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.

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)

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.

Elections Have Consequences

Two weeks and a day.  That’s how long it has been since America made its presidential choice for the next four years.  The prediction of Michelle Obama will continue to unfold as the country’s Democrat leadership works to “change our traditions, our history,” and as we “move into a different place as a nation.”

While I was wrong about how the voting would turn out on November 6th, there were some things I got right.  I wondered aloud back in February if “Anybody But Obama” was enough to defeat the sitting president.  The GOP tried to be excited about this contest, but I’m not convinced that most Republican voters were that enthused about Mitt Romney. Their energy was aimed at removing Obama from the White House rather than putting Romney into it.  That wasn’t enough.

If you compare the electoral maps of the 2008 and 2012 presidential elections, you’ll see that very little has changed in terms of how the state electoral votes will actually be cast on December 17th.  Romney garnered a few more electoral numbers than McCain (206 to 173), but the overall pool of nationwide voters was down.  Approximately five and a half million fewer voters turned out for this election than in 2008.

One of the biggest mistakes that Romney made in his campaign was to present the economic issue as “us vs. them.”  As I have often pointed out here, the tide of those who receive government benefits is growing rapidly while the number of taxpayers is shrinking. That isn’t the combination for a successful economy; it’s bad news for the future.  But it’s understandable that people vote to keep their benefits coming.  Mitt Romney was right to point this out, but he did a poor job of explaining why it’s such a dangerous situation to be in.

It’s not “us vs. them.”  Nor is it really “the makers vs. the takers” or anything else like that.  It’s about us–all of us.  By describing the free market in a way that divides us (as Democrats often do) we misrepresent its communal nature and we allow ourselves to be duped by the rhetoric of the left.  Simply put, Republicans must make the case for why our current spending is a path of destruction–not for the rich but for the poor and the middle class.  Romney was painted as the wealthy guy who resents the poor and the working classes.  I don’t for a moment think that hey believes that, but the Democrats did a good job of making it appear that he does.

How high will spending go?  Will it get to $20 trillion?  Perhaps $24 trillion?  Economic bubbles eventually burst.  That includes monetary bubbles.  Maybe we’ll be fortunate enough to avoid a complete meltdown.  But must we take the chance?  Can we awaken from this dreamworld of never-ending spending that our political leaders have led us into? The one good thing about Obama’s re-election is that if the double-dip recession does become a reality, there won’t be a Republican in the White House for the Democrats to blame, though they’ll undoubtedly try to blame the Republican-controlled House of Representatives.  (Given the timid nature of Speaker John Boehner and his merry band of big-spending Republicans, that will be especially ironic.)

By the way, that predicted double dip is now a reality in Europe.  We can expect it to move our way in the near future.  As it does, the economic darlings of the left will continue to push for more spending and higher taxes.  This includes the intractable Paul Krugman.  In a recent column he sang the praises of 91% federal taxation.  That’s right.  He seems to like the idea that a wasteful, bloated, overspending federal government should be allowed to return to the days of taking nearly all the money of the very wealthy.  He wants them to pay their fair share.  We hear that often these days, don’t we?  How much is fair?  If they take 100%, will that finally be fair?

As author Dustin Siggins points out, the top 1% of earners make fifty times the amount of money made by the bottom 20% of earners.  But they pay 1500 times the taxes!  It’s not enough to talk about what’s fair–we have to talk about what’s just, what makes sense, and what is hurting everyone.

In the midst of all this, it appears that the GOP has lost its soul.  New Jersey Governor Chris Christie got to take a ride on Marine One (the president’s helicopter) and to speak to Barack Obama and Bruce Springsteen while they rode on Air Force One.  Who knows?  Maybe he even voted for Obama.  Now he has made his debut on Saturday Night Live.  His constituents probably enjoyed seeing their governor on TV.  Well, those who have electricity anyway.  These are unfortunate signs of the time.

Don’t look for genuine leadership from most of the GOP.  Instead, you should expect them to stomp their feet and to talk a good game.  All the while they’ll do only what they have to do in order to appear to oppose Obama.  Our nation’s capital is a stage on which the players perform.  Perception is everything.

Even I was surprised on November 6th, but now I’m listening more attentively.  As Republican leaders argue about turning further left and becoming even more like their Democrat counterparts, I wonder if we really have a two-party system anymore.  The Democrats kept the White House and the Senate.  The Republicans kept the House.  The electoral map has barely changed.  That speaks more to me of apathy than an energetic mandate.

Republicans, take note.  Becoming more like Democrats is the wrong lesson to take from this election.  Drinking their Kool-Aid is intoxicating, but it makes you lean left.  It doesn’t look good on you.  Give the voters an alternative vision, one that is inspired by the constitutional values and free-market inventiveness that made this country great.

This vision might be a hard thing to sell to voters who have been poorly educated in these truly American values, but acting more like liberal Democrats isn’t winning the GOP any friends.  In fact, it appears to be losing them the few that they already have.

Every Bill Eventually Comes Due

I’m occasionally accused of being too gloomy when it comes to America’s future.  That certainly isn’t my intention.  There is some melodrama to my personality, but those who know me well recognize that I’m an optimist at heart.  It was my optimism that blinded me to the strength of the Obama campaign and its victory over Mitt Romney.

Perhaps you’ve been out to a nice dinner lately.  Is it a doomsday prophecy to know that at the end of the meal a bill will be presented?  If you spend on your credit card, is it pessimism or gloom to realize that you must have a plan for paying that charge when the statement comes in the mail?  Of course not.  These are simple economic realities.

I spent years in Catholic seminaries.  From 1983-1986 I studied in Rome, Italy, and resided at the preparatory residence established there by the American bishops of the Catholic Church. It is known as the North American College.  At the time there was a terrible economic situation in Ethiopia.  Because of historic colonial ties, many Ethiopians were immigrating to Italy in search of a better way of life.  Some of my seminary brothers were engaged in ministries to assist them.

