Real Thought

The Dow is off by 200 some odd points.  Finally, someone in Washington had the guts to shoo the autoo companies away from the Federal slop trough and it is going to be a beautiful day here in northern California.  What amazes me is that so many people in our country seem to believe that the government is the answer to all of our problems.  I find this attitude more and more pervasive every year.  For those of you who believe that government is the answer, I have a small reading assignment for you.  First, read Thomas Hobbes Leviathan. Once you are done with that you then need to read the Declaration of Independence.  Finally read Ayn Rand’s Atlas Shrugged. For extra credit you may read either John Locke’s Two Treatises on Government or John Stewart Mills’ On Liberty.

Now I realize that there are those who will say, “Doug, these ideas are old and outdated and besides Ayn Rand was a nutter.”  To them I would say that there are certain principles which are timeless, one of which is the preservation of individual liberty.  Furthermore, I would argue that the furtherance of individual liberty should be the object of any enlightened society  and that the current trend toward collectivization is not a step forward but retrograde movement toward slavery and totalitarianism.  As free individuals we should not be dependent on the state, instead we should solve what ever problems may arise through individual action or voluntary association, if necessary.  If we depend on the state, we become its slave and we sacrifice that liberty which is our birthright and for which so many American lives have been sacrificed.  We squander our inheritance and like Esau sell that which should be most valuable to us for a mess of pottage, the false security of a state taking care of us.

Very simple.  Cut the corporate and personal income tax rate to 11%.  Raise the personal exemption to $35,000 per person.  Allow everyone to take a automatic 10% deduction for charitable donations.  Eliminate all other deductions.  Eliminate the AMT, capital gains and estate taxes.  Make all investment and interest income tax exempt.  Cut Federal spending by 50%.  Eliminate the Department of Homeland Security, the Department of Education, the Department of Health and Human Services and the Department of Labor.  Watch the economy take off.

The only two sure things in life unless you happen to be a high ranking Democrat.  Currently we have a President who promised to restore the people’s trust and have the highest ethical standards of any administration in history, yet it seems that several of President Obama’s early erstwhile appointments seem not to know who to hire to prepare their taxes nor do they seem to be able to understand the horrific United States tax code.  So, if a former employee of the International Monetary Fund and a sitting senator and a top executive with a consulting firm all can’t seem to figure out what is taxable and what isn’t; how is the average Joe supposed to figure it out?  Of course, if the Average Joe made a $146,000 error on his 1040, he would be in Federal Prison, not sitting in the US Senate or in the office of the Secretary of the Treasury.

Perhaps the leadership of the Democratic party should listen to the words of Vice-president Biden, it IS patriotic to pay taxes, especially if you are an elected or appointed servant feeding at the public trough.  The arrogance toward the “common classes” currently on display in Washington DC is exactly what doomed the ancien regime in France.  Perhaps it is time we had a little rebellion again.  After all it was the founder of the Democratic Party who famously said:

“God forbid we should ever be twenty years without such a rebellion. The people cannot be all, and always, well informed. The part which is wrong will be discontented, in proportion to the importance of the facts they misconceive. If they remain quiet under such misconceptions, it is lethargy, the forerunner of death to the public liberty. … What country before ever existed a century and half without a rebellion? And what country can preserve its liberties if their rulers are not warned from time to time that their people preserve the spirit of resistance? Let them take arms. The remedy is to set them right as to facts, pardon and pacify them. What signify a few lives lost in a century or two? The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants. It is its natural manure.”

Perhaps it is time we resisted and held those we elect to be accountable for their actions.  After all, it was years of government waste and mis-management that got the United States and several of the individual states into the current political, economic and fiscal messes that they are in, perhaps it is time for some real change.  We can start by not re-electing a single incumbent to local, state or federal office.  If that doesn’t provide enough change, then perhaps a little rebellion is called for.

With this Barack Obama becomes the 44th president of the United States.  I wish him all the luck, success and support that President Bush had, especially from the media, Hollywood and Congress.  Good Luck, Mr. President!  You  are going to need it.

Well, the President-elect has finished his prospective cabinet appointments and it looks like it is 1996 all over again.  We have Hillary as Secretary of State, Tom Daschle at HHS, Bill Richardson at Commerce and a host of other Clinton era retreads at various other posts.  Is this the “change” that the American people expected when they elected Senator Obama?  Somehow, I doubt it.

There are some interesting changes, however, like appointing Hilda Solis, a California congresswoman who is in bed with the AFL-CIO as Secretary of Labor and Tom Vilsack, the Iowa governor who never met a farm subsidy that he didn’t like, as Secretary of Agriculture.  Now there are a couple of appointments that signal “change”.  So we can see that government pay-offs to big labor and corporate agribusiness will continue and Americans will be forced to pay higher prices for food and consumer goods as well as higher taxes.

There has been a historic change in the American political landscape, one which I fear is not for the better.  But, for the short term at least, it appears that things will remain the same.

