Orwellian history on the left when it comes to the banking industry’s collapse

One of my take-away images from reading George Orwell’s 1984 is Winston Smith’s job:  he destroys any historic evidence that conflicts with Big Brother’s current agenda.  As with all things Left, George Orwell knew exactly what he was talking about.  The Left likes to re-write history.  Its misfortune is that it hasn’t yet created a society in which it has complete control over the memory hole.  For example, there are people who paid attention to the root causes of the banking crisis at the time, and who can now call out the Left’s attempted revisionism.

When even Liberals wake up

Here is a financial report on USA, Inc., presented as a slide show, as developed by financial analysts.

Most of us Bookworm Room aficionados know that the economic state of health of our country is not good and getting worse. It is critical, actually. Unfortunately, there are many still wedded to Keynesian mythologies of the Hoover and FDR era who insist on bleeding the patient with leeches when major surgeries are warranted.

Where I see hope is that this devastating report, authored by Morgan Stanley analyst and Silicon Valley venture capitalist Mary Meeker, was supported by famous Liberal Democrat heavyweights such as Laura Tyson, Al Gore and Peter Orzag. Small rays of sunshine are beginning to enlighten the clinicians’ gloom. One can quibble with details (that General Motors has turned the corner, for example), but the core facts presented are solid and irrefutable. Scroll toward the end and visualize how this is not just the United States but the entire western world as we know it that is affected.

To solve a problem, one must first define the problem. Read it, skim it (just the graphs are explanatory enough) bookmark it, and use it to educate as many  people as you can. Because the real battles will begin when all of us must decide between surrendering our entitlements to the scalpel and turning off artificial life support altogether.

Our era is ending and we are seeing the first birth pangs of the new. Birth is a painful, bloody process.

H/T Richard Fernandez and Ace of Spades HQ.


Some people have had trouble with the link above, so here is another link to the article.

Bankrupt generations?

There’s an excellent article in the WSJ about the challenges that retiring baby boomers face as 401(k)s fail to meet their retirement needs.

I don’t know if this can be accessed without an online subscription to the WSJ, so to summarize…buffeted by two major stock market crashes, most baby boomers on the cusp of retirement don’t have close to what they need (median 401(k) for  the 60+ age bracket is about $150,000).

The letters are especially interesting for what they reveal about peoples’ generational attitudes.

As examples of sentiments encountered:

  • The “Greatest Generation” was really a generation of moochers all too happy to fund their retirements and other obligations on the back of the taxpayers.
  • People will need far less income upon which to retire comfortably than financial planners claim (very good back and forth arguments on that point).
  • Baby boomers should stop whining about their plight as it was they who got themselves into it.

I find that last point interesting from the perspective of what it means to be living “paycheck-to-paycheck”. For many people I know, this definition encompasses the need to pay-off massive credit card and other debts accumulated whilst purchasing toys, vacations, entertainment and all other expensive lifestyle expenses that many have come to view as entitlements.

Does this square with your observations, or am I being too harsh?

I ask this because my amazing spouse and I have been fairly heavy savers and have denied ourselves many of these pleasures during the years when we raised children. Yet I know that, inevitably, the gimlet eyes of those who lived high on the hog when times were good but failed to prepare for their future will turn their focus on our savings as the solution to their penury.

UPDATE **********


This is too good of a summary not to include in the post:

Thanks, SADIE.

Wisconsin Liberal Disconnects

Today, several schools in Wisconsin announced that they would be closed so that their teachers could attend protests in the state capital, Madison, against GOP Gov. Walker’s proposals to take away collective bargaining rights from public sector unions. Wisconsin, like neighboring Illinois, is going broke. The behavior of the Wisconsin public school teachers pretty much underscores why Gov. Walker is right.


We have several friends and relatives in Wisconsin who come from solid blue-color union backgrounds. Some have already retired on handsome benefit packages (one was able to retire with full retirement benefits at age-49), albeit from the private sector. Following their Facebook comments, we learn that they are in full uproar, encouraging each other to go to Madison to lend their support to the protests.

The funny thing is, these are the same individuals who have been complaining to us that they are thinking of moving out of Wisconsin because the cost of living and taxes are too high.

I suspect that this type of cluelessness is pretty common among Liberals in general.

So, in trying to patiently explain our (national) debt crisis to Liberals (I know, I know…for too many of them, math is hard, so KISS), I propose trying to lead them to the following exchange, based on conversations that I have had:

Liberal: “Our country should not have any trouble affording [insert Liberal pet project du jour]. We are the richest country in the world” (a line repeated to me ad nauseum)

Conservative: “Is someone with an annual income of $150,000 rich?”

(national GDP of roughly $15 trillion)

Liberal: “yes”

Conservative: “Is someone with an annual income of $150,000 that already owes $1,300,000 and $15,000 in new credit card debt rich”?

(Government debt obligations of $130 trillion plus $1.5 trillion in annual debt)

Liberal: ??

Conservative: “This is where we are as a country today!” (national + state debt plus entitlements, in trillions).

Does anyone have any better ideas on how to get this simple idea across to Liberals….that we are flat broke?

Liberal makes lemonade from Obama’s lemon of a budget

It’s not often I get the pleasure of laughing out loud when I read a “serious” political piece, especially one from an Obama acolyte, but I have to admit that this one completely lifted my mood.  The author, David Kendall, at heart, seems to be an honest soul because he recognizes that there is nothing serious about the President’s proposed budget.  If he was less blinded by ideology, he might use that knowledge to understand that either (a) the President is an idiot or (b) the President has made the first move in a very dangerous game of chicken, with the United States standing in for the car that’s heading for the cliff.  Honesty, though, does not equal clarity and intelligence, so Kendall takes another tack altogether, and that’s what had me laughing.

What Kendall argues, with a perfectly straight face, boils down to this:  the budget is a great thing because its awfulness sparks a necessary dialog:

A president’s budget is only as good as the debate that it engenders. After all, Congress doesn’t even have to vote on it, and it rarely does.

Measured by this standard, President Obama’s budget is a resounding success. Republicans have tagged it as a job-killer. Deficit hawks say it doesn’t go far enough. Budget doves fear the impact of cuts to heating assistance and numerous other programs.

Even with the criticism, it nudges the debate forward. It brings Democrats to the table with tough but necessary cuts that move away from stimulus spending. It challenges Republicans with long-term investments to unclog highways, expand exports and produce clean energy. And it tees up a debate about entitlements and taxes by making it clear that incremental changes aren’t enough to bring the debt down to previous levels.

You can read the rest here, in which Kendall essentially gives his opinion what he would do if he controlled the budget.

All I could think as I read Kendall’s gushy lemonade was “Silly me, I thought that proposed budgets from the executive office were meant to be serious efforts to manage the nation’s finances. It never occurred to me that the President’s duty apparently began and ended with getting a good conversation going.”

Salary envy

I attended a family gathering not long ago, liberally populated with Liberal in-laws,  in which the mood was decidedly sour. Discussions revolved around the poor job market, employment uncertainty and health insurance.

In conversations, a lot of resentment was directed at corporations, CEOs and their “disgusting and greedy” profits, salaries, benefits and bonuses. I understand (but don’t excuse) much of this as pure envy, a failing that I see expressed far more in Liberal/Left circles than conservative circles. I should also point out that some of this is the bitterness expressed by people that were pretty casual about their own work ethics and careers and now, in middle age, confront an uncertain future, not to mention retirement prospects. We all make critical decisions at key junctures in life with which we have to live.