A few of those brothers who were particularly justice-minded proposed that some empty rooms in our residence be turned over to a few of the refugees.  They developed a plan for the accommodation of our proposed guests, including their dining and personal-care needs, how they would travel to and from work, and how they would interact with the seminary community.

Then the seminary rector called a mandatory meeting of the entire student body.  I’ll never forget his speech to us.  As we sat there with wide eyes and laudable goals, he began by thanking the community for its commitment to justice.  He recognized the planning committee for its work and he expressed support for their goals of helping the immigrants in need.

Then he asked a simple but demanding question, one that we must also ask.  For affect, he used the native language of the Italian people.  Firmly, but with a gentle tone, he looked at us from his rector’s podium and he asked:  Chi paga?

Whether you put it in Italian or English, it’s just two words:  Chi paga?  Who pays?

The wise among the student body got it.  In our zeal to reach out to those in need, we idealistic seminarians were putting all the burden on the institution.  We expected it to provide free rooms to the needy, and free board as well.  We were talking about spending money belonging to someone else rather than taking on responsibility ourselves.

Another example comes to mind from my childhood.  My brother had friends who liked to work on motors:  cars, lawnmowers, or whatever.  He was always lending my father’s tools to his friends.  That wasn’t a problem except for one thing.  He usually never secured the return of the items that had been lent!  On many a day off, Dad went to the tool box to find that a needed item for a household chore was missing.  “Where is my crescent wrench?” he would ask.  My brother would sheepishly admit that he had lent it to a friend some time back and that it had never been returned.

How easy it is to be careless with the things that we don’t pay for.  How quick we are to demand that the money and efforts of others be spent as we see fit, or worse, that they be spent on us.

This is exactly where we Americans find ourselves at this moment in our national history. Slightly more than half the voters on Tuesday chose to ignore the fiscal insanity of our federal leadership–including more than $16 Trillion of growing debt and the failure to even pass a budget.  Our credit rating has suffered and been cut repeatedly (even as recently as September), yet the debt continues to sore and most of the media give President Obama a pass on the matter.  It is widely expected that in Obama’s second term the debt will reach at least $20 Trillion, and White House data appears to support that expectation.

Half the country has set the course for the other half.  It won’t be a pleasant journey.

Two things seem self-evident.

1.  The trillions of tax dollars spent by Obama and his fellow Democrats were an investment in his re-election.  Millions of Americans voted on Tuesday to keep the benefits coming.  Though I find their thinking to be short-sighted and economically dangerous, I understand why they did it.  49% of us pay no federal income tax.  47% of us live in a household where someone is receiving a government benefit.  The presidential election should have been about long-term economic recovery and the salvaging of American prestige on the international scene.  Instead, it was a vote to keep the presents coming from the Democrats.  The major problem with this particular holiday story is that instead of elves who make toys, Obama Claus pays for his gifts on the backs of the people and businesses that could rescue our economy if given a chance.  They won’t get that chance for four more years.  I see no reason that Obama won’t continue to retard economic expansion with his political extortion.  He will do this by securing the cooperation of the Democrats of the Senate and by making the Republican-controlled House of Representatives look selfish.

2.  Despite the talk of pending disaster when we go over a “fiscal cliff” on January 1st (if the “Bush tax cuts” expire), the fact is that we went over the cliff three days ago.  Ron Paul agrees.  Remember the old saying:  it’s not the fall that kills you–it’s the sudden stop.  We have been racing toward the cliff’s edge for years.  It began under George W. Bush and it has accelerated to frightening proportions in Obama’s first term.  Voting to continue  that dangerous momentum this week, a slim majority of Americans tipped the balance as we sat on the precipice.  We went over the edge and we’re now engaged in a rapid descent.  When we hit rock bottom you won’t have to ask if this is the time or not.  You’ll know.

One way or the other, the bill must always be paid.  Just because government is large, convoluted, and serpentine doesn’t mean that it’s exempt from the laws of economics.  Money today is nothing more than an idea propped upon a hope.  It is created daily by the Federal Reserve and the banks of the nation.  It has more to do with electronic data than with anything of concrete value.

America is broke.  Like people who are broke, that doesn’t mean we can’t get our hands on money.  We can always fool someone into giving us credit.  At this point Americans are just fooling themselves.  Even the wisest spendthrift eventually gets caught.  His credit is cut off and his debt must be addressed.

We don’t have to slam the poor.  We don’t have to abandon a strong military.  We simply have to get serious about fiscal responsibility.  In Washington, they don’t want to do that because it will anger somebody and cost them votes.  This move has been in the political play book a long time.  A slim majority of us fell for it again on Tuesday.

When the bill comes due and the credit card is cut in half, Americans will be forced into fiscal maturity.  It will hurt a great deal more at that time then it would have hurt now.

Even the strongest of pack animals cannot bear all the weight of the world.  Our economy cannot sustain the increased strain being placed upon it by redistribution schemes and taxes.  The pony’s back will eventually break.  It’s no wonder that so many have suggested such a goal from the beginning of the Obama administration.  This idea has a name.  It’s called the Cloward-Piven Strategy and it was first proposed in the 1960s by two ultra-liberal academics.  The idea is to overwhelm the welfare system until it collapses.  Afterward, a system of guaranteed income will be set in its place.  In other words, the socialism that failed in the USSR and Eastern Europe.

While addressing his campaign staff on Wednesday, Obama wept.  They may be tears of joy as well as disbelief.  Who could have imagined that any single president could do so much damage and still be re-elected to a second term?

Obama’s dream of the “fundamental transformation of America” is only half finished.  Even he is probably shocked that he gets four more years to bring it to completion.

