Caveat Emptor

The FOMC: There they go again

2012-01-31T10:19:00.000-08:00

The other day Mitt Romney took a respite from blasting Newt Gingrich (although Newt did no such thing) and concentrated on Obama in a speech in the Villages. Romney actually said that he would work to repeal everything done by Obama. He attacked Obama for cutting military spending, trying to emulate Europe, for health care, Dodd-Frank and all the rest. He promised to rein in the EPA. What he left out was the Federal Reserve. In 2010 he supported the reappointment of Ben Bernanke to be Fed Chairman. In 2011 he had changed his mind. Lets hope that if he becomes president he remembers that and does not reappoint Bernanke - perhaps Bush's most disastrous appointment. Like the sainted Anna Jacobson Schwartz said (Friedman's coauthor of the Monetary History of the United States), Bernanke is not up to the task. The Fed's recent vote in the Open Market Committee to hold the fed funds rate near zero is instructive. Demonstrating that the Fed is stubborn and has not learned its lesson the vote was 9-1. I would have thought that by now there would be more dissent on the FOMC but apparently not. The fed needs to be shaken up but not blown up (sorry Ron Paul). Romney has stated in 2011 about whether he would now reappoint Bernanke and he said "No, I'd be looking for somebody new. I'm -- I think Ben Bernanke has -- has over-inflated the amount of currency that he's created." Amen to that. Since Bernanke seems intent to keep destroying the US currency by financing Obama's policies and the FOMC has yet to go a set and just say no, then it is time for Bernanke to go back to Princeton. Lastly. although Ron Paul wants to blow up the Fed and I have often written that he is mistaken because the management of the money supply is too important to be managed by either the president or certainly the congress. At least Romney recognizes this when he says that he would not agree with ending the Federal Reserve and he did not trust Congress with managing the responsibilities of the Fed. The fed structure is intended to isolate it from politics. The only thing wrong with this fed is who is leading it. Maybe next time the next president will give us a secretary of the Treasury not from Wall Street and a fed chairman who is not from the ivy league.

You like who?

2012-01-29T15:05:00.000-08:00

All those pleased with the survivors in the republican field raise their hands. Personally I think the scenario is akin to what happened last time: no matter who the republicans nominated would lose to whomever the democrats nominated. Because Bush was so vilified, it would have been hard to think otherwise. In this case, Obama has so screwed things up that it is difficult to see him re-elected regardless of who the republicans nominate (save Ron Paul). However, the process is bringing us a flawed candidate. Newt has global warming, ethanol, Fannie Mae, Nancy Pelosi, personal ethics and professional ethics to deal with. He has also only worked for the government - state run universities and the congress - or lived off his government past. He is scatter-brained yet awfully smart. The only thing he has going for him is that he is not Mitt Romney. As to Mitt, a venture capitalist is not a hands on manager of a firm and does not know the nuts and bolts of responding to consumer demand and meeting a payroll. He is obviously not comfortable with being a rich guy but should be selling himself as an embodiment of the American dream. He also has Romney-care hanging around his neck. His recently crafted answer is that it is a state specific program works for me. But he is not comfortable with admitting that much of the criticism of the program have merit and it is a budget buster for Massachusetts. He should say that it ended up being poorly crafted by the democrats who insisted on its final structure. Santorum could not win re-election to his senate seat and lost by 30 points. He whines that it was because of the assault of the pro-democratic press in his state. Well what does he think the national press is - bipartisan? If he thought the attacks in Pennsylvania were bad, he hasn't seen anything yet if he became the nominee. And Ron Paul? What do you like about him other than he named his son Rand? He claims to be a libertarian but is an isolationist in libertarian's clothing. I am an Adam Smith libertarian. Ron Paul is the antithesis of that - a mercantilist.

Declinare Sirenum Scopuli

2012-01-17T06:49:00.000-08:00

In Greek mythology, the sirens lived on an island, Sirenum Scopuli, and lured sailors to shipwreck on its rocks with their enchanting songs. Socialism is the Sirenum Scopuli of civilization. Its incredible to me that socialism remains so appealing to so many people. It has always failed miserably to increase the well-being of the people subjected to it no matter where it has been tried. It failed the Pilgrims and almost led them to starvation. It failed the Soviets who were unbelievably wasteful in energy and food production. It has never succeeded and will ultimately rend apart China. Yet it continues to hold favor mainly with those who are among the taking class and those who seek to impose their own personal beliefs upon others. Lets consider the two. The first is the taking class. These are the persons in the society who are dependent upon the largesse of others in the society. They are either non-productive through no fault of their own or non-productive through choice. Either way rather than depend upon their own resources, they depend upon family, friends or the state to provide for their welfare. Note that all members of the taking class do not necessarily favor socialism. However, it is likely that most do. The second group is what some call facetiously “the elites.” These are “elite” in their own minds. They have the attitude of superiority in that they feel they can make decisions for others better than the others can make decisions for themselves. They tend to have ivy league educations. Do you know any elites from Ohio State? They are the ultimate snobs. Their tastes in music are superior. Their tastes in food are superior. Their tastes in fashion, arts, culture, diet, health and most importantly economics are superior. They know what is best for others and seek to impose themselves upon the masses. Milton Friedman once said that the reason why the intellectual tends to the left is not the desire to discuss the merits of their arguments with others but rather to impose them upon others. These snobs cannot accept the simple fact is that people in the main regardless of background know what is best for themselves and act accordingly. Moreover those acts led to market demand which directs resources to be used in their most efficient manner resulting in greatest consumer satisfaction and the least waste of resources. The irony is that the imposition of the will of the few on the many results in just the opposite, less consumer satisfaction and more waste. The government is inherently inefficient because it does not operate under the profit motive. By taking resources from the productive and allocating them to the non-productive creates disincentives on both ends. And this is precisely why in the end socialism fails: it is wasteful and breeds sloth. Despite the obvious, in the final analysis it is not surprising why socialism is still appealing. The takers think they will be better off, event though they will end up being worse off as the economy gets less productive. The “elites” are our modern day sirens. They favor it regardless even though they know that the economy will shipwreck. They will have more individual resources in their control and most importantly to them, they will have more power.

No Bain No Pain

2012-01-16T14:09:00.000-08:00

Two of the remaining republican candidates have lashed out at Mitt Romney for his role in managing a hedge fund, Bain Capital. I find it somewhat interesting that these republicans have any prominence whatsoever given their glaring ignorance. If they are not ignorant but are trying to use their attacks to political advantage is even more disgraceful. Either they know nothing about hedge funds and venture capitalists or they think that republican voters know nothing about them either. I presume that Gingrich is attacking Bain because of his loathing for Mitt Romney and that Rick Perry joined in because he is trying to paint himself as a populist. I have a problem with Romney for another reason. He keeps painting himself as a businessman. However, his brand of businessman is different from Herman Cain's. Romney was not a businessman from the standpoint of manufacturing a product for consumers, being constrained by the forces of supply, demand and competition. He did not have to primarily concern himself with labor contracts, meeting payrolls and the fickleness of consumer demand. Rather he ran a hedge fund among whose purposes is to find inefficient businesses that may be worth more broken up than as presently constituted. Make no mistake, this watchdog role is an important one. However, there is a point that has to date been overlooked. It has often been said that the problem with Mitt Romney is that he is not a rock the boat type of guy when what this country really needs is to blow stuff up. Agencies need to be eliminated. There needs to be a systematic cutback in federal employment and federal benefits and compensation. Why? It is because since it has no profit motive, the federal government is inherently inefficient and wasteful. Of the candidates still in the race, only Perry has ventured forth a bold plan to rein in the federal government. Nevertheless, the most qualified person to effect change is Mitt Romney due to his experience at Bain Capital. If Romney at Bain Capital saw a multibillion bloated, inefficient, wasteful fortune 500 firm worth more if pared down in size, it would a prime candidate for a takeover. So lets hope that if Romney wins the nomination and then the election, he applies his hedge fund background to the federal government.

Why income inequality is a bogus argument

2012-01-08T08:40:00.001-08:00

This from my January 1 Knoxville News-Sentinel article

Happy New Year. Generally when politicians and the media all latch on to a topic, you can be assured that it is trivial. That is certainly true of the topic du jour, income inequality.

First of all, the president in a speech said that we have reached the point "when middle-class families can no longer buy the goods and services that businesses are selling." Excuse me?

Certainly the president cannot be this out of touch with the truth. Surely there is an argument to be made that his policies have made us worse off. But to conclude that the middle class is suddenly impoverished is hyperbole at best.

What has prompted all of this are reports of rising income inequality in the United States over the past 20 years. However, when the top 1 percent of earners is excluded, income inequality has remained the same. What also is true is over that same period the real income of all income cohorts — save the bottom 20 percent — has risen.

There are reasons for these trends.

First, as pointed out by the Heritage Foundation, the top tier increased because a change in tax laws caused a shifting of business income to individual tax returns as individual rates fell below corporate rates.

Second, the bottom tier has been adversely affected by illegal immigration. We keep hearing that the middle class is shrinking.

However, economist Stephan Rose notes that since 1979 although those households earning between $30,000 and $100,000 shrank, there was no increase in the percentage of households earning below $30,000.

What happened?

The households above $100,000 doubled. So the shrinkage of the middle class was caused by upward mobility. Not a bad thing.

The catalyst for all the income inequality hand-wringing was a study released by the United Nation's Office for Economic Cooperation and Development that showed the measures of income inequality increasing. However, income inequality statistics tell you nothing about the well-being of a population.

The same report cited India as being one the worst performers, with its income inequality doubling over the past 20 years. This is because of the dramatic growth in India's middle class during that period.

Also the emergence of middle classes in Russia and China have worsened income inequality.

Yet who would argue that the Indians, the Chinese and the Russians are worse off because of increasing income inequality? Quite the contrary.

Now consider that the countries with the most equal incomes are in this order: Slovenia, Slovakia, Czech Republic, Sweden and the Ukraine. Four former Soviet bloc countries plus a western welfare state. All have median incomes significantly below that of the United States.

It should not be surprising that socialist countries striving for wage equalization create disincentives on both ends. Those with lower incomes have little incentive to work harder and those on the upper end have no incentive to keep earning more and innovating either.

However, those who would rather be poor but equal in income are all welcome to emigrate.

The Albert Pujols tax

2011-12-29T10:46:00.000-08:00

The politically correct world of income equality has emerged in California in the form of the Albert Pujols tax. Ostensively, it is call the Kim Kardashian tax. The group is adopting the tired mantra that millionaires such as Kardashian are “not paying their fair share” and should be taxed more. The group calling itself the “Courage Campaign” wants those with incomes of $1-2 million to pay 3 percent more and 5 percent more if they make over $2 million. The bold – and wrong – claim is that this will raise state tax receipts by $6 billion a year. Of course this assumes that no one moves or shelters income. Of course if Kardashian threatened to move to Nevada, that state would probably enact a Kardashian specific tax to keep her out. That Ms Kardashian has been targeted is because despite her popularity (or notoriety) apparently she is also intensely disliked. If she has political views, they are not well known. “Courage” Campaign could have easily targeted Michael Moore, Morgan Freeman, Sean Penn or Meryl Streep. But of course those are the “good rich”. So what about Mr Pujols? He just signed a $250 million contract with the Los Angeles Angels of Anaheim rather than a competing contract with the Miami Marlins. I wonder if he now regrets moving to a high tax state instead of one with no state income tax since there is no way he will be able to avoid it. On a different level, it is really disturbing that the voters are allowed to take such punitive actions against their fellow citizens. However, lets take a microeconomic view of millionaires and the concept of marginal utility which says that each incremental unit conveys less value to the consumer. Total satisfaction is increasing but marginal satisfaction is decreasing. The empirical question is where does the marginal satisfaction of acquiring one more dollar decrease to the point where the earner is indifferent? Surely that point for Bill Gates is different from some relative pauper making $1 million. When the earner is at the point of indifference then the additional dollars can be taxed at higher rates without an appreciable change in behavior up to the point where the millionaire ceases to be indifferent about the increased tax burden. I doubt very seriously if that point is at one million for Californians or if Obama had his druthers $250,000 for the rest of us.

Are all fossil fuels from fossils?

2011-12-17T04:36:00.001-08:00

The current dustup over the Keystone pipeline has conjured up one of my nagging questions. Call me crazy but I have always been skeptical of those who assert that we will run out of fossil fuels. This has always been a basis for advocating "alternative" or "renewable" energy as well as all the hand wringing on CO2 emissions. I guess the animals are not dying quick enough and decomposing rapidly enough to keep up with demand and even if they were we would die of pollution and global warming first. However, a couple of years ago I recall reading an article in Scientific America that indicated that my speculation was not entirely fanciful (http://www.scientificamerican.com/article.cfm?id=fossil-fuels-without-the-fossils). It is about a process know as abiogenic hydrocarbon genesis. Here ethane and heavy hydrocarbons are produced under pressure below the earth's crust. This may not be entirely fanciful since some scientists have argued that the new oil and gas discoveries well below the surface of the earth could not have originated from fossils due to the depth of the reservoirs. If this is true then the world will not run out of oil and gas regardless of the rate of demise in animals and plants. Such a discovery would speed up all the deep drill technologies and decrease the importation of oil world wide as more and more finds would occur throughout the world.

Is "social justice" just?

2011-12-05T12:13:00.000-08:00

Return with me now to those thrilling days of yesteryear. When I was in college “social justice” meant the equality of opportunity. Blacks wanted an equal opportunity to attend the University of Georgia rather than being denied admission based solely on race. The university insisted that there were no qualified blacks applicants. I have heard some people whine about EEO saying that the blacks hired will be looked down upon by the whites because if it were not for EEO they would not be there. Give me a break. Can you imagine the pressure we first blacks at Georgia were under where the other students thought “well if the courts had not ordered their admission, they would not be here on merit.” Some thought that some of us had chips on our shoulders – mine was a 2x4. My attitude was “lets see if anyone in here is smarter than I am.” Virtually all of us who graduated from there in the 1960s were high achievers with terminal degrees and of the first two admissions, one is a Pulitzer prize winner and the other was and orthopedic surgeon and hospital CEO.

Now social justice is less defined amalgamating into whatever the utterer means. Like all of us I hear the words “social justice” bandied about. Everyone nods their heads thinking they know what that means – except me. I haven’t a clue what is meant by “social justice”. So I proceeded to google it. There is a clear definition found in the Center for Economic and Social Justice's website. It is "Social justice encompasses economic justice. Social justice is the virtue which guides us in creating those organized human interactions we call institutions. In turn, social institutions, when justly organized, provide us with access to what is good for the person, both individually and in our associations with others. Social justice also imposes on each of us a personal responsibility to work with others to design and continually perfect our institutions as tools for personal and social development." http://www.cesj.org/thirdway/economicjustice-defined.htm. Great definition but how is the term used? The web is a mishmash of topics: from bisexual/transgender equality to anti-smoking. There is Catholic social justice (which presumably does not include abortion rights) and Universalist Unitarian social justice (which does). There is even something called “ethical eating” which is probably PETA friendly. Environmental justice. Humane labeling (huh). And “slow food”? Must be the pro-crock pot crowd. From now on, when you hear someone spout the words “social justice”, say “define it”. If they can’t then tune them out – or simply say “you are an idiot”. More times than not I bet you will hear some disjointed, illogical ramblings which will invariably lead to some socialist collective solution for some imagined problems. Now I am in favor or putting all the bisexual/transgender-environmentalist-PETA friendly- humane labeling- slow food crowd into their own collective. The irony is that the social justice crowd wants to impose their values on the rest of us. Well that imposition is the opposite of justice. However, the important question is whether the Catholics and the Unitarians are socialist collectivists.

The payroll tax reduction: Only in Washington does this make sense

2011-12-05T07:43:00.000-08:00

File this under the "I don't get it" category. We all know that social security is in trouble. It is a pay as you go system with current receipts paying current recipients. At some point in the near future, the payments to the recipients are projected to exceed the receipts creating a shortfall that must either be made up with tax receipts or decrease benefits. So why did the congress reduce the payroll tax? This reduces the projected payments into social security by $265 billion. Won't this make the day of reckoning even sooner? To add to my confusion, the president has advocated that the payroll tax reduction continue for an additional year. You can imagine my surprise when I heard him say and other dems repeat that increasing the amount of money in the hands of Americans is critical during these days of economic crisis. Of course if they really believe this as opposed to it being a mere talking point, they would make permanent by Bush tax rates and move to lower income taxes across the board (even to the so-called 1 percent). Since a reduction in taxes on a permanent basis leads to increased income, the result will be more paid into social security rather than less. Thus, what should have been done is to leave the payroll tax rate alone and to reduce income taxes instead. Only Washington could screw things up this badly.

Well they didn't get them all right: They left off the "State"

2011-12-05T07:30:00.000-08:00

Here is the cover of Sports Illustrated College football preview issue back in August (http://sigroup.files.wordpress.com/2011/08/34covv14_bama_promo.jpg). Note that their top four teams are 1. Alabama 2. Oklahoma 3. LSU and 4. Stanford. Could we get those guys to pick my stocks? As to the Heisman winner, their final three are Landry Jones (now eliminated because of Oklahoma's dismal and disappointing - for them - season), Trent Richardson and Andrew Luck. Want to better that they got the final two right? Their winner? Andrew Luck.

The negative income tax

2011-12-05T07:13:00.000-08:00

The great Milton Friedman died on November 16, 2006 and we all have been worse off due to his passing. Friedman was a generator of ideas and possessed great vision and instinct based on micro economics. Some have misinterpreted his conclusions in the Monetary History of the United States by contending that he criticized the Fed for not inflating the currency during the Great Depression saying that this is why the current Fed has acted in such an irresponsible manner. Not so. Friedman was an advocate of steady money growth (the Quantity Theory of Money) and disliked discretionary monetary policy as being inherently destabilizing. Thus, he was critical of the Fed for allowing the money supply to contract by one-third during 1932-1933 which caused the Great Depression. Friedman always said that if the Fed had kept the money supply at a constant level, we would have had a recession and not a depression. Now it is time for consideration of another Friedman idea, the negative income tax. Perhaps the only positive byproduct of the republican presidential race has been the uniform notion to blow up the income tax structure in the United States with either a flat tax, or a value added tax, or a combination of the two (Cain's 999). The problem with these proposals is that although they would eliminate all other federal taxes, they would leave the structure of federal income redistribution unchanged. This would change with a negative income tax. Friedman's negative income tax would be coupled with a flat tax. These would not only replace all of the federal taxes (income. FICA, and excise) but would also replace all social redistribution programs (Social security, food stamps, housing subsidies, and all welfare programs) and eliminate minimum wages as well. The negative income tax would guarantee a certain income floor for all citizens. If a person earned above the floor then in Friedman's world they would keep a set declining percentage of each dollar earned up to some maximum level of income. Then the flat tax would kick in at that higher income. The advantage of this program would be that low income earners would have a positive incentive to work because they would keep more of their income. This is in contrast to the present system of disincentives where if you work you might lose the government assistance completely. The key to the negative income tax is that the guaranteed floor (say the so-called poverty level) cannot exist for an able bodied adult regardless of incentives to work or else the slothful amongst us would opt not to work. However, for those who want to do better and to have a brighter future for their children, the system would work. Lastly, I would advocate the elimination of all government transfers period (such as tax credits, farm subsidies, and corporate welfare). It seems to me that if we really want to blow up the income tax, we might as well blow it all up.

Why is the failure of statism being foisted on us as a failure of capitalism?

2011-12-01T09:45:00.000-08:00

On a local radio show I was asked to defend capitalism. I observed that it was interesting that capitalism was currently being attacked as a failed system based on the past four years or so. The irony is that rather than it being exhibited that capitalism had failed it was rather that statism had failed. Capitalism is not the bailouts of the financial institutions, the nationalization of Fannie Mae and Freddie Mac, the takeover of Chrysler and General Motors, the stimulus packages. the takeover of health care, cap and trade and the myriad of the intrusions of the federal government into the economy. I said that this is a recipe for permanent European levels of unemployment, inflation, low productivity and lower standards of living. What follows is more to that point.

From the Wall Street Journal
OPINIONMARCH 11, 2011

A European's Warning to America
The perils of following us toward greater regulation, higher taxes and centralized power.
By DANIEL HANNAN

On a U.S. talk-radio show recently, I was asked what I thought about the notion that Barack Obama had been born in Kenya. "Pah!" I replied. "Your president was plainly born in Brussels."

American conservatives have struggled to press the president's policies into a meaningful narrative. Is he a socialist? No, at least not in the sense of wanting the state to own key industries. Is he a straightforward New Deal big spender, in the model of FDR and LBJ? Not exactly.

My guess is that, if anything, Obama would verbalize his ideology using the same vocabulary that Eurocrats do. He would say he wants a fairer America, a more tolerant America, a less arrogant America, a more engaged America. When you prize away the cliché, what these phrases amount to are higher taxes, less patriotism, a bigger role for state bureaucracies, and a transfer of sovereignty to global institutions.

He is not pursuing a set of random initiatives but a program of comprehensive Europeanization: European health care, European welfare, European carbon taxes, European day care, European college education, even a European foreign policy, based on engagement with supranational technocracies, nuclear disarmament and a reluctance to deploy forces overseas.

No previous president has offered such uncritical support for European integration. On his very first trip to Europe as president, Mr. Obama declared, "In my view, there is no Old Europe or New Europe. There is a united Europe."

Barbara Kelley
I don't doubt the sincerity of those Americans who want to copy the European model. A few may be snobs who wear their euro-enthusiasm as a badge of sophistication. But most genuinely believe that making their country less American and more like the rest of the world would make it more comfortable and peaceable.

All right, growth would be slower, but the quality of life might improve. All right, taxes would be higher, but workers need no longer fear sickness or unemployment. All right, the U.S. would no longer be the world's superpower, but perhaps that would make it more popular. Is a European future truly so terrible?

Yes. I have been an elected member of the European Parliament for 11 years. I have seen firsthand what the European political model means.

The critical difference between the American and European unions has to do with the location of power. The U.S. was founded on what we might loosely call the Jeffersonian ideal: the notion that decisions should be taken as closely as possible to the people they affect. The European Union was based on precisely the opposite ideal. Article One of its foundational treaty commits its nations to establish "an ever-closer union."

From that distinction, much follows. The U.S. has evolved a series of unique institutions designed to limit the power of the state: recall mechanisms, ballot initiatives, balanced budget rules, open primaries, localism, states' rights, term limits, the direct election of public officials from the sheriff to the school board. The EU places supreme power in the hands of 27 unelected Commissioners invulnerable to public opinion.

The will of the people is generally seen by Eurocrats as an obstacle to overcome, not a reason to change direction. When France, the Netherlands and Ireland voted against the European Constitution, the referendum results were swatted aside and the document adopted regardless. For, in Brussels, the ruling doctrine—that the nation-state must be transcended—is seen as more important than freedom, democracy or the rule of law.

This doctrine has had several malign consequences. For example, it has made the assimilation of immigrants far more difficult. Whereas the U.S. is based around the idea that anyone who buys into American values can become American, the EU clings to the notion that national identities are anachronistic and dangerous. Unsurprisingly, some newcomers, finding their adopted countries scorned, have turned to other, less apologetic identities.

The single worst aspect of Europeanization is its impact on the economy. Many Americans, and many Europeans, have a collective memory of how Europe managed to combine economic growth with social justice. Like most folk memories, the idea of a European economic miracle has some basis in fact. Between 1945 and 1974, Western Europe did outperform the U.S. Europe happened to enjoy perfect conditions for rapid growth. Infrastructure had been destroyed during the war, but an educated, industrious and disciplined work force remained.

Human nature being what it is, few European leaders attributed their success to the fact that they were recovering from an artificial low. They convinced themselves, rather, that they were responsible for their countries' growth rates. Their genius, they thought, lay in having hit upon a European "third way" between the excesses of American capitalism and the totalitarianism of Soviet communism.

We can now see where that road leads: to burgeoning bureaucracy, more spending, higher taxes, slower growth and rising unemployment. But an entire political class has grown up believing not just in the economic superiority of euro-corporatism but in its moral superiority. After all, if the American system were better—if people could thrive without government supervision—there would be less need for politicians. As Upton Sinclair once observed, "It is difficult to get a man to understand something when his job depends on not understanding it."

Nonetheless, the economic data are pitilessly clear. For the past 40 years, Europeans have fallen further and further behind Americans in their standard of living. Europe also has become accustomed to a high level of structural unemployment. Only now, as the U.S. applies a European-style economic strategy based on fiscal stimulus, nationalization, bailouts, quantitative easing and the regulation of private-sector remuneration, has the rate of unemployment in the U.S. leaped to European levels.

Why is a European politician urging America to avoid Europeanization? As a Briton, I see the American republic as a repository of our traditional freedoms. The doctrines rooted in the common law, in the Magna Carta, and in the Bill of Rights found their fullest and most sublime expression in the old courthouse of Philadelphia. Britain, as a result of its unhappy membership in the European Union, has now surrendered a large part of its birthright. But our freedoms live on in America.

Which brings me to my country's present tragedy. The fears that the American patriot leaders had about a Hanoverian tyranny were exaggerated. The United Kingdom did not develop into an absolutist state. Power continued to pass from the Crown to the House of Commons.

Until now. Nearly two and a half centuries after the Declaration of Independence, the grievances it adumbrated are belatedly coming true. Colossal sums are being commandeered by the government in order to fund bailouts and nationalizations without any proper parliamentary authorization. Legislation happens increasingly through what are called standing orders, a device that allows ministers to make laws without parliamentary consent—often for the purpose of implementing EU standards.

How aptly the British people might today apply the ringing phrases of the Declaration of Independence against their own rulers, who have "combined with others to subject us to a jurisdiction foreign to our constitution, and unacknowledged by our laws."

So you can imagine how I feel when I see the U.S. making the same mistakes that Britain has made: expanding its government, regulating private commerce, centralizing its jurisdiction, breaking the link between taxation and representation, abandoning its sovereignty.

You deserve better, cousins. And we expect better.

Mr. Hannan is a member of the European Parliament. This essay is adapted from the Encounter Books Broadside, "Why America Must Not Follow Europe."

Animal spirits and the stock market

2011-12-01T08:42:00.000-08:00

The recent dramatic surge of 490 in the stock market over the news regarding the Fed and other central banks to lower the cost of banks outside the US to borrow cheaper dollars from their central banks is a head scratcher. First, the liquidity swaps are only related to European money markets and have absolutely nothing to do with the fundamental causes of the debt crisis - too much government spending. Second, it is a short term patch expiring in February 2013. Third, it is another slap in the face of finance fundamentals as taught in our universities. The price of a stock is supposed to reflect the market's long term assessment of the value of the firm rather than a short term temporary action (unless that action has a long term impact). Certainly it is true that the profitability of American internationals are dependent upon European markets. But I have seen little evidence that the resolution of their current liquidity crunch would have a great impact on firm profitability. It is similar to the volatility in the market that learned observers have attributed to the Greek financial crisis. Nonsense. Greece is a rounding error and its default would have little noticeable impact on US financial firms and internationals. It is as though those learned analysts are grasping at straws to come with an explanation as to what is going on in today's markets. I guess they cannot tell the truth which is "I don't know."

Global warming takes another hit; Is anyone paying attention?