I have also known and worked with enough CEOs and senior execs with large corporations to know that they work under highly stressful conditions and in between short, sleepless nights. The ones that I have known were extremely hard workers 24/7 and I, personally, value my quality of life far too much to envy them their salaries and perks (we don’t need to explore how seriously pathetic many of their personal and family lives are). Anyway, I consider envy a particularly ugly member of the deadly sins.

One irony is that my Liberal/Left relatives (some of whom purport to be very well educated) apparently cannot draw the connection between corporate profitability, personal incentives and a healthy jobs market. I can understand this to be the case with college students (sophomoric minds full of mush), but working adults have no excuse.

However, what floors me, is that these same Liberal/Lefty in-laws seem to have no trouble accepting the extraordinary high incomes of a) sports figures and b) entertainment figures (newscasters, movie actors, television personalities, etc.).

Sports figures that play games to entertain, singers that…sing songs…, actresses that pretend to be people they aren’t (when they do work) and newscasters that read copy from teleprompters are idolized.

Corporate executives that manufacture services and products that improve our lives (drugs, fuel, cars, food, shelter, insurance, bank loans, etc.) are vilified.

Why is this the case? Any ideas? Please help to understand.

Strong Children

I was at my church this past weekend and was struck by the large number of college-graduate children that are now back living at home with their parents, out of work. The impression I have is that many of these kids still have no idea what they want to do with their lives. I get the sense that most pursued college degrees in either the soft social sciences (sociology, psychology, political science, environmental science), liberal arts (English, history) or hobby-arts (music, physical training), without any idea of what they planned to do with those degrees.

I largely blame their parents for this.

Meanwhile, I was at a professional meeting last week (I work in a technology-intensive industry) and heard over and over again, “we just can’t find any qualified new hires”). There are companies all over my industry looking to hire young talent. I had an executive with a large French company recently lament to me that he couldn’t find qualified American scientists, they were all from “China or India”.

I also watched a young adult professional give a PowerPoint presentation replete with misspellings and disconnected thoughts.
Where have we gone wrong in parenting and education in our society?

What do we need to do to build strong individuals and productive citizens?

Democrat, Corruptocrat!

Democrats are the friends of big business, Conservatives are the friends of small business. Democrat government inevitably ratchets its way to corruptocracy.

If you don’t agree with this, can we at least agree that Democrats favor highly regulated economies and societies and conservatives don’t?

Let me explain with two examples.

1) The Wall Street Journal recently ran a story about how the EPA has decided that milk, because it contains 4% butterfat, should be regulated under the same environmental control standards as petroleum. Consequently, dairy farmers will have to file Federally approve emergency plans on how to deal with “oil spills” and such. Large dairies (some dairies in California milk 10,000 or more cows at a time) will probably be able to comply. Small dairies (goat and sheep milk farms, Vermont dairy producers etc. ) are just out of luck. I happen to know something about the dairy industry – it’s a highly politicized, highly subsidized industry that operates on very thin margins. I’m sure that they will come to an accommodation with the EPA and Federal Government…at a very steep price, politically and $-wise!

2) As it becomes increasingly clear the degree to which Obama Care really is a pig-in-a-poke, there is frantic activity to opt out of it. The numbers of entities that have received waivers from ObamaCare (other than Congress) magically rose from about 200 to 700+ immediately after the SOTU speech. Those entities are large companies and unions on the inside track. The way you get a waiver is to have a lobbyist obtain it on your behalf. Money exchanges hands. Large companies can afford this, small companies…out of luck! If ObamaCare is so great, why the rush by Congress, favored businesses and union to obtain waivers?

Increased regulation is inversely proportional to lobbying activity. The less regulation there is, the less the need to influence government. The more regulation, the more the need to petition the royal aristocracy at a heavy price. The need to petition our government for redress under regulations fostered by our government is a corrupting influence. If you lack influence and can’t make payment, you are out of the equation. Here in Chicagoland, we know all about this. Here is what happens:

Society sediments into three classes: a) an aristocratic Democrat nomenklatura that controls the regulatory and judiciary structures of society; b) a wealthy, economic class that can afford to exchange favors for regulatory exemptions and waivers…at a price; c) a lumpen proletariat, outside of the power structures, imprisoned into forced into regulatory straight-jackets (taxable prey…if you will) that they will never be able to escape unless willing to surrender at the price of their souls. It is this last class that pays the bills for the others. This isn’t new…despite its “progressive” tag, it’s a regression to 19th Century economic “shakedown” realities.

My entire career, I have been a champion of entrepreneurs and small companies. They are vital to our society and economy, as innovators, risk-takers and employers. I would hate to see this glorious period end as we slouch toward third-world corruptocracy.

I know that Democrats mouth have historically mouthed platitudes about looking after the “little guy”. I would like to think that only the truly moronic and armchair philosophers walled into their temples of abstract theory can fail to see how Orwellian and corrupting these platitudes are.

Have we as a nation arrived at a point where we can stop this from happening or is it inevitable? A Jewish relative once remarked that no Jew sleeps without two shoes under his bed stuffed with a roll of cash, in case of a quick getaway. I am starting to understand his point.

Youth unemployment – where does it lead?

As we settle into the Obama Depression era, one thing that I and others have noticed is that many of the very youth that voted enthusiastically for Obama are the ones already feeling the consequence of his policies: they are unemployed. As one of my college-age kids put it, “our generation is so over Obama, today!”.

High youth unemployment is an inevitable consequence of socialism. In modern Europe, it has always been high. Here is an example of its pervasiveness in the U.K., for example:


In Europe, the problem has been exacerbated by extensive “social safety nets” that guarantee a pretty good lifestyle for the unemployed. Why work, when you can live comfortably on public assistance combined with the black market economy (dealing drugs, for example)? There are large swaths of the European population that, like people in our inner city projects, have no idea how to work. A young man in France with a finance degree recently reported to me that he was “happily unemployed”. Thanks to his government, he leads a comfortable existence. However, that, too, shall come to an end, for Europe faces the same economic collapse as the U.S.

I really do feel sorry for university students graduating today: for many, if not most, their degrees will be obsolete by the time the economy recovers (which could be a very long time). What employer would hire a student with, say, a business, philosophy, English, or whatever degree that has lain fallow for two, four or more years when they can hire a freshly minted graduate instead? These students’ parents, meanwhile, will often have drained hundreds of thousands of dollars from their retirement funds to fund such now worthless educations. I know of parents that have destroyed their retirement options in order to put their kids through university.

So, what happens when you have armies of unemployed young people with obsolete skills? I know that this has happened before, such as in the Great Depression. However, when economic recovery did come in the mid-to-late ’40s, workers with no education and technical skills could still find plenty of hands-on work opportunities. I don’t know that this holds true anymore in a modern economy. There’s only so many openings for baristas.
Any ideas?

Democrat success stories

Incredibly, from the U.K.’s left-wing Guardian, comes a photo essay of what happens when Democrats are given the opportunity to put their economic and political theories to work: welcome to the future….


h/t smalldeadanimals.com

How does one make money in a failing economy? *UPDATED*

Mr. Bookworm had an interesting question.  He noted that it looks as if several states are going to default on their bonds, along with the possibility that these same states will file for bankruptcy.  He wondered if, armed with knowledge of these imminent economic collapses, it was possible to make money in the market.  As I said, that’s a good question.  I know that, no matter the economic disaster, one always reads about someone who walks away counting the piles of cash in his hands.

Do any of you have any idea how to turn the failing stock/bond markets to ones advantage?