Two Reasons to Vote for Barack Obama

Someone recently accused me of having a hidden agenda.  Nope.  You’ve got me confused with someone else.  I’m an extrovert.  I have to say what I really think or I’ll explode.  That’s the predominant reason I started this blog.  The other reason was that if I ever decided to run for public office, my agenda would be out there for everyone to see and understand.  Disagree with me if you wish, but at least give me credit for being honest.  I’d rather die in obscurity than as someone who has no integrity.

My agenda and my values are on the table for all to see.  I’m a constitutional conservative.  When it comes to government, what I want to conserve is not any particular political party.  What I want to conserve–what I want to be faithful to–is the Constitution.  Not only that:  I want to interpret that Constitution as our Founders did.  In other words, I understand its purpose to be to limit the power of the federal government in order to guarantee the liberties of we the people.

Ours is not a nation-state.  It is a nation of states.  And this idea is not out of date.  It’s more important than ever.  The presidency of Barack Obama proves it.

I say all of this as a preamble to the rest of this post.  Now that the final presidential debate is done, I’m trying to understand exactly why someone would vote for another term for Mr. Obama.  I can only think of two reasons, but of course, I’m not objective.  I see and understand all politicians not as they present themselves, but as they compare to what I understand to be the vision of the Constitution.  I’m not afraid to be critical of any of them, no matter what their party.

As I search my poor brain I have to confess that I can find only two reasons why someone would vote for Obama.  Others that have crossed my mind seem either to be hyperbolic or related to these two.

If you’re an Obama supporter, I heartily welcome your criticism and your comments.  Please feel free to offer them by replying to this blog post (below).  Perhaps I’m blind.  Maybe I’m too limited in my understanding.  I may never agree with you, but I will at least try to consider your criticism.  And let me be clear, please:  it is my assumption, unless I have evidence to the contrary, that all of my debate partners are sincere.  I don’t know how anyone can approach political dialogue unless we grant such an assumption.

If you’re voting for Barack Obama, I assume you believe him to be the best candidate.  It also seems to me that you must agree with one or both of the following positions.

1.  Perhaps you are voting for Obama because you believe that the United States is more of a problem for the world than a solution.  Note the way I have phrased that.  No country is perfect.  Every patriot should be a critical patriot.  In other words, we simply must be honest enough to search out and to identify the mistakes our country has made in the arenas of politics, military, and society.  There are things about the US that I find objectionable, and my issues run the gamut.  The question at hand, however, is whether we have brought more to the world that is positive than negative.  I believe we have.  From our Constitution, to our pluralistic religious society that respects people of all faiths and none, to the fact that Europe might not be free today if not for our efforts–I believe that, in spite of our moral failings, we have done more for the world that is good than bad.

If you disagree, then perhaps you are happy that Mr. Obama has dropped us down a rung or two with regard to our defense and our international standing.  Perhaps you want to be more like Europe.  If so, I remind you that Europe has had more money to spend on socialist-type programs because we’ve had them underneath our nuclear umbrella.  As Mr. Obama scales back that umbrella of protection, Europe will either be more vulnerable or they’ll be forced to spend more on defense.  Even worse, more nations in Europe may feel the necessity of obtaining nuclear warheads.  Object if you wish, but  you should at least realize that there are consequences to the fact that America is taking a back seat or playing “second fiddle” on the world stage.  There are others who are happy to assume the position we seem to be vacating.

2.  Or, if international issues aren’t your interest, perhaps you’ll vote for Mr. Obama because you believe that the way to make our nation stronger and more fair is to take money from some for the purpose of giving it to others.  I’m not talking about reasonable federal taxation.  I’m talking about the forced redistribution of wealth.  Remember Joe “the plumber” and his encounter with candidate Obama in 2008?  Obama said that when we spread the wealth around “it’s good for everybody.”

Redistribution of wealth is a good thing–but not the way government does it.  The really important question is how wealth is distributed.  I strongly opposed the practice of politicians picking and choosing the distribution of wealth.  It should be distributed through the free exercise of economic liberty.  In other words, by the free market in which you and I get to decide how it’s distributed, or spent.

Joe the plumber wanted to buy a company that made just over $250,000 per year.  Sounds like alot, huh?  What you need to understand is that the dollar amount mentioned by Joe was the company’s income, not his profit.  What do you think would happen to most (or all) of that money?  It would not go to Joe.  It would go to his employees, his suppliers, his insurer, and multiple other providers and services he desperately needs in order to make his company viable.

Let’s imagine that, to bring in an income of $250,000 a year ($20,833) a month, Joe needs five plumbers on his staff (a typical small company).  Let’s also imagine that he wants really good plumbers because he hopes to build a company that is solid and made for the long haul.  He hires the best workers because he doesn’t want people to be disappointed in his employees and the work they perform.  He pays them $20 an hour.  In a forty-hour week that’s $800 per week, per employee.  So his salary costs are now $4,000 per week–$280,000 per year.  Plus, if he wants to take good care of his employees and to give them reasonable health insurance, his costs are even higher.  Let’s say he finds a bargain and pools his employees into an insurance fund for just $400 a month each (a remarkable bargain if he can actually find it).  With five employees, now he will spend another $24,000 a year.

As a business owner myself, I can tell you that the proposed numbers above are very reasonable (in fact, they are probably low–but that will help me make my argument even better).  If Joe bought a business that takes in $250,000 a year and has only five employees besides himself, and if he wants to pay them reasonably and give them reasonable benefits, look at the facts:  the company will spend more on salary and benefits than it takes in.  The math I’ve proposed, which is reasonable, gives Joe a salary and benefit cost of $304,000.  That means he’s losing $54,000 a year before he even starts … and before he pays himself any salary at all.  He would do this in the hope of building something that would give him an income later, and for the long term.  He would be taking a tremendous risk.  He’d be building a business.  He would be helping not only himself, but others as well.