2011-11-29T06:16:00.000-08:00

Its no secret that I am a global warming skeptic. Like any other issue that is important to me, I thoroughly researched both sides of the argument. Although I was tempted to prejudge the issue simply based on who were the people and groups supporting the global warming mantra, I became increasingly skeptical when that side kept saying that the debate was over: scientists had reached a consensus. Huh? Scientists never reach a consensus on any hypothesis so the progrobal warming crowd was trying to squelch debate. . The cornerstone of the global warming argument is that it is caused by CO2 emissions and those need to be curbed or else we are all dead. Several things have transpired. First, a new study Andreas Schmitter of Oregon State reported in Science says that the global warming models have overestimated its impact on earth's temperatures and the previous estimates of temperature increases of 10 F are implausible. Nonetheless, he concludes that CO2 will likely cause climate change, but not as severe. Schmitter's work as well as other models must still be taken with a healthy dose of salt however. Remember this is the same crowd that cannot predict the temperatures next week rather than next century. Then there is the report from China Daily (http://www.chinadaily.com.cn/opinion/2011-11/29/content_14181836.htm) that poor nations cannot afford to aggressively reduce CO2 omissions but that black carbon soot (from stoves and fires) is the problem (not to the environment but to people's health). Although once thought to contribute to global warming, the research now shows that black soot lingers in the atmosphere too short a time to have a major impact on earth's tempertures. Lastly, there is the work of geologist (and retired energy executive) Leighton Steward who warms that aggressive reduction in CO2 levels will be dangerous. Steward argues that CO2 is not responsible for global warming and reductions will inhibit plant growth. Less CO2 means that food production would slow and that fruits and vegetables would require more water for growth. One of Steward's compelling arguments regarding CO2 is that currently the earth's levels are 338 parts per million while the danger level for US submarines is 8,000 parts per million. So we are nowhere near the danger zone for health, reductions will harm food production, CO2 does not cause the earth to warm and even if it did, it would have a debatable impact on temperature. So who do you believe?

Is green safe?

2011-11-29T04:29:00.000-08:00

I am not a greenie weenie but I do own an electric four wheel drive ATV. At our farm I have always walked to where I deer hunt and then went back and got the ATV if I took a deer. Now as I have aged I ride to about a quarter of a mile of where I hunt and walk the rest of the way. I have found that I seem to see more deer if I use the electric rather than my gas ATV. However, two problems got my attention. First, I got shocked (no pun intended) when I had to replace the 8 batteries ($700). Second, I learned not to trust the battery charge indicator when the ATV died while on the way back from a hunt. These issues are probably obvious but now comes the news that the national highway traffic safety administration is investigating the Chevy Volt because of the tendency of lithium batteries to explode in a crash. It makes one wonder if green is safe. GM rushed out immediately and stated that the cars were safe but would offer loans to the dozen or so people who have bought the car if they had concerns. Presumably they are not offering another electric vehicle. The news also is augmented by Duke Power telling its customers not to use the home charging stations because of a fire hazard. With those concerns and questions raised on the impact on the power grid from off peak use if there were thousands (rather than dozens) of vehicles charging and questions on the demand on coal power plants, one wonders if these vehicles were not politically correct if they would be banned. The same is true for ethanol which has been demonstrated to be worse for the environment than gasoline and for the incandescent light bulb with its hazmat warnings. If these were conventional products the environmental activists would be up in arms demanding recalls and bans. However, since these products are "green" apparently it doesn't matter that they are harmful to the environment or even dangerous.

Why socialism always fails

2011-11-23T06:24:00.000-08:00

Recall that I was on the radio with the editor of Knoxville's "alternative" newspaper and he said that we should increase taxing the wealthy to distribute it to the poor to make them better off. My response was this was truly dumb because it created disincentives among both groups. Well a friend of mine sent me the following.

1. You cannot legislate the poor into prosperity by legislating the wealthy out of prosperity.

2. What one person receives without working for, another person must work for without receiving.

3. The government cannot give to anybody anything that the government does not first take from somebody else.

4. You cannot multiply wealth by dividing it!

5. When half of the people get the idea that they do not have to work because the other half is going to take care of them, and when the other half gets the idea that it does no good to work because somebody else is going to get what they work for, that is the beginning of the end of any nation.

He also sent me the following basic economic lesson on why socialism always fails.

An economics professor at a local college made a statement that he had never failed a single student before, but had recently failed an entire class. That class had insisted that socialism worked and that no one would be poor and no one would be rich, a great equalizer.

The professor then said, "OK, we will have an experiment in this class on socialism". All grades will be averaged and everyone will receive the same grade so no one will fail and no one will receive an A.... (substituting grades for dollars - something closer to home and more readily understood by all).

After the first test, the grades were averaged and everyone got a B. The students who studied hard were upset and the students who studied little were happy. As the second test rolled around, the students who studied little had studied even less and the ones who studied hard decided they wanted a free ride too so they studied little.

The second test average was a D! No one was happy.
When the 3rd test rolled around, the average was an F.

As the tests proceeded, the scores never increased as bickering, blame and name-calling all resulted in hard feelings and no one would study for the benefit of anyone else.

To their great surprise, ALL FAILED and the professor told them that socialism would also ultimately fail because when the reward is great, the effort to succeed is great, but when government takes all the reward away, no one will try or want to succeed.

The "supercommittee": The mouse that didn't roar

2011-11-21T15:13:00.000-08:00

Remember when we had the bogus agreement to preserve the Bush tax cuts? After months of haggling the compromise ended up being a budgetary rounding error. Now the so-called supercommittee has thrown up its hands and has given up trying to find $125 lousy billion in cuts a year for 10 years. Mind you although this was continually referred to as a $1.25 trillion cut, it actually is only 3 percent of the federal budget each year. Actually I thought that the supercommittee was anti-constitutional in the first place because the supercommittee replaced the House of Representatives which has the budgetary responsibility under the constitution. Some pundits have stated that the president who always sits on the sidelines would have gotten a deal if he wanted one. However, they argue he did not want a deal because he plans to run on a do nothing congress. The only problem is why the congressional democrats would be dumb enough to go along since they are part of the do nothingness (see Steny Hoyer's comments in a previous post). So the bottom line is that if the supercommittee succeeded it would have not made a difference. The fact that it failed reiterates the need to replace the incumbent administration and the overwhelming majority of the incumbent congress regardless of party.

So Steny Hoyer agrees with Rick Perry?

2011-11-20T06:24:00.000-08:00

Rick Perry in a speech in Iowa called for sweeping changes in the federal government. Among the highlights were to make congress part time, cut congressional pay in half, criminalize insider congressional trading, cut congressional staffs, end lifetime appointments to the supreme court. enact a balance budget amendment and limit federal spending to 18 percent of GDP. For all the proposals see http://www.rickperry.org/uproot-and-overhaul-washington-html/. Of course if spending is limited to 18 percent then a balanced budget amendment is unnecessary. But what about the ones dealing with the congress. I believe it was Mark Twain who said that when congress is in session no man's life, liberty or property is safe. Tis true. A part time congress would force our elected officials to have real jobs that would force them to live amongst real people with real problems rather than being on the fantasy island that is Washington, DC. I have written that the Fed needs to move from DC to Kansas City and we would see a dramatic shift in monetary policy. The same could be said for the congress. It was interesting to see Steny Hoyer's (D-Md) comments. Hoyer is a lifelong politician who is the number 2 house democrat. Hoyer was said to react angrily and stated: “Is this a serious proposal he’s making for a country that has very high unemployment, who’s budget deficit is larger than it’s ever been in history, which has two wars that we’re confronting and trying to bring to a conclusion?” Mr. Hoyer said of the Republican presidential hopeful. If this is what he thinks is pandering to the Tea Party, it is not in my opinion speaking to the issues that the American public feels are very, very critical to them, jobs being the number one issue,” Mr. Hoyer said. “So I don’t think it’s a very serious effort on his part.”

Methinks the gentleman protesteth too much. It seems that Hoyer is making Perry's case. The congress is in large part responsible for all that Hoyer laments. Instead of fixing it, they have - and are- making things worse. If I were Perry, I would circulate Hoyer;s comments as an endorsement for congressional overhaul.

How's that liberal professor bias going?

2011-11-20T05:52:00.000-08:00

One of the blogs I follow is Greg Mankiw's - a Harvard professor with ties to republican administrations. Students walked out of his introductory econ class protesting that it was unbalanced in favor of Adam Smith over John Maynard Keynes. Excuse me? An introductory class has to be heavy on Smith since the basic principles of microeconomics are the heart of the discipline. Teaching Keynes is teaching macroeconomics which in some hands is a discipline other than economics. If it is not based on supply and demand, it becomes sociology. Here is the story from Slate.

Harvard Students Stage Walkout in OWS-Like Protest
Intro econ class walks out, criticizes professor as favoring the rich.
By Will Oremus | Posted Tuesday, Nov. 8, 2011, at 9:39 AM ET

http://slatest.slate.com/posts/2011/11/07/occupy_harvard_students_walk_out_on_greg_mankiw_economics_class_.html
The Occupy Wall Street movement has landed at Harvard University, where some 70 students walked out of an introductory economics class last week to protest what they saw as biased teachings.
The students explained their walkout in an open letter to professor Greg Mankiw posted on the website of the Harvard Political Review. "Today, we are walking out of your class, Economics 10, in order to express our discontent with the bias inherent in this introductory economics course," they wrote. "We are deeply concerned about the way that this bias affects students, the University, and our greater society."
NPR’s Morning Edition covered the kerfuffle, suggesting that the students objected to the class partly because of Mankiw’s résumé. He served as an adviser to President George W. Bush and is now advising the campaign of Republican presidential contender Mitt Romney. He has also criticized the Occupy Wall Street protests and warned against the "politics of envy."
Ironically, Mankiw said he was lecturing on income inequality on the day the students walked out.
Students who participated in the walkout wrote in the open letter that they had hoped to be presented with a balanced view of economics in a required introductory course. "Instead, we found a course that espouses a specific—and limited—view of economics that we believe perpetuates problematic and inefficient systems of economic inequality in our society today. There is no justification for presenting Adam Smith’s economic theories as more fundamental or basic than, for example, Keynesian theory."
A former student of Mankiw’s jumped to his defense, pointing out that the students offered little explanation of what they found "biased" in the course, other than the reference to Smith and Keynes. The student, named Jeremy Patashnik, wrote:
Incidentally, the authors of this letter are in for a treat: there’s plenty of Keynesian theory to come in the second semester of Ec 10. In fact, Mankiw is a great Keynes admirer, and once wrote, “If you were going to turn to only one economist to understand the problems facing the economy, there’s little doubt that that economist would be John Maynard Keynes.” The only reason that these students have not yet studied the father of modern macroeconomics in Ec 10, of course, is that the first semester of the class is devoted to microeconomics.
Asked on NPR to elaborate on his views about economic inequality, Mankiw said there’s no question it has been on the rise for the past 70 years. "I think it’s primarily being driven by a variety of forces in the economy including, for example, technology," he said. Asked whether he thought it was a problem that government needs to address, Mankiw said it depends on one’s political philosophy. "I think the liberal position is more to try to address the outcomes through a progressive income tax, and I think the conservative point of view is to try to address the causes. One of the causes is the educational system."

So the stimulus is not really a stimulus but a drag?

2011-11-20T05:39:00.000-08:00

Since I do not watch the main stream media, I do not know if this was reported. CBO director Doug Elmendorf testified before congress. In an answer to Alabama's Jeff Sessions he conceded that the $800 billion stimulus package would in the end lower GDP.

SESSIONS: And in the next 10 years, since you’re carrying that debt and paying interest on it and the stimulus value is long since gone, it would be a continual negative of some effect?

ELMENDORF: Yes, it would represent a drag on the level of GDP beyond that, if no other actions were taken.

Elmendorf stated that the stimulus should have had a positive short run effect but a negative long term effect. I guess I should said "I told you so." But its like taking candy from a baby. The money to finance the "stimulus" would have to come from somewhere. Since the US was already deeply in deficit, the money would either have to be created by the Fed or borrowed from the private sector. Basic economics tells us that if created by the Fed, it would end up being purely inflationary with no creating in real output. If borrowed, it would reduce monies available to the private sector and crowd out business investment. Either was it would be a drag on the economy. Those who invented other scenarios are using faith and voodoo to supercede Adam Smith and like usual have failed. However, although I used to work at CBO I always take their projections with more than a grain of salt. Economics like the weather is a crap shoot when projecting long term and ten years is an eternity.

Obama's selective outrage

2011-11-19T12:50:00.000-08:00

When Fannie Mae and Freddie Mac came with hats in hand to beg for another $14 billion in taxpayers' money, there was bipartisan outrage at the committee hearing over their salaries and bonuses. The president was noticeably silent. Didn't the president rail over the AIG bonuses and give approval to the SEIU pickets at the homes of AIG's executives? Didn't the president appoint a wage czar to approve the salaries at the car companies? Something about protecting the taxpayer from the greed of corporate executives? So where was the president's outrage over the million dollar bonuses at Freddie and Fannie? As one of the committee members pointed out it was not just the bonuses but also the inflated salaries of the executives. "How many corporate general counsel's are paid $2 million?" one congressman asked. Indeed. How many? Of course Fannie Mae and Freddie Mac have always been known to pay big salaries and bonuses. Where was the outrage when Franklin Raines took home more than $90 million during his tenure? Regardless, Fannie and Freddie have difficult jobs but not that difficult.

Herman Cain: Another High Tech Lynching

2011-11-10T11:11:00.000-08:00

One of my closest friends is an Obama apologist. Yet she marvels at the hackneyed assault on Herman Cain wondering what blonde is going to be dredged up next. In the past when the accused were democrats, the press scoffed saying "private lives didn't matter" and then attacked the women accusers. In this case, where by some miracle all the women are connected to the democratic party, not a peep is heard. The first woman was trotted out as a republican. No one asked how someone who had not worked in 13 years, was in debt, bankrupt, somehow could live in the same building as Obama honcho David Axelrod. Surely Axelrod is not living in some slum yet this woman manages to live in the same building. Notice that this is playing on some's racisms by having a black man being accused by (blonde) white women. Somehow they have forgotten that the president is the result of a joining of a black man with a white woman. Regardless, the whole episode is shameful and as my mother said "I wondered how long it would take before they slandered Cain". When he was at the bottom of the polls it did not matter. Now it does. The left is threatened by a successful conservative black who is more of a role model than the president. Although both have remarkable stories, the president from humble beginnings went to elite ivy-league schools and has been either running for public office or elected to public office all his life. Cain on the other hand is like most of the wealthy people I know: humble beginnings, public education - although a Morehouse grad - and up from the ranks to success. Which is more likely for most of us regardless of origin? Its Cain. Hence the threat to the elite establishment. The following is from a piece by Ann Coulter, who incidentally is a blonde white woman.

David Axelrod's Pattern of Sexual Misbehavior
by Ann Coulter
11/09/2011

Herman Cain has spent his life living and working all over the country -- Indiana, Georgia, Minnesota, Nebraska, Kansas, Washington, D.C. -- but never in Chicago.  So it's curious that all the sexual harassment allegations against Cain emanate from Chicago: home of the Daley machine and Obama consigliere

David Axelrod.  Suspicions had already fallen on Sheila O'Grady, who is close with David Axelrod and went straight from being former Chicago mayor Richard M. Daley's chief of staff to president of the Illinois Restaurant Association (IRA), as being the person who dug up Herman Cain's personnel records from the National Restaurant Association (NRA).  The Daley-controlled IRA works hand-in-glove with the NRA. And strangely enough, Cain's short, three-year tenure at the NRA is evidently the only period in his decades-long career during which he's alleged to have been a sexual predator.  After O'Grady's name surfaced in connection with the miraculous appearance of Cain's personnel files from the NRA, she issued a Clintonesque denial of any involvement in producing them -- by vigorously denying that she knew Cain when he was at the NRA. (Duh.)  And now, after a week of conservative eye-rolling over unspecified, anonymous accusations against Cain, we've suddenly got very specific sexual assault allegations from an all-new accuser out of ... Chicago.  Herman Cain has never lived in Chicago. But you know who has? David Axelrod! And guess who lived in Axelrod's very building? Right again: Cain's latest accuser, Sharon Bialek.  Bialek's accusations were certainly specific. But they also demonstrated why anonymous accusations are worthless.  Within 24 hours of Bialek's press conference, friends and acquaintances of hers stepped forward to say that she's a "gold-digger," that she was constantly in financial trouble -- having filed for personal bankruptcy twice -- and, of course, that she had lived in Axelrod's apartment building at 505 North Lake Shore Drive, where, she admits, she knew the man The New York Times calls Obama's "hired muscle."  Throw in some federal tax evasion, and she's Obama's next Cabinet pick.  The reason all this is relevant is that both Axelrod and Daley have a history of smearing political opponents by digging up claims of sexual misconduct against them.  

http://www.humanevents.com/article.php?id=47438

A black Bull Connor?

2011-11-07T13:49:00.000-08:00

The Occupy folks have not covered themselves with glory all of the country. The reaction of the local authorities has been interesting. In Nashville, the governor has ordered the removal and arrests of Occupy Nashville. A local judge however has refused to hear the cases and has released them back to the streets. Little has been said of what happened in Atlanta where we have the case of a black mayor and a mostly black police department with a black police chief clearing out the mostly white Occupy Atlanta folks. If the races had been reversed we would have seen story upon story evoking the racist history of the south. Indeed one of the older Occupy Atlantans accused the black mayor, Kasim Reed of being akin to Bull Connor. Now it is likely that Reed who was born in 1969 does not have a clue who Bull Connor was. But the irony of it all: a black Bull Connor! Probably the only similarity is that both Reed and Connor are democrats. Regardless, one of the protestors opined that Reed was reacting to qrowing white constituency that is gentrifying midtown and downtown Atlanta implying that these in-migrants are conservatives. Quite the contrary, most of these whites are themselves liberals. I guess it is difficult for some to wrap their arms around the fact that many people regardless of political affiliation do not like to see their city trashed. Also the growing charges of crimes such as rape and robbery are disquieting. Perhaps Reed like mayors and governors across the political spectrum are more interested in maintaining law and order than in posturing by this generation's flower children.

Illegals in Alabama versus legals in Ohio: The new racial politics

2011-11-06T06:23:00.000-08:00

In the Kingsport, TN paper the Times News on October 26, 2011 was a story from the Associated Press with no by-line entitled “Alabama battle reminder of civil rights past.” It was an attempt to link the upcoming Supreme Court hearing of Alabama’s immigration law to that of its ugly history on civil rights. Saying that its immigration law “has resurrected ugly images from Alabama’s days as the nation’s battleground for civil rights a half-century ago” evoking memories “of the state’s sometimes violent path to desegregation.” I am sorry but it is a far stretch to equate the denial of state services to illegal immigrants to the denial of civil rights to citizens of the state. The main point of contention is the provision in the law that required schools to check the immigration status of students. How this “provision conjures images of Gov. George Wallace standing in the schoolhouse door to block integration” leaves me mystified. However, I am open minded to anyone who sees a parallel. George Wallace was the typical southern democrat: a segregationist who yelled the N-word loud and often to get elected and re-elected. He even used his notoriety to run for president. When blacks finally were able to vote in large numbers in Alabama, he was miraculously transformed, issued the appropriate mea culpas and re-elected with a significant number of black votes.

A basic question is what is the Alabama law if parents who are citizens secretly send their children to a school outside their district? In some states parents have been fined and/or jailed for doing this. For example, early this year a poor black Ohio woman living in subsidized housing in Akron was sentenced to 10 days in jail and three years probation for sending her two children to a school in another district! Instead of sending them to an inferior school in Akron, she registered them with their father’s address in nearby Copley. The children’s father was found guilty of a felony of grand theft for “defrauding the school system for two years for the educational services provided to his children.” The court said that the cost of sending the children to the wrong school was $30,500.

Ohio’s governor pardoned the parents. However, if it is legal for state to do this to its own citizens for sending their kids to the “wrong” school then why is it illegal for a state not to provide educational services to non-citizens? Moreover, what would Alabama law provide for a non-resident citizen of say neighboring Georgia illegally sending a child to a school across the state line in Alabama? I would wager that there would be expulsions, penalties, fines and possibly jail time too. So the question is why should illegals be given privileges not granted to citizens?

Alabama has been subject to calling the R-word (racist) by the usual suspects. It is not mentioned in the media that two republican representatives have introduced legislation to remove all racist wording from the state's constitution. The measure, co-sponsored by Sen. Arthur Orr, R-Decatur, and Rep. Phil Williams, R-Huntsville, would have to be a ratified by voters in a statewide referendum, likely in November 2012. The offensive language that would be removed includes a provision that says separate schools shall be provided for "white and colored children," and that no child of either race shall attend the same school.It would also remove references to Alabama's "poll tax," which was used to keep blacks from voting until passage of the 1965 federal Voting Rights Act.

So the democrats have replaced the N-word with the R-word in electoral politics. Isn't it interesting that the liberals and especially the black liberals did not say a peep in the defense of the poor black woman in Ohio and yet have all come to the aid of illegals in Alabama? That says something about who is becoming the more important voting block in racial politics.

News flash: Ron Paul has nice things to say about government workers!

2011-11-01T13:38:00.000-07:00

Rep. Ron Paul in an interview with CNN's Wolf Blitzer was reported in the Politico as: "Paul was pressed by Wolf Blitzer on how eliminating about 221,000 government jobs across five cabinet departments would boost the economy. He responded: 'They're not productive jobs,' he said." The implication is that the 221,000 were employed in activities that would not be demanded by the private sector. Eliminating these positions would enable the 221,000 workers to pursue activities demanded by the market which are by definition "productive". The question is whether this is the case. Undeniably, many government jobs are a creation of the government's desire to grow itself. However, to address the issue of whether these jobs as productive, I fall back on the venerable Adam Smith. On May 29, 2009, I wrote "What would Adam Smith do? http://haroldblack.blogspot.com/2009/05/what-would-adam-smith-do.html). Here Smith on the role of government says that the functions of the government were national defense, administration of justice, and the provision of public goods (transportation infrastructure and education). Although many of us would quibble over education, it strikes me that some of these should be the province of the federal government while others belong to the states. For example, the national defense is the federal government's responsibility rather than the states. To argue that those employed in all aspects of national defense from the private sector companies servicing the demands of the military, to those directly employed by the military are "nonproductive" is at best specious. Although the market does not provide this service, it is because of the difficulties of measuring and meeting individual demands in the market place. All within proximity would receive the same service regardless of demand. In that case, all individuals would allocate $0 for the service. Thus national defense is as much a public good as in transportation infrastructure. Although some may argue that this is the responsibility of the states, one must consider the building of the interstate highway system - a wonderful boon to commerce and to public convenience. It would have been difficult if not impossible for this to have been done by the states. However, other than these few items, the federal government should have few if any other responsibilities rendering those other employees nonproductive. Rather than nonproductive, these workers are counterproductive in that they suck capital out of the real economy and dramatically raise the costs of production. In that sense, Ron Paul was being kind when he called them "nonproductive".

Herman Cain and the attack of the racist left

2011-10-31T17:50:00.000-07:00

The left in our country accuses the right and the Tea Party as being racist. Where is the evidence? I have spoken at Tea Party rallies. I know blacks who are leaders in the Tea Party. None of us has seen any manifestation of racism. How a bunch of citizens concerned with the growth of the government and the enormous burden of ever increasing deficits could be linked with racism is beyond me. The only link is that the leader of the party endorsing big and bigger government is black. However, some of the leading Tea Party advocates are also black, namely Allen West (R-FL), Tim Scott (R-SC) and of course Herman Cain. So it was only a matter of time that the leftist media would try to besmear Herman Cain. Their tactic was to use the racist stereotype regarding black male sexuality. In a sense it was reminiscent of the attack on Clarence Thomas who called it all quite correctly "a high tech lynching" of a black who didn't know his place and who refused to stay on the welfare plantation. The same can be said of Cain. The main difference is that in the case of Thomas, the left dredged up a live person - Anita Hill - to make the accusations. For Cain, its all innuendo, no named victims and generally shameful shabby journalism. The laughable thing is that both the accusations against Thomas and Cain seem tame. It is interesting to see all the headlines and lead stories when the same media all but gave Bill Clinton and Anthony Weiner a pass for much more egregious escapades. Attacks like this on liberal blacks are unheard of. When black politicians on the left are cited for taking bribes, or violation of ethics they are defended and the accusers are accused of racism. Well please pardon me but let's call a spade a spade: the attack on Herman Cain is the latest example of racism on the left.

Obama: The Anti-American American President

2011-10-31T17:37:00.000-07:00

I am really disturbed by the president's anti-wealthy rhetoric. His constantly harping on the rich "not paying their share" and the wealthiest one percent profiting at the expense of the other 99 percent is incendiary and dangerous. Having determined that he cannot run on his record, he has proceeded to forget his Gabrielle Giffords speech where he implored that American's should set aside partisan animosity and talk with each other "in a way that heals, not in a way that wounds." He has declared that republicans only care about the rich and if elected will give us dirty air, dirty water and fewer people with health insurance. I don't recall a sitting president being this openly partisan while in office and not campaigning after the convention. His anti-wealthy mantra has been adopted by the occupy Wall Street crowd who seem to be increasingly violent. Before president's implored the country to strive toward greatness not begrudge the success of others. Instead of saying that all can pursue the American dream, this president says that the doors to success are closed to the 99 percent and the situation can only be changed with the help of the government. This president also seems to believe or at least get us to believe that the economic pie is fixed and that the only way the rich get richer is by stealing from the rest of us. This is sheer lunacy. The president has forgotten that people like Herman Cain, Bob Johnson, Steve Jobs, Jim Clayton, Jim Haslam and scores of successful Americans were not born into wealth. He has conveniently forgotten that the growth of the American pie has made our poor the envy of 99 percent of the rest of the world. When Giffords was shot, the media rushed to put the blame on Sarah Palin and Rush Limbaugh. Hence Obama's inference in his speech. Now with Obama spewing out speech upon speech berating the rich and evoking class envy, what will the media say which the inevitable crazy inflicts bodily harm on someone rich?

So who is this Biden guy?

2011-10-25T11:02:00.000-07:00

The dumbing of our children is nothing new. I'm a former professor whose students did not know Joe Biden, could not name their senators, had no idea of how the political process worked, did not know geography, had not read a book other than a text, could not compute, did not know history and had no basic skills. This is nothing new. My mother thought that although I took Latin and French in high school, she sniffed "Well we had to take Greek". (Note: this was in an all black school in the deep south!) I just noted that things are getting worse as technology is substituted for knowledge.To show that the dumbing down is nothing new consider the following written in 1986: "America's children need strong academic skills more than ever before. Yet, despite a decade of educational reforms, their achievement remains disappointing. In a 1986 assessment of 17-year-old juniors, students were asked when World War I occurred. A little more than 40% were unable to place the event "sometime between 1900 and 1950. Last year's National Assessment of Education Progress found that only 6% of American high school graduates are ready for college math. American students rank near the bottom of industrialized countries."

When I would tell my students that they had less basic knowledge than kids in the 1800s they scoffed. I then said that if they could pass an entrance exam to high school in 1885, I would increase their grade by one level. If they failed, I would reduce it my one level. When asked if they could see the exam first, I agreed. After showing them the exam not one ever took it. One student actually asked me why did he have to know anything? Why know math when there are calculators? Why know geography when there is mapquest? Why know anything when there is google? My answer was that all on google is not correct and while they are googling, the successful are doing things because they do not have to waste their time trying to acquire fundamental knowledge. The exam was printed in the Wall Street Journal in 1992 and is as follows:
The following is the Jersey City, NJ High School Entrance Examination for June 1885, reprinted in the Wall Street Journal in 1992. Keep in mind that this was a test given to children at about age 14 or 15 at most, and was based on what was determined to be important knowledge. Test yourself in algebra, arithmetic, geography, grammar and US history.