Likewise, the real estate market is still in collapsed mode.  In theory, that means there are bargains to be had.  However, bargains work only if you’re reasonably confident that you’re buying in a market that will, sooner, rather than later, rebound.  How do you pick the next hot market?  A few years ago, my sister and her husband thought they’d found the next “hot market.”  Instead, when the real estate market collapsed, they found themselves in one of the most foreclosed upon market in the U.S.  They were completely unable to unload their real estate investments, and ended up handing them back to the banks.

Those are the two examples that came to my mind but, generally speaking, is there a way to use money to make money right now, or is the sinking economic tide bringing down all boats?

UPDATE:  This charming, interesting post perfectly articulates the confusion that I see when I try to figure out how people are supposed to make money (or not lose money) now.  (Although I’m not going to rush out and buy gold and silver.  I tried that last year, only to have Mr. Bookworm tell me that this was a right wing wacko investment idea.)

How do we get out of this?

If the U.S. and our government were a business, we would already have been declared insolvent. Here’s why:

On our 2009 P/L (profit & loss) statement, our annual Federal expenditures amounted to about $3.5 trillion, against revenues (tax receipts) of $2.1 trillion. If history is guide, the $1.4 trillion gap between revenues and outlays will increase rather than decrease in subsequent years. Mind you, this is only at the Federal level…we haven’t included state and municipal financials, which add more black crepe to an already dismal picture.

How much could government revenues be expected to increase in order to plug this gap? The traditional conservative approach has been to grow the economy, using incentives: more growth = more profits = more tax revenues. The traditional Liberal/Left approach has been to increase taxes: more taxes = more government spending = more economic growth (!?).

In my view, we have traveled to a point far, far beyond these arguments: neither approach suffices.

The U.S. Gross Domestic Product (GDP), or “gross sales revenues”, is approximately $15 trillion.
If the U.S. operated as a business, national disposable income (meaning, after-tax income, or “net income” on the P/L statement) approximates $10 trillion, according to Euromonitor.com [http://www.euromonitor.com/factfile.aspx?country=US].
This is the total money available to be recycled back into the economy by the private sector, either through direct purchases (income-stimulating reinvestments) or capital formation (savings and investments).
Now, to close the Federal revenue gap would in the most basic of terms require taking an additional $1.4 trillion (14%) -PLUS out of our national disposable income in the form of taxes. Why “plus”?
Because government isn’t efficient: any monies taken in by the Federal government are inevitably depleted as they cycle through various government agencies before they can reach their target.  Unlike electronic transfers between bank accounts, only a small fraction of tax receipts go to their intended target. The rest is lost through government overhead and waste (I repeat myself).Thus, it will take considerably more than $1.4 trillion in tax revenues to close a $1.4 trillion budget gap.
In response to the obvious question this raises: yes, we could borrow this, but all borrowing does is defer payment of this sum at a stiff price (i.e., interest).
Eventually, payments must come from disposable income.
Let’s consider the national balance sheet:

A first-rate article by Kevin Williamson in the National Review (June 21, 2010) catalogued our country’s debt obligations as follows:

1) National Debt – $14 trillion (Williamson argues that this is vastly understated due to “funny money” accounting by the government)

2) State and Local Debt – $2.5 trillion (which the Feds will ultimately absorb). According to some, we already face massive impending municipal bond failures.

3) Unfunded government worker pension funds (federal, state and local) – $3.0 trillion. In large part, these are “unfunded” because governments expropriated their assets by borrowed against them, my corrupted state of Illinois being a prime culprit. Directly or indirectly, this cost will eventually be absorbed by all taxpayers.

4) Unfunded liabilities for all of our nation’s “we care about you but want someone else to pay for it” programs  (i.e., Medi/Obamacare, “Pharmacare”, Medicaid and Social Security) – $106 trillion (using Present Value). According to Williamson, this is more-than twice the total private net worth of the U.S. Even if we all individually sold-off all of our belongings (assets), we still couldn’t cover these obligations.

So, in sum, we have a “business” (USA Inc.) with negative-$1.4 trillion in net revenues and a balance sheet debt of $125.5 trillion. Williamson adds in a few more odds and ends to round-up the value to $130 trillion. And we haven’t even touched corporate and consumer debt.
Hmmm…how about some perspective?
According to a McKinsey & Co. report, world financial assets in 2008 (prior to two subsequent years of asset deflation) totalled $178 trillion. http://www.mckinsey.com/mgi/publications/gcm_sixth_annual_report/executive_summary.asp

I’ve looked long and hard for this number because it is admittedly “fuzzy math”, but the best estimate that I could come up for the total estimated tangible asset (book) value of the United States economy is $188 trillion. These are, for the most part, non-liquid assets…they cannot be simply sold off for cash-in-hand.

Source: http://rutledgecapital.com/2009/05/24/total-assets-of-the-us-economy-188-trillion-134xgdp/

In sum, USA, Inc. long ago exceeded its debt capacity.

As a bond holder of USA, Inc., would your next step be to:

a) invest in USA, Inc.

b) ask for a bankruptcy court to reorganize the corporation and restructure its debt obligations

c) liquidate and auction off its assets to cover its debt obligations to bond holders?

Ergo my conclusion: we are insolvent! There is no way that we will ever find the money to pay off these obligations. It just doesn’t exist, not within the U.S and not in the world economy. I anticipate option (b) — reorganization of debt. Of course, in this scenario, the shareholders (citizens, taxpayers) get left with crumbs (or “haircuts”, in financial parlance).

According to Democrat thinking processes, we should raise taxes. However, even doubling our total Federal, state and local tax receipts wouldn’t cover our income shortfall and debt service obligations, especially in the face of rising interest rates. Moreover, this  would crush the economy, ergo our ability to generate future tax revenues. It would kill the golden goose. In the meantime, the solution appears to be…print huge sums of money and get us into even more debt.


Looking at the Republican approach, growing the economy by lowering tax rates buys time, but I don’t see how we could possibly grow the economy enough to dig us out of this hole…or is my imagination too limited? Brazil’s economy grew about 10% last year, but then their starting base was much lower. Maybe Rep. Paul Ryan sees it differently.

Which leads me to the inescapable conclusion: the large majority of us will end up absorbing significant haircuts to our asset holdings as part of our inevitable national  and economic debt restructuring. My vote for the most likely targets of restructuring are: a) public employee pension funds; b) social security and Obamacare benefits; c) bond holders, via a national default a-la-Argentina…all inclusive. Bernanke’s QE2 movement  signals that massive inflation is already in the works.

Each of these steps spells disaster. In my view, it’s not a question of “if” but “when”.

So, as we begin this New Year, what are your ideas as to how we can climb out of this hole?

Do we invest Rep. Paul Ryan (R., Wis.) with dictatorial powers in order to implement his road map? Is that enough? (note: this is tongue-in-cheek, for those of you that don’t know me).

What do you think will happen if public employee pension fund obligations are shaved to 25% or less of current obligations? Do we become another UK, France or Greece and descend into anarchy? How do we prevent this from happening?

Many of us Bookworm Room aficionados, from comments gathered over the years, are either in retirement or seriously planning retirement….how will we / should we and others of our generation react to massive cuts in Social Security and ObamaCare? I note that some 25-30% of adults approaching retirement age have supposedly accrued virtually no retirement savings and individual net worth is likely to continue to decline in tandem with housing values. Plus, leading members of the Democrat regime have already made it known that it would like to strip me and thee of any anticipated inheritance incomes. What is to happen to them (us)?

What happens if the U.S. defaults on its bond obligations?

Or, am I all wet in my analysis? Although I do boast a corporate-finance-related degree, I do not pretend to be anything other than a hobby economist. Please, oh please, convince me that I am totally wrong in my analysis.