See my point?  We can argue all sorts of numbers, but if businesses don’t find it possible to succeed, why bother?  Every dollar that government takes from someone else costs something beyond the actual dollar amount in question.  It’s nuts to imagine that the only way to assist the poor is by taking from Joe and his employees in order to give to someone else. 

So, if you’re voting for Barack Obama, which of these reasons is most attractive?  Which inspires you?  Are there others?  I’m all ears, as they say.

For the sake of argument I’ll recap here a few of the reasons I’ve been hearing that just don’t seem to make much sense to me.  When I say “they don’t make sense,” it’s not because they are bad aspirations.  It’s because Barack Obama has had four years to show us what drives him and his agenda, and the reasons below aren’t being addressed in a way that should cause voter confidence.

1.  Some say they are going to vote for Obama because he’s helping Americans of African descent.  I suppose if this is your reason for voting Democrat, you might have a point if by “helping” you mean giving African Americans a sense of pride because the president shares their ethnic heritage.  If you mean economic help, then you need to vote for Mitt Romney.  At least he has a record of creating jobs as an experienced businessman.  As for Obama’s employment record for blacks in America, unemployment is over 14%.  Clearly, Obama’s policies aren’t creating jobs for the black community.  You can chant the silly mantra that the fault lies with the previous administration, but four years is enough time to begin to make a difference.  There is no light at the end of the tunnel when it comes to unemployment for African Americans, at least not yet.  Changes in policy can make a difference under a new administration that wants to inspire growth rather than tax it at a higher rate.

2.  Perhaps you plan to vote for Obama because of his stance toward immigration and the way he seems to support the Latino community in America.  Think again.  Obama has put the breaks on sending some people back to Mexico who are here illegally, but he hasn’t done anything of substance to advance the nation toward responsible, comprehensive immigration reform.  All he has done is to enact a few executive orders to win Latino votes.  If you or a loved one has been affected by such an order, you may wish to reward Obama with your vote.  But don’t accuse Americans of being anti-immigrant.  We’re not.  We are a nation of immigrants … but we’re also a nation of laws.  We will support generous immigration levels, but we want immigration programs to be operated fairly and within the bounds of the law.

Obama has reached out to the Mexican government, so perhaps you’re impressed by that.  But he has been duped by Felipe Calderon, the Mexican president who came to the US to lecture us about our immigration policy.  Our policy is more humane than his own.  Fixing the immigration problem on our southern border will require putting pressure on the corrupt Mexican government for reform.  Rather than doing that, the inempt Obama allowed Calderon to put America’s problems in the spotlight rather than the problem of extreme Mexican corruption.  Our immigration problem on the southern border starts in Mexico.  That’s also where the cure will start if any of our politicians get serious about it.

In terms of Hispanic support of Obama, the real concern should be about how many Mexicans have been murdered by drug lords armed by the failed Obama Justice Department policy known as “Fast and Furious.”  Thousands of weapons were unloaded on the unsuspecting people of Mexico at the expense of the US taxpayer.  If I were of Hispanic or Latino heritage, I’d be among those who are angry as heck.   I certainly would not give my vote to a president whose justice officials have used innocent Mexicans as political pawns to advance an ideology.

And as far as unemployment is concerned, among Latinos living in the US, the unemployment rate is still over 10%.  There’s another proof that the Obama administration isn’t doing much to help that segment of our population.

3.  Lots of folks say that they want to support Obama because he’s helping the poor.  I’m not sure how, other than the increase in government handouts.  There is a place for safety nets in our society, but Obama isn’t solving the problem that’s sapping our economic strength.  His policies are making the middle class poor and sending the poor into destitution.  As I pointed out in a post last week, grocery costs are rapidly increasing.  Simple things like coffee, peanut butter, and potatoes are rising quicker than the average inflation rate.  It is becoming more and more difficult to feed our familes, and for now there is no end in sight.  The government is creating more money–meaning that the money in circulation is worth less.  The laws of economics will force the value of the dollars in circulation to go down even further.  In our society that means the poor are going to be hurt even worse by the long-term effects of Obama’s policies.  Even Romney will find it hard to turn this trend around, but for heaven’s sake, why support a president who has demonstrated that handouts are the only way he knows to help the poor?

Obama knows how to “feed a person for a day,” but he has no clue how to “feed a person for a lifetime.”  As his bureaucrats increase the temporary government help to record numbers of Americans, our debt is rising too quickly to be counted easily.  The debt clock isn’t just ticking.  It’s spinning.  As government aid is increased and abused through fraud we can ignore the debt, but it won’t ignore us for much longer.  At some point our debt will be so high that our credit rating will be dropped again.  US credit is now three notches below the high rating it once held (it was downgraded again by a major credit agency last month).  You didn’t hear much about it in the pro-Obama press, did you?

Just like a person’s credit card that reaches its limit, the world will eventually refuse our dollars because they are going to be worthless.  At that point the poor will be hit harder than anyone else.  The potential for disaster is alarming.  To understand this you only have to look at the elderly eating from garbage cans in the hard-hit, debt-ridden nations of the European Union.  Do we really think that it can’t happen here?

In terms of true improvement to their lives, Obama has done nothing for those who are poor except to increase the depth of their poverty and to make it harder for the economy to lift the poor out of misery.  Granted, he has met some of their immediate needs, but he has done nothing to establish a long-term solution.  In fact, for the long haul, he and the Democrats in Congress have so damaged our economy that recovery may take a decade.

4.  Some people say they’ll vote for Obama because the Democrats truly care for the middle class.  He speaks a good game, but the same factors putting the poor into absolute destitution are chipping away at middle-class economic stability.  There is no economic recovery because the Obama regime is pro-tax, not pro-recovery.  Business owners don’t trust that the government has their backs.  They trust only that any corporation or business owner might be next for criticism and increased taxation.  Investment seldom occurs in an environment of uncertainty.  Obama and his minions have done nothing to sponsor an attitude of trust among the businesses that make our economy hum. 