Sharpen Your Pencil, and Begin Now
EXAMINATION FOR ADMISSION
Jersey City High School, June, 1885

ALGEBRA
1. Define Algebra, an algebraic expression, a polynomial.
2. Make a literal trinomial.
3. Write a homogeneous quadrinomial of the third degree. 4. Express the cube root of 10ax in two ways.
5. Find the sum and difference of 3x-4ay+7cd-4xy+16, and 10ay-3x-8xy+7cd-13.
6. Express the following in its simplest form by removing the parentheses and combining: 1-(1-a) + (1-a+a2)-(1-a+a2-a3).
7. Find the product of 3+4x+5x2-6x3 and 4-5x-6x2.
8. Expand each of the following expressions and give the theorem for each: [a+4] 2, [a2-10] 2, [a+4] [a-4].
9. Divide 6a4+4a3x-9a2x2-3ax3+2x4 by 2a2+2ax-x2.
10. Find the prime factors of x4-b4 and x3-l.
11. Find the G.C.D. of 6a2+11ax+3x2 and 6a2+7ax-3x2.
12. Divide (x2-2xy+y2)/ab by (x-y)/bc and give the answer in its lowest terms.
ARITHMETIC
1. If a 60 days note of $840 is discounted at a bank at 4 1/2 % what are the proceeds?
2. Find the sum of the square root of 16.7281 and the square root of 72 1/4.
3. The interest of $50 from March 1st to July 1st is $2.50. What is the rate?
4. What is the cost of 19 cwt. 83 lb. of sugar at $98.50 a ton?
5. What is discount? A number?
6. Divide the difference between 37 hundredths and 95 thousandths by 25 hundred thousands and express the result in words.
7. The mason work on a building can be finished by 16 men in 24 days, working 10 hours a day. How long will it take 22 men working 8 hours a day?
8. A merchant sold a quantity of goods for $18,775. He deducts 5% for cash and then finds that he has made 10%. What did he pay for the goods?
9. A requires 10 days and B 15 days to do a certain piece of work. How long will it take A and B working together to do the work?
10. By selling goods it 12 1/2 % profit a man clears $800. What was the cost of the goods, and for what were they sold?
11. A merchant offered some goods for $1170.90 cash, or $1206 payable in 30 days. Which was the better offer for the customer, money being worth 10%?
GEOGRAPHY
1. What is the axis of the earth? What is the equator? 2. What is the distance from the equator to either pole in degrees, in miles?
3. Why is it warmer at the equator than near the poles?
4. Name four principal ranges of mountains in Asia, three in Europe, and three in Africa.
5. Name the capitals of the following countries: Portugal, Greece, Egypt, Persia, Japan, China, Canada, Hindostan, Thibet, Cuba.
6. Name the states on the west bank of the Mississippi and the capital of each.
7. Bound New Jersey and name six important cities in the state.
8. Tell the situation of the following: Detroit, Chicago, Portland, Rio Janeiro, Callao, Venice, Bombay, St. Louis Halifax, Vera Cruz.
9. Name 10 countries of South America and the capital of each.
10. Bound Russia and name its capital and largest river.
11. In what countries is coffee raised?
12. What are the principal exports of France? Of the West Indies?
13. New York is nearly 75 degrees west of London. When it is noon at the former, what time is it at the latter?
GRAMMAR
1. Analyze the following: Perseus ground his teeth with rage, for he saw that he had fallen into a trap.
a. Make a list of all the verbs in the sentence above, and give the principal parts of each of them.
b. Parse for, had fallen, that, saw.
2. Give two uses of the hyphen.
3. Copy the sentence and punctuate it properly. "Will you please to tell me boys, for what the reindeer is useful".?
4. Write a sentence containing a noun used as an attribute, a verb in the perfect tense potential mood, and a proper adjective.
5. Correct [a] It is only me. [b] Who did she invite? [c] Whenever my husband or son take an umbrella down town, they always leave it.
6. Write the declension of [a] bird, [b] man, [c] fly, [d] fox, [e] it
7. Write four lines of poetry, giving particular attention to the use of capitals, and to punctuation.
8. Make three sentences, using the plural of sheep [1] in the nominative case, [2] in the possessive, [3] in the objective.
9. Write a declarative sentence; change to an imperative, to an interrogative, to an exclamatory, and punctuate.
U.S. HISTORY
1. What people settled Massachusetts? Where did they land, and was their character?
2. Name four Spanish explorers and state what induced them to come to America.
3. What event do you connect with 1565, 1607, 1620, 1664, 1775?
4. Name the thirteen colonies that declared their independence in 1776.
5. Name three events of 1777. Which was the most important and why?
6. What caused the war of 1812? Who was president during that war? What was the result of it?
7. What form of government was established in 1789?
8. Into what three branches was the government divided? 9. What do the Senate and House of Representatives constitute?
10. What caused the Mexican War? What was the result? 11. What American general commanded at the capture of the City of Mexico?
12. What was the remote and the immediate cause of the great Civil War.
13. Who captured Fort Donelson?
14. Name three commanders of the Army of the Potomac. 15. In what battle was "Stonewall" Jackson killed? How?

.

Watch out DC fat cats!

2011-10-19T12:55:00.000-07:00

The news is just out that the highest income MSA is Washington DC. Federal employees whose compensation averages more than $126,000 and the nation’s greatest concentration of lawyers helped Washington edge out San Jose as the wealthiest U.S. metropolitan area, government data show reports Bloomberg News. So its DC, not silicon valley, not Wall Street and yet the protestors have concentrated on financial centers when they need to be protesting government centers. There has been a rather feeble Occupy DC which is more like a sleep over by a couple hundred at McPherson Square but it has been targeting banks and "corporate greed". More relevant should be government greed where the government has the authority to line its own pockets with our money without our consent. Last year $719 billion went to anti-poverty programs and only 32 percent made it to the poor. Sen. Tom Coburn has pointed out that $340 billion a year is wasted on duplicative programs. Obama has said on many occasions that he is going to go after waste and fraud. Bur like on most issues he is simply lying. The reason is that these are among his most loyal constituents. Regardless of the administration, most federal employees are loyal democrats and he is not about to alienate them. So if Occupy DC wants to be relevant rather than being a hippie commune, they should target the fat cats in the federal government.

Occupy Wall Street: A creation of the media

2011-10-19T12:13:00.000-07:00

What is the genesis of Occupy Wall Street? Perhaps it was the President’s constant demonizing of the wealthy. Perhaps it was his urging others such as the Congressional Black Caucus to put on their marching shoes – although few of the protestors are black. Are what are they protesting? Asking them is not particularly helpful and the media has simply summed it up as “unhappiness”. But why Wall Street? Most of the protestors haven’t a clue as to the function of Wall Street. If they did, they would find somewhere else to protest. So its not Wall Street that they are protesting but rather the achievement of wealth by a talented few. They could be protesting Apple, or Microsoft, or Warren Buffett, or Michael Moore, or Susan Sarandon, or most sports stars. But for whatever reason, these wealthy few are exempt from protestations. So what do the protestors want? There is the famous list of demands posted on their website that they disavow such as forgive all debt worldwide and free college education for all. Then there is the “proposed demands for congress” emanating from the “Sovereign People’s Movement” that reads like an Obama platform such as pass the Buffett rule and revamp the SEC http://coupmedia.org/occupywallstreet/occupy-wall-street-official-demands-2009). Very very few of the Wall Street protestors would have a clue about any of these. It is ironic that when juxtaposed with the Tea Party, this motley crew is lacking. It is also ironic that when the left called the Tea Party racist and nazi, that the nazi party of the US would endorse Occupy Wall Street, along with the socialist party and the communist party. Where is the media outrage about that? So to sum up, these people do not have coherent common demands, they are wildly diverse, they are disaffected, unproductive and reminiscent of the flower children of the 60’s. However, they do have something in common: they hate capitalism and the ability of individuals to make choices via markets. Perhaps this is why their numbers are so small and why without the media coverage they would fade back into the holes that they have come from.

Musings on the Republican candidates

2011-10-19T04:57:00.000-07:00

Rick Perry: There are certain defining moments that influence my views of political candidates. Mine for Rick Perry was when he was asked on Fox's morning show what would he do about illegals currently in America. Now you would think that of all questions, he would be prepared to answer this one. Especially after being beat up on the out of state tuition waiver in Texas for illegals, Perry should have known that this was a logical follow up question. His answer was that we should first address the problem of illegals coming into the country. He explained why a continuous border fence was not practical and that other methods would be much more effective. He was then reminded that he did not answer the question which was what would he do with those currently in the country. He then repeated his non-answer evading the question. The Fox person gave up and said thank you. Certainly as governor of Texas, Perry has been implementing a policy regarding the 1.7 million illegals in Texas. That he was evasive on this issue is illuminating. On the basis of that one answer, Perry has moved to the bottom of my list of republican candidates.

Herman Cain: I have heard several talking heads and callers on talk shows saying that Herman Cain was on the Fed board. One even said that Cain was head of the Fed! Cain was a Kansas City Fed director and chairman. Just like I was an Atlanta Fed - Nashville branch - director and chairman. Neither I or Cain were ever on the Fed's Board of Governors. Fed directors are akin to advisors to the Fed regional banks and have virtually no influence on the actions of the Board of Governors. To say that Herman Cain was on the Fed is misleading and just plain wrong.

Whatever happened to Michele Bachmann?

I liked Rick Santorum when he was in the senate but someone who is an incumbent senator and loses a race for re-election by 20 points cannot be seriously considered for the presidency - regardless of how many people try to use to the Richard Nixon analogy.

Ron Paul is considered a libertarian - why else would he name is son Rand? However, his position on illegal immigration is in conflict with basic libertarian principles. Libertarians generally favor open borders with labor flowing freely in response to market forces. Paul on the other hand favors closed borders. My position is basically libertarian. I favor open borders but all "visitors" must be documented. With no documents they will be arrested and deported as soon as the law permits. While in the country non-citizens cannot avail themselves to entitlements which are reserved for citizens. As to healthcare, hospitals would still not turn down those in need of medical care but those without insurance would be billed for the services and pursued by debt collectors in the event of no pay. One interesting thing to consider is the possibility allowing state citizenship without national citizenship because these decisions are best made at the state level.

Who are Jon Huntsman and Gary Johnson and why do they think we should vote for them? I guess they feel that the exposure will position them for the future.

I also like Newt Gingrich - except for his lobbying for ethanol. Gingrich is clearly the most articulate, informed, intelligent of all the candidates. His knowledge on both domestic issues and foreign policy is encyclopedic. Although trained as a historian, he is rare among that profession in his understanding of market forces and capitalism. I have thoroughly enjoyed his alternative history novels with Bill Fortschen. However, his main liability may be that he will not listen to the advice of his staff and cabinet if elected president.

Mit Romney: Romney keeps touting himself as a successful businessman. However, is he really? He was head of a hedge fund. Although hedge funds serve a vital role in the market of mainly keeping listed firms focused, hedge funds are certainly like what we generally consider as a business. Herman Cain came up through the traditional business world and managed a firm that provides goods and services to consumers rather than to other investors. Although both rely on market tests, they are not similar in scope or responsibility. I for one think that having to meet budgets, to market your products to the public and to be cognizant of the forces of supply and demand are qualities I would like to see in a president and on that basis Cain is superior to Romney. For me I would like to see a Cain-Romney ticket if one were to come from these candidates with Gingrich as Secretary of State.

Herman Cain versus Cornel West Part Deux

2011-10-19T04:12:00.000-07:00

The dust up between Princeton professor Cornel West and Herman Cain is interesting from several aspects. Recall that West said that Cain was smoking a "symbolic crack pipe" by insisting that racism was no longer debilitating to blacks in America. Cain said that racism is overcome by hard work and diligence. Cain said to CNN's Cathy Crowley, “I have seen blacks in middle management move up to top management in some of the biggest corporations in America,” the candidate explained. “They weren’t held back because of racism. No, people sometimes hold themselves back because they want to use racism as excuse for them not being able to achieve what they want to achieve.” West was then asked for his opinion and he said something to think that racism no longer held back people of color. “Well, black people have been working hard for decades. I think he needs to get off the symbolic crack pipe and acknowledge that the evidence is overwhelming. And I think he also knows that if brother Anthony Davis — a brother who was just put to death — were a white Wall Street banker brother, that the response in the nation would have been very different as opposed to a poor black brother. And that’s just one small example — one very small example of racism still at work holding people back.” Huh? What does the execution of Davis have to do with "racism holding people back"? Also West seems to have forgotten that conservative Georgia ex-congressman Bob Barr supported staying the execution of Davis. Nevertheless it is instructive to compare West and Cain and make your own decision about who is correct. West was the son of a Department of Defense contractor and a teacher. Cain's mother was a domestic and father a chauffeur, barber and janitor. West grew up in Sacramento and was educated at Harvard and Princeton. Cain grew up in segregated Atlanta (as did I with separate water fountains, restrooms and schools) and was educated at a black college - Morehouse and has a masters' degree from my brother's alma mater - Purdue. West is a member of the Democratic Socialists of America, a Marxist, pro-Palestinian with his entire career in academia. Cain's business career is well documented. So here we have one individual growing up in the racist segregated south overcoming odds and becoming a successful businessman who understands markets and the power of capitalism saying from experience that racism is being used as an excuse by people like West. On the other hand we have someone who was by comparison a child of privilege, who goes to "elite" schools and becomes a dedicated socialist who opines on a system of which he is ignorant and only knows as a outside observer. Who would you believe?

I bet she isn't Italian

2011-10-15T05:50:00.001-07:00

"When we were young we might have been able to claim ignorance of the atrocities that Christopher Columbus committed against the indigenous peoples," wrote Kennedy School Principal Anne Foley.

"We can no longer do so. For many of us and our students celebrating this particular person is an insult and a slight to the people he annihilated. On the same lines, we need to be careful around the Thanksgiving Day time as well."

Poor Ms Foley. Someone needs to tell her that Columbus Day does not celebrate Christopher Columbus but rather Italian-American heritage. This is because the Icelandic-Americans did not have enough political clout to get a Leif Ericson Day.

True, Columbus was not a particularly good person – which was par for the course for ship’s captains of the day. But even if not viewed through today’s politically correct lens, he was not even a particularly good person in his day. He and his brothers were imprisoned in Spain due to their acts in the new world and on their ships. However, Columbus Day has been a federal holiday since 1937 to celebrate Italian-American heritage. Several states do not observe Columbus Day and have substituted their own versions such as Hawaii’s Discoverers’ Day and South Dakota’s Native American Day. I think that it is interesting that the Italians have their own day. Only the addition of MLK Day celebrates another ethnic American group. What about St. Patrick’s Day, or the Chinese New Year, or Mardi Gras, or Cinco De Mayo as official US holidays? Why not Hanukkah because its for 8 days? Personally, I celebrate December 6 since the 13th amendment was adopted on December 6, 1865.

Well maybe it was Columbus, Mississippi

2011-10-14T14:31:00.000-07:00

We have just observed Columbus Day which is as we all know the day that Columbus discovered Ohio.” In that vein, when I was talking with a group of very bright students at my alma mater – the University of Georgia – we fell into a discussion of history. One of the students said that he did not know that Columbus, Ohio had a harbor. I said, then why is the airport called “Port Columbus? I then asked “who discovered America?” Any educated person knows its not Columbus however most answers were some European. Then I asked them to define “discover”. Most then realized that you cannot discover something that has already been discovered, yet “the Indians” somehow did not get traction in our history books. I then asked “who freed the slaves?” All answered “Abraham Lincoln”. Really? How did he do that? “The Emancipation Proclamation.” When I told them that the Emancipation Proclamation was only valid in wartime and only “freed” the slaves in areas not at war with the union, then obviously Lincoln was not the correct answer. I then said “How about that homeboy East Tennessean Andrew Johnson who was president when the 13th amendment was ratified in December 1865?” Mostly they agreed. Then I told them that the president has no overt role in the ratification process. It is the congress and their two-thirds vote and the vote of three fourth of the states and not the president who ratify constitutional amendments. So who freed the slaves? The answer is the United States of America – all the states including those in the former confederacy – voted for the amendment. I did not know which was most egregious, bright students not knowing about the Emancipation Proclamation or their not knowing the Constitution of the United States.

This is a republic - right?

2011-10-14T13:24:00.000-07:00

Thank goodness we do not have a democracy which is akin to mob rule. Rather the founding fathers decided upon a republic where the power is vested in the states with the power of the federal government limited. Section 8 of the Constitution enumerates the powers of the congress. These are:
To borrow Money on the credit of the United States;
To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes;
To establish a uniform Rule of Naturalization, and uniform Laws on the subject of Bankruptcies throughout the United States;
To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;
To provide for the Punishment of counterfeiting the Securities and current coin of the United States;
To establish Post Offices and post Roads;
To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries;
To constitute Tribunals inferior to the supreme Court;
To define and punish Piracies and Felonies committed on the high Seas, and Offenses against the Law of Nations;
To declare War, grant Letters of Marque and Reprisal, and make Rules concerning Captures on Land and Water;
To raise and support Armies, but no Appropriation of Money to that Use shall be for a longer Term than two Years;
To provide and maintain a Navy;
To make Rules for the Government and Regulation of the land and naval Forces;
To provide for calling forth the Militia to execute the Laws of the Union, suppress Insurrections and repel Invasions;
To provide for organizing, arming, and disciplining, the Militia, and for governing such Part of them as may be employed in the Service of the United States, reserving to the States respectively, the Appointment of the Officers, and the Authority of training the Militia according to the discipline prescribed by Congress;
To exercise exclusive Legislation in all Cases whatsoever, over such District (not exceeding ten Miles square) as may, by Cession of particular States, and the Acceptance of Congress, become the Seat of the Government of the United States, and to exercise like Authority over all Places purchased by the Consent of the Legislature of the State in which the Same shall be, for the Erection of Forts, Magazines, Arsenals, dock-Yards, and other needful Buildings;—And
To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers, and all other Powers vested by this Constitution in the Government of the United States, or in any Department or Officer thereof.

The interpretation of the exercise (or abuse) of these powers has been one of the main tasks of the Supreme Court. However, one thing is clear. The states should be the laboratory where social policy is conducted and not at the Federal level. Therefore, I have no problem with Mitt Romney signing Romney care in Massachusetts, Romney defends his actions saying that any veto of the bill would have been overridden by the legislature. So he attempted to craft a less onerous bill. I have no problem with Rick Perry and the waiver of out of state tuition for illegals in Texas. As Perry points out, in state tuition is not waived. Since Texas is a no income tax state and is sales tax driven, illegals are paying for government just like legal residents through consumption. For me, the argument is that we are a republic and the states are free to craft policies and programs that may work for them. If they don't work then they can be re-crafted or repealed. Regardless, these are state specific. Therefore, I would expect Romney to say that Romney care is Massachusetts specific and no plan should be imposed on other states without their endorsement. The same is true with tuition waiver or with state immigration laws for that matter. If Arizona, Alabama and Georgia want to right state specific laws, then let them if they are constitutional. The same is true for health care and tuition waivers. Condemning Rick Perry on tuition or Mitt Romney on healthcare makes no sense unless they favor implementing those policies nationwide. Then condemn away!

999

2011-10-14T13:07:00.001-07:00

After Herman Cain shot to the top of the polls, the other republican candidates started sniping at his 999 plan. Much like when Rick Perry was at the top and Mitt Romney - of all people - turned attack dog on Texas' waiver of out of state tuition for children of illegal immigrants, the republicans turned their sights on each other rather than President Obama - Newt excepted. The result is that the plan will be nit picked to death. Much time will be wasted and very little accomplished. Well Art Laffer who likely knows more macro economics than any of the candidates has embraced 999. Laffer says “Herman Cain’s 9-9-9 plan would be a vast improvement over the current tax system and a boon to the U.S. economy,” Laffer told HUMAN EVENTS. “The goal of supply-side tax reform is always a broadening of the tax base and lowering of marginal tax rates. Cain’s plan is simple, transparent, neutral with respect to capital and labor, and savings and consumption, and also greatly decreases the hidden costs of tax compliance. There is no doubt that economic growth would surge upon implementation of 9-9-9.” Laffer is mostly correct. 999 is better than the Rube Goldberg machine that we have now and decreases the costs of tax compliance. It does broaden the tax base and lowers marginal tax rates. So what is not to love? First, it includes a national sales tax that hides the cost of government. Again a flat tax is far superior in that everyone knows how much government costs. Bur a consumption tax layered on top of an income tax even if that income tax is a flat 9 percent is inferior to a simple flat tax that eliminates the income tax altogether. As Rick Santorum pointed out in the debate, how many consumers would like to see their sales tax increased? In non-sales tax states like Delaware, this will be a shock. In high sales tax states like Tennessee, it will be a bigger shock especially on high ticket items. Let's go back to Econ 101 and see what will the impact be on supply and demand. First, the reduction in income taxes will shift demand curves for goods and services and for savings outward as net income increases. Cet. par., this means an increase in the prices of goods and services due to the increase in demand and a decrease in interest rates due to the increase in savings. The increase in demand will prompt an increase in the production of goods abetted by the decrease in interest rates. This, in turn leads to a decrease in prices as more supply comes on board. However, counter to this is the impact of an increase in all consumption goods caused by the consumption tax. The higher prices of goods and services will decrease the quantity demanded and works counter to the increase in net income. This may discourage consumption and encourage savings instead causing interest rates to decline further. However, given the decrease in demand, the additional savings will not generate real investment in plant and equipment. With deepest respect to Art Laffer, there is no way that a significant increase in prices can cause demand and production to increase. Thus, rather than mucking around with prices and wondering about the net effect of an increase in income and an increase in prices, the cleanest solution is to not have the government directly interfere with the prices set by the market for goods and services. Instead of 999, Herman Cain and the US would be better served by 18. That is an 18 percent flat tax on all earned income with no exceptions. no deductions and no IRS.

Herman Cain or Cornell West?

2011-10-13T15:22:00.000-07:00

Let me accept all the statistics others give about the poor. However, I have some numbers for you. Last year we spent $714 billion on anit-poverty programs. Thats $17,850 per person or $71,400 a year for a family of four. Note that the official povery line per person is $10,830. We could have just mailed every poor person a check and saved $210 billion. We are spending enough each year to make the poor middle class. Actually we would have spent less since only $3,000 is added on to the poverty level per child. That is why long ago when I started paying enough in taxes to support a family of four above the poverty level I suggested that the government just assign me a family. I would send them the money, give the kids birthday presents and visit them at christmas.
Do you know that the standard of living of America's poor is higher than that of the average European or Japanese? Poverty in America does not mean the devastating poverty seen in the rest of the world. Robert Rector of the Heritage Foundation points out that very few of America’s 40 million that live in poverty are actually impoverished suffering significant hardships. Rector notes such figures as 40 percent own their homes. 84 percent of the households are air conditioned. Two thirds have cable or satellite tv. 3-4 own a care. 98 percent own a color tv with 2/3 owning two or more color tvs. The typical poor American has more living space that the average european. Poor boys at 18 and 19 are an inch taller and 10 pounds heavier than the GIs who stormed the beaches of Normandy on D-Day.
The problem is that we have programs that do not encourage the incentives that lead to a reduction in poverty. We have programs that do just the opposite. Those programs when implemented saw the black nuclear family little different that whites. Now disincentives translate to 70 percent of black babies being born to single mothers. I would heavily subsidize the poor nuclear family whose kids are not in trouble, who go to school and work hard. Surely we are smart enough to structure anti-poverty programs that encourage people not to be poor.
We are all ill served by black intellectuals and our spokesmen. I am looking forward to the day when we have no spokesmen. Who speaks for the Jews? Who speaks for the Asians? Who speaks for the Hispanics? Who is the white spokesman? In the main, black scholars are not comfortable analyzing the black business tradition. Black scholars almost uniformly condemn capitalism. Black scholars tend to be socialists rather than capitalists. This is due in part to their training. They did not major in business but in liberal arts. It was telling to hear the criticism of Herman Cain by Cornell West who resorted to name calling. Well Herman Cain has done more for black people than Cornell West ever has. Just what has Professor West accomplished other than profess? No positive solutions from him. Although they exist in growing numbers, haven’t you noticed that most of the black voices that are pro market and pro free enterprise are seldom heard? The media ignores them and runs to Cornell West, Jesse Jackson and Al Sharpton rather than Bob Woodson or Allen West or Tim Scott.
The media which in the main are also educated in liberal arts chose those who are like minded to speak for blacks. We are left therefore with apologists who blame every ill on racism and demand more handouts which reinforce poverty rather seeking positive solutions.

Occupy Wall Street? Pity the poor parents of these kids

2011-10-10T17:35:00.000-07:00

Have you noticed how the icons on the left are falling all over themselves to praise and sympathize with the Occupy Wall Street bunch? Both Obama and Joe Biden made sympathetic clucking noises. Nancy Pelosi said “I support the message to the establishment, whether it's Wall Street or the political establishment and the rest, that change has to happen,” Robby Mook, executive director of the Democratic Congressional Campaign Committee, wrote: “Protestors are assembling in New York and around the country to let billionaires, big oil and big bankers know that we’re not going to let the richest 1% force draconian economic policies and massive cuts to crucial programs on Main Street Americans.” While calling a turnout of middle class Americans as terrorists and racists (since someone said that they saw a racist sign and a swastika at a Tea Party rally - even if not verified) can you imagine what the Tea Party folks would be called if they acted even a wee bit like the Occupy Wall Streeters? Eric Cantor was kind and understated when he called them a mob. Somehow the dems and the press have ignored the anti-semetic undertones of the rally. There are signs a-plenty complaining about Jewish bankers. One even referred to nazi Jewish bankers! Go figure that one out. So here we have a group protesting the bail out of Wall Street while approving of the bail out of the UAW and General Motors and Chrysler. Also approving of the bailout of state and local governments who used the money to keep paying the teachers unions and the SEIU. So some bailouts are ok. The Tea Party would differ in that it opposes them all. I can't imagine seeing my children with the occupiers and I feel for those who see their kids filthy, attacking the police, trying to force their way into museums, parading around naked and copulating in public while not being able to articulate why they are there. Occupy Wall Street is just this generations Woodstock.

The income inequality nonsense

2011-10-10T17:13:00.000-07:00

The occupy Wall Street rabble have brought to the fore the old mantra of the badness of income inequality. Of course they have no idea of what is "equitable" because even few of this bunch would argue that everyone should have the same income. But let us imagine that everyone had the same income. Would this mean that wealth would also be equal? Of course not. My favorite example is the economics of a prisoner of war camp (http://www.albany.edu/~mirer/eco110/pow.html). Essentially all the prisoners start out the same. They have equal income. They are issued the same clothes and other goods. Monthly they all get the same package from the Red Cross. Thus, all incomes are the same. Complete income equality. Yet before long, the wealth distribution is skewed. Some prisoners are wealthy while others are poor even though their income is the same per month. How can this be? Well tastes and preferences differ. Some smoke and others don't. Barter takes place for cigarettes. Some gamble and lose. Some gamble and win. Some incur debts to others. Soon when the prisoners receive their monthly package, some have to give it or parts of it to those they owe. Some accumulate wealth while others go lacking. As a consequence even if you could start out in perfect socialist heaven, it will quickly become full blown capitalism if left to its own devices. Socialism simply does not work because it goes against basic human nature. The only way to make it work is to have the state enforce it through coercion. And be honest, would you want to share your wealth with society's dregs who don't have a life and are occupying Wall Street?

Go Dawgs! Fran Tarkenton on our teachers

2011-10-03T12:14:00.000-07:00

In his blog Professor Bainbridge asks "What happens if the NCAA adopted Dodd-Frank"? In the same vein, the great Fran Tarkenton - an alumnus of my alma mater as is Bob McTeer - in the Wall Street Journal asks what would happen if pro football was modeled after our public school teachers. It appears in the Wall Street Journal today (October 3, 2011). Its a great piece.

* The Wall Street Journal

* OPINION
* OCTOBER 3, 2011

What if the NFL Played by Teachers' Rules?
Imagine a league where players who make it through three seasons could never be cut from the roster.

By FRAN TARKENTON

Imagine the National Football League in an alternate reality. Each player's salary is based on how long he's been in the league. It's about tenure, not talent. The same scale is used for every player, no matter whether he's an All-Pro quarterback or the last man on the roster. For every year a player's been in this NFL, he gets a bump in pay. The only difference between Tom Brady and the worst player in the league is a few years of step increases. And if a player makes it through his third season, he can never be cut from the roster until he chooses to retire, except in the most extreme cases of misconduct.

Let's face the truth about this alternate reality: The on-field product would steadily decline. Why bother playing harder or better and risk getting hurt?

No matter how much money was poured into the league, it wouldn't get better. In fact, in many ways the disincentive to play harder or to try to stand out would be even stronger with more money.

Of course, a few wild-eyed reformers might suggest the whole system was broken and needed revamping to reward better results, but the players union would refuse to budge and then demonize the reform advocates: "They hate football. They hate the players. They hate the fans." The only thing that might get done would be building bigger, more expensive stadiums and installing more state-of-the-art technology. But that just wouldn't help.

If you haven't figured it out yet, the NFL in this alternate reality is the real -life American public education system. Teachers' salaries have no relation to whether teachers are actually good at their job—excellence isn't rewarded, and neither is extra effort. Pay is almost solely determined by how many years they've been teaching. That's it. After a teacher earns tenure, which is often essentially automatic, firing him or her becomes almost impossible, no matter how bad the performance might be. And if you criticize the system, you're demonized for hating teachers and not believing in our nation's children.

