Friday, April 25, 2014

Larry Summers; Wrong Again

The supposed mainstream economists have absolutely no idea about what macro economic forces causes what. There is no logic to what they say and a complete ignorance of economic history.

This morning prior to an Export Import Bank meeting, Larry Summers, former Treasury Secretary, President of Harvard University and lifelong darling of leftist economists, was on Bloomberg TV discussing economic policy. I can’t quote him exactly but here is the gist of what he said. Export Import Bank subsidies (some of which go to healthy large corporations like Boeing) support US exports and labor. He added that he can’t understand why some economists oppose those subsidies and at the same time support corporate tax reduction, which, he said, only add to corporate profits. This is a perfect example of the Lefts one dimensional thinking and their complete ignorance of how capitalism works.

So far as corporate profits go he is right, but only to a point. A reduction in the corporate tax rate would boost profits temporarily, but (everything being equal) competition would kick in and prices would decline below where they were before the tax cut. The former tax revenue would find it’s way into the customers pockets, not the shareholders.

In a free market system a product is priced in order to return the maximum profit to shareholders. But, that price is not freely arrived at. Competition determines what that maximum price is, and if everyone competing eliminates an expense (as in corporate taxes) at least one competitor will reduce prices proportionately, forcing everyone else to do so.

Of course a profit is necessary to survive, putting a floor on prices, but in theory that price level was determined before the tax reduction and would remain the same afterwards. Better marketing, cheaper production costs and a host of other things always cause variations in pricing and profitability, but these things are ongoing with or without tax reductions. If the coffee growers price goes down you can be sure after an adjustment period the supermarket price will go down as well. The first Ford car cost about $5,000, but after Henry Ford successfully reduced production costs with his assembly line, the price came down to $500. It is no different with taxes.

I will only briefly mention the other positive ramifications of corporate tax reduction. Cheaper prices that would result are a benefit that every consumer enjoys, not only that reviled 1%. Consumer price reductions equate to an earnings increase for everyone, although liberal economists are loath to point that out. And although this simple concept seems too abstract for geniuses such as Summers, lower taxes and thus lower prices support wealth production and economic growth.

My question is, are these ridiculous one dimensional (in a multi dimensional universe) liberal economic theories honestly (albeit foolishly) believed, or are the always decorated liberal economists really doing leftist marketing disguised as scholarship?



Tuesday, April 1, 2014

How Did Obama Get Elected?

How is it possible that Barack Obama got reelected? One might explain his original ascendency, however unlikely, to his hidden nature, something the press studiously avoided talking about. But to make the same mistake again is almost unfathomable. He is a man that sat in the pews of a racist, Jew hating, America hating preacher and called him his mentor. He refers in his autobiographies (the plural is not a typo, he has two of them) to Frank, who is Frank Marshall, another mentor. Marshall was a lifelong communist, as thus an apologist for Joseph Stalin, the murderer of 80 million people. He cut his teeth in Chicago politics at the home of Bill and Bernadette Ayres, convicted domestic terrorists. He attended events for fundraisers for Hamas, terrorists in the middle east. And if anyone doubts that past is prologue, he has governed using the same destructive principles that the aforementioned rogues gallery advocate. Who would vote for such a man? How could this happen?

The founding fathers believed that a representative democracy could only flourish if the voters had a vested interest in the long term health of the country. It is often the case that the long and short term interests are opposite one another. Some men are willing to delay gratification in order to enhance long term benefits, while others seek instant gratification at the expense of long term health. Our founding fathers understood that allowing everyone to vote was a recipe for disaster. Too many voters would opt for instant gratification regardless of the longer term costs. It was almost self evident that any system embracing one man one vote was doomed to fail.

The fathers wanted to insure that only voters with a long term interest qualified to vote. Because women were considered ignorant in the ways of government and business, and a man not owning property was thought to be too young and inexperienced to cast a thoughtful ballot, or simply unqualified by virtue of his station in life, they were excluded from voting. Land was prized above most  things (this was a time when Ben Franklin said of our agrarian society, “All wealth will come from the ground.”), so that or a minimum amounts of land, savings or taxes paid were used as a criteria to qualify to vote.