I can go on all day, especially in light of the false manner in which Obama presented himself last night.  I’m no longer angry … instead, I find myself laughing outloud at the television when Obama begins his laundry list of ways he has strengthened America and its international image.  But mine is nervous laughter.  There is nothing funny about what’s happening to our country.

Vote for Obama if you want America weaker, less influential, and supposedly “put in her place.”  Vote for Obama if you think America’s immigration policies are better than those of Mexico.  Return him to the Oval Office if you believe we can spend on the government credit card without disastrous consequences.

For many, Obama is their man because “he’ll make sure I get mine.”  When it comes to the very real possibility of economic collapse in the US, there is no “mine” and there is no “yours.”  There is only ours and we don’t have forever to begin making the necessary corrections to save what belongs to us all.

A Shanty Town Called “Obamaville”

Symbol of hard times: Nickelsville, a tent city located in Seattle WA

“Shanty” is a word that has fallen into disuse these days.  You seldom hear it in the US.  According to Etymonline (a delightful etymological dictionary), it’s derived from the Canadian French word chantier, referring to a rough wooden cabin used by lumberjacks.  During the economic upheaval of the Great Depression, the shanty came to represent the plight of the average American who had lost home, work, and all but the most basic of sustenance.  Using whatever they could find, homeless families built their shanties while waiting for the economic turnaround that would make it possible to enjoy a comfortable lifestyle.

During the depression years of the 1930s, shanty towns peppered the American landscape.  They were often known as Hoovervilles, a derisive way of referring to the man who sat in the Oval Office at the start of the depression:  Herbert Hoover.  Even the powerless in our society have their way of getting a small bit of revenge.  In this case, who can blame them?

What you may not know is that makeshift homeless communities are back.  Only this time they’re not composed of wood and metal shanties, but inexpensive camping materials.  Tent cities have emerged across the nation, inhabited by homeless families and even their pets as they endure the same economic waiting game faced by earlier Americans seventy-five years ago.  For two stories about this sad reality (one from the east coast and the other from the west), click HERE and HERE.  These stories stand as bookends of shame, marking just how low our financial and economic strength has deteriorated.

As a child, I read of the plight of depression-era Americans.  I heard the stories my father told of those difficult times.  A nickel or a fresh egg was something to be cherished.  To this day, Dad doesn’t feel he’s had a meal unless it includes at least a little bit of meat.  That sense of loss goes all the way back to his experience of the Great Depression.  It marked him forever, and I suspect in part that it turned him into the successful and compassionate businessman that he became.  Hearing those stories as a child, I never dreamed I would live in an America where it’s happening again on a large scale.

Is it any wonder so many of our nation’s citizens are turning to government for help?  Franklin Roosevelt promised help rather than pushing free-market reforms that could have ended the depression.  Barack Obama does likewise.

Our choice is not between the average American worker or the rich tycoon.  That’s a false choice that has been proposed to us by the politicians who get rich on the arguments that divide us.  Our true choice, the one we must make and that we must use to help us choose elected leaders, is between more government interference in the market or a genuinely free market where people decide for themselves how to use their economic power.

Government is a bed where two lovers sleep.  Their names are Power and Money.  They can always be found together.  This has always been true and it will always remain the truth.  Power needs Money to get into office and to remain in office.  Money needs Power in order to gain an unfair advantage.  There are only two ways to prevent their relationship from damaging the economy as a whole.  First, we must elect truthful representatives of the greatest integrity who tell us what we need to hear, not what we long to hear.  Second, we the people must take back the power that has been amassed at the top by self-serving politicians who feather their nests while throwing crumbs to the rest of us.  The federal government must be cut in size, scope, power, and spending.

Power belongs to the people only when it’s diffused.  And there is no greater way to exercise your personal power than to make your own choices about where you’ll live, where you will work, and how you’ll spend your earnings.  There will always be those among us who will sacrifice leisure time to work harder.  There will always be those who prefer to relax more, drink more wine, spend more days at the beach.  I say that with no moral judgment because I recognize both to be good options.  But the choice belongs to those who make it.  The choice for others is not mine to make, nor does it belong to the government.

In this world there are no perfect economic systems; the closest thing we have is the free market.  A truly free market is nothing more than personal liberty exercised in an economic way.  (Do yourself a great favor and read Liberalism by Ludwig von Mises.  It will change you forever.)  What made America the economic power house that it used to be?  Invention, new ideas, creativity, ingenuity. Where do we find these unleashed in such a way as to build strong nations?  Only in the free world.  Countries with centralized, socialized planning are weaker for it.

Our jealousy that someone else might have a bit more than we have has turned us into slaves who are willing to give our government masters more control.  They wield that control gladly, evidently convinced of their moral superiority, and they are well paid for it with salaries, perks, pensions, healthcare services, and speaker’s fees.  Occasionally, a liberty-minded candidate invites us to emerge from that slavery, to walk in the golden sunshine of economic and personal freedom, but the bright beams of liberty frighten us back into our shanties.  “No,” we cry, “it is better to take the certain crumbs of our government overlords than to face the uncertainties of our own decision making.”

We no longer have Hooverville shanty towns in America.  Today we have Obamaville tent cities.  A review of the economic times might demonstrate the accuracy of my point.  Barack Obama, a believer in centralized planning and former member of the socialist New Party, was elected in November 2008.  Where have his leadership and his policies brought us in four years?

Well, let’s start with the prices you’re paying at your grocery store.  In 2011 alone they increased dramatically.  According to the Bureau of Labor Statistics, coffee went up 31% in price.  If you paid $3.00 for your pack of coffee, it went up to $3.62.  Here are some other increases for 2011:  peanut butter 22% increase, margarine 18%, flour 16%, potatoes 14%, orange juice 12% and bread and pasta 10%.