For balance, I do not think the prognosis is all doom and gloom, although I believe that we are in for a very rough ride. Our country faced similar difficulties early in our history and we got through them. I think the party is over, but I also think we have the wherewithal to climb out of the mess all of us have created, even if we cannot yet discern the way out. I am trying to understand how best to weather the storm.

Either way, please share your thoughts.

Forewarned is forearmed.

Capitalist societies benefit from rich people

The “Progressive” aversion to rich people (at least, rich people in the abstract, since so many prominent Progressives are filthy rich) is a hangover from a non-capitalist time, when wealth was class-based.  In America, with a free, capitalistic system, wealth is, at least in theory, available to all people.  Historic evidence indicates that, assuming people aren’t destroyed by generations of welfare, even if one generation doesn’t ascend the American wealth ladder, the next one will.  I mention all of this because of John Goodman’s penetrating article explaining precisely why wealthy people are good for all American people.

I’ve said it before and I’ll say it again, whether one is talking about the rich or abortions or dealing with our enemies, the Progressives are rooted in the past.  They live in a time and place in which there is no birth control and illegitimacy is a sin; where society is so stratified that the poor are virtual serfs while the rich are a hereditary aristocracy; and where the enemy is just like us, only misunderstood.  (Okay, that last isn’t another time or place, it’s a fantasy.)

Taxes, government dependency and happiness

Two interesting things rolled across my desk today, interesting because they address the same topic — dependence on Big Government — but reach diametrically opposite conclusions.  The first is a Dennis Prager column that examines why American conservatives are happier than American liberals.  This isn’t just Dennis’ opinion, by the way.  Instead, several recent polls have shown that, on the whole, conservatives are happier people.

Dennis opines that the matter essentially boils down to a few key differences in outlook.  One is a sense of victimhood.  In America, those who turn to the government for succor are those who feel betrayed by the American system, whether because they’re blacks invested in the notion of racism, or people of any color feeling that they haven’t succeeded in the American system as they deserved.  Another is the notion of utopianism.  Liberals believe in perfectibility, and are constantly disappointed; conservatives recognize flaws, and are always thrilled to live in the society that best harnesses negative human traits and gives the most rein to positive traits.  Conservatives are also more generous — they give their money away to causes, rather than waiting for the government to take it.  That affects how they feel about their own contributions to societal good.

The other article that came to me, via a very Progressive facebook friend, is one by Thom Hartmann that argues in favor of huge taxes on the rich, with the assurance that, in Denmark, people are happy because they pay such high taxes, with the rich taking the greatest hit, but not feeling it, while everyone else gets cheap, high-quality government services.  It’s a very sophisticated argument, and often a correct one, about the differing effect taxes have on the rich and the poor.

As I understand it, Hartmann argument boils down to this.  The rich earn far more than they can ever spend.  This means that taxes affect only their non-discretionary income, not their discretionary income.  If they’re taxed more, they might save less, but it won’t affect the money they spend annually on both life’s necessities and its reasonable frivolities.  The non-rich, however, spend everything they earn after taxes.  If taxes are raised, they have less after-tax money to spend, which hurts them.  BUT (and this is the kicker), Hartmann contends that, invariably, the market adjusts so that, after a few years, the non-rich end up getting from their employers precisely the same amount in adjusted dollars to bring them to spending parity with their situation before the tax increase.

This means, says Hartmann that, if top marginal tax rates are increased, only the rich will suffer.  Everyone else will remain the same, except that the government will have hugely greater number of dollars at its disposal for free health care and education. Further, the less money the rich people have to throw around, the more stable the economy is, because it prevents bubbles.  This means that there is no great wealth creation, but there are no collapses either.

A large chunk of the article is concerned with trying to figure out why non-rich people are so stupid that they don’t want to tax the rich at a higher rate, considering that, in the long run, higher rates will leave non-rich people with pretty much the same amount of disposable income.  Scaife comes into all of this, of course, as does the Heritage Foundation, William Kristol, and the usual conservative suspects. I found that part of the article uninteresting.  When Hartmann got back to substance, he started making thought-provoking points again.

Thus, Hartmann asserts that, if you increase tax rates, government actually shrinks, which is what sensible conservatives should want.  I can’t summarize the argument adequately, so let me quote it here:

From 1985 until 2008, William A. Niskanen was the chairman of the Cato Institute, a libertarian think tank, and before 1985 he was chairman of Reagan’s Council of Economic Advisers and a key architect of Reaganomics. He figured out something that would explode Reagan’s head if he were still around. Looking at the 24-year period from 1981 to 2005, when the great experiment of cutting taxes (Reagan) then raising them (Bush Sr. and Clinton) then cutting them again (Bush Jr.) played out, Niskanen saw a clear trend: when taxes go up, government shrinks, and when taxes go down, government gets bigger.

Consider this: You have a clothing store and you offer a “50 percent off” sale on everything in the store. What happens? Sales go up. Do it for a few years and you’ll even need to hire more workers and move into a larger store because sales will continue to rise if you’re selling below cost. “But won’t the store go broke?” you may ask. Not if it’s able to borrow unlimited amounts of money and never—or at least not for 20 years or more—pay it back.

That’s what happens when we have unfunded tax cuts. Taxpayers get government services—from parks and schools to corporate welfare and crop subsidy payments—at a lower cost than they did before the tax cuts. And, like with anything else, lower cost translates into more demand.

This is why when Reagan cut taxes massively in the 1980s, he almost doubled the size of government: there was more demand for that “cheap government” because nobody was paying for it. And, of course, he ran up a massive debt in the process, but that was invisible because the Republican strategy, called “two Santa Clauses,” is to run up government debt when in office and spend the money to make the economy seem good, and then to scream about the debt and the deficit when Democrats come into office. So while Reagan and W were exploding our debt, there wasn’t a peep from the right or in the media; as soon as a Democrat was elected (Clinton and Obama), both the right-wingers and the corporate media became hysterical about the debt.

And when Clinton raised taxes so that people actually started paying the true cost of government (a balanced budget as in the years 1999 and 2000), they concluded that they didn’t need as many services, so government actually shrank—in terms of both cost and the number of federal employees.

As a non-economist, I have to admit that what Hartmann says makes a certain amount of superficial sense.  I suspect, though, that there’s more to it.  For example, Laffer’s curve may be involved.  That says that lower tax rates create greater wealth, which actually increases government revenue.  With greater government revenue, profligate politicians and greedy citizens have more to play with. The problem, then, isn’t the tax structure; it’s the boondoggles, and earmarks, and “other people’s money” syndrome that inevitably plagues an organization that lacks fiscal discipline.

My core problem with Hartmann’s whole premise, though, is that it works because his allusion to Denmark shows that what he really wants is a world in which the government is responsible for all income that’s not dedicated to life’s necessities.  Under the current American system, that “excess” money that the “rich” have floating around — the money that Hartmann thinks the government should take and redistribute — is money that goes to banks that lend it to future homeowners and entrepreneurs; it goes into businesses that hire people; and it goes into funding innovation that improves people’s lives.

Having wealth circulate in the marketplace increases the risks of a slap happy economy, but it also vastly increases the possibilities of life improvement.  It increases innovation and, yes, greed, which is a powerful motivator.  In the Scandinavian countries, which until recently had stunningly homogeneous populations, no defense budgets, and no sense of obligation to the rest of the world (which we, in the U.S., heavily fund), it’s easy to have a tight little loop of shiny, clean, teeny houses; lean, mean Danish modern furniture; health care for that homogeneous population; and an almost zero track record on innovations that improve life for most of the world’s population.

