parade of others following a “Pied Piper” of any sort, I shy away to watch … and to learn.

A third truth about truth that we must recognize is that money changes everything. Even truth–or what is presented as truth. There are plenty of people who would sell their souls for money. There are even more who would manipulate data for money or accept funding with “strings” attached. When billions and billions in government funding is involved, there simply is no way to know how deeply the influence and corruption have drilled themselves into a search for truth. Big money can come from big government or big corporations. Sometimes both.

Finally, let’s remind ourselves that there is no such thing as pure objectivity. Perhaps Leonard Nemoy’s Mister Spock came close, but even he was half human. We humans are motivated by all sorts of things, and not all of them are bad. Please don’t interpret my words to suggest that I’m a pessimist or misanthrope (a people hater). I’m not. But I am a realist. Call it sin, or imperfection, or simply human reality–but let’s face it. We humans aren’t perfect. Sometimes we respond to our base instinct for self-preservation. Sometimes we’re selfish or greedy. Other times we act with real generosity. Quite often we are a mix of “good” and “bad” at the same time. (As an aside, it strikes me as odd that when government starts doling out money to those “in need,” our human failings are no longer suitable for discussion.)

Lack of objectivity isn’t a bad thing. It’s a very human thing. The problem isn’t that objectivity is lacking. The problem is that we’re not honest about its absence. Wouldn’t it be nice if people claimed their biases so that when they speak of their greatest beliefs and philosophical commitments we can understand where they’re coming from?

Imagine a Fox News broadcast beginning like this:  “Good evening. We here at Fox believe that Barack Obama is the devil. Now on with the news.” Or imagine that CNN begins its nightly programs in this way: “In the interest of honesty, the broadcasters of CNN wish to remind you that we believe that conservatives, Republicans, and Tea-Party people are selfish bastards who want to screw Mexican immigrants and the poor. Here are this evening’s highlights.”

I always find such honesty to be quite refreshing, actually. It’s one of the reasons I named this blog “The Liberty Professor.” If you’re looking for absolute objectivity, you won’t find it here. The truth is that you won’t find it anywhere. But I’m honest about that. Get it?

With all of these caveats in mind, here are a few of the so-called “truths” that I have rejected. I speak only for myself, but I do so after reasoned reflection and research. Each of the issues described is what Patricia King and Karen Kitchener refer to as an “ill-defined problem.” If you’re a teacher or have a philosophical bent, you might enjoy their book entitled Developing Reflective Judgment. In it they argue that an ill-defined problem has more than one possible outcome (as opposed to a well-defined problem with an easy solution).

Let there be fanfare and the blast of trumpet … here are some “truths” that I robustly reject!

1. The Patient Protection and Affordable Care Act (“Obamacare”) was intended by its creators to lower healthcare costs and “fix” what’s wrong with America’s healthcare system. Nope. Not even close. It was designed to move us toward a single-payer healthcare system in which the federal government is financier and supervisor. Promises were made about how much it would cost and how much freedom would be granted to those who already have health insurance. Guesses, estimates, and even lies were offered to us for our mental consumption. The most recent estimate I heard is that it will cost three times as much as promised in the first ten years. In addition, its thousands and thousands of pages of regulations are going to cause premiums to go up for nearly everybody, especially young men. Remember the promise of Barack Obama about your own health insurance? “If you like it, you can keep it,” he insisted. Maybe. If you can afford it. Most of us won’t be able to. We–along with our employers–will be forced to drop private coverage to move into the single-payer (federal) system. The entire law was designed with this in mind. As they say, “out with the old and in with the new.” Don’t forget the words of Barack Obama to the Illinois AFL-CIO in June of 2003: “I happen to be a proponent of the single-payer, universal healthcare program.”

2. Federal gun-control initiatives are being designed to reduce crime and protect our children from violent criminals. Even I have to say that this sounds nice. It’s a feel-good proposal if ever there was one. But that’s not the primary factor for the unconstitutional gun grab taking place before our very eyes. (It has hit some temporary road blocks, but as with Obamacare, its proponents won’t stop until they get what they want.) The real goal is to have a nation in which guns are in the hands only of government officials and to outlaw them for everyone else. When that happens the government will have little to fear from dissenters, and only outlaws will be armed. Everyone with a weapon, whether it’s used in a crime or not, will be subject to arrest and punishment. In addition to maneuvers in Washington, international pressure is being put upon Mr. Obama to sign the UN Arms Trade Treaty. That treaty, like all treaties, will require Senate approval. We can look for one heck of a mud slide when that battle comes. Obama is widely expected to sign the treaty since it moves us one more step toward his goal, and since it provides cover for the confiscation of many types of civilian-owned weapons as well as a UN-supervised, international gun registry. That’s right. According to the president of Iowa Gun Owners, if allowed to keep my .38-caliber pistol I’ll have my name on a UN list as well as a US list.