When it comes to the average price of a gallon of gasonline, the increase is more than 100%.  That affects not only your ability to get to work, but the cost of public transportation for those who use it, and the cost of every single item that is moved by gas-powered vehicles or farmed with gas-powered vehicles.  In response, President Obama has doubled down on the very policies that are causing gasoline prices to increase.  He is waging a war on the producers of our energy and that energy is costing more at every step of the production and delivery of the items we need every day.

At the Democrat National Convention this summer, Obama said that America is not in decline.  Oh, if only that were true.  To be fair, the decline began before he took office.  But the big-government, massive-bailout, vote-buying policies that started this mess have only increased under Obama.  We’re standing in an economic sinkhole.  Our government goes deeper while telling us that we’ll somehow see light of day if we just keep digging.  A disastrous third round of “quantitative easing” recently began (QE3).  An already deflated dollar will sink further.  Nations will increasingly avoid the dollar, even as they are already doing.

Are we really that stupid?  Or are we just blind and fearful?  The blinders must come off.  And when Mitt Romney takes the oath of office we must keep them off.

America isn’t a shanty town after all.  It’s a tent city.  Either way, it’s the middle class and the poor who are moving into those tents among the ruins of their former lives.  The buck stops there, Mr. President.

Welcome to Obamaville, everyone.

Joe, When You’re Smilin’ — Does the Whole World Smile With You?

I have never been fond of the practice of deciding the winner or loser of a political debate.  Even after last week’s Obama Meltdown, I didn’t declare Romney the winner.  The reason for this has to do with the complicated nature of the debate itself.  Viewers can never be entirely sure about the agenda and goals of the debaters, thus they can’t know if the debaters really achieved their goals.

There were some commentators last week who proposed that Barack Obama intentionally performed as he did in the first presidential debate in order to garner sympathy from voters.  I don’t put any stock in that theory–it’s just pro-Obama cover.  But the idea itself demonstrates the nature of the beast.

It’s apparent to me that VP Joe Biden had his marching orders, and that he was a faithful soldier in the effort to return Barack Obama to the White House for four more years.  As I predicted yesterday, he came out swinging.  And he kept on swinging even when it wasn’t his turn.  He sighed.  He exhaled in an audible way.  He murmurmed and complained.  He shook his head.  He played up the drama and interrupted without end.  He sneered.  He laughed.  He was overbearing and condescending.  And all the while there was that obnoxious smile, apparently borrowed from the Cheshire Cat of Wonderland.

Some are saying that Biden did the same thing to Ryan that Romney did to Obama.  No way.  There is a qualitative difference in the mannerisms of the two.  Romney was in control.  He was dignified.  Biden was just … can I say it?  He was just creepy.

I’ll give one thing to Smokin’ Joe Biden.  He has a stage presence and a sure-footed dance step that could baffle anyone.  At times he seemed to be getting the upper hand on Ryan, who doesn’t have the experience Biden has in front of national crowds.  But then the buffoon emerged; the clown returned.  As Biden performed his antics I had the same puzzled feeling I get anytime a van of clowns drives into a circus tent:  the real show is paused while the big cat prepares for the next segment.

All in all, Joe was making up for the failures of his boss from last week.  He didn’t do it very well.

For me, one of the most powerful moments of the evening came as Ryan reminded the audience of the hometown roots of each of them.  Ryan is from Janesville, Wisconsin.  Biden hails from Scranton, Pennsylvania.  “You know what the unemployment rate in Scranton is today?” Ryan asked.  “I sure do,” stated Biden, seeming oblivious to the importance of the question.  “It’s 10%.  You know what it was the day you guys came in?  8.5%.  That’s how it’s going all around America.”

The official jobs numbers from DC say things are getting better, but working America knows the truth.  The only way you can fudge the employment numbers to show improvement these days is by not counting those who have stopped looking for work.  Joe’s hometown is an example of what the Obama-Biden administration has done–and continues to do–to American prosperity.

The political pundits will be bombarding us with analysis all day.  I won’t recap all the great moments of the debate.  I will, however, remark about the final segments, those dealing with the question of character and and giving the candidates a closing remark.  I believe the comments at this point of the debate tell us who these men are at their very core.  They should also remind us how important our vote is next month.

When pushed to define his character, Paul Ryan spoke of honesty.  Joe Biden spoke of his record.  There was a time when Obama and Biden spoke of honesty, but they have failed to live it.  And there is little in the Obama-Biden record that has been of use to the nation.

In his closing remarks, Biden once again blamed the previous administration.  We inherited “God-awful circumstances,” he said.  Supposedly he and Obama want four more years to fix those problematic circumstances.  The problem is that no matter how bad things get, the road to recovery by now should be showing some signs of betterment if we’re doing the right things.  But we’re not.  We’re living on a credit card whose credit limit may eventually bring even more suffering than we’ve seen yet.  And that part doesn’t change just because the occupant of the White House changes.

In his final remarks, Ryan said that he and Mitt Romney “won’t duck responsibility or blame others.”  I, for one, want to give Romney and Ryan the opportunity to prove it.

Did Ryan take a thumping from Biden?  I suppose so, at least in the early segments of the debate.  It was the same kind of thumping a bully gives to the bright kid in class who doesn’t know yet how to handle himself on the playground.  But it became clear last night that the bright kid learns quickly.

Who won?  I like to think the winners were the American people, waking up from the nightmare of a failed presidency.

The Ghoulish World of Government-Controlled Healthcare

A dear friend wondered aloud on his Facebook page recently why so many of us are upset by the Supreme Court’s 5-4 ruling on the constitutionality of most of the Affordable Care Act (Obamacare), including the individual mandate.  I don’t have the heart to respond.  I suppose our political worlds are just too far apart. 

Political disagreement doesn’t bother me in any philosophic or personal sense.  It is in the nature of our existence as humans that we’re going to disagree about what makes life good, and about morality in general, and about the forms of government to which we ascent.  I truly do understand that. 