Below are quotes illustrating the thinking at that time. It applies today as much as it did then. My thesis is that if only people with a vested interest in the long term survival of the US were voting, this aberration of an Obama re-election could never have happened.

'Property requirements were widespread. Some colonies required a voter to own a certain amount of land or land of a specified value. Others required personal property of a certain value, or payment of a certain amount of taxes. Examples from 1763 show the variety of these requirements. Delaware expected voters to own fifty acres of land or property worth £40. Rhode Island set the limit at land valued at £40 or worth an annual rent of £2. Connecticut required land worth an annual rent of £2 or livestock worth £40.

John Adams, signer of the Declaration of Independence and later president, wrote in 1776 that no good could come from enfranchising more Americans:
Depend upon it, Sir, it is dangerous to open so fruitful a source of controversy and altercation as would be opened by attempting to alter the qualifications of voters; there will be no end to it. New claims will arise; women will demand the vote; lads from 12 to 21 will think their rights not enough attended to; and every man who has not a farthing, will demand an equal voice with any other, in all acts of state. It tends to confound and destroy all distinctions, and prostrate all ranks to one common level.

The true reason of requiring any qualification, with regard to property, in voters, is to exclude such persons as are in so mean a situation that they are esteemed to have no will of their own. If these persons had votes, they would be tempted to dispose of them under some undue influence or other. This would give a great, an artful, or a wealthy man, a larger share in elections than is consistent with general liberty. 

Interesting that the quote above believes limiting who can vote would protect against wealth having an undue influence. What has happened since the one man one vote policy was adopted is not that wealthy individuals have gained undue influence, but the government itself has become the wealthy force that trades favors for votes. The never ending expansion of the social programs has provided a framework for Democrats to gain and expand power. These programs have proven to be cancers destroying the nations economic and social fabric under the false banner of compassion, but they succeed in garnering votes. 

Most Democratic voters have no idea what philosophy the party employs, they don’t know who the Vice President is, who their senator is, or anything else related to the economy, civics or the legal system. But they do know how to apply for welfare, food stamps, aid to dependent children, heating subsidies  rent subsidies and Obama phones, and they know what party to vote for to insure the money for these programs keeps flowing.    

Whether these laws limiting voting accomplished their purpose, or could have been crafted better is open to debate. Even if there was merit at the time to the prohibition on women voting, it certainly would be an absurdity today. But the idea that letting the entire public vote would destroy the democracy is as true today as it was then. In order to expand the class of uninformed voters, the Obama crowd routinely insults our intelligence with nonsensical claims such as arguing that identifying oneself at a polling place is undemocratic and an undue burden. To the contrary it is both democratic and a small step in the right direction if this nation is to survive.

Early critics of a democratic system said a democracy can only exist until the voters learn they can vote themselves the other guys money. I fear our system, one man one vote, will prove those early critics right. We are seeing it in real time with the election of the most unqualified, most dangerous, man to ever run for much less hold the office of the President. He is an ideologue with no sense of history, no experience in the real world, no understanding of capitalism or any other economic system, whose world view has been shaped by intellectually arrogant and intellectually bankrupt, unaccomplished, fringe radicals.  

Tuesday, January 28, 2014

Castro And His Friends

My daughter Kathryn wrote this a couple of years ago. It is a reminder of the power of the mythology regularly embraced by the Left.