3. IRS officials did nothing wrong when they targeted conservative groups,Tea-Party organizations, and groups favoring Israel for special scrutiny. Oh, really? That must be why IRS division director Lois Lerner invoked her Fifth-Amendment right against self-incrimination when called to answer questions before Congress. That’s a constitutional perversion of the highest order. Here’s why: She is a government employee called before the people to answer for her actions. The Fifth Amendment of the Constitution was enacted to protect the people from the government, not the other way around. She and her minions at the IRS have the power to pry, to search, to seize, to confiscate, and to order the arrest and imprisonment of citizens. They carry guns. When we, the people, call her to an accounting she suddenly wants to invoke her constitutional rights. She needs to be held in contempt of Congress and the investigation into the matter must continue. Without a doubt, the trail will end in the Oval Office. White House visitors’ logs already demonstrate this.

4. Global warming is a rising disaster caused by human industrial and economic activity. Look, I reject this proposition. But I don’t reject the idea that we should be responsible stewards of our environment. Another of Dad’s witty and wise sayings recognizable to many fellow Southerners is that one should never put fecal material on the handle of the water pump! But the global-warming hype isn’t being controlled by reasonable people who care for the environment. It’s being directed from the upper echelon of government for the sake of raking in more tax money, penalties, and fees to fund bigger government. The “science” behind human-generated global warming is tainted with government money. As some very bright but mistaken academics have argued, the scientific consensus is that human-caused global warming threatens the planet (not just Venice). They insist we need severe limits on economic activity, travel, and energy production; we need more taxes and government-controlled carbon credits. My own research brings me to the conviction that global warming is entirely natural and that the recent warming trend is tapering off. We are probably entering a new period of global cooling. It wouldn’t be the first time, as historians recognize from recent history. Perhaps our children and grandchildren will be subjected to overblown predictions of a new Ice Age!

5. The solution to our economic problems and social injustices is to be found in more government activism. So said Benito Mussolini, Joseph Stalin, Mao Tse-tung and a veritable host of central planners. But when central planning fails it fails big. Guns are needed to keep people in line. Perhaps you’re seeing a pattern? American constitutionalists do not reject all centralized government activity. The Constitution makes provision for the activities of the federal government. But once it’s engaged, the power at the top tends to be centripetal. In other words, it exerts a pull toward itself. Power exercised at the top tends to increase and multiply toward the top, or toward the center of power. The founders of the United States recognized this fact. They had overwhelming historical precedent for it. That’s precisely why power was invested primarily in citizens organized by states, not in the federal government. It’s also why they chose a federated system and not a national government (there is a difference). Only a small number of powers were granted to the federal government. Was it a perfect system? No. It didn’t recognize the rights of slaves, for instance. But its inspiration (that everyone is “created equal” in rights, not abilities) would eventually blossom to repair this immorality as well as other defects.

6. Fatty foods are making us fat and high blood cholesterol is putting us at risk for heart attack. So says an official US government blog and the Centers for Disease Control and Prevention (the CDC). There is even a new government push to monitor the cholesterol of children and to put them on statin drugs if necessary. Research is moving us rapidly away from this thesis. Fat isn’t making us fat. Carbohydrates and sugar are making us fat. They increase inflammation and cause heart disease. Among the scientists and medical doctors now arguing for a new approach to the matter can be counted Dr. Jonny Bowden and Dr. Stephen Sinatra. Check out their excellent and well-researched book, The Great Cholesterol Myth. According to them, the “four horsemen” of the cardiac apocalypse are inflammation, oxidation, sugar, and stress. Dangerous statin drugs, they insist, should be used only by those who already have heart disease. They show strong evidence that statins are useful only because of their anti-inflammatory properties and that lowering cholesterol isn’t the proper approach for stopping heart disease. In their opinion statins should never be given to children. To get the updated research full disseminated, the tie between big pharmaceutical companies and big government must be broken. And doctors who treat patients should never be paid advocates for particular companies or brands. The ties between these entities amount to a contemporary medical mercantilism or corporatocracy–similar to the military-industrial complex that guides so much of our foreign policy.

7. If you love someone you’ll never hurt their feelings. Well, you might not hurt their feelings intentionally–but that’s a whole different matter. Love isn’t a feeling. As Jesuit theologian William O’Malley has pointed out, love is a conscious and active commitment to the well-being of someone. I bring up this point because too many people these days, when arguing politics, seem to be guided less by intellectual consideration and more by emotion. They decide what’s right based upon how their proposals make them feel. The Christian virtue of love is shared by many religions. One doesn’t have to foist one’s Christianity on others to love them, but love nonetheless is a terrific guide for making political decisions. Too often our political debate is framed as if it’s a choice between the people who care for others (the “liberals”) and those who don’t (the “conservatives”). That’s just downright stupid. There are people on both sides of that divide who genuinely care to increase the well-being of others. My complaint is that we can’t decide what’s best based upon how it makes us feel. We need to think and think hard.