Inflation-adjusted spending per student in the United States has nearly tripled since 1970. According to the Organization for Economic Cooperation and Development, we spend more per student than any nation except Switzerland, with only middling results to show for it.

Over the past 20 years, we've been told that a big part of the problem is crumbling schools—that with new buildings and computers in every classroom, everything would improve. But even though spending on facilities and equipment has more than doubled since 1989 (again adjusted for inflation), we're still not seeing results, and officials assume the answer is that we haven't spent enough.

These same misguided beliefs are front and center in President Obama's jobs plan, which includes billions for "public school modernization." The popular definition of insanity is doing the same thing over and over, expecting different results. We've been spending billions of dollars on school modernization for decades, and I suspect we could keep on doing it until the end of the world, without much in the way of academic results. The only beneficiaries are the teachers unions.

Some reformers, including Bill Gates, are finally catching on that our federally centralized, union-created system provides no incentive for better performance. If anything, it penalizes those who work hard because they spend time, energy and their own money to help students, only to get the same check each month as the worst teacher in the district (or an even smaller one, if that teacher has been there longer). Is it any surprise, then, that so many good teachers burn out or become disenchanted?

Perhaps no other sector of American society so demonstrates the failure of government spending and interference. We've destroyed individual initiative, individual innovation and personal achievement, and marginalized anyone willing to point it out. As one of my coaches used to say, "You don't get vast results with half-vast efforts!"

The results we're looking for are students learning, so we need to reward great teachers who show they can make that happen—and get rid of bad teachers who don't get the job done. It's what we do in every other profession: If you're good, you get rewarded, and if you're not, then you look for other work. It's fine to look for ways to improve the measuring tools, but don't let the perfect be the enemy of the good.

Our rigid, top-down, union-dictated system isn't working. If results are the objective, then we need to loosen the reins, giving teachers the ability to fulfill their responsibilities to students to the best of their abilities, not to the letter of the union contract and federal standards.

Mr. Tarkenton, an NFL Hall of Fame quarterback with the Minnesota Vikings and the New York Giants from 1961 to 1978, is an entrepreneur who runs two websites devoted to small business education.

Saying Bev Perdue is a bird brain insults chickens

2011-10-03T08:39:00.000-07:00

Was I the only one puzzled by the reaction over North Carolina governor's Bev Perdue's comment? You may recall that she said “I think we ought to suspend, perhaps, elections for Congress for two years and just tell them we won't hold it against them, whatever decisions they make, to just let them help this country recover. I really hope that someone can agree with me on that. You want people who don't worry about the next election.” The conservative talkers went ballistic arguing that she should be impeached for suggesting this. This would be a first: impeachment due to stupidity. Naturally most think that a governor should have some modicum of intelligence, However, being raised in the south during the civil rights era and seeing Lester Maddox, Ross Barnett, Herman and Gene Talmadge among others, an ignorant governor comes as no surprise. One of my dearest friends who is an Obama supporter (yes even now) lives in North Carolina and says that Perdue is simply stupid. So why we should be outraged over comments that carry little weight and reflect more on the ignorance of the people who voted for her rather than on the ignorant governor herself is beyond me. All of us (except the governor) know that the only way to suspend a congressional election is via a constitutional amendment and not by simple fiat. Perhaps the governor was engaged in wistful thinking given her dim prospects for reelection. For the talking heads to waste an entire day on this dolt simply shows that it was a slow news day.

Random Thoughts

2011-10-01T06:49:00.000-07:00

Drudge (http://www.drudge.com/news/148721/epa-regs-require-230000-employees-cost) reported something truly astounding. The EPA says that its new regulations on green house emissions (the back door to implement cap and trade) will require 230,000 new employees at a cost of $21 billion. That has got to be a misprint. Surely, congress will stop this by not funding the increase. Well Obama said that he would create jobs so I guess this is how. By the way, the republican candidates have fallen into the trap of saying how they would create jobs. Remember, the government does not create jobs - even if it is a republican one. Jobs are created by the market. The government can hamper job creation (see the current administration) or it can create an environment in which the market will create the jobs.

Note that when Warren Buffett said that he was taxed a a lower rate than his secretary, everyone including conservatives danced around the obvious question "Is Buffett senile?" Perhaps he was simply mistaken and everyone was too polite to correct him. Since we have a progressive tax system, he might have meant that net of deductions, his rate was lower. Perhaps he was referring to the capital gains tax being lower than the income tax rate. But this would assume that he did not pay taxes on the income used to purchase stocks and bonds. Since Buffett has not released his tax returns we can't actually know what he meant. However, if he is feeling guilty, he could always declare his capital gains as ordinary income and pay the higher rate. Surely he is not advocating the taxing of capital gains as ordinary income? Alternatively, he could just write the government a check for a few billion dollars. OK. I give up. He is senile. Nevertheless, he has turned out to be an ordinary liberal wanting to impose his own views on others rather than on himself.

First its Obama, then Maxine Waters, Andre Cason, NPR executive Ron Schiller, and now Morgan Freeman among slews of libs calling the tea party racist. Well how do they reconcile that obvious lie over the fact that the two black tea party backed congressional representatives Allen West (Fl) and Tim Scott (SC) are black and Scott defeated the grandson of old Dixiecrat legend Strom Thurmond? And then there is Herman Cain who won the Florida straw poll besting Mitt Romney and Rick Perry. I guess they think the rest of us are blind or are fools.

Do you remember when Hillary Clinton was in the senate, she said that the republicans were heavy handed and rammed through legislation without debate? I wonder how she felt about health care, Dodd-Frank and TARP2. With health care debate was limited and no amendments were allowed. I don't recall Clinton protesting the heavy handedness then.

Elizabeth Warren, Metropulse and the Progressive mumbo jumbo

2011-10-01T06:13:00.000-07:00

The quote by Elizabeth Warren, Harvard Law professor and maven of the Consumer Protection Agency, who is running for Scott Brown's Senate seat in Massachusetts has been making the rounds. She says that nobody got rich on their own. That the rest of us paid for the roads on which the goods went to market. We paid for the police and fire protection, we paid for the education of the workers who were hired to produce the product and that "part of the underlying social contract is you take a hunk of that and pay forward for the next kid that comes along". This was essentially what the editor of Knoxville's alternative newspaper Metropulse said to me during a local radio talk show. I said that it was the most ridiculous thing I had ever heard. It turns out that this is basic Progressive mantra. It is stupid at is very core. It is assuming that the rich and the rich before them did not contribute to the social infrastructure. Of course this is nonsense because in our "progressive" tax system, those with the highest incomes pay the greatest proportion of the taxes. It is also assuming that there are no net benefits to society coming from the activities of business - that business only takes and not gives. Wrong. The only expropriators in society is the government. Business must pay all sorts of taxes, by employing workers they provide wages, they educate further their workers, provide all sorts of benefits directly and indirectly to both workers and society. The progressive mantra ignores all of this. It is truly amazing that well educated people actually believe this nonsense.

Let the sun shine in

2011-10-01T06:00:00.000-07:00

The bankruptcy of solar panel manufacturer Solyndra has raised interesting questions concerning government loan guarantees, the picking of winners and losers and of course the possibility of scandal. First off the Department of Energy's loan guarantee program for renewable technology was enacted in 2005 with wide majorities. The senate vote was 85 ayes, 12 nays and 3 present. The House vote was 249 ayes, 183 nays and 3 present. DOE was authorized to guarantee $38 billion in loans. This means the bill received support from both republicans and democrats. That the republicans basically supported this bill shows that precious few seek market solutions to our problems.. Remember one of Harold Black's laws is that if it is subsidized it is bad. Some have said that this demonstrates that the government is picking winners and losers. Wrong or else Solyndra would be a winner. That it is a loser means that the market still picks the winners and losers. In order for the government to guarantee that Solyndra is a winner, it would have to do more than just guarantee its loans. It would have to buy its soar panels and then put them on all government buildings, or put them in a warehouse somewhere or perhaps even mandate that we must buy them (health care anyone) all put them on our homes. Regardless, the discussion has not been about repealing or not renewing (pun) the guarantee program but rather looking into only Solyndra. What about the other loans guarantees? By the way, it turns out that the biggest single loan has ironically been an $8 billion guarantee for a nuclear power plant in Georgia! Personally, I think that the renewable energy industry is in its infant stage and that its costs will go down over time as the technology advances. The mistake the president and all the greenies are making is to try to make it replace fossil fuels. Wrong. It won't. It will always at best complement fossil fuels rather than replace it. It will be a niche product serving the demands of those who desire it and are willing to pay a premium for it. To try to use it to replace fossil fuels is a mistake, a big mistake that only the government can afford to make.

Obama prevents job creation

2011-10-01T04:03:00.000-07:00

THE WEEKEND INTERVIEWOCTOBER 1, 2011

How North Dakota Became Saudi Arabia

Harold Hamm, discoverer of the Bakken fields of the northern Great Plains, on America's oil future and why OPEC's days are numbered.
By STEPHEN MOORE

Harold Hamm, the Oklahoma-based founder and CEO of Continental Resources, the 14th-largest oil company in America, is a man who thinks big. He came to Washington last month to spread a needed message of economic optimism: With the right set of national energy policies, the United States could be "completely energy independent by the end of the decade. We can be the Saudi Arabia of oil and natural gas in the 21st century."

"President Obama is riding the wrong horse on energy," he adds. We can't come anywhere near the scale of energy production to achieve energy independence by pouring tax dollars into "green energy" sources like wind and solar, he argues. It has to come from oil and gas.

You'd expect an oilman to make the "drill, baby, drill" pitch. But since 2005 America truly has been in the midst of a revolution in oil and natural gas, which is the nation's fastest-growing manufacturing sector. No one is more responsible for that resurgence than Mr. Hamm. He was the original discoverer of the gigantic and prolific Bakken oil fields of Montana and North Dakota that have already helped move the U.S. into third place among world oil producers.

How much oil does Bakken have? The official estimate of the U.S. Geological Survey a few years ago was between four and five billion barrels. Mr. Hamm disagrees: "No way. We estimate that the entire field, fully developed, in Bakken is 24 billion barrels."

If he's right, that'll double America's proven oil reserves. "Bakken is almost twice as big as the oil reserve in Prudhoe Bay, Alaska," he continues. According to Department of Energy data, North Dakota is on pace to surpass California in oil production in the next few years. Mr. Hamm explains over lunch in Washington, D.C., that the more his company drills, the more oil it finds. Continental Resources has seen its "proved reserves" of oil and natural gas (mostly in North Dakota) skyrocket to 421 million barrels this summer from 118 million barrels in 2006.

"We expect our reserves and production to triple over the next five years." And for those who think this oil find is only making Mr. Hamm rich, he notes that today in America "there are 10 million royalty owners across the country" who receive payments for the oil drilled on their land. "The wealth is being widely shared."

One reason for the renaissance has been OPEC's erosion of market power. "For nearly 50 years in this country nobody looked for oil here and drilling was in steady decline. Every time the domestic industry picked itself up, the Saudis would open the taps and drown us with cheap oil," he recalls. "They had unlimited production capacity, and company after company would go bust."

Zina Saunders
Today OPEC's market share is falling and no longer dictates the world price. This is huge, Mr. Hamm says. "Finally we have an opportunity to go out and explore for oil and drill without fear of price collapse." When OPEC was at its peak in the 1990s, the U.S. imported about two-thirds of its oil. Now we import less than half of it, and about 40% of what we do import comes from Mexico and Canada. That's why Mr. Hamm thinks North America can achieve oil independence.

The other reason for America's abundant supply of oil and natural gas has been the development of new drilling techniques. "Horizontal drilling" allows rigs to reach two miles into the ground and then spread horizontally by thousands of feet. Mr. Hamm was one of the pioneers of this method in the 1990s, and it has done for the oil industry what hydraulic fracturing has done for natural gas drilling in places like the Marcellus Shale in the Northeast. Both innovations have unlocked decades worth of new sources of domestic fossil fuels that previously couldn't be extracted at affordable cost.

Mr. Hamm's rags to riches success is the quintessential "only in America" story. He was the last of 13 kids, growing up in rural Oklahoma "the son of sharecroppers who never owned land." He didn't have money to go to college, so as a teenager he went to work in the oil fields and developed a passion. "I always wanted to find oil. It was always an irresistible calling."

He became a wildcat driller and his success rate became legendary in the industry. "People started to say I have ESP," he remarks. "I was fortunate, I guess. Next year it will be 45 years in the business."

Mr. Hamm ranks 33rd on the Forbes wealth list for America, but given the massive amount of oil that he owns, much still in the ground, and the dizzying growth of Continental's output and profits (up 34% last year alone), his wealth could rise above $20 billion and he could soon be rubbing elbows with the likes of Warren Buffett.

His only beef these days is with Washington. Mr. Hamm was invited to the White House for a "giving summit" with wealthy Americans who have pledged to donate at least half their wealth to charity. (He's given tens of millions of dollars already to schools like Oklahoma State and for diabetes research.) "Bill Gates, Warren Buffett, they were all there," he recalls.

When it was Mr. Hamm's turn to talk briefly with President Obama, "I told him of the revolution in the oil and gas industry and how we have the capacity to produce enough oil to enable America to replace OPEC. I wanted to make sure he knew about this."

The president's reaction? "He turned to me and said, 'Oil and gas will be important for the next few years. But we need to go on to green and alternative energy. [Energy] Secretary [Steven] Chu has assured me that within five years, we can have a battery developed that will make a car with the equivalent of 130 miles per gallon.'" Mr. Hamm holds his head in his hands and says, "Even if you believed that, why would you want to stop oil and gas development? It was pretty disappointing."

Washington keeps "sticking a regulatory boot at our necks and then turns around and asks: 'Why aren't you creating more jobs,'" he says. He roils at the Interior Department delays of months and sometimes years to get permits for drilling. "These delays kill projects," he says. Even the Securities and Exchange Commission is now tightening the screws on the oil industry, requiring companies like Continental to report their production and federal royalties on thousands of individual leases under the Sarbanes-Oxley accounting rules. "I could go to jail because a local operator misreported the production in the field," he says.

The White House proposal to raise $40 billion of taxes on oil and gas—by excluding those industries from credits that go to all domestic manufacturers—is also a major hindrance to exploration and drilling. "That just stops the drilling," Mr. Hamm believes. "I've seen these things come about before, like [Jimmy] Carter's windfall profits tax." He says America's rig count on active wells went from 4,500 to less than 55 in a matter of months. "That was a dumb idea. Thank God, Reagan got rid of that."

A few months ago the Obama Justice Department brought charges against Continental and six other oil companies in North Dakota for causing the death of 28 migratory birds, in violation of the Migratory Bird Act. Continental's crime was killing one bird "the size of a sparrow" in its oil pits. The charges carry criminal penalties of up to six months in jail. "It's not even a rare bird. There're jillions of them," he explains. He says that "people in North Dakota are really outraged by these legal actions," which he views as "completely discriminatory" because the feds have rarely if ever prosecuted the Obama administration's beloved wind industry, which kills hundreds of thousands of birds each year.

Continental pleaded not guilty to the charges last week in federal court. For Mr. Hamm the whole incident is tantamount to harassment. "This shouldn't happen in America," he says. To him the case is further proof that Washington "is out to get us."

Mr. Hamm believes that if Mr. Obama truly wants more job creation, he should study North Dakota, the state with the lowest unemployment rate in the nation at 3.5%. He swears that number is overstated: "We can't find any unemployed people up there. The state has 18,000 unfilled jobs," Mr. Hamm insists. "And these are jobs that pay $60,000 to $80,000 a year." The economy is expanding so fast that North Dakota has a housing shortage. Thanks to the oil boom—Continental pays more than $50 million in state taxes a year—the state has a budget surplus and is considering ending income and property taxes.

It's hard to disagree with Mr. Hamm's assessment that Barack Obama has the energy story in America wrong. The government floods green energy—a niche market that supplies 2.5% of our energy needs—with billions of dollars of subsidies a year. "Wind isn't commercially feasible with natural gas prices below $6" per thousand cubic feet, notes Mr. Hamm. Right now its price is below $4. This may explain the administration's hostility to the fossil-fuel renaissance.

Mr. Hamm calculates that if Washington would allow more drilling permits for oil and natural gas on federal lands and federal waters, "I truly believe the federal government could over time raise $18 trillion in royalties." That's more than the U.S. national debt, I say. He smiles.

This estimate sounds implausibly high, but Mr. Hamm has a lifelong habit of proving skeptics wrong. And even if he's wrong by half, it's a stunning number to think about. So this America-first energy story isn't just about jobs and economic revival. It's also about repairing America's battered balance sheet. Someone should get this man in front of the congressional deficit-reduction supercommittee.

Mr. Moore is a member of the Journal's editorial board.

http://online.wsj.com/article/SB10001424052970204226204576602524023932438.html?mod=WSJ_article_MoreIn_Opinion

Maxine Waters got this one right

2011-09-27T08:53:00.000-07:00

Barack Obama was in full campaign mode when he berated attendees at the Congressional Black Caucus legislative forum in Washington. Its was ironic that in a speech to blacks that they should support him and his jobs package, the media ignored two things. First, there were a hundred protestors walking around silently wearing t-shirts saying “got jobs?”. Second, Obama was wearing a tuxedo! Certainly not the image conveying poverty, unemployment and need. Here is some of Obama’s speech.

"But we got to work. With your help, we started fighting our way back from the brink. And at every step of the way, we’ve faced fierce opposition based on an old idea - the idea that the only way to restore prosperity can’t just be to let every corporation write its own rules, or give out tax breaks to the wealthiest and the most fortunate and to tell everybody that they're on their own," he said. "There has to be a different concept of what America's all about. It has to be based on the idea that I am my brother’s keeper, and I am my sister’s keeper, and we’re in this together. We are in this thing together."
"Against all sorts of setbacks, when the opposition fought us with everything they had, we finally made clear that in the United States of America nobody should go broke because they get sick. We are better than that. Today, insurance companies can no longer drop or deny your coverage for no good reason. In just a year and a half, about one million more young adults have health insurance because of this law," he said. "So in these hard years, we’ve won a lot of fights that needed fighting, and we’ve done a lot of good. But we’ve got more work to do. So many people are still hurting. So many people are still barely hanging on. And too many people in this city are still fighting us every step of the way."
"I need your help. We have to do more to put people to work right now. We’ve got to make that everyone in this country gets a fair shake, and a fair shot and a chance to get ahead. And I know we won’t get where we need to go if we don’t travel down this road together. I need you with me.”
"I don’t know about you, CBC, but the future rewards those who press on. With patient and firm determination, I am going to press on for jobs. I'm going to press on for equality. I'm going to press on for the sake of our children. I'm going to press on for the sake of all those families who are struggling right now. I don’t have time to feel sorry for myself. I don’t have time to complain. I am going to press on."
"I expect all of you to march with me and press on," Obama said. "Take off your bedroom slippers. Put on your marching shoes. Shake it off. Stop complaining. Stop grumbling. Stop crying. We are going to press on. We’ve got work to do, CBC."

Personally I don’t understand the bedroom slippers comment but I marveled at the berating of his audience. Rep. Maxine Waters, a member of the Congressional Black Caucus and one of the most liberal members in Congress said "I don't know who he was talking to because we're certainly not complaining. I found that language a bit curious because the president spoke to the Hispanic Caucus, and certainly they're pushing him on immigration... he certainly didn't tell them to stop complaining," she said. "And he would never say that to the gay and lesbian community, who really pushed him on Don't Ask, Don't Tell." Say what you will about Maxine Waters but in this case, she got it right.

Great minds

2011-09-27T08:27:00.000-07:00

This morning was a posting on Mises Daily (http://mises.org/daily/5688/Twist-Again)

Twist? Again?
by Christopher Westley on September 26, 2011
Do you remember when,
Things were really hummin',
Yeaaaah, let's twist again,
Twistin' time is here!

So crooned that 1960s social philosopher, Chubby Checker, hoping to extend the popularity of the dance craze he started in a follow-up song urging the kiddies buying his music to do it again for another year. It was a successful twist on the Twist; his sequel, "Let's Twist Again" won the Grammy for best rock recording.

They twisted like crazy in 1961. And it wasn't just Chubby and his followers.

William McChesney Martin, the epitome of the boring-by-design Fed chairman, came up with a twist of his own. His "Operation Twist" involved purchasing long-term bonds with the proceeds resulting from the sale of short-term bonds during the first year of the Kennedy administration. Essentially rearranging the Fed's portfolio, the arch-Democrat, whose father helped write the Federal Reserve Act for Woodrow Wilson, attempted to thwart the effects of his monetary expansions on long-term interest rates.

A Yale student at the height of Irving Fisher's fame, Martin knew one of the effects of monetary inflation is an upward pressure on interest rates. Lenders tend to require higher rates of return when they expect the price level to rise. After all, they loan purchasing power and want to be paid back with at least the same amount of purchasing power in the future.

So when I loan you a dollar today, I am actually loaning you the goods you can buy with that dollar. However, I am worse off if the dollar paid back can be exchanged for fewer goods because prices have risen. That's why, if I expect prices to rise, I am more likely to require a higher rate of interest.

But I'd have a harder time charging a higher rate if the Fed is able to force down rates by buying up a bunch of loans in the same category as mine. Such actions counter the "Fisher effect" we teach in macroeconomics. It states that there is a positive relationship between expected inflation and nominal interest rates.

"Clearly, Benanke's policy gun is out of bullets."
By twisting the Fed's portfolio, Martin attempted the monetary equivalent of having one's cake and eating it too. He wanted the Fed to engage in the inflation desired by the political class — to finance the 1960s version of welfare and warfare spending — without inflicting on the country the adverse effects that follow money printing, including rising rates.

The verdict of the economics establishment on this episode is that Martin's time would have been better spent practicing the Twist than implementing Operation Twist. The research indicates a small effect on interest rates. One paper coauthored by future Nobel laureate Franco Modigliani argued that the purchases were too small and spread out over too long of a time period to have a significant effect on long-term rates.

This literature is well-known to Ben Bernanke. The current Fed chair included it in a 2004 paper he coauthored studying possible Fed policies at a time when normal open-market operations are hindered by a zero lower bound federal funds rate. Yet, 50 years later, twistin' time is here again. Buoyed by new research by San Francisco Fed economist Eric Swanson, Bernanke plans on selling about $400 billion in short-term Treasuries and buying longer-term Treasuries with the proceeds, within the next nine months.

Clearly, Benanke's policy gun is out of bullets. His grasping at a new Operation Twist underscores the sense of impotence of Fed policies that have today brought low growth, high unemployment, and a 7.2 percent increase in producer prices over the last 12 months. Its attempts at stabilization have instead wrought chaos both in the United States and overseas, reflecting what happens when, on the outset of a recession, policies are implemented to avoid correction with an infusion of trillions of dollars of new money.

Similar massive interventions, especially on the fiscal side, are what caused a market correction in 1929 to drag into a 17-year contraction. The powers responsible for that episode also tried to mask their impotence with Twist-like gimmicks as well.

It's possible that today the public is catching on. We are far away from 1961. For proof, consider the scrutiny placed on Bernanke's job performance compared to that received by William McChesney Martin.

Martin, of course, was virtually unknown in the popular mind, thanks in part to a large establishmentarian media characterized by three television networks. Bernanke, in contrast, has to deal with the fact that even MSNBC was so underwhelmed by his Twist that it decided to discuss it with Chubby Checker himself.

"The Twist has always meant money for everybody," the 69-year old gushed to his hosts, presumably referring to the song, not the Fed policy tool. If not, then Checker's confusion of money with real wealth suggests he has more in common with central bankers than he realizes.

Christopher Westley is an adjunct scholar at the Ludwig von Mises Institute. He teaches in the College of Commerce and Business Administration at Jacksonville State University.

Well maybe he will be nice to Laura

2011-09-26T16:16:00.000-07:00

We are rapidly approaching the time when it is traditional for the sitting president to unveil the portraits of the previous president and first lady. I, for one, am waiting to see what transpires. George Bush was one of most most gracious politicians we have seen. Perhaps I have a short memory but I cannot recall him engaging in partisan rancor while in the White House. Obama, on the other hand, has been anything but presidential in his behavior conducting open class warfare against the republicans. Consider the speech given by Bush when the Clinton portraits were unveiled on June 14, 2004 (http://www.washingtonpost.com/wp-dyn/articles/A40563-2004Jun14.html). President Bush said Clinton demonstrated "incredible energy and great personal appeal" as a candidate for public office. "As chief executive, he showed a deep and far-ranging knowledge of public policy, a great compassion for people in need, and the forward-looking spirit that Americans like in a president. Bill Clinton could always see a better day ahead -- and Americans knew he was working hard to bring that day closer. Over eight years, it was clear that Bill Clinton loved the job of the presidency. He filled this house with energy and joy. He's a man of enthusiasm and warmth, who could make a compelling case and effectively advance the causes that drew him to public service. And meeting those expectations took more than charm and intellect -- it took hard work and drive and determination and optimism and after all, you've got to be optimistic to give six months of your life running the McGovern campaign in Texas." Bush noted some of Clinton's other accomplishments, including his standing as the first Democrat to win reelection to the White House since Franklin D. Roosevelt. "And I could tell you more of the story, but it's coming out in fine bookstores all over America," Bush added to laughter and applause in what amounted to a plug for Clinton's forthcoming memoir.Bush also heaped praise on Hillary Rodham Clinton, currently a Democratic senator from New York and a favorite target of conservatives.Calling her "a woman greatly admired in our country," Bush said Sen. Clinton "inspires respect and loyalty from those who know her, and it was a good day in both their lives when they [the Clintons] met at the . . . Yale Law School Library." Of course, Hillary Clinton a year later called the Bush administration ""a culture of corruption, we have cronyism, we have incompetence," she said. "I predict to you that this administration will go down in history as one of the worst that has ever governed our country." I predict that Obama will be equally gracious.

Gee Mahmoud, we thought we were in the Tetons!

2011-09-26T15:21:00.000-07:00

How do you ignore stupidity? For two years, first three American hikers – later reduced to two – were held in Iran accused of spying. First, the Iranians are stupid (we knew that already) thinking that three young Americans wandering around the Iranian countryside could find out anything valuable. Standing out like a sore thumb. certainly they could not blend in and pass among the natives. Obviously they were lost. I can relate, having gotten lost on the property adjacent to my farm while following a blood trail while bow hunting. I now carry both a compass and a GPS in my backpack. I am assuming that these hikers somehow forgot their GPS. The basic question is what were they doing hiking near the Iranian border in the first place? I can think of thousands of places of great hikes that are nowhere near Iran. So it is hard to think that these three didn’t know what they were doing. Perhaps they were mindless thrill seekers. The cynic in me says that they knew exactly what they were doing and will now try to cash in with TV appearances and book deals. We have just gotten a taste of their grandstanding in their weepy blasting of the Iranians for their treatment during detention. It almost makes you feel sorry for Mahmoud Ahmadinejad. The money they are paid should be forwarded to reimburse the costs incurred by their sheer stupidity. They should be sent a bill for all the costs incurred trying to get them out of jail. I have no idea what the total costs were but the $1 million ransom paid to the Iranians would be just a start.