The mainstream media tells a consistent story about Cuba’s past and present—Cuba’s healthcare and education are better than the United States’, and Fidel Castro is a romantic revolutionary who saved his people from the evils of Batista. Dan Rather was so enamored that he referred to Fidel as “Cuba’s own Elvis.” Castro's supporters admit that although he may have “infringed on a few human rights,” such is the cost of a revolution, one that has vastly improved the Cuban quality of life.
This narrative portrays Che Guevara as a young martyr, inspired by the injustices he saw. He looked to Marxism for the answer. This image is pervasive throughout every leftist center in the world.  His face is plastered on t-shirts and stickers of trendy hipsters. Little do they know they are wearing the face of a sadistic mass murderer. Castro too is a cold-blooded killer who has kept 6 million people in an island prison for 60 years.  
I was lucky enough to interview Humberto Fontova, a Cuban American author who escaped with his family in 1961.  Tragically, his father was killed in the process.  Fontova has worked for years to expose Castro’s lies. He wrote two books on the subject, Exposing the Real Che Guevara and the Useful Idiots Who Idolize Him, and Fidel: Hollywood’s Favorite Tyrant. For those who are skeptical of what follows, please note that Fontova’s work is all footnoted and well sourced.
Here are some facts he presents comparing pre Castro Cuba with the present  Pre-revolution Cuba had a higher per capita income than most Western countries.  It was a first world country from the 1940s until 1959 when Castro seized power.  Today it is one of the poorest countries in the western hemisphere. Prior to Castro, Cubans were free to leave if they chose.  Today emigration is not permitted and is punishable by death.  Before Castro more Americans lived in Cuba than Cubans lived in the United States. Today Cubans risk their lives daily trying to escape.  Before Castro, Cuba had the 13th lowest infant mortality rate in the world. Today it is 50th. Before Castro, Cuba had more doctors and dentists per capita than the US. Today 75% of doctors who have escaped to the US fail the exam to practice medicine.  Worse, over half fail the examination to simply practice as nurses.  The average height of Cubans has decreased over the last two decades, a clear sign of malnutrition. There have been outbreaks of Dengue fever, which had been completely eradicated prior to Castro. The "quality education" claims are preposterous. What Castro calls education is mere indoctrination.  Cuba has the highest abortion rate in the Western hemisphere. Women undergo forced abortions if any pregnancy hints at trouble in an effort to keep the infant mortality rate down. Malformed infants are routinely murdered in secret. In short, it is a failed state run by a murderous tyrant.
What about political freedom? Cuba has the highest incarceration rate on earth right now. There are so many speech and assembly restrictions that it is hard to determine who is a political prisoner and who is a common criminal. Fontova thinks that 90% of those in jail are there for political reasons. Authorities can throw anyone into prison without reason if they perceive political threat.
So what’s the attraction? Why has Castro been so embraced by the left? Fontova said Che and Fidel exude coolness to liberals.  “Look, Che looks like Jim Morrison. Fidel looks like Jerry Garcia. They both nailed the coolness cache of being hippies who were bringing freedom to Cuba. Picture the United States in the late 50s. The US is reigned over by an old bald golfer, Eisenhower.  America is filled with white picket fences and families watching June Cleaver. All of a sudden these bearded long-haired guys pop up and they seem so cool. They were the first beatniks."
This cache persists. Fontova explained, “One might have hoped that the veil would have fallen by now. Castro and Che jailed more political prisoners as a percentage of the population than Stalin.  They murdered more political prisoners in first three years in power than Hitler in his first six.  They introduced Stalinist horror to western hemisphere imprisoning 10,000 women, hundreds of whom were murdered, and committed countless other atrocities. One would think the cache might have worn off. Well if you do think that, you are wrong.”
Fontova further explained why the world believes so many lies about Cuba.  Castro has a genius propaganda machine. “He began the initiative before he reached ‘office’ to bamboozle the US media while he was still a so-called rebel,” said Fontova. “There is a passage in Che’s diary where he said ‘more valuable to us than military recruits for our guerrilla force were media recruits from America to spread our propaganda.’ In 1954 Castro was in jail in Cuba. He wrote a letter to a revolutionary colleague stating, ‘propaganda is at the very heart of our struggle.  We can never abandon propaganda.’” He recognized the importance of his control of the US media.  He still commits any number of heinous crimes that the world never hears about because of his skill in controlling the information flow.
Castro has a near flawless system controlling the media. Every mainstream American news source must report through the state controlled Havana Bureau, which reports only what the state approves.  It seems that since the end of the Cold War, Americans have forgotten what news from a Communist regime is like. “Thirty years ago years ago during the Cold War, people knew what Communism was and no one would believe any reports coming from a communist source,” explained Fontova.  “It’s really laughable. You knew they were liars. Nowadays, we have CNN (Castro News Network), ABC, CBS, Reuters, et. al. reporting out of Cuba only what is handed to them from Castro’s propaganda ministry. “
The left’s blind acceptance of this ruthless thug as an inspirational revolutionary is best highlighted by an episode here at Harvard. Castro had applied to Harvard Law School in 1948 and been rejected. In April 1959 Harvard Law Dean McGeorge Bundy decided to correct this "injustice." Encouraged by the adulation of the Harvard student body and faculty, the Dean had hardly declared, “I’ve decided to admit him!” before the crowd erupted with delight. In April 1959 while Castro was speaking at to standing ovations at the school, his firing squads were murdering hundreds of Cubans, including women and children as young as 17.
I asked Fontova about the debate between conservatives and liberals on how to deal with Cuba.  Conservatives generally believe sanctions are the best way to bring Castro down, while liberals believe sanctions have not worked and engagement would be more effective.  It seems like both sides make reasonable arguments.  Fontova disagrees.  “The verdict is in, and anyone who cares to look at the evidence will determine that engagement has failed abysmally.”  He went on to list some frightening statistics. Contrary to US State Department claims, there is no real US embargo. Until last year, the US was Cuba’s largest food supplier and fifth largest commercial trading partner. Nearly 500,000 Americans legally visited Cuba last year. Nearly $3,000,000,000 reaches Cuba annually from the US.  Only Chavez’s Venezuela is a larger trading partner with Cuba.
Obama’s recent policy changes allow even more open travel and money to be sent to Cuba. Fontova believes this is keeping Castro’s regime alive.  He said that they are nearly bankrupt. This past December Raoul Castro (Fidel's brother and newly appointed head of the state) said, “the life of the revolution hangs in the balance. We either reform or we sink.”  The Italian ambassador to Cuba publicly stated that Cuba would almost certainly be bankrupt by 2011.  “But just as they reach the tipping point, Obama throws them a life line.  Hundreds of thousands more Americans will put money directly into Castro’s pocket,” said Fontova.  This is not just from direct payments. The government controls the tourism industry. Every type of travel there directly funds the regime.
He believes that that a real change can only occur after Castro and Raoul die. Raoul’s recent ascendancy has done nothing for change in Cuba. He was a Communist party member before Fidel.  The regime is composed of  “the abject failures and common criminals who have absolutely nothing to gain by adopting capitalism. But there are younger men in the bureaucracy who feel left out.  The older guys make all of the money. The younger men, simply for materialistic reasons, want in.  This will probably start the reform after the biological solution” (the death of the leaders).  “It’ll unwittingly open things up.”
A genuine embargo would certainly help. Fontova pointed to South Africa as an example of a successful US embargo. We should set the international example. Political support is essential to do this. The American public needs to be educated. Let us hope that with alternative news sources available, people will stop believing the nonsense spit out by the mainstream media and will start getting the true story.