So there they are. Seven “truths” that I reject because I don’t think they are true at all. There are others, such as immigration reform (the real reason for which is to secure votes). Each of these is an ill-defined problem with adherents who passionately argue that I’m wrong. So be it. As Martin Luther is reputed to have said, “Here I stand. I can do no other.” But my stance isn’t based upon any attempt to be hard-headed or belligerent. It’s based upon my appropriation of the best information I can find. Don’t take my word on any of it. Do your own research. If I found the information, you can find it as well. I make my own choices and live with the consequences. You must do likewise. Gosh, we don’t hear that too often, do we?

In the final analysis, remember one thing, please. Only in a free society can divergence exist when it comes to values, beliefs, and ideologies. Wherever you stand on the issues, I beg you to be consistent and to be honest with yourself. Don’t give a pass to politicians or government bureaucrats just because they share your preferred political agenda–especially not if they have the privilege of carrying government-issued sidearms.

Avoid schadenfreude. That German word describes the human tendency to take pleasure in the suffering of someone else. If it pleased you to see certain groups targeted by the IRS, remember that it may one day be a group you admire. It could even be you. Political winds blow where they will.

Tyranny hurts us all. Even when it’s applied to our political adversaries.

Why Republicans Are Losing to Obama

Approximately twenty-five hundred years ago a Chinese general named Sun Tzu is said to have written a treatise known as The Art of War. Of all the strategic advice it offers perhaps none is more important than this: for success, you must know your enemy and know yourself. It applies to politics as well as war.

When it comes to dealing with Barack Obama, it appears that the GOP leadership doesn’t get it. They fail to understand who it is they are dealing with or the ideology that inspires their political opponent. Republicans complain that since Congress is deadlocked between a Democrat Senate and Republican House, the president should lead us away from the so-called “fiscal cliff.”

Senator Roy Blount (R-MO) recognizes that President Obama admires Abraham Lincoln. He used that recognition to make a point.  Referencing the new Spielberg movie, Lincoln, Blount said that “the lesson of that movie is that to get hard things done the president has to decide he wants something done.”  He seems to think the president wants a preventive measure to be found that will avoid the expiration of the tax cuts that have been in place since the administration of George W. Bush. Speaker of the House John Boehner seems to be negotiating with the same premise.

Republicans are focused only on the short term, hoping to stop an increase in taxes during a period of economic decline.  Obama is focused on his ultimate goal, the redistribution of wealth away from the producers and investors whose success he believes to be the product of a great immorality. His rhetoric about protecting the middle class is nothing more than a political ploy to achieve his goal of remaking America into a welfare state where taxes are higher on all producers and earners, but especially high on anyone he refers to as “the wealthy.”

Obama’s goal–and the legacy by which he wishes to be remembered–is not a stronger, more prosperous economy. It’s an economy of redistribution. The long-term cost is of little concern to him. Like Lincoln, whom he admires, Obama will do whatever he must to achieve his goal.

Lincoln’s goal was the forced preservation of the American union. Using an invading army in states that had declared themselves separated from his authority, he presided over scorched-earth tactics, declared martial law and imprisoned Americans without legal authority, closed hundreds of dissenting newspapers, ignored constitutional limits on government, and oversaw the arrest and deportation of a member of Congress because he had sympathies for the states in rebellion. Sadly, in this case, might really does make right. Lincoln successfully remade America into nation where membership could be compelled by force of arms and states were no longer sovereign.

Slavery could have been ended without warfare, as it was elsewhere. There were already southern leaders preparing for the end of this immoral institution. Political conflicts could have been settled without the violation of states’ rights. Constitutional limits on federal power could have been preserved. But Lincoln wanted a stronger, more powerful federal government. He could not allow threats to this goal to stand. As Prof. Thomas DiLorenzo has pointed out, “the Lincoln regime destroyed the system of federalism, or states’ rights, that was established by the founding fathers.”

For Obama, the economy is a zero-sum game. It’s a pie with only so many pieces–a pie that belongs ultimately to federal authority. It can therefore be seized and divided any way the government sees fit. He fails to understand even the most basic of economic principles. Why should he? He has never operated a business, paid employees, taken a risk to expand services or hire new workers. He has always been a leader among those who criticize the investors, planters, growers, makers, and builders–unless those growers are building a bigger government.

What he will not, cannot see, is that economies can grow and expand. Governmental power can be used to fashion an environment where that can happen or it can be used in a way that impedes it. The pie of economic vitality can actually grow and assist everyone in securing increased prosperity. That idea, however, is anathema to Obama. He sees economic growth as an injustice perpetrated upon workers rather than a form of economic cooperation bringing rewards to all.