Ben Bernanke is Chubby Checker

2011-09-26T09:15:00.000-07:00

Here we go again. Our hyperactive Fed has announced Operation Twist. It is a repeat of 1961 where the Fed tried without much success to flatten the yield curve by buying long term bonds while selling short term bills. In those days one of the purposes was to lower the cost of the government debt. Today the Fed is supposed to be trying to lower long term rates in order (it is said) to push mortgage rates even lower in an effort to boost housing. I find this hard to believe. Mortgage rates are already extremely low and the housing market is essentially flat. Until consumer sentiment turns up and the economy recovers, housing will still stagnate. Personally I think that the Fed feels obligated to seem like it is trying to do something and I seriously doubt if even Bernanke is confident that this Operation Twist will do any good. The reality is that the Fed once it committed itself to aggressive discretionary policy finds that it must keep easing or else market forces will cause rates to rise. I learned this in graduate school in the 1960s and it is still true today. Consider that the Fed has injected over $1 trillion in liquidity into the banking system. That money has piled up in excess reserves. Given the paucity of consumer demand for borrowing, the banks can earn interest just by leaving it in reserves without incurring additional risk. Bankers have told me that their regulators - ironically including the Fed - have hammered them on their lending decisions and have nitpicked their loans actually discouraging them from lending. Now the banks can borrow at virtually zero interest and lend the money back to the Fed. What Bernanke is doing is making the fundamental mistake in thinking that interest rates are the major determinant of lending and borrowing decisions. It is not. Borrowers will borrow at higher rates if demand is high enough to be profitable and will not borrow at low rates if there is little demand for the final products. The Fed should know this. When the recession started I wrote that the best Fed policy was to do nothing. The same is true today. We are ion this mess largely due to misguided monetary policy. Just like the country needs another Ronald Reagan, the Fed needs another Paul Volcker.

Obama's class warfare rhetoric and the new math

2011-09-20T06:57:00.000-07:00

In the president’s continuing conduct of class warfare on higher income earning Americans, he proclaimed “Either we ask the wealthiest Americans to pay their fair share in taxes or we’re going to have to ask seniors to pay more for Medicare. We can’t afford to do both. This is not class warfare, it’s math”. Of course it is class warfare and it is evident that the same group of teachers that taught him economics must have also taught him mathematics. What the president is doing is saying that instead of having a spending problem we have a revenue problem. Nothing could be further from the truth. But framing the argument by blaming the “wealthiest Americans” is campaign rhetoric and decidedly unpresidential. It is time to call the president out and demand what does he mean by “pay their fair share”. We know that he has latched on the catch phrase “millionaires and billionaires” and as part of the new math has defined that group to include those who earn $200,000 and more. Why doesn’t he get asked how $200,000 equates to being a millionaire? Obviously, the president has flunked math by leaving off a zero. However, no one has asked him to define “fair share”. We all know that this group pays the vast majority of federal income taxes and the only group not paying its “fair share” is the 47 percent of wage earners who pay no federal income tax at all. Perhaps he is alluding to Warren Buffet when he says that hedge fund managers pay less than their secretaries. Here again is the new math. There is no way that this can be true. Even if you assume that the hedge fund manager is paying at a lower capital gains tax rate when you do the math, the manager is paying much more than the secretary is at the personal income rate. So Obama flunks this math test as well. The third way the president flunks is that he assumes that we are too stupid to do the math. He asserts that if we just raise the taxes on high earnings that the deficit problem will go away. Really? The American Thinker has pointed out (http://www.americanthinker.com/archived-articles/../2011/03/confiscate_americans_wealth_to.html) that if the government confiscated 100 percent of all income over $200,000 per year then the gain to the treasury would be only $221 billion! This means that the confiscation could not even cover the $714 billion spent on antipoverty programs last year. Lastly, as pointed out in EconLog (Obama's budgetary sleight of hand http://econlog.econlib.org/archives/2011/09/obamas_budgetar.html) the president also flunks the math test by double counting budget cuts as well. Thus the president is either bad at mathematics or is a bad liar.

Kiss the docs goodbye

2011-09-19T09:22:00.000-07:00

Obamacare is a terrible piece of legislation. It is a bill to take care of a minor problem with insurance and in the process screws up medical care. As Mark Perry has pointed out, US medical care passes the market test with over 500,000 tourists coming here to get care. Why did not those people get care at home? Why did many of them come from managed care countries where it is "free" to pay for it here? The answer is obvious. What needs to be asked is whether those tourists will come here once Obamacare gets fully implemented? I doubt it. What I will do is invest in hospital groups that will set up offshore. If the governments in the Caribbean are smart, they will establish medical sanctuaries much as they have done with banking. One likelihood has been given little attention and is most troublesome. It is that Obamacare limits the tests that doctors can recommend for patients without capping malpractice awards. Although a fairly sizable portion of medical costs is attributed to testing, those tests are not being conducted to enrich the doctors but rather to protect them against malpractice suits. Yet Obamacare does not limit malpractice awards. This means that one of the protections for the doctors is taken away. Without those protections we can expect the doctors to start leaving the profession. Looking at malpractice under managed care in Canada and the UK shows that the doctors are shielded. In the UK where the docs work for the government, the government rather than the doctors defend against the suits. In Canada where the doctors remain in independent practices and are re-imbursed by the government, medical malpractice awards are limited to $300,000. An article in the St. Pete Times (http://www.tampabay.com/news/article1021977.ece) notes that neurosurgeons in Miami pay annual malpractice insurance premiums of $237,000 while in Canada a neurosurgeon in Toronto pays $29,000 and one in Vancouver BC pays only $10,650. Not surprising there were less than 1,000 suits in Canada last year and fewer than 100 went to trial. Without a limit on malpractice awards, removing the allowable tests and trying to control costs by squeezing reimbursements will drive doctors out of practice. So not only will we end up with worse medical care, we will also have worse medical care practiced by worse doctors.

All the attacks must mean that Rick Perry is right

2011-09-19T08:57:00.000-07:00

Rick Perry has become a lightening rod. Isn't it interesting that the media seems intent on vilifying whoever is the current conservative frontrunner on the republican side. When Michele Bachmann won the Iowa caucuses, they went after several comments she had made. Now it is Rick Perry they are after for saying that a further easing of money would be akin to treason and calling social security a ponzi scheme. First off Perry may have done us all a favor by calling attention to the Fed. Studies have shown that monetary policy almost always gets easier during the reelection year of an incumbent president regardless of party. Since this Fed has eased like no other lending out over $1 trillion, Bernanke has been put on notice that we all are now watching. It is possible that he would back off anyway. The Open Market Committee is clearly split with the reserve bank presidents taking a less easing policy stance than the governors. There is also the little problem for Bernanke that he will certainly not be reappointed if Obama loses. Given that those prospects are dim, maybe just maybe he will start being less accommodative anyway. By the way, why is it that all the pundits are saying that a conservative like Perry or Bachmann or even Ron Paul could not beat Obama? It seems to me that we are in a state similar to the previous election. George Bush was so unpopular that any democrat would have won. If Obama's numbers do not get out of the 40's he will lose no matter who runs for the republicans. Now back to Rick Perry calling social security a ponzi scheme. Actually social security has giver Charles Ponzi a bad name. A ponzi scheme only works if new "investors" are lured in so that their money goes to pay the old "investors". Eventually Ponzi schemes fail when there is a shortage of new "investors". With social security which is a pay-as-you-go scheme in which current benefits are pay from current "contributions", if there is a shortfall the government can expropriate more funds. As a result the social security tax keeps getting raised as does the income limit. What has been disappointing is that surely all the republican candidates know this and instead of all of them backing Perry and saying the same thing, some are actually attacking him on it. I don't know about you, but I have no enthusiasm for someone who isn't truthful on this issue. All of them should be saying that it is a ponzi scheme and the practical solution is to raise the "retirement" (full benefit) age to make the program financially sound. Then other solutions such as privatization can be phased in.

Speculative trading

2011-09-14T20:01:00.000-07:00

I was asked whether short sales contributed to stock market volatility. My answer was "I don't know" since the research is mixed. There has been a recent paper on the New York Fed's website that links speculative trading to co-movements in global markets. Enjoy. http://libertystreeteconomics.newyorkfed.org/2011/09/can-speculative-trading-magnify-financial-market-co-movement.html

Global Warming: The duping of the Knoxville News-Sentinel

2011-09-11T09:19:00.000-07:00

One of the contenders for dumbest articles of the decade was an article by someone named Eugene Linden in the Los Angeles Times (http://articles.latimes.com/2011/aug/28/opinion/la-oe-linden-climate-20110828). However, what can be expected from a person who wrote "Our brand of capitalism is making us stupid"? That article should be titled "Our brand of capitalism has made me stupid". It shames me to say that my newspaper the Knoxville News-Sentinel decided to devote its entire front page of "Perspective" to this nonsense on September 4. What Linden is saying is that the governors of Texas, Oklahoma and New Mexico have been global warming skeptics yet their states are experiencing severe droughts. I presume Linden is either stupid or thinks that we are stupid. Are we to believe that the current drought is a first time event for those states? Are we to believe that somehow global warming is really Texas, Oklahoma and New Mexico warming? This is utter nonsense assuming somehow "global" warming is state specific. Moreover, Linden expects us to believe that we are able to make a conclusion about global warming from what is occurring at this moment when trends are what are important. Most evidence that I have seen indicates that the earth is actually cooling rather than warming. The polar caps are getting thicker rather than shrinking (sorry Al Gore). Again, how were are supposed to give credence as to what is going to happen in 100 years or more into the future when the same bunch cannot predict tomorrow's weather is beyond me.

Barack Obama's Keynesian laboratory

2011-09-11T02:27:00.000-07:00

This administration is dominated by Keynesians as evidenced in their policies to "create jobs". What has been interesting to observe are their futile efforts, their lack of recognition that those efforts are futile, hence the "we just did not throw enough money at it." Indeed, Maxine Waters (D-CA) said that we need a trillion dollar jobs bill. What the president, his team and people like Rep. Waters refuse to recognize is failure. Such stimulus packages fail because they only evoke a short run and not a long run reaction from economic agents. Studies show that if households know that the stimulus is short term, they will not change expenditure patterns. Rather they use the stimulus to pay down debt. Businesses will do the same. Trying to encourage them to employ more workers will fail unless demand is adequate to keep those workers employed. The previous stimulus did not create new permanent jobs. The people hired, or rehired were terminated when the money went away because there was no change in long term demand. John Maynard Keynes is reported to have said when told that his theories were only relevant in the short term "In the long term we are all dead." So true but the long term is relevant to creating real jobs through policies that are not focused on the short run. I do not expect that this administration is capable of learning this lesson because large scale government is in the DNA of most liberals and the role of government dominates the thinking of Keynesians. For both, it has now become an article of faith and no evidence can dissuade them. One responder to a News-Sentinel article argued that every bit of evidence that I presented could be found lacking or manipulated. I gave up trying. The same is true with Keynesians and sadly the same is true with this administration.

Green cars? A lesson for Obama

2011-09-05T06:48:00.000-07:00

Our president seems to think that he can create green jobs through subsidization. What he does not realize is that if the market will not support the company, then the only way it can survive is through never ending subsidies. The question then becomes whether the government is willing to continually throw funding at money losing enterprises. Here is a lesson on China by Gordon Chang in Forbes.com.

Gordon G. Chang, Contributor

8/21/2011
Warren Buffett Beware: Beijing Trashes Its "Garbage" Green Cars

Powerful Chinese bureaucrats are now fighting over the future of China’s green-car industry, with the National Development and Reform Commission and the Ministry of Industry and Information Technology squaring off in public. In July, the NDRC’s Li Gang referred to the “hopeless” prospects of the country’s “garbage technology” for electric cars. MIIT, replying through former official Hou Shiguo, argued that Beijing was not built in a day.
The fierce debate in the Chinese capital was further fueled by Wen Jiabao’s comments in last month’s issue of Qiushi, a leading Communist Party magazine. “It remains uncertain whether hybrid and electric cars, which are now the focus of much of the development, will be the winners in the end,” wrote China’s premier as he listed “problems with their technical path, problems with core technologies, problems with investment, problems with policy support.”

Beijing has bet big on electric vehicles. In fact, no government has devoted more effort and money than China’s, as official media likes to brag. Last year, for instance, Beijing announced plans to spend 100 billion yuan—about $15.6 billion—to put 20 million “green” cars on China’s roads by 2020. Now, just a little more than a year later, the country’s leaders are rethinking their decade-long commitment and have yet to release crucial details.
That looks like a setback for foreign investors, who have rushed into the green-car sector in the last few years. Take Warren Buffett. In September 2008, the “Oracle of Omaha” took a 10% stake in BYD, the Shenzhen-based battery and vehicle maker, for $200 million. The move landed him on the cover of Fortune in 2009, inside the company’s e6 model with the now-famous caption, “Warren Buffett hasn’t just seen the car of the future, he’s sitting in the driver’s seat.”
There’s no question the photo shows him smiling behind the wheel, but the rest of the caption is in dispute. BYD has sold a grand total of 53 e6s since March 2010. Think the story for Buffett couldn’t get worse? Almost all of the sales of the “car of the future” were to a taxi company in Shenzhen of which BYD owns 45%. BYD has done slightly better with its plug-in hybrid model F3DM. Since the car’s February 2009 launch, the company has sold 365 of them.
BYD’s woes mirror those of its home base. Now, Shenzhen has 1,107 electric or hybrid vehicles on its roads—50 taxis, 618 buses, and 439 private cars. The government’s goal for next year is to boost the total to 35,000, of which 25,000 will be privately owned autos.
That goal will undoubtedly be scaled back. A little over 10,000 electric and hybrid vehicles have been sold in all of China in the last two years. Less than a tenth of them went to private owners, with most of the rest going to governments and state enterprises for trials.
The prospect for coming years will be heavily dependent on central government decisions. Since June last year, electric-car sales to private citizens have been aided by government subsidies of as much as 120,000 yuan per vehicle in selected cities, but some inducements are scheduled to come to an end next year. According to the official China Daily, “future policy remains unclear.” Policy is important because surveys show that consumers will not buy electric cars priced far beyond gas-powered ones.
In China, where no sector is too small for large government incentives, it is inconceivable that the government will halt policy support for green vehicles. For one thing, sales growth in the world’s largest vehicle market is slowing fast, and the overcrowded “pillar” industry needs Beijing’s help.

That help will certainly be good news for BYD, “seen widely as the flagbearer for China’s drive into the green-vehicle market.” That also means the success or failure of Buffett’s investment is in the hands of central technocrats.
So what are the prospects for the green-car industry? China Daily says the “country’s developmental roadmap for new-energy vehicles over the next decade is expected to be formally released during the coming months,” but not all agree. Vehicle manufacturers are arguing about policy as are the government agencies involved.
Moreover, the seemingly intractable disputes are aggravated by the general infighting in the run up to the leadership changes to be announced at the Communist Party’s 18th Congress, slated for next fall. While officials jockey for position at the crucial gathering, the country’s policymaking will be generally put on hold.
Finally, central government spending is now constrained by economic factors. Beijing’s blowout stimulus programs since 2008 have resulted in diminished fiscal capacity, and any government expenditure will aggravate the number-one economic problem of the moment, runaway inflation. Officials will surely continue policy support for green vehicles, but to have an effect, they need to devote even more cash than they have in the past.
All these factors mean BYD will be held hostage to politics in the Chinese capital. Buffett once famously advised others not to invest in things they did not understand. At the moment, it’s hard for Buffett—or anyone else—to understand what will happen to electric vehicles in China over the next few years.

Chinese entrepreneurs leaving

2011-09-05T06:44:00.000-07:00

I have written before that the Chinese are an enigma. All over the world they are entrepreneurs and capitalists. However, their homeland government is practicing fascism - large government married to large businesses. Given that the masses have largely been bypassed, this has all the makings of a major upheaval. Gordon Chang recently posted this on Forbes.com

6/05/2011 @ 10:16PM |Forbes
Chinese Entrepreneurs Are Leaving China

Gordon G. Chang, Contributor

China’s rich, primarily driven by a sense of insecurity, are taking money out of their country. Many are actually preparing to move elsewhere.
According to a new study, almost 60% of China’s “high net worth individuals,” defined as those possessing more than 10 million yuan in investable assets, are either considering emigration through investment programs or are completing the emigration process. The survey, conducted by China Merchants Bank and Bain & Co., also reports that 27% of those with more than 100 million yuan in investable assets have already emigrated and 47% of them are thinking about leaving the Motherland.

The stunning results correspond to reports that the U.S. Treasury unit monitoring illegal money flows has, since the beginning of last summer, detected a surge in hidden cash transfers out of China.

Almost all of the funds supporting emigration applications were spirited out of China in violation of Beijing’s strict rules. The country leads the world in illicit fund transfers, according to Global Financial Integrity, a nonprofit. The estimated total of China’s outbound flows from 2000 to 2008 was a staggering $2.18 trillion.

The flood of “hot money” leaving China picked up in the last quarter of 2008. That was when the Chinese central government announced its stimulus plan, which initiated a new phase in the partial renationalization of the economy. Then, Premier Wen Jiabao started pouring state cash into the state sector and state financial institutions began diverting credit to state-sponsored infrastructure. As a result of the stimulus program, about 95% of China’s growth in 2009 was attributable to investment, and almost all of the investment had come from the state. The percentage for 2010 will not be too far off of that.

Beijing’s plan, however, was good for private entrepreneurs who, although shut out of many portions of the economy by state enterprises, rode the resulting asset bubbles to even greater wealth. The number of the country’s high net worth individuals according to the China Merchants-Bain study will reach 585,000 this year, almost double the figure for 2008.
The emigration of China’s wealthy has, not surprisingly, triggered controversy. “We have been working hard to develop the economy in the past 30 years, but now these elite members of society are fleeing with the majority of the wealth,” said economic analyst Zhong Dajun to the Global Times, the Communist Party-run newspaper. “The loss may be even higher than all the foreign investment we have attracted. It is as if, when the time of harvest comes, we find the fruits have all gone to others’ baskets.” Zhong should not be shocked. Beijing, since 2008, has been targeting private entrepreneurs and abusing them even more than usual, so it is natural they are now trying to protect themselves from a rapacious state.

And the situation is bound to get even worse if Xi Jinping becomes the next Party general secretary at the end of next year, as just about everyone expects. Xi will undoubtedly bring his fellow “princelings” into positions of political power.
The princelings, descendents of former leaders of the People’s Republic, will surely use their new political clout to consolidate their grip on the economy. This means, among other things, that others, especially owners of private domestic enterprises, will have even fewer opportunities than they do today.

“We can only hope the rich people stay out of patriotism,” says Xia Xueluan of Peking University. Patriotism, these days, may be the only thing keeping Chinese entrepreneurs in China. And, from the look of things, it is not enough. The country’s wealthy are going on shopping tours for U.S. real estate and, if they have not done so already, are moving their families abroad. There has, in the last five years, been a 73% increase in Chinese investment immigrants to the United States. Countries, like Canada, are raising their minimum investment requirements for investment-immigrant candidates due to the sheer size of the tide of Chinese cash.
Chinese cash is largely responsible for the third wave of buying from Asia into Vancouver. In an “unprecedented” surge of business for brokerages in that city in February, Chinese buyers snapped up homes, townhouses, and condominiums as sales skyrocketed 70% over the preceding month.
As foreigners pour into China, China’s entrepreneurs are taking their money out. Which group do you think knows more about what is going on?

Is infrastructure code for stimulus?

2011-09-04T06:01:00.000-07:00

This article appeared in the September 4, 2011 Knoxville News-Sentinel

The president has threatened to deliver a speech after Labor Day outlining his program for jobs. If he is true to his muse, it will advocate a bigger stimulus package — the other ones being too small.

But of course it will because there is no way such a package would be approved in the House and it is doubtful that it could find 60 votes in the Senate. So he will call it a jobs package.

Of course, he could advocate more temporary measures such as a cut in the payroll tax. But temporary measures have little effect on either consumer or business spending patterns and as a consequence have little impact on the overall economy.

Instead of advocating measures that would have a real impact on jobs, productivity and economic growth, such as a rollback in personal and corporate tax rates, a moratorium on the implementation of health care "reform," and decreasing regulatory burdens, we likely will see the president's continued infatuation with big government spending.

Look for a renewed push to create "green" jobs and for a massive increase in infrastructure spending. These types of spending appeal to the president and his supporters. It has been well documented that green job spending is mostly wasteful and makes little sense economically. It also is true that the allure of infrastructure spending is a siren's song — one that is difficult to resist but which will inevitably end up with a bad result.

The first stimulus program created few permanent jobs and is generally considered as a failure. So look for the president to try to call a new stimulus program a different name — infrastructure. This too will be a failure.

Consider the case of Japan, which in the 1990s initiated an expansive infrastructure program. Some observers have credited the decline in the Japanese economy directly to its squandering billions of yen on wasteful projects. The Japanese also forgot that such projects also would need billions to be spent on upkeep lest they fall into disrepair.

The Japanese economy declined as government spending increased. Indeed, there is a parallel in this country. When the president was elected, he had sizable majorities in both houses of Congress. Together they initiated an unprecedented expansion of government spending.

If increases in government spending were supposed to foster economic growth and job creation, Japan would be booming and we would be better off today than in 2008. That we are significantly worse off is a repudiation of those who would advocate more government spending as a solution.

Again, such policies do not stimulate growth but rather serve to deter it. We have learned our lesson. The question is has the president?

© 2011, Knoxville News Sentinel Co.

Congressional racism?

2011-09-01T10:46:00.000-07:00

All of a sudden, black democratic members of the congressional black caucus are focusing on the tea party as being racist. First Maxine Waters (D-CA) told a group that the tea party can go to hell. Then Andre Carson (D-IN) said that tea party members of the house of representatives said “Some of these folks in Congress right now would love to see us as second-class citizens. Some of them in Congress right now of this tea party movement would love to see you and me ... hanging on a tree." The news has misreported this saying that Carson said that the tea party wanted blacks to be lynched. No. Carson explicitly says that its members of congress who want this. Where is the outrage? Carson is obviously ignoring the two black republicans just elected with tea party backing, Alan West (R-FL) and Tim Scott (R-SC). We all know about West, the colonel who was forced to resign because he threatened to kill an Iraqi terrorist unless he told where fellow snipers were located. Tim Scott is noteworthy because he defeated the grandson of Strom Thurmond in the republican primary. What Waters and Carson are doing is firing the first salvos in what is going to be an ugly race war in the upcoming presidential election. What the democrats have obviously decided to do is that since Barack Obama cannot run on his record, what will be done is to conduct an ugly campaign based on class envy and on race. When Carson was asked about his comments, he would not relent. His spokesman said that Carson “believes the tea party caucus in the House is seeking to protect millionaires, oil companies and tax cuts for the wealthy at the expense of funding for "child nutrition, Head Start, job training and job creation. The tea party policies are devastating, Carson believes, for those at the low end of the economic scale.” This is not only race warfare but class warfare as well. Would anyone be surprised that the result of such a campaign will be the further exacerbation of the divide between black and white that exists in the country? It is only a miracle that there has been little violence motivated by such comments. It makes little difference that there are black conservatives and black members of the tea party. I have spoken at several tea party rallies. The tea party is not racist. It arose because of the fear of increasing government interference in our lives, the increased government spending, the deficits and the irresponsible increase in the national debt. If these had grown during any administration, it would have give birth to the tea party. That the current president is black is irrelevant. He happened to have been the democratic nominee and any democrat could have beaten John McCain. The only good thing about the election of Obama is that he saved us from another President Clinton. Be forewarned, this is merely a preview of the presidential campaign. The apparent democrat strategy is to make this a black versus white, rich versus poor campaign hoping to appeal to white guilt. The democrats have already lost white men but trying to convince white independents that a vote against Obama is a vote for racism and "millionaires and billionaires" is apparently their only hope for victory.

Black and Hispanic conservatives and white male liberals: A common ground

2011-08-25T13:01:00.000-07:00

Like it or not the reality is that there are racial differences in political opinions. I was listening to the radio and the commentator said that blacks and Hispanics were conservative but voted liberal and was wondering why. Both groups have higher percentages of regular church goers than whites but vote democratic. Whites on the other hand mostly vote Republican in national elections. Bob Beckel once remarked that the Democrats lost the white male vote in the Goldwater election and have slipped ever since. Given the high percentage of church goers I wondered how blacks and Hispanics could support a party whose leaders routinely trashed religion and actively seek to minimize it in America. So I was wondering whether blacks and Hispanics were truly conservative but thought it was in their best interests to vote democratic? The best site I know for looking at the answers is the Pew Research Center (pewresearch.org). I looked at the support for the hot button issues of abortion, gun control, gay marriage and immigration. Here is what I found from Pew Research Center polls taken in 2009.
Support for:
Abortion
White 47%
Black 50
Hispanic 39
Naturally I presumed that the lesser Hispanic support was because of Catholicism.
Ban Handguns:
White 38%
Black 64
Hispanic 61
I was stunned. I grew up in the deep south and every black adult I knew had guns. Basically the attitude was that protection was needed because the local law enforcement people would not. It would seem that blacks and Hispanics not whites would be the ones most in favor of handguns.
Gay Marriage:
White 39%
Black 26
Hispanic 45
Again I was stunned, not because of the low black support because homosexuality is still widely stigmatized in black communities but because of the high Hispanic support and their catholic faith.
Support for the Arizona immigration law:
White 72%
Black 42
Hispanic 27
Again I was stunned, but this time by the black percentage. Since illegal immigration has been touted as a vehicle for job loss for blacks, it would seem that blacks would favor more restrictive immigration laws.
Well back to the question: are blacks and Hispanics conservatives. The results from Pew indicate that they are not. Indeed, there are black and Hispanic conservatives but apparently their percentages equal those of white male liberals.

So what happens when China explodes?

2011-08-23T19:15:00.000-07:00

What an amazing year! We have seen turmoil in Yemen, Iran, Algeria, Bahrain, Tunisia, Qatar, Syria, Egypt, Lebanon, Sudan, Morocco, Oman, Mauritania and Libya. Did I leave out any? The despots in the Middle East and Africa have probably not had a worse year. Naturally, the question is "when will China blow up"? Consider the following: everywhere in the world, the Chinese are capitalists. They are the entrepreneurs, the shop keepers, the bankers, the merchant class all over the world - except mainland China. In their native homeland, the communist government is practicing fascism - big government and big business and has allowed only limited entrepreneurship among the masses. If you think the Chinese economic engine is mighty now, imagine what it would be if the Chinese people's freedom to invest, to choose, to own property were unleashed? But right now, Chinese mightiness is vastly overstated and overrated. Consider that now domestic consumption is only a pitiful 35 percent of GDP. That emphasis on exports while surpressing imports is an historically failed strategy. It harkens back to mercantilism which was derided by Adam Smith in 1776 as lowering the economic well being of the British people. The same is true today. With the Chinese so dependent upon exports, the slowdown in the world economies is leading to a sharp decline in Chinese growth. Chinese well being has not been appreciably affected by its economic growth. The Chinese poor and its rural population have benefited hardly at all. At home, Obama fuels class envy. The same is doubly true in China where there is real discord between the poor majority toward the nonpoor and the well to do bureaucrats. China's problems have been compounded by the anger of its people over its staggering losses on its holdings of US Treasurys and other foreign assets estimated to be over $3 trillion. Add to this the growing threat of inflation and revaluation of the yuan. All this means that the Chinese are in real trouble. Jealousy and envy among its people, a faltering economy, authoritarian leadership, lack of democracy and a myriad of troubles point to the inevitable - a collapse of the Chinese economy and a revolt of its amongst its people that will make the upheavals in Africa and the Middle East look like little leaguers.

Barack Obama is brilliant - so what's the good news?

2011-08-23T18:42:00.000-07:00

Isn't it interesting that usually the press accords someone with degrees from Harvard and Yale with intelligence - unless his name is George Bush? I am old enough to remember the emergence of Jimmy Carter on the national scene. He was trumpeted as being perhaps the most intelligent candidate for president since Woodrow Wilson. Indeed, he went to the US Naval Academy and was a nuclear engineer. Consider that he is also a Nobel laureate, a professor, best selling author, humanitarian and farmer, it is difficult to quarrel with Carter being an accomplished individual. The Christian Science Monitor has gone as far as saying that “Carter was one of the most brilliant presidents we have ever had”. I am not going to dispute that. One evidence of the truth of the statement was that he appointed me to run the National Credit Union Administration. However, all that brilliance and intelligence did not translate into a successful presidency. Carter was plagued by the Iranian hostage crisis and skyrocketing energy prices. He gave the impression that he could not make a tough decision. The usually fawning Washington Post ran a Herblock cartoon with Carter and his senior advisor Hamilton Jordan walking into a room full of the polls with Carter saying “Let’s go see what our policies are today”. The pundits concocted a misery index. The economy was in sad shape and there was a “crisis of confidence”. Carter famous “malaise” speech said:

“I want to talk to you right now about a fundamental threat to American democracy. . . . I do not refer to the outward strength of America, a nation that is at peace tonight everywhere in the world, with unmatched economic power and military might. The threat is nearly invisible in ordinary ways. It is a crisis of confidence. It is a crisis that strikes at the very heart and soul and spirit of our national will. We can see this crisis in the growing doubt about the meaning of our own lives and in the loss of a unity of purpose for our nation. . . .In a nation that was proud of hard work, strong families, close-knit communities, and our faith in God, too many of us now tend to worship self-indulgence and consumption. Human identity is no longer defined by what one does, but by what one owns. But we've discovered that owning things and consuming things does not satisfy our longing for meaning. . . .I'm asking you for your good and for your nation's security to take no unnecessary trips, to use carpools or public transportation whenever you can, to park your car one extra day per week, to obey the speed limit, and to set your thermostats to save fuel... I have seen the strength of America in the inexhaustible resources of our people. In the days to come, let us renew that strength in the struggle for an energy-secure nation.”