Hartmann envisions a world in which everyone is happy with a brightly colored Danish modern version of very little.  Hartmann also fails to take into account dynamic populations.  The Scandinavian countries worked so well for so long because they were populated by people with precisely the same values and precisely the same life habits, habits that happened to be particularly neat and self-disciplined.  The tremors are starting, though, as these same countries struggle to deal with newcomers who have nothing in common with this nice, neat, egalitarian very white world view.  The welfare scams, violence, polygamy, cultural incest, etc., that the Muslim populations are bringing to Denmark and Sweden, and other northern countries, are all going to place a very interesting burden on these happy little taxpayers who could always rely on each other for homogeneity and on Papa America for world stability.

Before being quite so smug, places such as Sweden and Denmark might want to cast a jaundiced eye on Holland and Britain and France, all of which started with less homogeneous populations than the northern countries; all of which have had a head start on the challenging task of incorporating Muslims into their closed world views; and two of which (Britain and France) actually had to set aside defense budgets.  Hartmann, too, might want to consider that America is Holland, Britain, France, etc., on speed when it comes to population diversity; constant immigration; and defense spending upon which the entire Western world has relied since 1942.

At bottom, I’d rather be a happy American iconoclast, living with a fairly low level of risk (heck, we’re not yet Argentina, Greece or Ireland) and wedded to the infinite possibilities of a dynamic economy that trusts the innovation and drive individuals, rather than coping with a government’s overarching static, inefficient bureaucracy.  I’d also rather be in a surging country that, better than any place in the world, incorporates incomers, even illegal ones, as opposed to a country that is, for the first time, has to deal with profound outsider disruptions to its cozy little system.  I’m happy here.  Not droned, not pacified, not opiated, but happy.

Cross-posted at Right Wing News

Friedman tries — but he’s still an idiot

Thomas Friedman has a habit of making obvious statements in grandiose and portentous tones, only to ruin his credibility by following his astute grasp of the obvious with utterly fatuous and meaningless conclusions, bolstered by totalitarian-themed practical recommendations.  His latest column is a perfect example.

In the first paragraph, Friedman describes a piece of decaying infrastructure — which just happens to be an Amtrak line.  Now, that’s an interesting starting point, because I’ve been under the impression that Amtrak is absolutely and completely incapable of functioning with steady government infusions.  It’s a classic example of a completely ineptly run government program.  That is, despite Friedman’s implication the Amtrak’s problem is the current economy, the problem isn’t the recession at all, it’s Amtrak’s fundamental nature.

In his next paragraph, Friedman, in oracular tones, asks a question from on high:  “If we were a serious country, this is what the midterms would be about: How do we generate the jobs needed to sustain our middle class and pay for new infrastructure?”  Having set up his straw man scenario, Friedman follows immediately with a meaningless, “let’s pretend” conclusion:  “It would require a different kind of politics — one that doesn’t conform to either party’s platform.”

How do I know that this is a meaningless, let’s pretend conclusion?  Because Friedman then proceeds to waffle on, as he inevitably does, about taxing the rich and having the government spend on infrastructure.  (“We will have to raise some taxes to generate revenue, like on energy or maybe a value-added tax, and lower others, on payrolls to stimulate work, and on multinational corporations to get them to bring the trillion dollars they have offshore back to the U.S. for investment” and “we’ll probably need more stimulus to get the economy moving again so people have the confidence to buy and invest.”)  As you read that, just think of Friedman’s personal wealth, and ask yourself what percentage he expects to give to the government, and what percentage he happily concludes you ought to give.

But back to that whole “tax and spend on infrastructure” meme….

Pardon me for my confusion, Mr. Friedman, but wasn’t that what you and Obama promised back in 2008 would happen, so much so that our unemployment would be below 9% and are economy booming?  You know — all those “shovel ready” jobs?  You guys sold the nation on the concept of an infrastructure building binge of the type we saw in the 1930s (Hoover Dam, the Tennessee Valley Authority) or the 1950s (the interstate highway system).  As Obama has admitted, he didn’t know what he was talking about and, as David Brooks confirmed, he knew a long time ago that he was selling a lie.  Not only has our money not been used for infrastructure, it’s been used for boondoggles that make Tammany Hall look like amateur hour at the Ritz.  The jobs numbers aren’t so good either, with even reliable Democrat shill 60 Minutes conceding an unemployment rate in excess of 17%.

Friedman tries to hide his usual socialist cheering by following that useless prescription with vaguely uplifting phrases supporting some basic capitalist principles (“Ultimately, though, good jobs at scale come only when we create more products and services that make people’s lives more healthy, more productive, more secure, more comfortable or more entertained — and then sell them to more people around the world,” a goal that will be achieved with workers inspired to become “artisans”) but his heart’s not in it.  The overall tone of his article makes it manifestly clear that he’s incapable of imagining American people, functioning freely in an open marketplace, having the energy and innovation to create those products and services.  Without Nanny State help, he thinks, we’re doomed.

You know what the tell is for the fact that his column doesn’t mark an admission that his prior beliefs were all wrong but is, instead, the usual melange of lies, fantasy, and totalitarian dreaming?  The last sentence:  “Government’s job is to help inspire, educate, enable and protect that work force. This election should have been about how.”  For a nice book translating Friedman’s touchy-feelie totalitarianism, I highly recommend Jonah Goldberg’s Liberal Fascism: The Secret History of the American Left, From Mussolini to the Politics of Meaning.

Have I mentioned that Friedman is an idiot?

Balancing the budget by cutting spending

In my life, if I’m running at a deficit, I cannot demand more money from my boss.  The only thing I can do is cut my spending.  In the world of government, which is running at a deficit, the fed demands more money from its boss (that would be, collectively, the taxpayers who are constrained by their employee’s believable threat to imprison them), and then increase spending.  It doesn’t have to be this way:

Misspent government funds

If you subscribe to the WSJ, I urge you to read Liberalism and Public Works, which uses Chris Christie’s decision to shut down the tunnel project as a springboard to explain that liberal entitlement programs have destroyed public works programs:

To govern is to choose, or ought to be. And the reason New Jersey and so many other states can’t afford new “infrastructure” is because the politicians who’ve been running the state have blown the budget on everything else. For years, Democrats in Trenton have steered ever-more state revenues to government employees and their pensions, while squeezing state spending on the core purposes of government such as roads. Mr. Christie is telling them that the jig is up, and that a government that tries to do everything ends up doing nothing well.

That pretty much nails it. What’s really funny is that it’s the Big Government types who think of the economy as finite, which is why they’re so focused on redistribution. Capitalists understand that a healthy, relatively unbound economy can raise the standard of living for everyone, while Marxists see the money in an economy as perpetually limited, which requires government to decide who is entitled to its benefit. That same Big Government person, however, sees the government budget as endless, capable of being supplied in perpetuity by the same people whose wealth the government relentlessly steals.

New technologies = new wealth; or the rich get richer, but the poor don’t get poorer *UPDATED*

One of the great Marxist fallacies is that there is only so much pie to go around.  We know that changing human efficiencies put the lie to this, but the liberals still live in a small pie world.  That’s why you end up with Robert Reich, who ought to know better, trying to compare today’s economy to that in the 1970s.  John Steele Gordon puts him firmly in his place:

Reich simply ignores the fact that whenever there has been a major technological development, from the full-rigged ship in the 15th century to the microprocessor in the 20th, there has always quickly followed an inflorescence of fortunes based on the new technology. This, inevitably, causes income inequality to widen. The poor don’t get poorer, the rich just get suddenly much richer. The more fundamental the new technology is, the more the gap will widen, and the microprocessor is the most fundamental new technology since agriculture 10,000 years ago.