Republicans, stop negotiating as if Obama wants to avoid economic disaster. He doesn’t. You do. Take a hint from the ancient writings of Sun Tzu. Know Obama and know yourselves.

The Fallacy of Centralized Planning

It’s Christmas eve.  Perhaps this is a good time to remind ourselves why God is the only central planner in whom we should place our faith. “In God We Trust” remains our national motto for now, but it appears that more and more Americans trust a powerful welfare state at least as much. It didn’t happen overnight. Certain segments of our citizenry and political leadership have been moving us in this direction for decades.

This fact didn’t dawn sufficiently upon me until the summer of 2008. I was visiting Atlanta at the time, teaching a spirituality course for the college where I’m employed as a theologian. One evening we found ourselves dining in the home of a mutual friend who lives in the area. This friend and his wife had invited others from their neighborhood as well. One of them was an attorney who was also a leader in the Atlanta-area Democrat party.

As you can imagine, being only a few months before the presidential election of 2008, much of the evening was spent in the discussion of politics. I quickly realized that the Democrat attorney and I had opposing views of what made America great. Rather than debate him, I set about trying to understand him. I asked lots of questions. At some point he confessed that, if truth be told, he was honestly a socialist. He was thrilled with the candidacy of Barack Obama.

As I listened for the remainder of the evening I was seized with concern for the future. The emotional wave that came upon me that night was something new for me in terms of its focus. As he spoke throughout the evening, the attorney opened my eyes to the fact that the socialist Utopian hopes that I thought belonged only to a small minority of Americans were actually deeper and more determined than I had ever imagined. I have thought of that socialist Democrat often since that night.

Led by the “mainstream” media and the self-serving rhetoric of Barack Obama, much of America has a romantic crush on socialism.  We’re talking, writing, and even smiling about it. This is the dream promised to us by candidate Obama when he was in Ohio in 2008. He told Joe the plumber and all of us then that “when you spread the wealth around, it’s good for everybody.”

Obama is right.  Spreading the wealth around is good for everybody.  Of course it is. Spreading wealth by seizure and centralized authority, however, is not good for anybody. It’s what we in American today call taxation and entitlements.

Giving people money to spend is different from paying them for producing wealth through production of consumables or provision of necessary services. The great socialist fallacy is that money is the same as wealth. Money is nothing but a tool of exchange. Without genuine wealth produced through labor, there is nothing to give value to money. Nations work themselves into poverty when they fail to see this, as we are doing now.

Socialism appears to be a refined lady, but she is a cruel witch in disguise.

Like a teenager succumbing to “love at first sight” while knowing nothing about the beloved, some Americans are fooled by the supposed beauty of socialist central planning. “We’re all socialists now,” proclaimed Newsweek just a month after Obama was inaugurated. The love affair has continued ever since. Back in September, the high-school band in New Oxford, Pennsylvania honored the Russian Revolution of 1917 in a football halftime show. Unconcerned for the millions slaughtered under Soviet rule, the students proudly wore costumes resembling Russian military from the era of the Cold War and dutifully carried the hammer and sickle.

The superintendent of schools for the region defended it by reminding angry parents that the band was justified in their subject since it had celebrated freedom back in 2008. How symbolic.

Centralized economic planning does nothing but make the elites more wealthy and powerful while making most citizens destitute and powerless.  Do you see any people of average economic means in Congress, or in the Oval Office, or directing the Federal Reserve? Enough said.

If you believe in the average American and his or her ability to make the country strong, then you should be a proponent of the free-market economy. Centralized planning has never worked. It can’t.  Small groups of powerful people at the top cannot monitor and control an economy to any adequate degree. The attempt to do so is known as Keynesianism, an approach advocated by economist John Maynard Keynes. As Ron Hera of the Ludwig von Mises Institute reminds us, Keynes “advocated that the government should play a large, active role in the economy.” The result is clear: “Western economies today are characterized by large, central governments, central banks, and massive debts.”

I wonder if the young people in the New Oxford High School Band have ever been told about the police state that was necessary to keep the people of Soviet nations in line, or the walls and barbed wire that kept them from fleeing their misery. Socialism is a Utopian vision that doesn’t work because that which is given away free is abused. Money provided without production becomes worthless. Incentives are destroyed but government promises remain. The result is poverty and totalitarianism.

Traveling behind the Iron Curtain in the late 1970s and early 1980s, friends and I saw firsthand that Soviet centralized planning was a disaster. People bartered for what little they could get. They begged tourists to trade clothes for the military memorabilia they were able to steal or buy cheap from their soldier friends (it seemed the only things in abundance in the Soviet-controlled lands were items related to military dominance; that fact alone should awaken us to the suffering of the people of the time and place). Even in nice hotels the bathrooms were stocked with newspaper instead of toilet tissue.

All the while there were the prying and ever-present eyes of the police state. Brave Soviet citizens spoke of it occasionally, but only in a hushed whisper, only inside their homes, and only after locking the doors and closing their curtains.