On the other hand, we citizens of the United States have a form of federal government that is already in place.  We can argue and debate many things, but one thing seems clear to me and it seems so clear as to be beyond debate:  the only way the Founders were able to get sovereign states to sign on to the compact known as the US Constitution was by guaranteeing that their sovereignty and the rights of their particular people would be respected.  So, while I’m not upset that people disagree about government and its purposes, I’m terribly distraught and at this point quite frightened and somewhat disillusioned that so many fail to understand the context, purpose, and intent of the Constitution.  But even worse:  I’m startled and disturbed by the manner in which the Constitution is ignored or misrepresented by most of those in the federal halls of power–now including the Supreme Court.  They appear to think that the mere passage of time has invalidated the limits placed upon the federal government.

As is well known at this point, it was the vote of Chief Justice John Roberts that brought victory for the individual mandate since the court was otherwise split on the matter.  It now appears that in the Court’s deliberations, Roberts originally found the mandate to be unconstitutional.  He agreed on this matter with Alito, Kennedy, Thomas, and Scalia.  But when they insisted that the unconstitutional mandate required the striking of the entire law, Roberts switched sides and upheld it in order to preserve the law itself.  According to the online Insurance Journal, he did this because of “a traditional Supreme Court principle that if the justices can find any constitutional grounds on which to uphold a law, they should do so.”

On that slim argument the Chief Justice of the United States gave the upper hand to an overreaching Congress and President against the liberties of the nation’s citizens.

Finding a reason to preserve a challenged law that has come before it is, constitutionally speaking and without a shade of doubt, NOT the job of the Supreme Court.  The job of that court is to judge the constitutionality of the law before it.  Or, as the Supreme Court said in its decision, “whether the Constitution grants Congress the powers it now asserts.”  One wonders how it can genuinely fulfill this self-stated responsibility while simultaneously attempting to uphold the matter being judged.  Would this qualify as schizophrenic jurisprudence?

If you find my argument less than convincing, imagine how such a lack of objectivity would function in any other court in the land.  Imagine if a judge or jury, supposedly disinterested and unbiased in order to guarantee a fair trial, were to decide that their job is to find a way to put you in jail no matter what the facts are.  See my point?

Whatever happens next with regard to Obamacare, so-called progressives will not rest until the United States has a centralized single-payer system administered by the federal government.  That was the goal of the Affordable Care Act and it remains the purpose toward which its implementation is moving us.  Federal regulations on insurers, limitations on insurance contracts and provisions, and even changes to the military insurance program (TRICARE) are designed with this end in sight.

Here are a few things we can look forward to if Obamacare if not overturned and if we continue moving toward a single-payer system as we are doing now.  My predictions aren’t the product of gazing into a crystal ball, but come simply from studying the record of government involvement in other issues of our lives, and from looking at similar programs in other welfare nations.

First, the goal is that private insurance and private medical arrangments–even if paid for by one’s own personal funds–will be illegal, and will result in severe penalties.  Waiting times will increase dramatically and the wealthy among us will simply go to other countries for the medical procedures they need.  The United States will no longer be the country where the wealthy of other countries come for surgery unless they are able to take advantage of my second prediction.

What is my second prediction?  That’s easy:  our elected officials will have access to better and quicker healthcare than the constituents they supposedly represent.  You can count on that.  No matter what happens, they’ll see that they get the best for themselves and their loved ones.  That’s one of the perks to being among the political elite.

Third, the entire plan will cost far more than anyone has even begun to suggest.  The process to realizing this has already begun. 

Fourth, in an attempt to control costs, the federal government is going to insist on massive new intrusions into our personal lives.  By federal law, our health records are already being maintained electronically.  And progressives in some states and cities are already putting intrusive food-related measures into place.  We can expect all sorts of new regulations and limitations on any substances considered unhealthy:  alcohol, edible fats, salt, types of carbohydrates, sizes of food containers, and an eventual absolute ban on tobacco.

I can easily imagine that, under a nationalized healthcare system, we’ll be forced to undergo certain medical tests to ensure that we are complying with the law.  Simple blood tests will be the espionage system that gives the truth of our activities to the government (in other words, our bodies will be tattling on us to government representatives who will then take the necessary measures to punish us through taxation or worse).  I can already imagine the conversations between doctors and patients. 

Doctor:  “Mr. Smith, I thought you told me you quit smoking six months ago.  Your blood test says otherwise.”

Patient:  “Well, doc, I tried.  I stopped for a week or two but the habit was too strong.  I went back to smoking … but hey, I was able to cut back to only half a pack a day.”

Doctor:  “Nonetheless, you realize that the law requires me to report this fact to the national health agency.  Otherwise I’ll lose my medical license.”

Patient:  “No, wait … please, doc, I can’t afford another increase in my taxes … they’re getting outrageous.  Ever since my cholesterol went up and you told the feds about it my health-related government fees are eating me alive.  My family and I are looking to sell our house and get a smaller one just so we have more money to send the government for cover our lifestyle fees.”

(By the way, if the part about downsizing a home in order to have more money to give to government sounds ridiculous, then you need to take note of the rising number of retired elderly people who are selling their homes because they can’t afford the property taxes.)

For now the part about government “lifestyle fees” is just a horror story.  But before now who would have thought that the highest court in the land would say that it’s ok for the feds to force us to buy something under penalty of law?  Justice Roberts says it’s just a tax.  I feel better already.  After all, we have massive taxation on cigarettes.  Let’s tax the heck out of butter, whole milk, and cooking oils.  While we’re at it we can impose a targeted federal tax on all fried foods and all caffeinated beverages the same as we’re targeting a federal tax already on tanning salons.  All of this stuff is just not good for you. 