Read the rest here.

UPDATE:  This very silly video, of a woman returning to the workforce after 30 years, nicely illustrates Gordon’s point:

A German economist bemoans the decline of Americanism

In Der Spiegel, of all places, one finds an article bemoaning, loudly and strongly, the profound mistake inherent in the Democrats’ Europeanization of America:

The Obama administration and the Federal Reserve want to fix the United States economy by spending more money. But while that approach might work for Europe, it is risky for the US. The nation would be better off embracing traditional American values like self-reliance and small government.

There’s no question about it: The 20th century was America’s era. The United States rose rapidly from virtually nothing to become the most politically powerful and economically strongest country in the world. But the financial crisis and subsequent recession have now raised doubts about its future. Are we currently witnessing the beginning of the end of the American era?

A firm belief in the individual’s ability, ideas, courage, will and a reliance on one’s own resources brought the US to the top. The American dream promised everyone the chance of upward mobility — literally from rags to riches, from minimum wage to millionaire. The individual’s pursuit of happiness was seen as the crucial foundation for the well-being of society, rather than the benevolent state which cares for its subjects — and certainly not the welfare state, which provides a social safety net for its citizens.

In the American system, every man was responsible for himself — in good times and bad. No one could count on government assistance, not even the wannabe millionaire who did not make it and ended up homeless.

Read the rest here.  Thomas Straubhaar essentially argues that America must be true to itself in order to reinstate its former economic greatness. Sounds right to me.

Elizabeth Warren’s inchoate thought process

I know that not all (or even many) of her former students agree with me, but I hated Elizabeth Warren’s professorship because I often found her incoherent.  She had problems finishing sentences and wrapping up thoughts, and much of what she said came with built-in internal inconsistencies.  Dissecting her lectures was labor-intensive.

It seems as if nothing has changed, if Alan Reynolds’ analysis of a law review article she wrote is any guide.  If you add condescending and statist to Warren’s sins of incoherence, not to mention erroneous, you end up with a pretty dangerous person to have in charge of our nation’s banking system.

Obama’s economic ambiguity

I’m almost done going through my emails, but still have a few left.  One of them brought to my attention Zombie’s post about Obama’s schiz0phrenia when it comes to the economy.  As for me, I’m not so sure that Obama is pulled in two directions.  I think he’s got a Cloward-Piven goal, but understands that he does not have the political might to make it happen.  The Keynesian approach is both a useful stopgap and a cover.

Speaking of economics, I can almost guarantee you that this movie will never see the light of day in Marin movie theaters when it opens this fall (although Marin has seen a huge increase in Republican voter registrations, so maybe there’s hope even here):

(h/t Earl)

All About Money

One of the things that I try to understand is the Great Divide between today’s Liberals and conservatives that has left us talking past one another on policy issues. Frankly, I have concluded that discussion with Liberals is often futile because we attribute different meanings to words and concepts.

One of those concepts, I suspect, has to do with “money”.  Let me throw the following proposition on the table for discussion:

Liberal /Lefties view “money” as a fixed, tangible quantity with intrinsic value, like gold coins, for example. Thus, the value of money is intrinsic to the lucre itself, be it coins or dollar notes. Conservatives, on the other hand, see “money” more abstractly as representing “created value”…as scrip or IOU on value created or received. As economists put it, money is a “medium of exchange” for value. So, for liberals, “money” is something tangible to that must be amassed by taking from someone else’s stash. For conservatives, “money” is something more abstract that must to be created (i.e. goods or services) directly (e.g., wages) or indirectly (e.g., inheritance) through the creation of “value”.

How might this color our perceptions of one another?

1) When people like Bill Gates amass a large quantity of money by creating products that many people wish to purchase, conservatives view Gates’ money as a reflection of the value that he created and contributed others. No hard feelings there – it’s a fair exchange. A Liberal/Lefty, however, sees only Gate’s amassed pot of lucre that appears disproportionately high compared to the lucre stored in other peoples’ pots. They see this imbalance as patently unfair, especially since this lucre was transferred from other peoples’ modest stashes into Bill Gates’ already whopping big stash: Bill has more, all of his customers have less.

2) When money is needed to achieve a desirable social or governmental goal, a conservative recognizes that such money needs to be generated somewhere to pay for this goal. This can only be done by either drawing down existing value (confiscating peoples’ lucre) or by creating new  ‘value” that can be taxed (i.e., growing the economy). A Liberal/Lefty doesn’t make this connection – they see the process simply as one of either redistributing the existing lucre from other peoples’ pots or creating new lucre by printing more money. The problem of printing new lucre, of course, is that it is still underwritten by a fixed quantity of value – expanding money supply representing a fixed value means that each dollar is worth less. We call that inflation.

I can’t tell you how many times Liberals have looked at me with puzzlement when I have asked where they expect to get the money for their favored social programs.

3) De-linking “money” from the process of wealth creation makes it easy for Liberal/Lefties to confuse using tax money to pay for unemployment checks, dance troupes or road repair as “economic stimulus”. You are, after all, taking lucre sitting idle in some peoples’ pots and putting that lucre into other peoples’ pockets to spend on purchases. Unfortunately, the fact is that such activities do not in themselves create new value. This cannot therefore “grow” the economy.

What do you think? Am I onto something? And, if so, what other aspects of the Great Divide does this help to explain? Does this help or hinder us in discussing our differences with the Liberal /Left?

Random wonderful stuff

Just random stuff that’s so good you shouldn’t miss it:

Shirley Sherrod’s been on a roller coaster.  Thanks to a video snippet that Andrew Breitbart posted, she got pilloried as the face of Leftist/NAACP racial intolerance.  When it turned out the snippet was out of context, she got sanctified as the face of true racial harmony.  Now, though, that we know who this formerly anonymous government worker is, we’ve learned that she is indeed just another Leftist race-baiter, that she’s been complicit in government fraud, and that she has a long history of much badness.  Turns out that Breitbart managed to target precisely the right person to show what the Left is like.

May I recommend to you — no, may I urge upon you — Wolf Howling’s fabulous post regarding the judicial activism on display in Perry v. Schwarzenegger?  As a conservative, whether one agrees with gay marriage or not, the true issue is whether judges should be allowed to impose their values, wrapped in an ostensible cloak of legal reasoning, on citizens. Or, as Wolf Howling more eloquently says, “gay marriage is not an issue of Constitutional law for the Courts, but rather one of social policy for the people of the fifty states and their state legislatures to decide.”  A nice companion piece is James Taranto on the same subject.

And a simple economics video for you (h/t Danny Lemieux):

Another one to add to your reading list is Michael Totten’s article about the way in which the media, which never steps outside of its small Leftist bubble in Israel, grossly misrepresents that country.

I’ve never liked David Letterman, whom I’ve always found self-centered and mean-spirited.  His periodic forays into actual wit could never compensate in my mind for the essential ugliness of his character.  According to Ed Driscoll, he’s only gotten worse, attacking conservatives with “sclerotic” glee.  (Isn’t “sclerotic” a great word?  I fell in love with Ed’s post practically on the basis of that word alone.)

Message to the Democratic states: It’s not working

My brilliant brother-in-law put together a chart showing the correlation between a state’s debt load and it’s government (Democratic or Republican).  The chart’s statistics won’t come as a surprise to conservatives, but I bet they’d come as a big surprise to a whole lot of liberals:

I wish there was a simple, pithy way to suggest to the citizens of Democratically run states that they might want to try something different for a change.