Yes, indeed. Christmas is a good time to think about what you believe.

A Simple Lesson in Economics

Although I don’t generally post long quotations from other sources here, in this case I’m going to make an exception.  In fact, I’m going to post an entire page. It’s just that good.

Not only is it top-notch information, it’s timely too. As you read it, compare its wisdom to the message coming from our nation’s capital these days.  Big difference.  Given the consequences, I’d say there’s not only an important difference, but a frightening one as well. Barack Obama certainly doesn’t get it (unless his ultimate goal is to bring down and remake the American economy into a socialist model). I don’t think that John Boehner and his merry band of big-government Republicans get it, either. Otherwise they would refuse to cooperate with President Obama’s agenda altogether.

Be sure to read the entire thing (it’s short).  Reflect a few moments.  Then read it again. I suspect it will leave you shaking your head. It’s page 139 of Henry Hazlitt’s fine little volume entitled Economics in One Lesson: The Shortest and Surest Way to Understand Basic Economics (Three Rivers Press edition, 1979).  It’s still available if you’d like to purchase a copy for yourself. I highly recommend it; it was written for folks like you and me, folks who aren’t economists but who wish to understand the topic.

Hazlitt was an economist, but also a philosopher and a journalist. He wrote for several influential publications, including the New York Times, the Wall Street Journal, and Newsweek.  He was greatly influenced by economist Ludwig von Mises and the so-called Austrian School of Economics (I have written in this blog before about Mises and the Austrian School). Economics in One Lesson originally appeared in 1946 and it has become a classic economics text. I wish every American would read it, just after they take the time to read the Constitution.

A voice for reason and logic rather than emotionalism and polemics, Hazlitt died in 1993. From the vaults of heaven I bet he’s shaking his head and thinking, “they still don’t get it.” Anyway, here is the extended quotation. I find it inspiring and loaded with common sense. Sadly, common sense isn’t so common in the halls of government. Though it begins with the topic of the minimum wage, it raises broader implications quickly. I have reproduced the page in bold print to make it clear that this is the work of Hazlitt and not my own.

As you read Hazlitt’s words, you may come to the conclusion that our federal government is doing the exact opposite of what it should be doing to assist our citizens in securing their economic recovery. It’s as if Hazlitt were still alive, writing for today.

 

Henry Hazlitt

“All this is not to argue that there is no way of raising wages. It is merely to point out that the apparently easy method of raising them by government fiat is the wrong way and the worst way.

This is perhaps as good a place as any to point out that what distinguishes many reformers from those who cannot accept their proposals is not their greater philanthropy, but their greater impatience. The question is not whether we wish to see everybody as well off as possible. Among men of good will such an aim can be taken for granted. The real question concerns the proper means of achieving it. And in trying to answer this we must never lose sight of a few elementary truisms. We cannot distribute more wealth than is created. We cannot in the long run pay labor as a whole more than it produces.

The best way to raise wages, therefore, is to raise marginal labor productivity. This can be done by many methods: by an increase in capital accumulation–i.e., by an increase in the machines with which the workers are aided; by new inventions and improvement; by more efficient management on the part of employers; by more industriousness and efficiency on the part of workers; by better education and training. The more the individual worker produces, the more he increases the wealth of the whole community. The more he produces, the more his services are worth to consumers, and hence to employers. And the more he is worth to employers, the more he will be paid. Real wages come out of production, not out of government decrees.

So government policy should be directed, not to imposing more burdensome requirements on employers, but to following policies that encourage profits, that encourage employers to expand, to invest in newer and better machines to increase the productivity of workers–in brief, to encourage capital accumulation, instead of discouraging it–and to increase both employment and wage rates.”

(Henry Hazzlit, Economics in One Lesson: The Shortest and Surest Way to Understand Basic Economics. (New York: Three Rivers Press 1979)

Taxation Stupidity–It Doesn’t Have to Be This Way

I had an interesting chat with a friend the other day.  He works in a technical field and makes about twice what I make a year–and that fact doesn’t bother me a bit.  What I adore about being an educator is that I get lots of time “off” from the job, which means that I can read, study, and write.  It’s what I’m called to do.  Other people are called to other things and their salary, like mine, should be determined by the forces of the free market.  What people want, they pay for.

Success doesn’t bother me.  And since I’m not a greedy person, I don’t have hateful or covetous emotions when I see others doing well.  That applies even when their income is more than mine.

Recently, a valued colleague at the college where I teach shared with me something from Martin Luther’s Large Catechism. I’d like to adopt it for my own and live by it. I encourage you to do likewise. Here is the quotation: “If our neighbor has property, we are to be glad about it, allow him to enjoy it, and promote and protect everything that may be of service to him.” An attitude such as this is certainly a far cry from what we’re hearing from the politicians in Washington, DC these days. While they pit citizens of differing economic strata against one another, the elected elite in that city of power and glory are making a darned fine living … far beyond what most Americans experience.