I guess there is no need to worry about this anytime soon.  When the economy collapses we’ll all be getting skinny one way or the other.  I note that the latest reports from Europe state that unemployment in EU nations is higher than it’s ever been before and the entire continent is racing toward recession.  There’s nothing to worry about, I’m sure–except that our federal government seems to be emulating EU economic, financial, and regulatory policies.  I’m sure economic collapse will never happen here.  After all, our Constitution and our Supreme Court will protect the liberties that would prevent such a thing in this country.

How many of us still believe that fairy tale?

Politicians Play While the Second Shoe Begins to Drop

Let me begin this blog post with a confession:  I’m not an economist.  I don’t play one on TV and I didn’t even stay in a Holiday Inn last night.  I do recognize, however, that the better grasp you have on human behavior the better understanding you’ll have for the economy–the real economy that is the lifeblood of our national success.  I also profess to be a student of economics.  I began learning from my father, a banker, as a small child and I spent some time in banking myself during a break from seminary training in the 1980s.

Something important I learned from my father is not only that people are social animals, we’re also a bit like cattle.  We move together unthinkingly at times, even though we’re headed as a group toward a difficult situation.  In my mind’s eye I can see a bunch of talking cattle moving together toward a cliff.  One or two begin to complain that there is danger ahead, but habit and intransigence hold the herd together.  The pressure of the majority, and the ridicule of others have the effect of convincing the prophets to hush and then the inevitable occurs.  The entire herd goes off the cliff.

It’s an effective metaphor for what I think is one of our greatest national problems:  an ineffective and out-of-touch elite class of “super citizens” that feeds on political inbreeding, is paralyzed against genuine change that would be good for our nation, produces little or no imaginative thinking other than regulating (telling us what we can’t do) and taxing (seizing what we have earned by our labors), being herded by its own lack of vision toward inevitable destruction and taking us all with them.  Its myopia and lack of creativity is supported by a childish cast of media personalities more interested in being stars and supporting “their guy or gal”  than doing the difficult work of honest investigative reporting.  Human history is littered with examples of failed nations:  Assyria, Babylonia, Persia, Greece, Rome, the Ottoman Empire.  Must we join them?  Even worse, as we go the way of the dinosaur, must we do it so gladly?

What began as classical liberalism was a great boon to humanity.  Inspired by the Enlightenment and humanity’s discovery of its own power and ability, it was intended to liberate us from the limited thinking that held us back as a species and mired us in poverty and tyranny.  Once established upon the foundation of equal opportunity and equal status before the law, liberalism today has become a sad caricature of what it once was.  Ridiculously it attempts to enforce equal outcomes, a fool’s quest if ever there was one.  It is bankrupting us, preventing creativity and effort, increasing government at the expense of the economic power of citizens, and encouraging irresponsible monetary policy.

Our politicians are having a great time in Washington.  As they play, the economic news gets worse and worse.  Remember Nero?  They say he fiddled as Rome burned.  There’s a whole lot of fiddling going on in Washington these days, and because most of the press is convinced that Democrats care more about the average American than Republicans, they give far too little attention to the dangerous cliff toward which we’re sadly progressing.  (By the way, more than one study has confirmed the left-leaning bias of the media, including a 1997 survey by the American Society of Newspaper Editors and a 2002 study by Dartmouth College.)  Warning bells are sounding and too few among the political and media class are making note of it.

A few days ago the president of the World Bank warned that Europe is heading into a financial “danger zone.”  British markets suffered their most disastrous drop in three years.  Job growth in the US was reported on Friday as stagnant, the official unemployment figure remains above 8% (it’s actually much higher), and more and more economists are talking about a new economic downturn of global proportions.  As I have been predicting for some time now, Round Two of economic deprivation is headed our way.  I now believe that this past week can accurately be described as the early phase of the “second shoe” of economic pain as it begins to drop.  The problem will worsen and we’ll hear cries from DC for more spending, and a third round of “quantitative easing” (so-called “QE3,” an expression that means the government will probably create more money and pump it into the economy).  These rounds of “easing” have the same effect as giving heroine to an addict.  The addict feels better for a while but the underlying problem remains and will eventually kill him unless he makes a major change in lifestyle.

Will the politicians in their playground agree to the major changes needed?  No, most of them won’t–at least not until the pain is unbearable.  (There are some voices calling for fiscal responsibility but they are few in DC.)  The economic darling of the Left, economist Paul Krugman has gone on record saying that a new round of economic failure will be caused by the fact that we didn’t spend enough when the original problem started!  He has become so influential with the present regime in Washington that I no longer refer to the dominant (failing) economic model as a Keynesian one (Keynes argued for government spending as a model for solving economic woes) but as Krugman-Keynesianism.  I hope it catches on.

Here’s why Krugman’s call for “more of the same” is so ridiculous.  First, it comes at a cost.  Yes, government spending can have a positive effect on the economy.  But it has a backside cost that is foisted upon the earners and producers who make that economy work.  When government spending is out of control its counter-effect is disastrous upon the economy.  Second, the Krugman-Keynesian model was predicted to fail by many economists who prefer models other than the big-spending model of Keynes (economists such as those from the Austrian School inspired by Ludwig von Mises).

So let’s make this choice as simple and obvious as possible.  We can avoid the cure and spend more even though it was predicted to fail and has now demonstrated its failure, or we can begin to get serious about debt and serious about encouraging people to start businesses, expand businesses, and hire personnel.  To do the latter of these two options we’ll have to demonstrate that well-paid government elites see the problem.  And let’s be honest.  That won’t happen as long as big-spending Democrats control the White House and the Senate.

I suspect we’re looking at a full sweep in DC come November.  If the Republicans have the White House and both chambers of Congress, they’ll have to begin some very unpopular measures quickly.  And even that may not be enough.  Once the economic shoe begins to drop, economic gravity does the rest.  And, unfortunately, there are plenty of big-spending politicians in the GOP.