Economics help requested

On my “real” facebook page, I posted a link to Laffer’s article arguing in favor of lower taxes on the rich.  A liberal friend posted a reply that pointed out that, during the 1950s, which was a time of tremendous US economic strength, the top bracket was taxed at a marginal rate of up to 90%. By contrast, the top bracket today is taxed at something approximating half that, but the economy is weak. From that he concludes that Laffer is dead wrong.

Is my friend right? I believe as a matter of principle that money should be in the hands of the people and not the government, and I believe as a matter of principle that government redistribution of wealth is wrong, but I am incapable of explaining in economic terms why high taxes worked in the 1950s — or, at least, didn’t seem to have stifled the economy — while the lower tax rate now doesn’t seem to have stemmed the recession.  One of my more conservative friends suggested that the answer might lie in the fact that the post-war US economy, unlike the rest of the world’s, wasn’t lying in ruins, which certainly helped.  Is that it, or is there more to the story?

I trust that many of you, more sophisticated about economics and taxes than I, can either set me right — or, possibly, confess that my friend has a point.

Heartless thoughts about joblessness from someone whose lifestyle hasn’t been affected too much by the recession

I blush to admit this, but the recession has been something of a blessing for me.  Subject to two short intervals, once when I was a 19/20 year old exchange student and was not allowed to work abroad, and once for a few months after my second child was born, I’ve worked steadily since I was 17.

I worked my way through college and law school.  Since I am self-employed, I went back to work within a week of my first child’s birth.  I slowed down briefly after my second child only because I’d reached the end of my rope, and was worried about damaging my reputation as a quality attorney.

Admittedly, since I’ve had children, I stopped being the primary breadwinner, but I kept working, with my workload varying between 20-40 hours a week.  In between times, I was also a full-time parent to my children, as well as I full time housekeeper.  I did volunteer work at the schools and youth organizations, ran carpools, shopped, cooked, cleaned, did laundry, helped with homework, etc.

I’m neither boasting right now, nor complaining.  I’m not boasting because I know dozens of other mothers who carry the same load, most with more grace and competence than I.  And I’m not complaining because, thanks to the recession, my work dried up.  It’s been a tremendous relief for me to hold down only one job:  parent/homemaker, and not to have to worry about legal work on top of it all.  Indeed, I’m going to regret it when the recession (eventually) ends, and my phone starts ringing again.  I’ve liked not working and have been fortunate enough to be able to afford not to work.

A friend of mine hasn’t been working lately either.  Her story is quite different from mine, and it’s why I’m not always quite as sympathetic as I should be to all of the jobless claims.  You see, my friend has been unemployed for 4 years.  Her husband has been unemployed for 13 years.  Up until 4 years ago, they lived off of her salary.  Then, they lived off of their savings.  Now, after having abandoned their home to the bank (a home worth substantially less than the original loan the bank issued them) they’re living off the last dregs of their savings, plus food stamps.  Welfare is not far away.

If you ask them, they will tell you that they’ve given up on looking for jobs (and my friend, to give her credit, looked very hard for work in her rather narrow, specialized field).  What they say is that there are no jobs to be had where they live, so why bother?  What they won’t tell you is that, despite their travails, they’re very picky.  The jobs that are available are “beneath them.”  The hourly pay is too low to be worth their while.  (This is especially true for jobs that do not require special training, such as fast food store clerks, etc., where the pay for a tiring, demoralizing job is comparable to that of a welfare check.)  The company that might hire them has an inconvenient habit of requiring drug tests.  Unlike my parents’ generation, which would do anything or move anywhere (following the jobs) to bring in money, my friends represent a generation that believes that, unless the job is not only just right, but is also in their back yard, they really shouldn’t have to work.

My friend’s friends are similarly situated.  They live a welfare lifestyle that doesn’t include such bourgeois notions as being a reliable employee, refraining from drugs and alcohol, having children within wedlock, etc.  Although they swell the unemployment roles, their unemployment isn’t a problem of the recession, it’s a moral problem.

I know with absolute certainty (or at least I think I know this) that my friends are not representative of the vast majority of those left unemployed by this economy.   I know that whole industries, especially those that are traditionally male dominated (c0nstruction, especially) have been wiped out.  I know that, because the government has sucked money out of the private sector and paralyzed potential employers with fright, there are simply fewer private sector jobs to be had.

But I also know that there are people out there who, like me, are enjoying being unemployed.  The difference between them and me is that, while I can afford it (at least for now), they cannot.  Or, rather, they can also afford it, but only as long as you pay the bill.  I also suspect that, once the American taxpayers stop willingly footing this bill (Nancy Pelosi’s economic theories notwithstanding), this specific subgroup of unemployed people will find that there is less virtue in their work-free lifestyle.

I’ve never been a fan of George Bernard Shaw (a bombastic old socialist who believed in eugenics, and therefore supported the “cleansing” aspects of Nazi social policy), but he certainly articulated beautifully the distinction between the deserving and the undeserving poor, as articulated by that delightful reprobate, Alfred Doolittle:

What am I, Governors both? I ask you, what am I? I’m one of the undeserving poor: that’s what I am. Think of what that means to a man. It means that he’s up agen middle class morality all the time. If there’s anything going, and I put in for a bit of it, it’s always the same story: “You’re undeserving; so you can’t have it.” But my needs is as great as the most deserving widow’s that ever got money out of six different charities in one week for the death of the same husband. I don’t need less than a deserving man: I need more. I don’t eat less hearty than him; and I drink a lot more. I want a bit of amusement, cause I’m a thinking man. I want cheerfulness and a song and a band when I feel low. Well, they charge me just the same for everything as they charge the deserving. What is middle class morality? Just an excuse for never giving me anything. Therefore, I ask you, as two gentlemen, not to play that game on me. I’m playing straight with you. I ain’t pretending to be deserving. I’m undeserving; and I mean to go on being undeserving. I like it; and that’s the truth. Will you take advantage of a man’s nature to do him out of the price of his own daughter what hes brought up and fed and clothed by the sweat of his brow until shes growed big enough to be interesting to you two gentlemen? Is five pounds unreasonable? I put it to you; and I leave it to you.

Both the federal the state governments  paint only in broad, distant, brush strokes.  They are incapable of distinguishing between the deserving poor and the undeserving poor.  If charity was a bit closer to home, there might be a better process for winnowing out those who truly want work and those who, like me, are enjoying a recession breather.

Timeless wisdom from a long-forgotten Scotswoman

D.E. Stevenson, born in Edinburgh in 1892, wrote 42 novels in the years between 1923 and 1970.  Most are out of print, so I’ve had the pleasure of reading only the small handful I’ve stumbled across in local libraries over the years.  She writes about the British and Scottish middle class, always with a loving, respectful, sometimes humorous tone.  Those of her books that are my favorites are the ones she wrote during WWII.  Stevenson was intensely patriotic, and believed that the British were in an existential war that must be won in order to preserve their democratic way of life against Nazi totalitarianism.

I was recently lucky enough to get my hands on a copy of Spring Magic, which Stevenson wrote in 1941, when Britain stood alone against the Nazis.  The book is ostensibly a romance, with an innocent, but gallant young woman meeting, and falling in love with, a young officer.  That story-line, however, is just a hook for the book’s real focus, which is to delineate the two things Stevenson believed gave Britain her strength and integrity:  its respect for individuals and its career military.  In book after book, Stevenson refines the theme of the goodness and power of the individual (which means her books are filled with charming, honorable characters), and the necessity of an honest, committed military class.  (Stevenson was herself the wife of a career army officer).