Anyway, my techno-friend shared with me the fact that, although his employer didn’t have as good a year as before the economic downturn, he still offered generous bonuses to his employees.  My friend received a bonus of $1000.

Sounds nice, doesn’t it?  After taxes, however, his actual income was $560.  That’s right. State and federal taxes gobbled up 44% of this extra bounty.

Admittedly, my friend and his wife are “DINKS”; they’re a married working couple without children, “Dual Income and No KidS.”  She works as an administrative assistant for a legal firm and together they make about $125,000 a year.  Neither their home nor their lifestyle is extravagant.  They are both good citizens, at least as far as I can tell.  Above all, they’re productive.

In other words, they are exactly the type of people who probably deserve a financial reward from their employers.  Yet when the primary wage earner in the family gets that reward, government (mostly federal government) steps in to take almost half before a single cent of it makes it into the wager earner’s pocket.

Perhaps you’re thinking that this is reasonable. After all, look at the benefits that this couple enjoys. Certainly, if you think this way, to a certain extent you are correct. But the fact is that taxation comes with a high price. It’s a price that is probably higher than you realize.

Imagine my friend to be in a situation where he can choose to earn that extra $1000 by doing more than usual.  Rather than a bonus, imagine that the $1000 is offered to those in his company who want to put in an extra number of hours or complete a certain number of additional projects. Most would probably jump at the offer, except for one thing. If they know my friend’s story they might hesitate.

Why? Well, because in government terms $1000 isn’t $1000.  For those in my friend’s tax bracket it’s only $560.  So when they decide if it’s worth the trouble they have to decide not about the $1000 but about the 56% of $1000.  And a certain percentage of those workers will simply decline the offer.

That’s right.  They’ll decline the offer. For whatever reason, they’ll decide that the payoff isn’t worth the trouble or the worry or the extra time or the hours away from home. It doesn’t really matter why because time belongs to them. They get to decide how to use it.

Here’s the lesson, dear friends: taxation comes with a price. And not only that, but taxation is by its nature punitive and regressive. The more success you have, the more taxes you pay. For most of you, the more hours you put in and the more money you make, the more the government smiles as it banks on your determination and strenuous efforts. That hurts everybody. It cripples our economy. I suspect that all across this nation there are millions who are choosing to work less because the incentive to do more is lower than they’re willing to accept.  I say that as a business owner in conversation with other business owners.  And there is no reason to think that we’re unique.

Let’s add insult to injury as we remind you that the US Tax Code is supposedly “progressive.” That means that as you earn more, you not only pay more dollars in the same tax bracket, you actually move up into new brackets and the percentage of your income that goes to government becomes even higher.

Are you feeling good about your hard work yet? Are those extra hours paying off?  Of course they are!  Well, not for you … but for the politicians who take your money and use it to purchase votes. For them it’s a great investment.  They get the big salary, the perks and benefits, and the parties and trips paid for by corporate backers: free trips for themselves and family, houses in the Caribbean, and a whole host of gifts that the average American taxpayer will never be able to afford. How many members of Congress became millionaires after being elected to the House or Senate?  Sounds fishy to me.

If we go over “the fiscal cliff” on January 1st, the money going to DC will increase tremendously.  And don’t be fooled by the rhetoric.  Everyone will pay for it, not just the so-called “rich.”

Washington isn’t the “District of Columbia.”  It’s the “District of Covetousness.”

Instead of punishing success, America needs a taxation system that rewards hard work.  What if extra work was taxed at a lower rate?  What if every hour after 35 in a week was taxed less rather than more?  What would happen if the elected elite who decide our tax burden realized that incentive actually means something and that people work less when they believe the payoff isn’t worthwhile?

What if taxation were for the purpose of funding the constitutionally-mandated functions of government rather than placating particular voting constituencies and ensuring the re-election of incumbent politicians?

Such questions serve as the explanation for why I support term limits–drastic term limits. This nation needs men and women who serve to solve problems, not those who serve to advance personal or party agendas.

What if taxation encouraged rather than discouraged hard work and extra effort? We have smart cars and smart phones, so why not smart taxation?

What a novel idea.

Obama the Avenging Angel

Here in the South we have an old saying that comes to mind in times like these:  “You ain’t seen nothin’ yet.”

When Barack Obama was elected to the presidency in 2008, he pulled off the greatest political hoax of all time. Then he did it again in 2012, to an even greater and more damaging degree.  In 2008 most Americans didn’t know who he really was or what he stood for.  They elected him in spite of this.  By 2012 they did know–and they re-elected him anyway.