Once upon a time Zimbabwe was a success. Zimbabwe had the one of the highest GDP’s in Africa, had a stable government, a high literacy rate and an increasing life expectancy and a decreasing infant mortality rate.  Now, it is a moribund state.  Inflation is officially at 231 million percent and a recent article pegs the real inflation rate at 516 quintillion percent.  The infrastructure has collapsed and there is a raging cholera epidemic which has claimed more than 600 lives.  A meal can cost over one billion Zimbabwe dollars.  Doctors and nurses have not been paid and there is almost no medicine in the country.  Hospitals are deserted and Zimbabwe Defense Forces soldiers recently rioted in the capital, Harare, because they haven’t been paid.

The simple fact is that Zimbabwe’s president, Robert Mugabe, who has been in power since independence is responsible for this collapse.  His disregard for the rule of law, basic democratic processes and the needs of his people, all under the guise of ending the legacy of colonialism, have led to the total economic collapse of his country.  He needs to be replaced for the sake of his country.

On how President-elect Obama is going to govern as president?  He was one of the most liberal senators during his brief tenure and he is going to have an absolute majority in both the House and the Senate which are led by Nancy Pelosi and Harry Reid both of whom are neither “centrist” nor “moderate” Democrats.  I believe that President Obama will govern far to the left with only a few sops tossed to the centrists and moderates in the Democratic party to keep them in line.  The speculation about the direction of President-elect Obama’s governance style comes from the fact that during both the primary and general election campaigns he was able to convince people that it was time for “change” in America without having to be specific on what that “change” would be.

Perhaps his most telling moments were when he let slip that he believed that the government should “spread the wealth” from those who were well off to those who were not.  To those who are not afraid to name thing accurately this is a form of socialism bordering on communism.  The on ly difference is that Obama has not called for the outright state ownership of the means of production.  Yet.  Unfortunately, President Obama’s election occurred in conjunction with a world wide economic contraction and many feel that the government should buy shares in corporations and other institutions in order to “save the economy”.  While this is not exactly communism it comes close to the national and state socialist models put into place by such luminaries as Benito Mussolini, Adolf Hitler and Francisco Franco.  Make no mistake, Fascism is a philosophy of the Left, not of the Right.  The antithesis of Fascism is not Communism but Libertarianism.  When we ask the government to provide for us we have to surrender our liberty to the government.  Personally, I fear that the American public may have traded liberty for temporary safety and, if that is true we do not, as Benjamin Franklin famously said, deserve either.

Gott im Himmel!! The economy is going to crash!!!!  We need massive government bailouts and control of industry!  Capitalism is finished!  We are in the worst crisis since the Great Depression!

OK, here is the real truth.  We are not in the worst crisis since the Great Depression.  Period.  End of story.  You see, during the Great Depression real domestic output fell by something like thirty to forty percent and there was twenty five percent unemployment.  Today, domestic output has fallen one tenth of one percent and we have six percent unemployment. Even the worst case scenarios foresee a decline in domestic output of no more than five to ten percent and unemployment of no more than ten percent.  There you go, this crisis will, in reality, be no worse than the stagflation of the late 1970’s and so what if it is?  All government intervention did in the 1930’s was prolong the Depression.

Nobel prize winning economist and economic adviser to President-elect Obama, Paul Krugman, in an article published in the New York Review of Books says that we need to perform a “rescue operation” on the economy.  He points out that letters of credit are getting harder to obtain and that international trade is suffering.  His evidence?  The Baltic Dry Index has fallen eighty nine percent in the last year.  The BDI is a measure of world shipping rates.  Well, in reality, the BDI has lost over 90% of its value in the last year, partially to the loss of credit but also to the development of larger cargo ships, more efficient loading and routing of those ships, reduced manning of those ships and finally a fifty percent decrease in the cost of fuel for those ships.  Also, may I ask, when exactly are lower shipping costs bad for the economy?  I was always under the impression that the lower the shipping costs, the lower the price for the consumer and the greater profit margin for the producer.

Of course, Professor Krugman’s plan is for the government to buy stock in the failing institutions and become part owners of the banking system.  Look, this is simple, no.  The government has no business doing this.  It was Fannie Mae and Freddie Mac, the government mortgage and loan corporations which got us into this mess to begin with.  More than that,  from where is the money used to by bank stock going to come?  We already have a national debt that is unprecedented.  As a matter of fact, that was one of the main complaints against the current administration, that it had “mortgaged our future” by increasing the national debt.  But now it is OK to add billions or even trillions of dollars to the national debt under President Obama?  I guess so, as long as the corporate vested interests which support President Obama, Representative Pelosi and Senator Reid get their cut.  It is not OK to raid the Federal treasury if you are Republican but quite another thing if you are a Democrat.   I have a better plan, how about we cut Federal spending by, say $700 billion dollars and give each taxpayer a  $5000 check.  Better yet, how about we cut government spending by $700 billion and use the savings to pay off the current national debt.  That would do a great deal to stimulate the economy.  But what do I know?  I am not a Nobel prize winning Economist.