Isn’t it stunning how this speech – with the exception of the reference to God – could have come from the mouth of our current intelligent, brilliant president – Barack Obama?

Harold Black's First Law Lives

2011-08-23T17:47:00.000-07:00

All my students know Harold Black's First Law: "Any law worth being circumvented will be". Evidence confirming the law abound. Indeed, it is harder to find disconfirming evidence. Consider the impact that regulators have had on community banks. Everyone knows that regulators always over-react. Rightly or wrongly the regulators were castigated for their perceived lack of regulatory oversight prior to the great recession. As a consequence, they have over compensated. The community banks are now faced with the regulators looking over their shoulders and micro managing. Since hardly any regulator has any experience actually running a financial institution, it is not surprising that they are mucking things up and actually working counter to any economic recovery. When lending should be encouraged it is being discouraged. Recently Main Street Bank of Kingwood, Texas has announced that it is giving up its charter and reorganizing as a pure small business lender. Community bankers tell me that every loan is closely scrutinized - so those loans that the banker would normally make based on experience, will not be made because the regulator does not understand the customer. Regulators are also telling bankers to raise capital even in cases in which loan losses are low. Regulators are demanding changes in portfolio balance based on what might happen rather than what is likely to happen. So many bankers are saying "take this bank and shove it". However, they have to get permission to quit with regulatory approval. The bankers who are quitting are not really giving up banking. Rather they are giving up being a bank. There are other institutions that perform banking functions without having to get a bank charter and have no banking regulator oversight (finance company, REITs and a mortgage banking company are examples). These institutions can't take deposits. Rather they borrow the money to fund their portfolios. So Main Street's bankers who got tired of trying to bank under the thumb of the regulators can quit and organize a bank-like firm and do what they do best - banking.

Rational markets? Who says?

2011-08-23T17:08:00.000-07:00

One of the things taught in finance classes is that markets are rational. The markets, students are told, price stocks based on their estimate of future earnings. News does not move markets unless the news is unanticipated for markets have already incorporated news that was expected. Students are also taught that markets are informationally efficient but there are degrees of efficiency. Weak form efficiency is when stock prices reflect only past information. Semi-strong efficiency is when stock prices reflect publicly available information. Strong market efficiency is when markets know all information both public and private. There is evidence that all have some truth associated with them - yes even strong market efficiency. However, recent events belie all notions of market efficiency. The markets move on reports of unemployment, inflation, consumer sentiment, oil prices, riots in Tunisia, Greek debt, French banks, if the Fed might announce easing or if the Fed does nothing. None of this can remotely be considered rational - especially in light that every knows the economic numbers will be revised. It is also interesting that the revisions do not move markets even though the initial numbers are always wrong. Consider last week when the Fed announced no policy change. The Dow fell by 200 points. Then when the statement was scrutinized, the word went out that the Fed had actually said that while it anticipated no change, that it had discussed the use of a wide range of tools. The markets immediately rebounded by 500 points. Such actions by professionals can only be described as irrational and put a lie to all that finance professors teach. Maybe its time to admit that the markets have a herd mentality and all those traders simply don't have a clue. By the way, most make their money by trading and not by the profitability of their actions. So just keep that in mind. Brokers get paid by the trade regardless of whether the stock goes up or down so if you are out there churning your stock along with all those professionals, your net return will be lower than if you simply bought and held. Its time for all to re-read Burton Malkiel's Random Walk Down Wall Street.

More Missed Opportunities

2011-08-23T12:27:00.000-07:00

I have essentially been away for a couple of weeks (at the Outer Banks working on my tan). I did not read a newspaper, nor looked at the news, nor did anything on the internet. When I got back I learned that the stock market has some wild swings - although it was almost at the same level as when I left. The Libyans had Qaddaffi on the run, Warren Buffett feels guilty about his tax payments, and the president has decided to run for re-election by bashing the Congress. First, I do not pay any attention whatsoever to the daily movements of the market. Since I am a long term investor, I care about trends and only look at what the market is doing quarterly. This day to day stuff can drive you crazy. It was shameful how the financial networks were milking the swings, actually saying that retirees should be worried about their 401Ks. Well if those accounts are not properly diversified then there should be concerned but otherwise - no. Second, I am certain that the administration's PR machine will tout the stance Obama took on Libya in supporting the NATO effort despite the criticism from Republicans for circumventing the War Powers Act. I guess this will be elevated to the "I got Usama" level. Third, there is already a mechanism in place for Buffett to send his guilt money to the IRS. However, in general if he is espousing raising the tax on the wealthy, he should know that there is not enough money there to make a serious dent in the deficit. Also, if the result will be to tax entrepreneurs and job creators, the result will be perverse. History tells us that when you raise the tax rates of upper incomes, you get less tax revenue. If you want to drive the high earners to shelters and off shore, then this is the ticket. Lastly, I am absolutely convinced that this president and his staff are tone deaf. Blaming the republicans in congress for the failures of this administration assumes that the voters forgot that Obama and the democrats had bullet proof margins in both houses of congress. Obama got health care "reform", Dodd-Frank, and everything else except Cap and trade (so he told the EPA to enforce it instead). His minions enacted the left's "progressive" agenda in all of the cabinets and agencies without a single republican vote. He surely can't be serious. Speaking of tone deaf, I have written before that this is a president that enjoys the trappings of the office but not the job. All the golf, parties, fund raisers and toney vacations speak to this juxtaposed to the lackluster leadership in the office of the president. What genius advised the president to go on a bus tour right after the Iowa caucuses in Darth Vader's bus? And what genius said take your vacation at the playground of the rich and famous during a time of perceived crisis, down economic times and general bad news? I would have advised the president to go to Dollywood or to Branson. Think of the power of those optics! I can't imagine Pat Caddell or Dick Morris or Bob Beckel advising any of this nonsense. The president seems clueless but perhaps he knows that unlike his predecessor, the media is going to be silent. But just ask yourself: what do you think the reaction would be if George Bush had done exactly the same things?

Congress has always been a joke. But now it is serious

2011-08-13T04:07:00.000-07:00

There is a great website, brainyquote.com. Many of the following are from it.

Suppose you were an idiot, and suppose you were a member of Congress; but I repeat myself.
Mark Twain

It could probably be shown by facts and figures that there is no distinctly native criminal class except Congress.
Mark Twain

I have wondered at times what the Ten Commandments would have looked like if Moses had run them through the US Congress.
Ronald Reagan

The only difference between death and taxes is that death doesn't get worse every time Congress meets.
Will Rogers

We have the right as individuals to give away as much of our own money as we please in charity; but as members of Congress we have no right to appropriate a dollar of the public money.
Davy Crockett

Being elected to Congress is regarded as being sent on a looting raid for one's friends.
George Will

No man's life, liberty, or property are safe while the legislature is in session.
Gideon J. Tucker

No man's pocketbook is safe while Congress is in session.
Mark Twain

The American Republic will endure until the day Congress discovers that it can bribe the public with the public's money.
Alexis de Tocqueville

We the people are the rightful masters of both Congress and the courts, not to overthrow the Constitution but to overthrow the men who pervert the Constitution.
Abraham Lincoln

Some more random thoughts

2011-08-12T14:59:00.000-07:00

What is body wash?

What is the commercial about with the guy dancing in Grand Central Station while everyone is standing around in trench coats?

Aren’t you irritated by the commercial with those guys wearing raw meat being chased by wild animals?

How about the commercial that asks if you are going scuba diving, which razor will you chose? The answer of course is “neither”.

I hate all AXE commercials – without exception.

What about that awful Dairy Queen commercial with poor Mary Lou Retton inside a pinata?

I cheer for sasquatch in all those beef jerky commercials.

I can prove that jerky is not food. I was given some and after trying unsuccessfully to break it down by chewing, gave it to my dogs. They wouldn't eat it either.

It must be hell being in a generation where the main talent to “sing” is cursing and the main talent to “act” is the ability to scream.

Why are all the dems quoting Reagan? Reagan’s Morning in America has become Obama’s Mourning in America.

I kid you not. The electric “Smart” car model is called the ED.

Michele Obama is touting a change in diet to counter obesity in kids while eating cheeseburgers. Has anyone tried to link obesity to this generation sitting at computers all day playing games or tweeting on their smart phones rather than being outside playing?

I trace the decline in America to my grandson’s not knowing what division in which the Atlanta Braves play.

I saw a poll in which 72% said the country was going in the wrong direction, 12% said that it was going in the right direction and the rest didn't know. What dimension are those 28% living in?

Isn’t it interesting that no one has called the rioting in Britain a race riot?

Kudos to Philadelphia’s mayor for telling kids to pull up their pants, cut their hair, eschew tattoos and maybe they can get a job.

I just got my first social security check. I am now officially an old man.

Only politicians could write this balanced budget amendment

2011-08-07T15:45:00.000-07:00

As it now stands the proposed balanced budget amendment is a mess and if enacted will create a mess that will lead to its repeal. Do I hear prohibition?
1. The proposal is that federal expenditures for the fiscal year not exceed revenues.
2. Federal spending is capped at 18 percent of GDP
3. The president must submit a balanced budget to congress each fiscal year
4. Taxes cannot be increased to balance a budget unless approved by three fourths of both houses of congress.
5. The provisions can be waived if approved by a three fourths vote of both houses.

Here are some immediate concerns:
1. How are the revenues determined? If it is based on a projection by CBO then since CBO usually gives scenarios such as “most likely” and “least likely” which is chosen? Also, economists predicting anything have a worse track record than weathermen. Wouldn’t it make more sense to base expenditures on the previous year’s revenues?
2. What happens if the budget is not balanced? Do the courts then step in to enforce the amendment? Do you really want judges involved?
3. I thought the constitution put the power of submitting a budget in the house of representatives? Why should the president be given the responsibility? The office of the president is probably the least able choice to submit a budget. What happens to all the congressional committees charged with deciding on the detailed line by line expenditures to each federal agency? It seems to me that the proposal should say that the congress must submit the balanced budget.
4. What happens if the president refuses to submit a budget? Is this an impeachable offense?
5. What happens if the congress refuses to accept the president's budget?
6. Although most of us agree that spending must be controlled, a limitation of 18 percent would be sufficient in and of itself. There are estimates that show that a cap of 18 percent would balance the budget all by itself in 10 years.
7. Lastly, as I have written before, the debt ceiling is an effective limiter of federal spending if it is adhered to. So why not simply make a raising of the debt ceiling subject to the three fourths majority?

The US Downgrade - Who is to blame?

2011-08-07T07:20:00.000-07:00

Standard and Poor's just downgraded the US from AAA to AA+. Who is to blame? First off, everyone is blaming everyone else. Obama is blaming Bush. No surprise since he blames Bush for everything. The Democrats are blaming the Tea Party. Huh? Yes they are blaming the Tea Party for creating the environment in which the president could not get his wish for a "clean" raising of the debt ceiling which would have raised the ceiling by $2.4 trillion with promised cuts in spending! These people are lunatics since the downgrade occurred because spending is out of control and would have been made worse if Obama had gotten his way and were there not a Tea Party. The Republicans are blaming the democrats for their lavish increase in spending, forgetting that this mess started with Bush's embracing of TARP. I guess the independents are blaming anyone who is not an independent forgetting that they are the ones who elected all the congresses and presidents in the first place. So the answer is simple: everyone is to blame except the Tea Party. The reason for the Tea Party's existence is out of control federal spending. However, until enough voters get the religion we apparently are going to continue on our profligate ways. Did I hear "Japan" anyone? By the way, Japan's bonds are probably the riskiest on the planet for developed countries, yet they are also rated AA (as is China - the least riskiest). Everyone is acting as if they know that the downgrade means and what effect it will have. In reality no one has a clue. First it assumes that the downgrade somehow caught everyone by surprise. Go figure. Only if there was a surprise would there be a market reaction. But unlike Nolan Ryan's fastball, we all saw this coming. So the markets should have already adjusted. Nevertheless, the link between the Treasury bond market and the stock market is tenuous at best. Moreover, no one knows the impact on Treasury yields although the folks at Fox seem to think that rates on everything for everyone will go up. Au contraire. In the face of an anticipated downgrade, rates on long term Treasurys last week actually fell as investors sought save havens from the European debacle. Say what you will, the dollar is still a lot safer than most world currencies. I suspect that given what is happening in the eurozone that Treasury bond rates will not rise dramatically. Bond markets are still going to be determined by the fundamentals of inflation and economic growth. Rising rates of inflation and continued lagging economic growth will ultimately cause Treasurys to rise and not any downgrade by S&P.

The debt crisis – Did I miss something?

2011-08-02T10:23:00.001-07:00

In the recent debate and resolution of the debt crisis, it seems that all sides have declared victory. How is this possible? Naturally, if all the big spenders are not harping then we all should be suspicious. The deal raises the debt ceiling by a whopping $2 trillion while cutting spending by the same amount. Some intriguing questions arise. First, two trillion dollars seems like a lot. The reason the debt ceiling was reached was that in this fiscal year, the amount remaining to be spent out of appropriations would have required the Treasury borrowing in excess of the debt ceiling. That amount is not $2 trillion but a number far less. The question is why didn’t the debt ceiling rise by just that amount? The answer is that the spending is slated to increase by larger amounts over the next two years and the congress did not want to revisit the issue at the start of the next fiscal year. Second, if the borrowing authority increased by $2 trillion and spending was “cut” by $2 trillion, then doesn’t that create considerable slack between the ceiling and the actual debt? The answer is no. The major sources of the increase in spending are in social security and medicare. Those have not been addressed. Third, the enormous increase in spending over the past four years have been baked into the cake and are part of the base. If that spending were temporary, then at least $2 trillion would have gone away meaning there would have been no crisis. That the politicians allowed $2 trillion to be put into the base line is obscene. Fourth, all of the hand wringing is just another charade. Remember when we had that “crisis” last year that forced Obama to prolong the Bush tax cuts and “cut” $300 billion in spending? As I pointed out then, $300 billion is a rounding error. The same can be said for the $900 billion in “cuts” that are to occur immediately and the $1.5 billion in “cuts” that are supposed to come later. If these were truly cuts, then the debt ceiling would have only had to be raised by the amount necessary to get through the fiscal year - a much smaller amount.In reality, despite the rise in the debt ceiling and the supposed "cuts", US debt is still projected to rise by $7 trillion over the next decade instead of rising by $9 trillion. We have been had.

Tax the poor!

2011-07-29T10:55:00.000-07:00

I keep hearing those on the left saying that people must pay their "fair share". These are buzz words for "increase taxes". However, it is curious that with 49 percent of workers not paying any taxes at all with the heaviest burden falling mainly on high earners, the only group not paying their "fair share" are those who are not paying any taxes. Thus, this group does not have any skin in the game. Campaigns to lower taxes do not find empathy with those who pay no taxes and neither do campaigns to raise taxes. It seems to me that a minimum requirement of citizenship should be the paying of federal income taxes. This is why I am for a flat tax. A flat tax of 20 percent would provide the government with "revenues" sufficient to cover its expenditures - except with the current administration. It would also mandate that everyone have skin in the game. I know you will hear the hue and cry about taxing those with the lowest incomes, but that is no tragedy. Low income people receive subsidies through things like food stamps, housing subsidies and numerous welfare programs. Thus, although they will pay taxes, they will get the money back through these programs. However, they will now have an interest in any discussion on taxation. A flat tax is simple and elegant. First, eliminate the federal income tax. Second, count as income all earnings regardless of source. This is must preferable to the so-called "fair" tax which is a consumption tax. A consumption tax is hidden. This is bad because it is important for all to know exactly how much of their income goes to the government. A flat tax accomplishes this while the "fair" tax does not. So in order for people to pay their "fair share", everyone must pay.

No to a balanced budget amendment

2011-07-29T10:41:00.000-07:00

A part of the debt ceiling bill that the House is insisting on is a balanced budget amendment. I am not certain if the bill says that a balanced budget amendment must be voted on in both houses or if it says that it must be passed by both houses. If it is the latter, then the ceiling crisis will continue because it is doubtful if the senate will pass the amendment. Nevertheless, I am opposed to a balanced budget amendment. To balance the budget, you must either decrease spending or increase taxes. Which is the more likely outcome? It is raising taxes. Consider the following: let us say that the congress must incorporate revenue projections from the congressional budget office into the appropriations process. Forecasters usually give three choices - most likely, a low side estimate and a high side estimate. Which one will the congress choose? Given the choice, spending will be dictated. It is guaranteed that whatever choice is made, it will not occur. How many times have economic forecasters been correct? Don't you hear that when economic statistics are released, the commentators always say that the numbers were "not anticipated" by the forecasters. Therefore, regardless of what estimate is chosen, it is highly likely that the actual revenues will not match with the appropriations thereby calling for an adjustment in revenues (taxes). So what can be done? Language would have to be incorporated into the amendment limiting the ability of the congress to balance the budget through taxation. This would mean that any balanced budget amendment would be complicated which would lessen its passage otherwise the spirit of the amendment would be circumvented virtually every year. What is ironic is that the discipline for limiting government is already on the books. It is the debt ceiling itself. If the congress just says no to raising the ceiling, the federal government would be forced to submit appropriations roughly equal to projected expenditures and no more. Congress could no longer write deficit budgets. So in essence we already have a law mandating a balanced budget on the books already. What is happening now is one of those rare instances in which the congress is not ignoring the law or constantly modifying it. What all this means is that we must elect more people to congress (senate and house) who pledge not to raise the debt ceiling.

Musings on the debt ceiling

2011-07-26T18:06:00.000-07:00

With all the talk about the debt ceiling I have found it intriguing that the Republicans keep submitting new budgets. The question is why? Does this mean that each proposal is better than the previous ones - or worse? By keep submitting proposals it gives me the impression that they are grasping at straws. Again the question is why? Since spending legislation is initiated in the House, then it seems to me that they have done their job. That the majority leader in the Senate refuses to bring the legislation to the floor, not allowing debate or a vote should not cause the House Republicans to write another piece of legislation, in essence negotiating with themselves. I have also have not heard anything about democrats in the house participating in the crafting of the bills. Surely there are blue dogs that would be willing. This reminds me of when the republicans were complaining about being excluded from crafting the hallmarks of the previous congress: health care, Dodd-Frank, and the stimulus. At least extend the invitation to the dems and then it might be more difficult for the senate to ignore the bills. If the senate will not consider the house bills, then I wonder how will the legislation get introduced? I guess a house democrat will introduce it. Then do the house republicans refuse to let it get to the floor? Also there are those who keep carping that the president does not have a plan. That is no surprise. This president has never been the source of any of the legislative initiatives during his administration. He has adopted bills introduced in the congress as his own and then pushed them on the public with speech after speech after speech. At least in this case, he does not want to state a position on spending cuts because he is looking to the next election. He feels that any words about cuts in entitlements will come back to bite him - although he did allow a $500 billion cut in medicare to make the math work on Obamacare. Remember that spending legislation starts in the house not in the Oval Office so for once, the president is not at fault on this one. Lastly, all this mess could have been avoided had the president demonstrated any political acumen. He could have easily adopted all the Simpson-Bowles recommendations.

US women's soccer. I give up: Lets move on

2011-07-20T03:48:00.000-07:00

I posted a piece on the total lack of diversity on the women's soccer team. Subsequently I was informed that one player was biracial. But back to the point. I was stunned by the responses I got that totally were off point (to me). I am a free market economist and am a devotee of Adam Smith, Milton Friedman and the great Karl Brunner (my phd advisor). I analyze everything in turns of market solutions. When teaching my students on the effects of restricting the market by doing something like fixing prices I illustrate the difference between a market solution and one made by individuals. I say what is the price of a ticket for a football game between UT and Alabama. They say $50. Is that market clearing? They all say no. Then what is the result? They say scalpers and long lines at the ticket office. I then say suppose the tickets were priced at the market clearing? They say "no lines". I then say suppose you had all the tickets how would you distribute them? They invariably say "first come first served". I say: that is your tastes and preferences but don't be politically correct, what would you really do? They say: I would give them to my fraternity brothers or I would only give them to cute girls. I then say those are your tastes and preferences too. The point being that discrimination is more likely if individual tastes and preferences rather than markets determined the distribution of goods and resources. So in asking why is the soccer team 100 percent Anglo (subsequently corrected), I got points raised that told me why it should be mostly white but not all white. Some pointed to (mostly) black basketball teams or to (mostly) white swimming teams or to (mostly) black sprinters forgetting that swim teams and sprint teams are actually market determined. They are selected solely based on timing heats. Surely that is nondiscriminatory. However soccer teams and basketball teams are ultimately selected by individuals who make judgments making 100 percent of anything more likely. Again I would proffer the same question regardless of the racial composition of any squad if it were selected and turned out to be 100 percent one race. You see, I don't care about the race of the team. That is intellectually uninteresting. If it were the US basketball team, the same question would occur to me. I care about addressing the question as to why it is 100 percent one race (not knowing about Shannon Box). I see this as being totally consistent with my market principles. That it generated such a firestorm with me being accused of racism has been illuminating. So keep those comments coming. I will publish them but this my last word on the matter.

Spending More Just Doesn't Work

2011-07-19T03:43:00.000-07:00

This is my Knoxville News-Sentinel article from July 3, 2011

Spending More Just Doesn't Work

Albert Einstein is reputed to have said that insanity is doing the same thing over and over and expecting different results. However, you need not be an Einstein to figure out that those arguing that the government didn't spend enough to stimulate the economy must be certifiable.

Yet this is the often-heard defense of government spending. We heard this with regard to the war on poverty and other failed government programs. We have heard it with education. It does not matter that there is no correlation between educational achievement and spending. It doesn't matter that the war on poverty destroyed poor families and dramatically increased out-of-wedlock births. It doesn't matter that TARP and stimulus did not lower unemployment.

The avowed solution is always "spend more."

The reality is that Keynesian macroeconomics has failed. Government spending is part of the problem, not the solution.

Government spending has to come from somewhere. If it comes from the private sector through raising taxes or selling government securities, it reduces the money that the private sector can spend and invest. If it comes from creating money, it causes inflation. There is considerable economic research showing that government spending stunts job creation as private investment - the fuel of job creation - falls.

Economist Martin Feldstein estimates that each dollar of deficit spending has added less than a dollar to gross domestic product. Since Keynesianism has given us more spending and less growth, it is now time to try something different.

First, we all seem to have conveniently forgotten that before any recovery can take place, people and businesses must shed their debt. Stimulus always fails in a recession because both households and firms reduce debt rather than expand demand or employment.

Once debt is reduced, the rival macroeconomic theory says that to grow the economy incentives need to be provided that are not temporary. Any change perceived as temporary will fail.

People and businesses will not alter their behavior due to temporary changes. Households who have less debt can be motivated to spend if their taxes are reduced. Businesses can be motivated to expand if regulatory burdens are lessened and corporate taxes are reduced. Investors will invest more if capital gains taxes are reduced. Jobs will not be exported if the government is less hostile to domestic businesses.

The Environmental Protection Agency is seeking to destroy jobs in the coal industry; the National Labor Relations Board is fostering a hostile U.S. work environment; increased costs are evident through Obamacare; the administration is threatening to increase taxes on the "wealthy." They all point to why the economy is not growing despite $2 trillion in "stimulus."

The actions taken by this administration have stunted any recovery. What is ironic is that economics tells us that we can have recovery without spending a dime. Isn't it time to test that theory?

And they call Bachmann "The gaffe queen"?

2011-07-19T03:40:00.000-07:00

One of my dearest friends recently moved back to her home state of North Carolina after 40 years in DC. Although an avowed liberal she is open-minded and has conservative friends (other than just me). The other day she said that NC governor Bev Perdue (a democrat) was stupid. Then she said that Michele Bachmann was "so stupid she could be elected governor of North Carolina." I asked her to give me examples of Bachmann's stupidity and she cited two of the examples that I had earlier posted on my blog (the mix up regarding Lexington and Concord and saying John Wayne was from Waterloo, Iowa). She however knew that all the founders were not pro-slavery because of the Quakers. I then said well at least Bachmann did not think there were 57 states. I was incredulous when she said "Now who would say that?" I said Barack Obama and she did not believe me so I sent her the following. By the way, it occurred to me that if George Bush had said it, she would know it. This simply shows how we are shaped by what media sources we listen to and read. I told her that this was only a sampling of Obama's gaffes. I could easily have sent her 20 more.

Obama gaffes

1. "I've now been in 57 states -- I think one left to go." --at a campaign event in Beaverton, Oregon.
2. Not knowing (or ignoring) the royal etiquette in the toast to the Queen.
3. "The Middle East is obviously an issue that has plagued the region for centuries." --Tampa, Fla., Jan. 28, 2010.
4. "UPS and FedEx are doing just fine, right? It's the Post Office that's always having problems." –attempting to make the case for government-run healthcare, while simultaneously undercutting his own argument, Portsmouth, N.H., Aug. 11, 2009
5. "One such translator was an American of Haitian descent, representative of the extraordinary work that our men and women in uniform do all around the world -- Navy Corpse-Man Christian Brossard." –mispronouncing "Corpsman" (the "ps" is silent) during a speech at the National Prayer Breakfast, Washington, D.C., Feb. 5, 2010 (The Corpsman's name is also Christopher, not Christian).
6. "The reforms we seek would bring greater competition, choice, savings and inefficiencies to our health care system." --in remarks after a health care roundtable with physicians, nurses and health care providers, Washington, D.C., July 20, 2009.
7. "It was also interesting to see that political interaction in Europe is not that different from the United States Senate. There's a lot of -- I don't know what the term is in Austrian, wheeling and dealing." --confusing German for "Austrian," a language which does not exist, Strasbourg, France, April 6, 2009.
8. "No, no. I have been practicing...I bowled a 129. It's like -- it was like Special Olympics, or something." --making an off-hand joke during an appearance on "The Tonight Show", March 19, 2009.
9. "I didn't want to get into a Nancy Reagan thing about doing any seances." --after saying he had spoken with all the living presidents as he prepared to take office, Washington, D.C., Nov. 7, 2008.
10. "What I was suggesting -- you're absolutely right that John McCain has not talked about my Muslim faith..." --in an interview with ABC's George Stephanopoulos, who jumped in to correct Obama by saying "your Christian faith."
11. "I'm here with the Girardo family here in St. Louis." --speaking via satellite to the Democratic National Convention, while in Kansas City, Missouri, Aug. 25, 2008.
12. "Let me introduce to you the next President -- the next Vice President of the United States of America, Joe Biden." -- Springfield, Illinois, Aug. 23, 2008.
13. "On this Memorial Day, as our nation honors its unbroken line of fallen heroes -- and I see many of them in the audience here today -- our sense of patriotism is particularly strong."
14. "In case you missed it, this week, there was a tragedy in Kansas. Ten thousand people died -- an entire town destroyed." --on a Kansas tornado that killed 12 people.
15. In London when he signed the guest book at Westminster Abbey. Obama reportedly asked someone nearby what the date was and they told him "May 24," assuming incorrectly that the leader of the free world would know what year it was (2011). Instead, Obama wrote in his leftist scrawl "24 May 2008."
16. How about the movie DVDs for Prime Minister Gordon Brown that wouldn't work on British players, and the iPod for Queen Elizabeth II thoughtfully pre-loaded with some of the Real Good Talker's own speeches.
17. “First time I saw 10th Mountain Division, you guys were in southern Iraq. When I went back to visit Afghanistan, you guys were the first ones there. I had the great honor of seeing some of you because a comrade of yours, Jared Monti, was the first person who I was able to award the Medal of Honor to who actually came back and wasn’t receiving it posthumously.“
18. Not only does Obama not know how many states there are, he also doesn’t know where they are. During the 2008 primary campaign, he explained why he was trailing Hillary Clinton in Kentucky: “Sen. Clinton, I think, is much better known, coming from a nearby state of Arkansas. So it’s not surprising that she would have an advantage in some of those states in the middle.” Obama’s home state of Illinois, and not Arkansas, shares a border with Kentucky.
19. Remember when he claimed that the civil rights march in Selma, Alabama resulted in his birth? “There was something stirring across the country because of what happened in Selma because some folks were willing to march across a bridge. So they go together and Barack Obama Jr. was born”. The only problem was that Obama was born in 1981 four years before the march at Selma.
20. How about his speech in Missouri when he said that one of the problems in the Afghan war is a lack of translators because “if they are all in Iraq, then it is harder for us to use them in Afghanistan.” Well it would be hard to use them anyway since Iraqis speak Arabic or Kurdish while Afghans speak Pashto and Farsi.