Internationally, Barack Obama intends to put the United States in its place.  Domestically, he intends to fix what has been wrong with the nation since its founding.  American capitalism is a gangrenous limb to him that must be amputated, even if the patient doesn’t recognize its poison.  For the next four years he will be relentless.  He will saw, hack, and chop off anyone and any institution that stands in his way.  Helping him in his hell-bent mission are his union and corporate minions whose pockets are stuffed with government cash disguised as “stimulus funding” and “quantitative easing.”

Nothing matters to him but his goal:  certainly not truth or honesty.  He is not interested in governing for the good of all.  He seeks only to divide us into competing constituencies where he can demonize those whose personal sacrifice has brought them success.  Those who have built businesses, earned salaries, and saved for retirement have done it by unjust treatment of others.  They have accomplished these things by harming, depriving, and cheating others whose backs were the stepping stones to their wealth.  So he believes.

You see, for Barack Obama, capitalism is not a form of economic freedom.  It’s not a way of social interaction for the sake of mutual benefit.  It’s a system of theft.  It’s dishonest.  It’s diseased.  It must be cut out.

And how does he propose to do it?  The first stage is already complete.  He has stolen from free-market enterprise the very language that explains it.  Back in July the president reminded us that “if you were successful somebody along the line gave you help.”  He went on to say that “if you’ve got a business, you didn’t build that.  Somebody else made that happen.”  Then, in October, he offered this insight: “As Abraham Lincoln understood, there are some things that we do better together.”

For all of his limitations, Obama is a master political strategist.  He learned his strategy from the very best of socialist agitators.  He is, after all, a community organizer.  His talents are to be found in primarily one area:  mobilizing mobs who make demands while threatening with the possibility of violence.  He does this by hijacking the message of his political adversaries, reframing that message and then turning it against them.

Let me make it clear in the examples I gave from Obama’s campaign speeches earlier this year.  He says there are some things we do better together.  He says we need each other to be economically successful.  He says we need the expertise and talents of others to build businesses.  Those of us who believe in economic liberty (free-market exchange of capital) already know this.  We understand that we can only build our businesses with the help of others … that’s why we put them to work, paying higher wages to the best and brightest.  That’s why business competitors are always offering more incentives and greater benefits to workers!

When Barack Obama says “we,” he doesn’t mean “we free people.”  He means “we the government–we the ones with the armed power of the state who can take what we want from anyone we wish.”  He means “we who will tax, spend, and redistribute as we wish.” He also means “we who will allow you keep an appropriate amount of what you’ve earned, saved, or inherited.”  This is the all-wise, all-powerful “we” of tyrannical government. This is the very government that is seizing control of healthcare, inserting its bureaucrats into your medical decisions, raising taxes, destroying the value of the dollar, and making plans to confiscate private retirement funds.

To accomplish all that he hopes, President Obama must have the backing of the people as willing accomplices in his tyranny.  He can only get this cooperation if he convinces enough Americans that their dream of freedom and economic success was a nightmare from which they must be awakened.  It appears he may have already accomplished this.  Our nation’s founders feared this tyranny of the majority and attempted to establish a governmental system that would prevent it.  We have chipped away at the precautions they left us.

Obama’s goal is simple:  tax, spend, and create fiat money so fast and ferociously that the entire economic and financial system implodes.  When it does, the president will calmly step forward with his head held high and his chin thrust forward. “All is well,” he will tell us. “We, the government, will make all of this right for you.”  In their fear and panic, most Americans will agree to anything that appears to give them security.  Governmental power, already at a dangerous all-time high, will increase exponentially.  The remaking of America will then be complete.

Like I said, you ain’t see nothin’ yet.

Democrat vs. Republican: Which is Better for the Economy?

In a recent post I suggested that we should pay attention to the market downturn that took place on the day after Barack Obama was elected to a second term.  I didn’t mean to suggest that we can judge his entire presidency by a day or two of economic activity, but only to suggest that there is something to be learned.  A friend whom I cherish questioned that post by stating that “the market has tended to perform better under Democratic administrations than Republican ones.”  Believing this statement to be correct, he wondered what the markets are telling us about Obama’s administration.

No source was cited for the statement, but it is an assertion I’ve heard before.  So I decided to do some research.  You, dear readers, are the beneficiaries of that research.

Let’s begin with a warning and some insight to the meaning of free markets.  To understand how politics affects market activity we must realize that politics isn’t the lone issue to be analyzed.  Quite literally, there are unlimited affects on markets.  Global affairs, national events, regional weather patterns, corporate decisions, and consumer choices all have an affect on what the markets do.  Taking one issue out of context and analyzing it separately from all other affects is a bad investment that will only provide poor returns if we’re looking for the truth.

I’m happy to admit that my original statement about the 200-point plunge in the stock market on the day after the election is easily misunderstood.  We can’t put too much emphasis on this single event, but I do believe we can draw one small conclusion:  the re-election of President Obama made the markets a bit jittery.  The reason is simple. Markets don’t function well in an atmosphere of uncertainty.