To President-elect Barak Obama when he wakes up on January 21st?  He has promised a health care reform, tax cuts for 95% of Americans, and end to the war in Iraq, a solution to the current economic downturn, energy independence, more jobs and a solution to global warming.  In other words he has made promises he cannot possibly keep even with the co-operation of Democratic majorities in the Senate and the House of Representatives.  First, the current economic crisis is global, not just national and I am not convinced that any government action will alleviate the market correction which has been long overdue.  As a matter of fact, I am convinced that the actions of Paul Volker, Ben Bernake and Allen Greenspan have intensified the downturn by postponing its inevitability.  Artificially lowering interest rates in order to stave off recession has only added to the over extension of credit which began with the Clinton era push to make more mortgages available even to those who normally would not qualify.

Next, the War in Iraq.  Quite honestly, I don’t know why we still are there except we still have forces in Germany, Italy and Japan sixty three years after the end of World War II.  Rather than beginning with Iraq, might I humbly suggest that United States troops be brought home from those former Axis powers?  Surely they are not an immediate threat to United States security?  Surely the reason we had troops stationed in those countries no longer exists?  Even the Soviet Union is no more.  I say bring the troops home but from friendly countries first.

National health care, now known as Obamacare.  I can keep my private, partially employer funded insurance plan or have the government pick up the tab.  Now that is a no-brainer.  Why would I keep my current insurance when for a pittance, I can get the government to take care of me?  I believe that this plan will and untold trillions to the national budget and still not really provide coverage for those who need it.  Soon, employers will simply find out that it is less expensive for them to pay higher taxes, pass the cost onto the consumers, who are the ones who really pay business taxes and everyone will be part of the government health care plan.  We will see the rationing of treatment as is already happening in Great Britain and Canada and a deterioration of medical services all across the nation.  Don’t believe me?  Look at what has happened to public education over the last 40 years.

Energy independence?  Sure, we can become energy independent with a massive increase in the use of natural gas, coal, oil shale and nuclear energy.  Hydrogen?  Forget about it.  It takes more energy to produce hydrogen than is recovered from burning it.  Electric vehicles?  Who is going to expend our already nearly overtaxed power grid?  How is the electricity going to be generated? Solar?  Solar cells are only about 5% efficient and take huge amounts of energy, toxic materials and specialized technology to manufacture.  Wind?  OK, but what happens on calm days?  Biofuel?  Remember that the fossil fuels we are using today were once part of the biomass.  Are we really saying that we want to consume 60% of the world’s agricultural output on a per annum basis simply to provide energy?  That means that there will be a massive increase in global food prices and massive starvation.  Conservation?  The United States already produces 50% of the world’s output of goods and services using 25% of the world’s energy with less than 10% of the world’s population.  How much more efficient can we be?  In other words, the energy problem is not easily solved, there is no quick fix, no matter what President-elect Obama may say.

More jobs?  There are always new jobs created as new technologies are developed and old industries fade away.  After all, thousands of Americans used to be involved directly or indirectly in the whaling industry.  Of course, very few, if any Americans are employed in the whaling industry any longer, except as protesters.  My point is that jobs cannot be created by government fiat unless they are government jobs.  Most new jobs are created by small companies who find a new niche in the market to exploit or a new more efficient way to produce goods and services driving their competition out of business.  It is the market which creates jobs, not the government.

Global warming?  Despite the best efforts of the media, scientific and political elites who wish to keep this crisis in the fore front of public consciousness in order to gain power, profit and government largess, the simple fact is that there is no real evidence that the Earth is getting dramatically warmer on the whole nor is there any real consensus as to the cause of certain recent dramatic climatological phenomena.  Some areas of the Earth are warming, some are cooling.  Certain glaciers are receding and other are expanding.  There are more storms in some areas and less in others.  There are droughts in some places and more rain in others.  Are these events man made?  No one really knows.  Is this trend transitory or more permanent?  Got me.  I do know that those who predict doom and gloom have a vested interest in predicting doom and gloom.  Doom and gloom sells newspapers, magazines, radio and television airtime, elicits more grants for research and produces legislation that increases the power of government over the individual and favors certain industries over others.  Call me a cynic but I say follow the money and you will find the real cause of global warming.

So, what will President-elect Obama face when he wakes up on January 21st?  A political minefield, one from which he may find it impossible to extricate himself or his party.

The election is over.  Barak Obama is the President elect.  Many in the country seem to have had an emotional catharsis.   I don’t get it.  This is only a Presidential election, people, get over it.  There will be plenty more elections in the next few years.  Here in the People’s Republic of California we have an election about every six months, they really are no big deal.  There is always a winner and a loser and some are happy and others are disappointed.  Soon after Senator Obama is inaugurated there will be a great disillusionment.  Neither he nor the Democratically controlled Congress will be able to do much about the economy as the economy operates independently from the political system.  Nor will the Democrats be able to deliver on all that they have promised, simply because in a contacting economy the money simply won’t be avaiable.  We are in for a long, rocky road and at the end we will all be better off but there will, in the meantime, a great deal of belt tightening no matter what the party which will take power in January promised.  Happy days will be here again, but it will not be because of Obama, Reid, Pelosi et al.