More on the social security scare

2011-07-18T14:23:00.000-07:00

Has anyone heard of FICA? The other day, Sean Hannity was interviewing Laura Ingraham and was ranting about Obama’s threatening seniors regarding social security checks. Recall the president said that he does not know if the money would be there in August to pay seniors if the debt ceiling were not raised. Hannity said that there were enough revenues to pay seniors. Ingraham rightly pointed out that social security is a pay as you go system with current payments coming out of FICA receipts. Hannity was confused. He said “I thought they had depleted the lockbox.” Ingraham patiently pointed out that yes: those monies had been siphoned off into the general tax fund and spent but still there were enough coming in from FICA to pay current recipients. I don’t think Hannity ever understood. Fast forward to an interview of an Obama supporter and Stuart Varney of the Fox News network. The Obama apologist said that the payments to the government were lumpy and the needed amount may not be at the treasury when the checks had to go out. Varney then insisted that the treasury secretary could then make a decision as to who would get paid when and the president was being irresponsible. At no time in the conversation were FICA payments even mentioned. At present the estimate is that we have another 25 years or so until FICA receipts no longer cover promised payments. Perhaps that is why Harry Reid said that we don’t have to worry about social security until 2036. Maybe Harry Reid should tell this to Obama in the debt ceiling talks.

News Flash: The Post Office is self sufficient!

2011-07-16T07:43:00.000-07:00

Have you ever seen a commercial and scratched your head and said "that makes no sense"? Actually, let me re-phrase that: the latest commercial that makes no sense is the American Postal Workers Union currently running a commercial saying that it delivers 8 zillion pieces of mail annually (give or take a zillion) without costing the taxpayers a dime. It says it is fully funded by what it charges for services. Huh? I thought the Post Office ran a deficit last year of $8.5 billion and it was the fourth straight year of losses. It lost $2.2 billion last quarter. If it is not getting subsidized by taxpayers then how can it stay in business? The commercial is parsing the facts (lying). Direct subsidies from taxpayers ended in 1982. Since then the Post Office has covered its deficits through borrowing rights from the Treasury (taxpayers). It owes the Treasury (taxpayers) over $4 billion and has a revolving credit line of $3.4 billion and has said that if it does not get relief it will default on its payments.. It also gets indirect subsidies from the taxpayers having to only pay 0.3% on outstanding debt and its credit line. The taxpayer subsidies also extend to its not paying any taxes, federal, state, local and, no vehicle registration fees.

Who needs death panels? We already have medicare

2011-07-16T07:12:00.001-07:00

Next month I will get my first social security check. At my age, my doctors’ visits are now regularly scheduled events (annual check up, dermatologist, allergist, and periodontist). Since I will be leaving Blue Cross Blue Shield and will be under Medicare I asked each if they would still keep me as a patient. They all said yes. I was relieved but something occurred to me. Under my present health care plan, the provider seldom pays 100 percent of the bill – even with the co-pay. I always get a bill for what was not covered. Since the Federal government’s solution to the costs of medicare is to pay the doctors an ever decreasing percentage of the bills, the talking heads say that the doctors are getting squeezed and will start accepting fewer and fewer medicare patients if they accept them at all. This makes no sense to me. It simply means that instead of getting a bill from my doctor for $50, it will be for a larger amount. Currently if I did not pay my doctors, they would drop me even though I have Blue Cross Blue Shield. So why would they drop me if I have medicare if I continue to pay the amount not covered by the government? In essence, medicare is being means tested as well as rationed. It is rationed because as most of us already know, medicare has a higher denial rate than any private insurer. It also covers fewer prescription drugs. So I don’t understand no one has ever pointed this out. There is no need for “death panels” in medicare because it is already being rationed. Thus, there should be no need for death panels either in Obamacare for the same reason.

There is no good news about the budget deficit

2011-07-13T15:54:00.000-07:00

I was going to write about how both sides on the debt ceiling debate were deceiving the American public but my old friend Larry Lindsey beat me to it. In his Wall Street Journal opinion piece "the deficit is worse than we think" (June 28) Larry points out that the numbers are cooked. First, an important question is what interest on the debt is being used to calculate how much interest is owed on the existing debt. The current rate is artificially low as a result of ramped up purchases of Treasurys by the Fed. If the Fed comes to its senses and conducts a more rational policy, interest rates will rise. Larry points out that if the rate goes up to 5.7 percent which is the average over the past 20 years, the deficit rises by $420 billion in 2014. Second, the revenue projections are based on economic growth forecasts put together by Rosie Scenario. The forecasts project growth rates in excess of 4 percent per annum even though we have been growing at half that. A one percent lower growth rate brings in $750 billion less in revenues PER YEAR! Third, Larry finally reiterates that the costs of Obamacare - like most government cost estimates - will be much higher than the political-based numbers foisted on the American public. Larry says be prepared for costs higher by $75 billion rising each year. I know it is too much to expect the administration to put forth more rational numbers but the republicans accepting the administration's numbers is inexcusable. All this means that whatever "solution" is decided upon by the congress and the president, the issue will have to be revisited after the 2012 election. Everyone loves to talk about the so-called "nonpartisan congressional budget office". I used to be a visiting scholar at CBO and why its called nonpartisan when its head is appointed by the house majority leader president pro tempore of the senate is beyond me. But John Boehner needs to make clear to the CBO chairman Doug Elmendorf that he expects realistic numbers rather than those that all of us know are wrong.

Are we seniors stupid yet?

2011-07-13T12:28:00.000-07:00

When the president lied about not knowing whether there would be enough money if the debt ceiling were not raised to pay seniors, the disabled and the military, the talking heads on the right went ballistic. They were saying that this was a typical democratic tactic to scare old people. Well as an old person I am insulted. I was not scared nor do I know any other old person who was scared. I am reminded of what my father told me when he said "Please tell me when I get stupid." What he meant was that he was getting calls and solicitations that only made sense if he had lost all his faculties - gotten stupid. Well my dad died at 86 and never got stupid. The talking heads are somehow assuming that us old folks somehow have gotten uninformed, or believe anything that apparently only the democrats tell us. It also puzzles me how anyone came to the conclusion that a failure to increase the debt ceiling would somehow only cause the voters to take it out on the republicans. It seems to me that if the republicans would somehow shed the mantle given to them by George Will as "the stupid party" they would in the house pass the Toomey bill to require the payment of the interest on the debt (so no default), entitlements and the military. The budget wonks tell us that that would leave $30 billion per month available for other spending. Personally I feel that if the government cannot get by on a mere $30 billion a month, it should not exist period. However, it would make the politicians earn their money by allocating it and making those tough decisions. Getting rid of all the Federal agencies except those specified by the constitution would be a good first step. As I said in the posting on "What would Adam Smith do?" if the government only performed its constitutional functions and the roles outlined in the Wealth of Nations, I bet we could get by on $30 billion and that amount would increase monthly as the debt decreased monthly as it matures and is not increased.

Obama threatens seniors!

2011-07-12T11:10:00.000-07:00

Whenever states have contemplated cuts during budget crises, they always pick high profile cuts like shutting down parks, cutting teachers, firefighters and police. They never talk about cutting faceless staffers in the bureaucracy or duplicative programs. By cutting stuff that voters like, the tactic is intended to leave spending alone so voters will endorse increases in taxes. The same tactic has now occurred at the federal level. The president has just said "I cannot guarantee that those checks (social security and military pay) go out on August 3rd if we haven't resolved this issue. Because there may simply not be the money in the coffers to do it." Obama said this in an interview with CBS Evening News. This president lying is nothing new. But this is outrageous and of course the interviewer on CBS News did not call him on it. All of us know that the government gets enough money to pay the interest on the debt, all entitlement payments and pay the military and even have a few billion left over. Pat Toomey (R-PA) had introduced legislation to mandate that the government must continue to pay these first knowing that the administration would try to play these games. By threatening to withhold these checks, Obama is hoping that the voters will pressure the republicans to raise the debt ceiling by raising taxes and not lowering spending significantly. Well if the republicans cave and fall for these disgraceful tactics then they are just fools. Only those politicians in districts populated by those who do not pay taxes should be able to safely vote for an increase in taxes. Even those who vote to increase the debt ceiling while decreasing spending should be in peril at the polls since spending cuts are never certain. The only certainty is that with no increase in the debt ceiling the federal government cannot increase spending. Ladies and gentlemen: Just say no.

What about those 261 millionaires in Congress?

2011-07-12T10:46:00.000-07:00

I have never understood how wealthy politicians could bash themselves. Obama, Pelosi, Harry Reed, Chuck Schumer have taken up the mantra of railing against tax breaks for millionaires and billionaires. This has also been taken up by the vast majority of the leftist talking heads on talk radio and the news channels. During the current discussions on raising the debt limit (see my Just say no in March) the president has said that if federal expenditures are to be cut, then limiting the tax breaks going to the “wealthy” must be part of the discussion. Of course his definition of the wealthy now includes those making $250,000. As I pointed out before, his singling out of the tax break for corporate jets was merely posturing and typical democrat class warfare in that the tax break was in the stimulus bill that no Republican voted for. I wonder if Claire McCaskill, John Kerry and other democrats with private jets are on board with thiw. Or what about those Gulfstream jets that Nancy Pelosi order for congressional use? I don’t believe that the media cared to point any of this out either to the president or to the public for that matter. The democrats have also railed (notably Nancy Pelosi) that the republicans want to cut medicare and her caucus would never vote for a decrease. Excuse me? Didn’t the democrats cut medicare by $500 billion to get the mathematics of Obamacare to work? How can the democrats get away with telling these two obvious lies? What I want asked is that if the top 50 percent of wage earners pay 96 percent of federal income taxes, how much more are they supposed to pay – 99 percent? Currently the top 1 percent of Americans earn 19 percent of the income but pay 37 percent of the income taxes. How much more is going to have to be ripped off to satisfy the president? The president always talks about “shared sacrifice”. Well if we are to engage in shared sacrifice, then we should include the federal government. While jobs in the private sector workforce has shrunk by 6.6 percent under Obama, the federal workforce has grown by 11.7 percent. With unemployment rate between 9-17 percent (depending on definition) the federal unemployment rate is only 4.4 percent which is essentially full employment. The republicans should say to the president, that revenues are not the problem and consequently are off the table. The solutions lie in spending excesses and only spending is on the table. We should put in place a plan to gradually pare down federal employment. I suggest a three percent cut in total federal employment (including the senior executive service) per year. I also suggest that total compensation for any position in the federal government not exceed the median total compensation for comparable jobs in the private sector.

Is Michele Bachmann a flake or is Chris Wallace just calling attention to himself?

2011-07-12T07:03:00.000-07:00

Sarah Palin, Michele Bachmann, Sharon Angle, Christine O’Donnell, Ann Coulter, Michelle Malkin, Laura Ingraham

We all know of the liberal media bias against conservative women as seen in the vicious attacks and slanted reporting. I googled “media attacks on conservative women” and got hit upon hit of comments many of which would cause me to blush – if that were possible. I then googled “media attacks on liberal women” and got mostly referrals to attacks on conservative women by liberals (with” liberal” and “women” being in the same search) or attacks by talk show hosts on Hillary Clinton, Nancy Pelosi and Maxine Waters. Now I am as put off by Rush Limbaugh’s comments on Hillary Clinton’s ankles and Michele Obama’s weight as I am by liberals referring to Sarah Palin as a cheerleader and Michele Bachmann as a prom queen. However, the liberal media’s domination of the major newspapers and major networks means that more of their comments are widely disseminated than those of talk radio. I know that many would have said “talk radio and Fox News”. But Fox News has had its moments as well. There was Chris Wallace astoundingly asking Michele Bachmann if she was a flake. (By the way, Wallace also had a “gotcha” moment when he asked Herman Cain about “the right of return”. Cain did not have a clue as to what Wallace was talking about. If Wallace had phrased the question differently by asking Cain his position on whether Palestinians should be allowed by Israel to reclaim the land of those displaced by the 1948 Palestinian War, there would have been no hesitation on his part). However, Wallace would not have asked the “flake” question to Nancy Pelosi or Maxine Waters or Sheila Jackson Lee – all certified flakes. Britt Hume even commented that Bachmann’s gaffes may hurt her campaign. What gaffes? The media has pounced on four. The first is her saying that John Wayne was from Waterloo, Iowa. The second was the comment that the Founding Fathers worked tirelessly to end slavery. The third is in a speech in New Hampshire, she said that she was in the state “where the shot was heard around the world at Lexington and Concord.” Lastly some have ridiculed her for saying that the Great Depression was caused by the “Smoot-Smalley tariff”. John Wayne was from Winterset, Iowa which is 150 miles from Waterloo. Some of the Founding Fathers did own slaves but others such as Alexander Hamilton and Ben Franklin were adamantly opposed to it. Significantly, the Northwest Ordinance in the Articles of Confederation of 1787 banned slavery in the new western territories. Would such a stunning ban in 1787 have existed were not there significant opposition to slavery among the founders? Bachmann’s speech in New Hampshire was a gaffe since Lexington and Concord are in Massachusetts. But is this any less of a gaffe than candidate Obama when he said "It is wonderful to be back in Oregon," Obama said. "Over the last 15 months, we’ve traveled to every corner of the United States. I’ve now been in 57 states. I think one left to go”? Maybe Britt Hume would explain to us how this hurt his candidacy. Finally, I am impressed that any person today would even have heard of the Smoot-Hawley tariff much less recognize its critical role in the Great Depression. That she mispronounced it is trivial. Remember when Obama pronounced the “s” in corpsman? Where was the ridicule from the media there? A good deal of the attacks against conservative women come from the liberal equivalents of the talk show right (Chris Matthews, Keith Olbermann, Rachael Maddow, Ed Schultz) who basically speak to themselves because their audience is so small. Indeed, most of us would not have even heard of them if conservative talk show hosts didn’t waste our time relating to us their comments. I have often said that Chris Matthews must talk about Rush Limbaugh so much because he knows that Limbaugh can’t resist talking about himself and in so doing calls attention to Matthew’s show. Finally, Chris Wallace asking Bachmann if she was a flake reflects on Wallace’s ignorance. Here is Bachmann’s response "I think that would be insulting to say something like that because I'm a serious person. I'm 55 years old. I've been married 33 years, I'm not only a lawyer, I have a post-doctorate degree in federal tax law from William and Mary. I've worked in serious scholarship. My husband and I have raised five kids, we've raised 23 foster children. We've applied ourselves to education reform. We started a charter school for at-risk kids. I've also been a state senator and member of the United States Congress for five years." Flake indeed. Any liberal woman with these credentials would be canonized by the media, not scorned.

It is now time to profile

2011-07-08T05:01:00.000-07:00

Last year, when we were flying to Cigar Aficionado's Big Smoke in Las Vegas my beloved Connie was subjected to humiliation by TSA agents at the Knoxville airport. She was wearing a loose fitting skirt (very attractive) and was told that they had instructions to fondle everyone wearing such types of dresses. I wondered if that applied to muslim women. She was irate and is still fuming one year later. Now comes the word that TSA is on the lookout for bombs inside the body - even though there is no documented threat. Give me a break! Are they saying that last year's invasions of privacy are just a minor foreboding of what is to come? Pray tell: how is the TSA going to look for inside the body bombs? Please spare me the lurid details. I can only say that it will be interesting to see whether the flying public finally rebels against this one. My suspicion is that it will be tested on international flights into the United States first rather than domestically. When I flew back from South Africa last year, the scrutiny was much greater than when I flew to South Africa. After the bags getting screened and going through security, we had to go through security again before boarding the plane with the men being separated from the women. I asked what was going on and was told that they were only following instructions from the American government. Well I can tell you this, when Connie and I fly to Las Vegas this year, if they even try to conduct a search like they did last year, we will not allow it and will go to the parking lot, get in the car and drive instead. God knows what we will do if they decide that an aging all-American looking couple poses a threat to national security and decide that we might be carrying a body bomb.

Bending Ben Bernanke

2011-07-08T04:46:00.000-07:00

The sainted Anna Jacobson Schwartz once told Ben Bernanke that he was out of his league (http://www.nytimes.com/2009/07/26/opinion/26schwartz.html). She was right. Ben Bernanke has been the most malleable Fed chairman since G. William Miller and is in the discussion for the worse Fed chairman ever (although Paul Krugman would nominate Alan Greenspan). Bernanke has been the ultimate accommodator to the administration. If the Fed did not monetize the national debt by directly buying Treasurys, the fiscal policy initiatives of the administration would have collapsed under their own weight. Let me explain. The administrations' dramatic $2 trillion increase in spending could only occur if they got "revenues" from increasing taxes or by selling Treasurys. They did the latter. However, the market only wants a certain amount of Treasurys for portfolio reasons and will not buy more than that amount. In rides the Fed who then purchases them directly from the Treasury. In addition to buying commercial paper, mortgage backed securities and who knows what from the private sector, the Fed bought from the Treasury as well. Now I am perhaps the only one who is not overly critical of the Fed buying from the private sector. Those purchases are actually collateral for loans at the discount window and will be bought back by the borrower when the loans are repaid. If the loans default then the Fed can either sell the collateral or sit on it. Buying Treasurys directly is entirely a different matter. If the Fed did not buy them, then the ability of the government to expand its spending is curtailed. This is why I would like to see a law prohibiting the Fed from purchasing Treasurys directly except in the case of a national emergency declared by the president and confirmed by a super-majority vote in both houses of Congress. Why the Bernanke Fed has chosen to abdicate its independence is beyond my pay grade but there is hope. With Obama sliding in the polls and looking increasingly like a one term president, Bernanke has a chance to grow a set. If a new president is elected, Bernanke should know that he will not be re-nominated as Fed chair. His only hope would be to start asserting his independence and conducting monetary policy for the good of the country rather than for the good of the party in power. Let's hope that it is not too late.

What would Colonel Sanders do?

2011-07-08T04:21:00.000-07:00

In the tradition of Socrates who remarked that all Greeks are liars, I often say that I am only prejudiced against prejudiced people. Recently my inbox has been flooded about the decision at Tyson Food's Shelbyville, TN plant to allow Muslim workers to substitute a Muslim holiday for Labor Day. However, the emails don't say that. Instead they say that Tyson Food's is dropping Labor Day for the Muslim holiday which is the Fox News headline (http://www.foxnews.com/story/0,2933,397645,00.html). I wonder if Fox's headline said "substitute" rather than "drop" if the response would have been the same. I am now being urged to boycott Tyson products. Give it a break: read the article and tell me what is unreasonable here. The article states that 250 of the 1,200 employees are Somali muslims and their union (a member of the AFL-CIO) negotiated with Tyson to substitute the holiday for Labor Day (only for the muslims) and provide them a prayer room. The rest of the employees will still have Labor Day as a holiday. This all sounds eminently reasonable to me. The union contract calls for 8 paid holidays a year and Eld al-Fitr becomes one for the muslims and not labor day. Therefore, the muslim workers do not get 9 paid holidays. Note that they still get all of the all-American holidays such as Memorial Day, Independence Day, Thanksgiving and the ultimate irony Christmas. As I responded to the emails, why boycott Tyson? Maybe they should urge a boycott of the AFL-CIO because the union negotiated the provision which was then ratified by all the workers. The hackneyed reaction is by people who have become intolerant toward a religion that advocates intolerance toward other religions, ergo, I am only intolerant against the intolerant. This may be perfectly understandable but I am disappointed nonetheless.

Government workers acting badly

2011-06-29T13:30:00.000-07:00

Have you noticed that all the people rioting in Greece and other countries over governments' new found austerity are welfare recipients and government workers? The British workers - sadly said to to that country's largest worker bloc - are threatening to go out on strike. Just like the state workers in Madison, Wisconsin acting badly, these government workers world wide are certainly not helping themselves with those of us who pay their bills. So here is a modest proposal: public worker's total package of salary and perks cannot be greater than comparable private sector workers. The president loves to rant and rail over private sector fact cats, but the silence is deafening over the compensation packages of union leaders. I would also like to see all active duty military fully exempt from all taxes state, local and Federal - much like what is accorded diplomats. Ronald Reagan fired the striking air controllers. It is about time that rioting government workers also get fired and their salaries and perks brought into line with the private sector workers. Another modest proposal would be to reduce the Federal workforce by 3 percent per year across the board. The government workforce is bloated because the government does not have a profit motive and can ignore all the basics fundamentals of finance and economics. As a former federal government employee, I say let the Fed's earn their money by enforcing discipline on them.

US women's soccer: No diversity so where is the outrage?

2011-06-29T13:14:00.000-07:00

I admit I am not a soccer fan but we have been inundated with US women's soccer and the world cup. This is the whitest least diverse squad I have ever seen. It makes the BYU sports teams look like the University of Memphis. There is not a single black or Asian player. There is one hispanic surnamed player who looks like a blond barbie. This is in contrast to the men's squad that has hispanics, blacks and Asians. That squad looks like America. Yet I have heard not a single word of outrage among the usual suspects. Where is Jesse Jackson and Al Sharpton? Or even Chuck Schumer and Nancy Pelosi? Yet Germany (muslims), Canada, the Brits, Brazil all have diverse squads. I have not looked at all the team photos but I would not be surprised by a diverse Swedish, Columbian or Australian squad either. I would be surprised by a diverse North Korean or Nigerian squad (but maybe they have diverse tribal groups). But that the US is not diverse is a travesty. It is hard to imagine that there are no world class minority women soccer players in the US. I would have thought that Title 9 would have increased these numbers dramatically. So please someone: what is going on?

I just needed to get this off my chest: A pox on black leadership

2011-06-29T12:23:00.001-07:00

I am a retired finance professor who loves history. One question is does history matter? Of course you will answer yes. So the next question is why? Perhaps the vital reason is that it gives us a sense of purpose and a sense of pride in ourselves. Abraham Lincoln was a great president. Not because he freed the slaves - which he didn't do actually - but because he was precisely the right leader of the country at its most trying time. Yet Lincoln stated that blacks would never be the equal of whites. Well we showed him, didn't we? Lincoln was wrong but given the tenor of the times, who can blame him for that assessment? Let me re-phrase that: Lincoln was wrong but our black leaders would have us believe that he was right. This must be the case, for how else do you explain their moaning about the plight of blacks in America?
Studing ethnic groups is revealing. One realizes that different groups develop a sense of well being as a result of the establishment of business enterprise. Note that I did not say that these groups develop a sense of well being as a result of the establishment of political power. There are numerous cases in which minorities succeed economically but not politically. There are cases in which they succeed politically but not economically. However, in this latter case, few develop a sense of well being. I often ask blacks in major cities with black mayors if they are better off now with black rule. Usually the answer is no but they feel better knowing that black politicians are just as incompetent as white ones.
You see part of our problem is in the interpretation of events. Remember the story about the glass of water. Some people say that it is half full while others say that it is half empty. The problem with blacks in America is that for whatever reason, we are told to perceive the glass as being half empty. The policies of the government are based on emptiness in us rather than our fullness. The poor are an industry and it is profitable and logical to keep the poor poor in order to assure the well being of those who profit from that industry. And I'm not talking about "big business" either. I'm talking about social workers, poverty administrators and those persons who see that the poor receive only 37 percent of the total money allocated in poverty programs. This encourages an image of negativism rather than positivism. We subsidize failue in this country. If a person is failing, then give him money. We do not reward success. The single mother in the ghetto who sends her kids to school, who imposes values on them, who keeps them off of drugs and protects them from gang violence and who works hard should get the subsidy not the failures.
I]I accept all the statistics others give about the poor. However,Ii have some numbers for you. In 2009 we spent $533 billion on “income security”. Of these monies about $200 billion went to the poor in housing assistance, food assistance and other income security programs. If there are 30 million poor then thats about $7,500 per person or $30,000 a year for a family of four. We are spending enough each year to make the poor middle class. Do you know that the standard of living of america's poor is higher than that of the average european or japanese? You see its how we count income. Transfer payments (welfare) are not counted as income. So consider this, 62 percent of our poor households own cars and 75,000 poor households own homes worth over $300, 000.
Generally black facts are presented in a half-empty mentality. However, why is it that Asians are praised for their industriousness when they are also a people of small shopkeepers yet blacks are chastised? Koreans own mom and pop stores. Vietnamese push carts. They are considered smart. Blacks do the same and are ridiculed. When I lived in Washington D.C. its mayor, who was black NS knoqn drug user sought to enjoin another black from operating a business of push cart shoe shiners in DC because the mayor felt it was demeaning. If the owner were a Vietnamese, the mayor probably would have praised him and bemoaned the fact that a black didn't have the same initiative.
This is nothing new. When the history of black enterprise is examined it is done so in a negative fashion. However, there is a strong tradition of black enterprise and entrepreneurship in this country since the 1700s. It should be applauded not ignored.
Lets talk for a moment about other groups. Catholics, a traditionally oppressed group in Europe, did not develop a tradition of enterprise. Yet it was a tendency for groups which had been treated unequally to develop business enterprise in order to gain economic stability. Why didn't the catholics. It was because of their religion which thought that usury - the charging of interest - was a sin. Business could not therefore be fostered. On the other hand, judaism had no such limitation which is why the major bankers in europe are jewish and not catholic. The jews being traditionally oppressed and often not allowed to own property instead invested in their children. Thus, the high proportion of professionals among the jews. When they could own property, they experienced the growth in business enterprise.
modern black mythology, often invented by our so-called leaders, constantly refers to the lack of a strong business tradition among blacks. This is false. W.e.b. dubois published the negro in business in 1898. Henry milton's early history of negroes in business in philadelphia which told of black entrepreneurship in the 1700s was published in 1913 as was abram harris' the negro as capitalist.
blacks in philadelphia and in durham north carolina had a sense of economic stability and provided capital for business enterprises. Few other racial groups have as strong a tradition of self-help than blacks. These institutions developed into banking and insurance enterprises from the strong base provided by benevolent societies and churches.
durham has been a economic enclave for blacks. At the turn of the century scholars analyzed the business spirit of blacks in durham as they analyze the cuban-american spirit in miami today. Black businesses in durham are still vital. Durham does not bemoan the fact that its black bank is one-fiftieth the size of bank of america or that its insurance company doesn't compete globally with prudential. They are positive in their assessment not negative. Do you know that the 40,000 blacks in durham have more wealth than do the million blacks who live in chicago. Why? The answer lies in the business tradition of durham and the lack of one in chicago.
why not a more positive outlook. It is easy, too easy to blame it all on whites. But in large part its our own fault. The study condemning black banks was conducted by a black. Black students do not boast of their academic achievements at school. Why not encourage academic accomplishments? Lets give "a" students starter jackets for academic excellence. We give them to our athletes. Lets emulate the building societies of old by having our churches encourage their members to give an extra amount per week for scholarships for the needy. Currently affirmative action helps those who least need it. What do you expect of a government program? Affirmative action is a subsidy for the black middle class. If we want to help the poor then we must do it ourselves.
i have conducted research on lending discrimination for the past 20 years. Its now a topic of vogue. The latest data are purported in the press and by social activists to show that blacks are being discriminated by banks against because their rejection rates are higher than those of whites. Using the same logic one would conclude that whites are discriminated against as well because their rejection rates are higher than those of asians. So i guess the asians must be the ones in power and are the ones doing the discriminating. Right?
of course not. Asians are different from the rest of us. But then too are blacks from the west indies who are economically akin to asians. What is the common denominator here? Its that these groups value education, strong families, and capitalism.
We are ill served by black intellectuals and our spokesmen. I am looking forward to the day when we have no spokesmen. Who speaks for the jews? Who speaks for the Asians? Who speaks for the hispanics? Who is the white spokesman? In the main, black scholars are not comfortable analyzing the black business tradition. Black scholars almost uniformly condemn the black middle class. It is almost a sin to be middle class and black in america. Black scholars tend to be socialists rather than capitalists. That is to our detriment. We are left therefore with apologists who blame every ill on racism and demand more handouts rather seeking positive solutions.
I believe that it is difficult to substantiate a claim that institutional racism exists in America. I do not believe that corperate america is racist, or our universities, our banks, or our society. Yes racism exists on an individual level but to elevate that to the society is the fallacy of composition. If you want to see a racist society look at Sri Lanka, look at Dafur, look at much of Africa. Look at Libya. Do we look like those places? Don't be ridiculous.
There is a black middle class and they are properly heroes. There is a continuing middle class tradition. They support higher education, have a strong respect for black institutions and educate their children. They support and belong to benevolent societies, and in integrated settings they continue to belong to institutions which were created in the old atmosphere of racial segregation. They may be looked upon as conservative. So be it. But they carry the old values which for all our sake must be carried forward to their children and their children's children.
It is vitally important that today we build on the business acumen of our foreparents. It is time to practice self help rather than be dependent on the government dole. It is time to strive to eliminate those policies that prevent us from helping ourselves. And they are many. It is time to preach self-help to ourselves and to our youth. Do not look to the government for it helps us at our peril..
Also, America owes us less than we owe it. Those who say differently and "demand" reparations are simply trying to take advantage of white guilt. As they say here in East Tennessee, that dog won't hunt. Anyway, we have reparations aplenty. Consider CRA, certification by the SBA of minority firms to get federal contracts worth $4.4 billion without competitive bids, defense department setasides of $3 billion, FCC race preferences on buying radio and tv stations, labor department monitoring of federal contracts which carry with them hiring and promotion quotas, RTC contracts to steer work to minorities, agriculture department grants, energy department loans, justice department grants, state department contracts, transportation contracts. Reparations aplenty.
As to afrocentricity, one student told me that the whites stole mathematics from the Africans (as if Africans are a monolith). I said thats interesting. If I steal your car, its gone and you no longer have possession of it. If whites steal my mathematics, then I would have still have the knowledge. So what happened to the knowledge? Are we then apologizing to ourselves for our documented lack of academic achievements by saying our knowledge was "stolen"? By the way, the dramatic decline in black male college students is going to radically change our culture. Another student was wearing a t shirt that depicted blacks in chains with the caption "we didn't ask to come here." I said, "but aren't you glad" and she said "damn right." When my daughter, inspired by Alex Haley's Roots was wondering about ours, I told her that some things were left best uncovered. I reminded her that our ancestors both black and white were losers. The black losers were captured by other black Africans and sold to whites. The strong and winners actually marveled that anyone (read dumb whites) would want to buy their flotsam. Our white ancestors were losers as well being indentured servants brought over in chains from England. Tom Sowell describes this marvellously in his “Black Rednecks and White Liberals”. I told her to wonder at the transformation of that dross into her kin, highly educated, professionals all. Such is the wonder of America where the descendants of the slaves teach the descendants of the owners. Such is the power of democracy. Such is the opportunity of capitalism. Spread the word.