What in heaven’s name does that mean?  Simple.  Markets aren’t hard to understand if you understand people.  And the fact is that people don’t invest as quickly, or they don’t keep investing, when they are uncertain about what the political power players are up to. Investors have been nervous about Obama for some time now because of his rhetoric regarding the wealthy (the economically successful) and his tendency to pick corporate winners and losers by the way he doles out federal stimulus money. In other words, he uses the power of centralized planning to affect markets in ways that aren’t natural to the markets.  That makes investors nervous.  It’s tough enough to bet on the unpredictable markets.  It’s even worse when you add unpredictable politicians to the mix.

There is always someone in government looking for access to more of someone else’s money.  Both parties are guilty of this.  It was federal spending that chased me out of the Republican party during the administration of George W. Bush (though I returned a couple of years ago in the hope of pushing a constitutionalist reform agenda).  If I may use a homespun metaphor, the Democrats and Republicans are two irresponsible and out-of-control children with their their hands in the wallets of their parents.  No two children are alike–not even bad children.  And in the case of this metaphor, the Democrats are much more dangerous to the economy than Republicans.

The historical data is clear to me:  Republicans are better for the overall economy than Democrats–especially when we have a divided government.

By now you may be tempted to abandon this post.  Please don’t.  I promise to present this as simply as possible and without recourse to all sorts of technical economic jargon that even I probably wouldn’t understand!  Feel free to click on the links provided that take the reader to appropriate graphs, or skip that part if you prefer.

To understand the data, we have to make an important distinction between the presidency and Congress.  Of these two political entities, I would argue that Congress has a greater influence upon markets because it is the source for financial and economic control as enshrined in federal law.  Thousands of pages of laws are passed each year.  Nonetheless, as chief federal executive, the nation’s president has great leeway in how he and his administration approach the enforcement of those regulations.  When it comes to the economy, I believe that most of what our federal officials do is more harmful than helpful. For markets, the best situation is probably a deadlocked government that prevents excessive economic meddling by officials eager to seize more cash.

In analyzing the question at hand, most people probably take the easy route by asking who controls the White House during times of strong economic performance.  Corey Rosenbloom is a Chartered Market Technician with lots of stock-market experience.  He specializes in helping those who’ve been burned by previous investments.  He has developed a webpage that analyzes the presidential administrations since Jimmy Carter and how the markets have responded.  To see his data, click HERE.  His study leaves us wondering.  It’s inconclusive.  Markets have done well and have done poorly under Democrat presidents as well as Republicans.

So where do we go now?  Easy.  Let’s take a look at which party controlled Congress during particular periods of strong markets.  For this exercise we can use the data of Landon Swan from 1945-2009.  To see his information, click HERE.  As Swan shows us, in those years the average stock-market gain under a Democrat-controlled Congress was 9.8%. Under Republican control it was 30.1%.  Other statistics are interesting as well.

Gain under Democrat president and Democrat Congress:  13.2%
Gain under Democrat president with Republican Congress:  32.6%

Gain under Republican president and Democrat Congress:  6.6%
Gain under Republican president with Republican Congress:  25.3%

Seeing these numbers, some may argue that they prove the fact that Republicans are business “fat cats” who line the pockets of their wealthy donors.  That’s a stereotype–one that the Democrat party carefully manages to its benefit.  The real fact is that there are wealthy patrons on both sides of the aisle who benefit from the work of those to whom they grant their patronage.  The people they support in Congress, with their insider knowledge, are becoming very wealthy.

As my readers know, I’m a constitutionalist.  That doesn’t mean I believe that government is evil.  Far from it.  I believe government can be a positive good within the constraints of its social charter.  If government truly is “of the people,” then the people must establish boundaries for the operations of that government.

Governments are established because people must be protected.  Not just certain groups of people, but all the people.  Certain evils must be prevented, or punished when perpetrated. These include fraud, abuse, misrepresentation, and arbitrary abrogation of binding contracts.  Government has a vital role to play in these affairs and its involvement should be as impartial and broad as possible so that it neither gives advantage to one group nor destroys the moral incentive of another. That is what is missing among today’s powerful political elites who use taxes to punish, benefits to reward particular constituencies, and federal investment to gain political support from unions.

What do the statistics tell us about Democrats, Republicans, and the markets?  They tell us that markets are more comfortable under Republican control of Congress than Democrat. But those same markets are most comfortable when Republicans have Congress and a Democrat sits in the White House.

Why is this so?  Again, the answer is simple:  control.  When politicians spend most of their time arguing between parties, they have less time to think of ways to rob the successful citizens who make the nation run.  When those citizens make economic choices about spending money, hiring workers, adding inventory, taking financial risks or expanding a business, they are exercising freedom.

Free markets are nothing more than free people making such economic choices.  Let’s let them do it.  We’ll all be better off for it.