Stevenson’s ruminations about British strengths — and the country’s occasionally dismaying fall into suicidal weakness — make for interesting reading seventy years later.  I’d like to share with you a single passage from her book, one that is as relevant today as it was in 1941.  Just so that we’re on the same page, I’ll mention that the passage below, which has the old Laird explaining things to a young officer, reminds me of the fact that (a) in January, the moratorium on estate taxes ends, with the result that estate taxes will go as high as 55% and (b) that the phrase most often heard on Obama’s lips, in one form or another, is always “it’s someone else’s fault,” a phrase usually coupled with a false statement to the effect that, at the time, Obama knew better:

“. . . but even before the war started we had been living on our capital for years,” Mr. MacDonald was saying earnestly.

“I’ve heard it said before,” admitted Guy. “But I’m no economist, I’m afraid.”

“It is quite easy to understand,” Mr. MacDonald replied. “You know what happens when a man starts to spend his capital, and the same thing is bound to happen when a Government starts spending a nation’s wealth. Death Duties and Succession Duties are capital, but the Government has been spending the proceeds as if they were income. It would not be so bad if the Government raked in the money and invested it and spent the income — but that does not seem to have occurred to them. It does not require an economist to realise that a nation’s wealth lies in the wealth of her citizens. Moneyed people are an asset to a nation; paupers are a liability. Take a man with an income of ten thousand a year; he is a valuable asset. The State can depend upon him for a definite yearly income. Then the man dies and the property — instead of passing to his son and continuing to yield the same yearly income to the State — has to be broken up and sold to pay Death Duties.”

“I see,” said Guy, nodding.

“You see,” continued Mr. MacDonald, “every time a big estate is sold up it is a national investment sold out. No more yearly income will accrue from it to the State. It means that the Government has killed one of its geese, so that goose cannot lay any more golden eggs. In the last fifteen years or so the Government has killed off dozens of geese . . . soon there will be no more geese left, and therefore no more golden eggs.”

“It seems very shortsighted,” said Guy thoughtfully.

“It is shortsighted,” replied Mr. MacDonald. “We have been suffering from shortsighted politicians for years. This dreadful was is due to myopia on the part of our politicians — ”

“That’s true!” exclaimed Guy.

Mr. MacDonald smiled. “They wouldn’t see and they wouldn’t listen,” he declared. “They never listen to people who try to tell them unpalatable truths. Lord Roberts warned them before the last war and they said he was in his dotage. Winston Churchill, Roger Keyes, Nevile Henderson and half a dozen others warned them that Germany was on the warpath again and all they did was to disarm faster and break up our battleships for scrap . . . . I don’t know whether you have noticed,” continued Mr. MacDonald. “It is rather an extraordinary thing. Churchill has never once said ‘I told you so’ or ‘If you had only listened to me.’ He is a big man, there is no doubt of that.”

Parallels between Obama’s green economy plans and, well, other governments’ economic changes

Obama plans to use brute force legislation to turn America into a green economy.  To do this, he is going to use the government’s police and economic power to break the backs of the oil and coal industries.  It occurred to me that (at least) three other governments have used brute force to change their country’s economies.

Stalin decided to break the backs of the farmers, and to industrialize the Soviet economy.  Estimates are that 35 million died.  Mao decided to break the backs of the farmers, and simply reallocate resources “equally.”  Estimates are that 50 to 100 million died.  Mugabe decided to reallocate Zimbabwe’s farm wealth from whites to blacks.  Overnight, Zimbabwe went from being Africa’s bread basket to being just another African basket case, with people starving in the streets.  (I don’t know the mortality rates arising from Mugabe’s policies.  Do any of you?)

Economic changes work wonderfully when driven by market forces.  When driven by government ideologies, the results, so far as I can tell, are invariably death, despair and poverty.


And a little bleg:

Even the November 2010 elections may not be enough to save the American economy

Neo-Neocon spells out clearly and explicitly how the ugly tyranny of the current Democratic majority may continue, even if voters throw “da bums” out of office.

Headline from a perpetually surprised AP

U.S. home sales, which were expected to rise, sink 2.2 percent despite help from federal tax credits – AP

In which collapsing economic universe did the AP expect home buyers to put their financial lives on the line because of a tax credit?  People know their taxes will rise, people know their health insurance rates will rise, people know their fuel costs will rise, and people know that the Democratically run federal government will self-destructive with its spending binge.  And they’re going to plunk down money for a house?!

Homeless man has better grasp of economics than Democrats

This is an amazing snippet of a homeless man — who must be sorely tempted by the welfare state — recognizing that the only way to relieve him from the burden of economic disaster is to get the government out of the economy:

For those liberal trolls who have found this website, let me explain to you what one savvy homeless man understands, and what no liberals seem to grasp:  Governments do not create goods.  Governments do not create wealth.  Governments print money (and, when they print too much, they create inflation).  Governments do have the power to take money from the wealth creators, and then to create make work so that people look as if they have meaningful jobs, but this is a giant Ponzi scheme.  Suck enough wealth out of the private sector for these pretend jobs, and you eventually end up with lots of pretend jobs and no wealth.

Hat tip:  Hot Air

Conventional wisdom — how often it’s wrong

My husband is hoping that I can put my prodigious knowledge of the news to work by predicting movement in the stock market.  I keep telling him that the fact that I know what’s happening in the world is entirely separate from my understanding what’s going to happen in the markets.  For example, I know that Greece may give up the Euro (as may other smaller, economically sick countries), but I have no idea whether that will cause the Euro to self-destruct, or if it will become stronger with the deadwood gone.  Knowing the facts doesn’t lead to economic understanding.

You can understand my dilemma.

There are some things I do know, though, one of which is that conventional wisdom is often proven wrong.  A case in point is a recent New Yorker article talking about the fact that world politics have an effect on the market.  (I would have thought that’s obvious, but it seems like a new idea to author James Surowiecki).  Surowiecki is sanguine about the fact that governments intentionally manipulate the market, despite the fact that, as his lead example of Merkel and the Greek Euro shows, they often do so ineptly and damagingly.

Most of Surowiecki’s article simply states the obvious, but it also states the wrong, as when it says this (emphasis mine):

The economic downturn and the debt crisis have given us instead a world where governments are among the most important players in markets—injecting money into economies on a colossal scale and routinely propping up, or even nationalizing, troubled companies.

As a result, investors have a vast range of new things to worry about, like voter sentiment in Westphalia. They have to try to figure out whether policymakers will do things they shouldn’t, like slash spending during a downturn, and not do what they should, which is to intervene promptly when systemic crises appear.

In other words, Surowiecki is saying that the best way to prop up a falling market is through “stimulus” plans — that is, increasing, or at least maintaining, high government spending.  That’s a Keynesian truism that’s guided liberals for decades — except that it’s wrong.

To the surprise of everyone in the Ivory Tower, actual real world data shows that, the more government spends, the more businesses retrench rather than joining the spending party.  Business people understand what liberal policy wonks don’t:  all that spending has to be paid for by taxes; all those taxes suck money out of the economy; and an economy with no money is a perilous business environment.  The best way to keep a falling economy stable is to give money back to the people, not suck it further into the government’s maw.

I’m not a gambler by nature, and playing the stock market, as opposed to investing in it for the long haul, strikes me as the biggest gamble of them all — especially when the movers and thinkers aren’t moving or thinking very well.

A simple explanation of the crooked accounting in Obama Care

Just wanted to direct your attention to Deroy Murdock’s article about the crooked accounting in Obama Care.  It’s one of the clearest explanations I’ve seen yet of the chicanery that the Democrats are using to try to fool the American people, even as they create plans that will inevitably make the American economy collapse.