Deliberate destruction?

2011-06-29T11:47:00.000-07:00

Rush Limbaugh has been saying for the past couple of years that Obama knows exactly what he is doing and what he is doing is deliberately destroying the American economy. Presumably this would leave the federal government to pick up the pieces and to make the rest of us even more dependent upon government largess. I just don't see it. Sure Obama believes in government being the solution and not the problem. Sure his administration has been party to more intrusive legislation and programs and all have failed. Do you know one (stimulus, cap and trade, taking over student loans, more TARP, Obamacare, moratorium on off shore drilling, the green agenda, Dodd-Frank, mortgage restructuring) that have worked? Not to mention that foreign policy has been an absolute disaster (Dafur, Middle East, Israel, South America, Britain, Nato, Africa, Egypt, Libya, Tunisia, the Kurds, abandoning the protestors in Iran. Name me a success. Calling Obama a marxist or a socialist also seems to be off base. His policies have linked government with big business (autos, Wall Street bankers, pharmaceuticals rather that the little guy). That looks like fascism to me rather than socialism or marxism. But I digress. Destroying the US economy would also destroy the democratic party. Americans do not like high unemployment, high inflation, high oil prices or any of the Obama debris from his policies. Obama deliberately destroying the economy is a sure ticket for republican control of both houses, the presidency and even state legislatures and governorships. So if Obama is trying to destroy the economy he can't do it alone. He has to have support of the democratic leadership (Pelosi and Reid and the DNC). I am all for it and hope that it is true. But sadly, I don't think it is deliberate. It is simply incompetence.

Here comes Mariano Rivera again

2011-06-29T09:54:00.000-07:00

Obama's replacing the lamentable Joe Biden in the debt ceiling talks with himself recalls the posting I did on Aug 11, 2011 (Mariano Rivera for president). He is the relevant part of that post

"It is evident that this president likes the trappings of the office but not the job. He golfs all the time through crises. He takes vacations during crises. He goes off on foreign trips to exotic locales during crises. He has private parties and concerts with the stars and glitterati. However, he does not lead. AS some have said, he is President Present. He comes to the party late and adopts the democratic position as if it is his own, giving speech upon endless speech. If a republican did this, he would be vilified by the media and ridiculed without pity. I am old enough to remember the press remarking about Dwight Eisenhower’s love for golf “Sam Snead for president! If we are going to have a golfer, we might as well have a good one”. With Barack Obama the best analogy is not to ask for Tiger Woods to be president since this president is a closer. The American people thought they were electing a president. Instead, they got Mariano Rivera."

As I said in "Just say no", the debt ceiling is the easiest way to limit government spending. I know that some republicans have proposed a balanced budget amendment but that only works if coupled with a provision that limits government spending to some proportion of GDP (say 18 percent). Otherwise congress would keep spending and then raising taxes to balance the budget.

Who was it that said Obama was smart?

2011-06-29T09:44:00.000-07:00

Obama seems to have singled out corporate welfare to get his increases in "revenue" although this makes up only a small portion of the deficit. He is giving speeches attacking hedge fund managers, Wall Street bankers and the tax breaks on corporate jets? Excuse me? As the Washington Examiner rushed to say Obama's stimulus package contained a provision providing a tax break for corporations to buy their own planes. The provision was first provided after 9/11 to aid the corporate jet industry. So Obama's intelligence obvious does not include a good memory - nor does that of his advisors. If I were the president I would fire all of them. Bad advice, short memory and teleprompters are what this president is most noted for. Why the president wants to conduct class warfare escapes me. Surely he knows that many of the hedge fund managers and Wall Street bankers are democrats who contribute lavishly to the dems. How can they reconcile giving while been lambasted is beyond me. It is also beyond me why Obama keeps waging class warfare by attacking hedge fund managers, Wall Street bankers and corporations. The attack on his richest supporters is beyond me. Maybe he has wink wink agreements on the side but it seems to me that the rational millionaires and billionaires that he constantly attacks will send their money to the republicans instead. Obama's speeches offer us a false choice: we have to take away the tax breaks for the rich or else we will not be able to fund school lunches, food inspections, air safety and all sorts of other things. Who ever believes this nonsense is a fool. What Obama should do is to make the proposal one in which corporate welfare is ended - including labor union welfare. In reality all the mishmash in the income tax code extending corporate welfare dramatically lowers the real income taxes that corporations pay (General Electric anyone?). He should trade off all corporate specific tax breaks for dramatically lower corporate income taxes and lower capital gains taxes. He should lower taxes on repatriating earnings from abroad. He should offer reining in the EPA and the NLRB's discouraging of job creation. He should postpone the implementation of Obamacare until 2020. He should lift all tariffs and quotas. End government support for biofuels. Enact all free trade agreements. Instead of falling back into the old mantra of class envy he should do something for once that actually helps to create jobs. As I have said before, if he did this (whether he wants to or not) he will be re-elected by a landslide. Again the government cannot create jobs it can only hamper job creation. And this guy is smart? Heaven help us all.

Ten Year Itch

2011-06-29T04:13:00.000-07:00

Have you noticed that we have had recessions in 1980, 1990, 2000 and 2010? What is spooky is that we have also had recessions at the start of each decade since the inception of the
republic: 1800, 1810,. 1820, 1830, 1840, 1850, 1860, 1870, 1880, 1890, 1900, 1910, 1920, 1930, 1937 (oops), 1950, 1960, and 1970. Every one of these we preceded by asset bubbles (irrational exuberance). Lets just go back to the more recent ones. In 1980 I was at the National Credit Union Administration having to deal with collapsing credit unions who were going to be forced to close because of loss of corporate sponsor. We converted the viable ones into community charters to save the credit unions and to save the insurance fund. The recession was the most significant since the Great Depression. I know we all seem to think that history begins yesterday and say the current downturn is "the most significant" but the recession of 1980 had double digit unemployment, inflation and interest rates. This one doesn't even come close. That recession was precipitated by high government spending, incompetent monetary policy (sound familiar?) and high oil prices. The recession of 1990 was precipitated by a burst in the real estate bubble (sound familiar?). The 2000 recession was preceded by the burst in the tech bubble. The current recession is due to the real estate bubble bursting. One of the differences in this recession is that the government and the Fed have striven to use discretionary policy to either prevent or slow down the recession. They have succeeded but have also failed. By doing so they have flattened out the recession. Instead of letting the bottom just happen they have just significantly grown the debt shoveling good money after bad. The result is that the "recovery" has been among the slowest in our history. It is ironic that the architect of the recovery in 1980 - Paul Volcker - was on the early Obama team. Volcker broke the back of his recession by the use of tight monetary policy. He told us that things would get worse before they get better and he was right. But when the economy came out of the recession it grew at rates in excess of 6 percent. This "recovery" is less than 2 percent and can be accomplished by increases in productivity rather than employment hence it term "jobless recovery". Where is Paul Volcker when we need him? In place we get gutless Ben Bernanke. So look for another recession in 2020. The question is what bubble bursting will cause it? My money is on commodities (gold).

Did we elect Ned Ludd?

2011-06-23T05:25:00.000-07:00

Isn’t it interesting that Obama is the least modern president of memory? His policies are a throw-back to FDR and he is obviously a split-the-pie rather than a grow-the-pie type of thinker. This looking back to the good old days of government expansion and intervention along with the spread the wealth mentality make sense of his comments on technological displacement. Obama saying that employment is lagging because innovations such as ATMs and kiosks show that this smart president is woefully ignorant. Obama is Ned Ludd – the British weaver displaced by mechanized looms thought he could get his job back by smashing and burning the looms. Instead of being rehired, he was hung. Someone needs to tell the president that thousands of jobs in the horse and buggy industry were lost when Henry Ford automated the automobile assembly line. When I was in graduate school thousands of women worked in typing pools at universities – all displaced by the PC and word processing. Obama must have taken classes at Harvard from professors who were members of the Ad Hoc Committee on the Triple Revolution who predicted in the 1960s that technology by the year 2000 would cause 90 percent of the labor force to be unemployed. When they made this prediction, I took the number of horses in 1863, ran my computer and discovered that by 1975 we would all be dead having been buried under 30 feed of horse manure worldwide.
The president does not realize that the displacement of workers by technology has not created permanent increases in unemployment. Technology creates new jobs and new opportunities for the creation of entirely new industries and jobs. I have lived through periods when there were not even transistors much less no color tvs, no cell phones, no ipads, no PCs, no Velcro, no personal software, no internet, and no gore-tex. The massive layoffs of middle managers during the recession of the early 1990s spurred a dramatic growth in entrepreneurial startups.
Technology is the single greatest threat to our society today. However, that has always been the case and always will be. I'm a professor and professors love to profess. The agricultural revolution was actually a technological revolution that replaced the hunting and gathering age. It devastated the existing political structure. Where once there were tribal groupings, now there were city states and feudal kingdoms. Then came the industrial revolution (obviously a technological revolution) and with it came mass production, mass bureaucracies, mass political organizations, and countries. Swept away, often violently, were the city states and feudal kingdoms. The old structure resisted but died. Workers also resisted but failed. Ned lud and his luddites were tailors displaced by automatic looms. Their reaction was to try and stop progress by burning them down. They failed and progress marched on. But the industrial revolution also occurred in agriculture, displacing workers and driving them to the cities. Yes there were sweat shops, horrible living conditions, child labor, rampant disease. But the workers were no longer serfs and indentured laborers on the farm. They were free and would shape the political structure of the future. Technology would aid the workers in the form of the printing press. Once information was the sole province of the church and its power was related to its control of information. Indeed, St. Thomas Aquinas was considered a genius because not only could he read, but he could read without moving his lips. The printing press changed all that and with widely disseminated news came the reduction in the power of the church.
Technology does not destroy jobs. It creates them. Implying that rolling back technology will create jobs shows that this modern president is actually the reincarnation of Ned Ludd.

More random thoughts

2011-06-21T08:19:00.000-07:00

1. Why is it that all female anchors smile when they deliver the news but no men do? It must be gender specific because have you ever tried to smile and talk at the same time? Even those who can't smile and talk at the same time always smile before and after they speak. Even the women on news panels smile when they are introduced. What gives?

2. Has anyone questioned the relationship between Madeline Albright and George Soros. News reported that a company they owned jointly bought a controlling stake in the energy firm APR for $250 million in March and then sold it for $800 million in June! Albright is also a trustee for the Center for American Progress - a think tank funded by Soros. Albright also lends her name to Albright Capital Management Company. Does anyone really think that she knows anything about either energy or investments? Her background is as an academic and political appointee in international affairs not in economics and finance. Lastly, where did she get the money to start buying companies? Nothing in her background shows the income generated necessary to be buying companies. And what about the George Soros connection? Why isn't this being scrutinized?

3. The ruling by the NLRB that Boeing could not open a plant in South Carolina is puzzling to me. How does the NLRB have the constitutional authority to dictate where or where not firms can operate? Since the plant is built and the workers hired, why doesn't Boeing just go ahead and operate it? Of course this has to be one of the dumbest rulings by the administration's lackeys. If Boeing can't go to a right to work state, it will make those aircraft out of the country. Some of said that Obama is doing this to appease the unions. I think maybe the fact that Washington's two senators are liberal democrats and South Carolina's senators are republicans including Jim DeMint may play a small role.

4. It will be interesting to see if EPA's war on coal fired plants will alter the political scene in the states most affected. West Virginia, Ohio, Pennsylvania, Illinois, Kentucky, Indiana (along with Montana, Wyoming, Colorado and Texas produce 90 percent of the country's coal. The EPS's proposed rules would shut down 60 coal fired plants and is said to destroy 250,000 jobs. How the democrats will be able to hold onto house and senate seats in the affected states will be interesting to see.

5. Did you know that both the Seminole Wars and Texas independence are both a direct consequence of slavery? The Seminoles did not recognize slavery and welcomed escaped slaves into their ranks. White slave owners agitated to get their slaves returned. The Seminoles refused. Osceola was even married to the daughter of a runaway slave and her kidnapping by whites was a main motivation for his leading the Seminoles into war. Also Texas was a province of Mexico which abolished slavery in 1829 and sought to ban it in Texas. The constant conflict between white Texans and Mexico over slavery finally exploded into the war of 1835 and the Alamo in 1836.

6. I am against a balanced budget amendment because it does not constrain spending. If spending increases then the legislature will likely balance it by raising taxes. The debt ceiling is a better constraint.

7. Notice how it has now become the vogue to adopt my idea of limiting government spending to a set percentage of GDP?

8. California has stopped the paychecks of state legislators for failing to pass a budget. What a great idea! Let's do that with the Congress.

Not a diamond in the rough

2011-06-21T07:19:00.000-07:00

Peter Diamond withdrew his name from being a FEderal Reserve governor nominee. Diamond who is an MIT labor economist was clearly miffed. He wrote a self serving whine in the New York Times lamenting that while he was qualified to be awarded a Nobel prize in economics, certainly he was qualified to be on the Fed board. He is wrong. Certainly a Nobel prize is noteworthy but it does not guarantee expertise in monetary economics or financial institutions. Indeed, Diamond's area is labor economics and although Diamond says that understanding of the labor market is a "central part" of managing monetary policy, that statement by itself should disqualify him. Sen. Shelby (R-AL) ranking minority member of Senate Banking was right to insist on someone who would not need on the job training as Mr. Diamond would require. Put Diamond on the NLRB but not the Fed board.

Pop!

2011-06-21T07:10:00.000-07:00

An area where the left and the right find agreement is in housing. The right seems to be against housing because it is subsidized and is used by the government to advance social policies (i.e. affordable housing). The left seems to be against housing because detached dwellings consume more energy than high density dwellings. As a consequence the sacred cow of mortgage interest deductions appear to be on the chopping block. The politicians can say that in these days of large deficits, everything is under scrutiny. The truth of the matter is that the politicians are just looking for more sources of revenue. What makes housing an attractive whipping boy is the housing bust caused as much by cheap credit fostered by federal reserve policy than by subsidies, affordable housing and fannie mae. Even the Wall St Journal says that the main purpose of housing should be shelter. However, homeownership has been one of the main vehicles for wealth building in America. Homeowners build equity that can be used for kid's college education and for retirement. Traditionally, the growth in equity has been a superior investment vehicle for Americans. However, homeownership also means other things to most Americans who opt not to live in high density areas like Washington, DC and New York City. It means privacy, space, peace and quiet. Since the bursting of the housing bubble, house prices should fall to a new equilibrium level just like any other investment. Then it will start to grow again. The positive benefits of homeownership will continue with or without all of the government interference. However, for those in DC and New York who are forced to live on top of each other to insist that those of us who prefer to live amongst trees with room for our dogs to run are somehow either bad for the business environment or the green environment are simply jealous and trying to impose their inferior lifestyle on the rest of us.

So who do you want to be president and why?

2011-06-15T14:46:00.000-07:00

I have often said that if Michele Bachmann were a democrat she would be idolized by the media - instead she is vilified like Sarah Palin. Actually, thank goodness for Sarah Palin. Palin has been spoofed so much, vilified so much that the left and the media have used up all their bullets. So the anti-Bachmann stuff just seems petty. How can you spoof someone who quotes Von Mises? Here is Stephen Moore's interview of Bachmann.

THE WEEKEND INTERVIEW

The Wall Street Journal

JUNE 11, 2011
'On the Beach, I Bring von Mises'
The tea party favorite on her start in politics, where she learned her economics, and why she disagrees with Reagan on the War Powers Resolution.

By STEPHEN MOORE

"If I'm in, I'll be all in," says Rep. Michele Bachmann of Minnesota, artfully dodging my question of whether she's running for president. Given that she just hired campaign strategist Ed Rollins, whose past clients include Ross Perot and Mike Huckabee, rumors abound. "We're getting close," she says, "and if I do run, like all my races, I will work like a maniac."
That's pretty much how she does everything, and it helps explain how the relatively junior congresswoman has become a tea party superstar—and uniquely adept at driving liberals bonkers.

After spending a good part of two days with her in Washington as she scurries from one appointment to another, I have no doubt that Ms. Bachmann will announce her presidential bid soon. And it would be a mistake to count her out: She's defied the prognosticators in nearly every race she's run since thrashing an 18-year incumbent in the Minnesota Senate by 20 points in 2000. Says Iowa Congressman Steve King, "No one has electrified Iowa crowds like Michelle has."
Ms. Bachmann is best known for her conservative activism on issues like abortion, but what I want to talk about today is economics. When I ask who she reads on the subject, she responds that she admires the late Milton Friedman as well as Thomas Sowell and Walter Williams. "I'm also an Art Laffer fiend—we're very close," she adds. "And [Ludwig] von Mises. I love von Mises," getting excited and rattling off some of his classics like "Human Action" and "Bureaucracy." "When I go on vacation and I lay on the beach, I bring von Mises."
As we rush from her first-floor digs in the Cannon House Office Building to the House floor so she can vote, I ask for her explanation of the 2008 financial meltdown. "There were a lot of bad actors involved, but it started with the Community Reinvestment Act under Jimmy Carter and then the enhanced amendments that Bill Clinton made to force, in effect, banks to make loans to people who lacked creditworthiness. If you want to come down to a bottom line of 'How did we get in the mess?' I think it was a reduction in standards."
She continues: "Nobody wanted to say, 'No.' The implicit and then the explicit guarantees of Fannie Mae and Freddie Mac were sopping up the losses. Being on the Financial Services Committee, I can assure you, all roads lead to Freddie and Fannie."

Steve Moore says that Rep. Michele Bachmann could win Iowa.
Ms. Bachmann voted against the Troubled Asset Relief Program (TARP) "both times," she boasts, and she has no regrets since Congress "just gave the Treasury a $700 billion blank check." She complains that no one bothered to ask about the constitutionality of these extraordinary interventions into the financial markets. "During a recent hearing I asked Secretary [Timothy] Geithner three times where the constitution authorized the Treasury's actions, and his response was, 'Well, Congress passed the law.'"
Insufficient focus on constitutional limits to federal power is a Bachmann pet peeve. "It's like when you come up to a stop sign and you're driving. Some people have it in their mind that the stop sign is optional. The Constitution is government's stop sign. It says, you—the three branches of government—can go so far and no farther. With TARP, the government blew through the Constitutional stop sign and decided 'Whatever it takes, that's what we're going to do.'"
Does this mean she would have favored allowing the banks to fail? "I would have. People think when you have a, quote, 'bank failure,' that that is the end of the bank. And it isn't necessarily. A normal way that the American free market system has worked is that we have a process of unwinding. It's called bankruptcy. It doesn't mean, necessarily, that the industry is eclipsed or that it's gone. Often times, the phoenix rises out of the ashes."
She also bristles at the idea, pushed of late by the White House, that the auto bailouts were a big success for workers and taxpayers. "We'll probably be out $15 billion. What was galling to so many investors was that Chrysler's secured creditors were supposed to receive 100% payout of the first money. We essentially watched over 100 years of bankruptcy law thrown out the window and President Obama eviscerated the private property interests of the secured creditors. He called them 'greedy' for enforcing their own legal rights."
So what would she have done? "For one, I believe my policies prior to '08 would have been much different from [President Bush's]. I wouldn't have spent so much money," she says, pointing in particular at the Department of Education and the Medicare prescription drug bill. "I would have advocated for greater reductions in the corporate tax rate and reductions in the capital gains rate—even more so than what the president did." Mr. Bush cut the capital gains rate to 15% from 20% in 2003.
She's also no fan of the Federal Reserve's decade-long policy of flooding the U.S. economy with cheap money. "I love a lowered interest rate like anyone else. But clearly the Fed has had competing goals and objectives. One is the soundness of money and then the other is jobs. The two different objectives are hard to reconcile. What has gotten us into deep trouble and has people so perturbed is the debasing of the currency."
That's why, if she were president, she wouldn't renominate Ben Bernanke as Fed chairman: "I think that it's very important to demonstrate to the American people that the Federal Reserve will have a new sheriff" to keep the dollar strong and stable.
As for foreign policy, she joined 86 other House Republicans last week in voting for the resolution sponsored by antiwar Democrat Dennis Kucinich to stop U.S. military action in Libya within 15 days. Is she a Midwestern isolationist? "I was opposed to the U.S. involvement in Libya from the very start," she says. "President Obama has never made a compelling national security case on Libya."
Even more striking, she says the 1973 War Powers Resolution, requiring congressional approval for military action after 60 days, is "the law of the land" and must be obeyed. That's a notable difference from every recent president of either party, including Ronald Reagan.

Ms. Bachmann attributes many of her views, especially on economics, to her middle-class upbringing in 1960s Iowa and Minnesota. She talks with almost religious fervor about the virtues of living frugally, working hard and long hours, and avoiding debt. When she was growing up, she recalls admiringly, Iowa dairy farmers worked from 5 a.m. to 10 p.m.
Her political opponents on the left portray her as a "she-devil," in her words, a caricature at odds with her life accomplishments. She's a mother of five, and she and her husband helped raise 23 teenage foster children in their home, as many as four at a time. They succeeded in getting all 23 through high school and later founded a charter school.
She got started in politics after seeing the failures in public schooling. "The kids were coloring posters in 11th grade algebra class," she says. "I decided to do my duty, go to the Republican convention. I had on jeans, a sweatshirt with a hole in it, white moccasins, and I showed up in this auditorium and everyone said, 'Why are we nominating this guy [Gary] Laidig every four years?'"
"I thought, 'I'm nobody from nowhere but maybe if I challenge the guy, he'll shape up a little bit.' So I gave a five-minute speech on freedom, economic liberty and all the rest. And no one could believe it, but I won a supermajority on the first ballot and he was out on his keister."
She ran for Congress in 2006, the worst year for Republicans in two decades. "Nancy Pelosi and all her horses spent $9.6 million to defeat me in that race"—almost three times what Ms. Bachmann had raised. She won 50% to 42%. In 2010, the Democrats and their union allies raised more than $10 million to try to defeat her. "My adversaries have certainly been highly motivated," she says.
But her adversaries—or, at least, rivals—aren't limited to the left. There's Sarah Palin, with whom journalists are convinced she has frosty relations, and fellow Minnesotan Tim Pawlenty, now running for president. About Ms. Palin the congresswoman shrugs, "People want to see a mud-wrestling fight. They won't get it from me because I like Sarah Palin and I respect her." As for whether Mr. Pawlenty was a good governor, "I really don't want to comment."
Ever ready to cite stories from American history, Ms. Bachmann notes with a grin that the last House member to be elected president was James Garfield in 1880. If she were to take her shot, she'd run on an economic package reminiscent of Jack Kemp, the late congressman who championed supply-side economics and was the GOP vice presidential nominee in 1996. "In my perfect world," she explains, "we'd take the 35% corporate tax rate down to nine so that we're the most competitive in the industrialized world. Zero out capital gains. Zero out the alternative minimum tax. Zero out the death tax."
The 3.8 million-word U.S. tax code may be irreparable, she says, a view she's held since working as a tax attorney at the IRS 20 years ago. "I love the FAIR tax. If we were starting over from scratch, I would favor a national sales tax." But she's not a sponsor of the FAIR tax bill because she fears that enacting it won't end the income tax, and "we would end up with a dual tax, a national sales tax and an income tax."
Her main goal is to get tax rates down with a broad-based income tax that everyone pays and that "gets rid of all the deductions." A system in which 47% of Americans don't pay any tax is ruinous for a democracy, she says, "because there is no tie to the government benefits that people demand. I think everyone should have to pay something."
On the stump she emphasizes an "America-centered energy policy" based on "drilling and mining for our rich resources here." And she believes that repealing ObamaCare is a precondition to restoring a prosperous economy. "You cannot have a pro-growth economy and advise, simultaneously, socialized medicine."
Her big challenge is whether the country is ready to support deep spending cuts. On this issue, she carries a sharper blade than everyone except Ron Paul. She voted for the Paul Ryan budget—but "with an asterisk." Why? "The asterisk is that we've got a huge messaging problem [on Medicare]. It needs to be called the 55-and-Under Plan. I can't tell you the number of 78-year-old women who think we're going to pull the rug out from under them."

Ms. Bachmann also voted for the Republican Study Committee budget that cuts deeper and faster than even Mr. Ryan would. "We do have an obligation with Social Security and Medicare, and we have to recognize that" for those who are already retired, she says. But after that, it's Katy bar the door: "Everything else is expendable to bring spending down," and she'd ax "whole departments" including the Department of Education.
"I think people realize the crisis we face isn't in 25 years or even 10 years off. It is right now. And people want it solved now—especially Republican primary voters."

Mr. Moore is a member of The Journal's editorial board.