Sunday, December 1, 2013

Pope Francis and Wrong Ideas

I am a great admirer of the Catholic Church, even though it has been under attack by the left and their media allies for decades. The child abuse scandal is the most recent of many failures during the Church’s 2000 years history. Popes have been less than infallible, the church has often been intolerant, cruel, self indulgent and power hungry. But none of that should be unexpected. The Church is made of men,  and men are by definition failed, even men of God. Therefore the institutions made of these men are failed as well. How could it be otherwise? However, failure does not mean evil. When all the church’s wrong doing is tallied, and there is a great deal of it, the sum total is tiny when compared to the massive good it has done for centuries.

For example…how many readers are aware that one third of all healthcare in the United States is provided by a Catholic institution. Imagine what that number would be if all the christian faiths were included. One quarter of healthcare worldwide is provided by the church. Education, adoption services, all manner of care for the poor and infirmed and other charitable works too numerous to name are staples of the church.

I could go on and on about their good works, but these are but a small part of what the church does for society. It works every day to provide a moral framework, a guide to life, teaching people how to maintain the important building blocks of self, the family, and community. There is no metric I know of to quantify this, but I do know we would be in a Hobbesian state of nature without it. The church is at the heart of our social structure, healing the sick, feeding the hungry, and nourishing the mind and spirit. There are many valid arguments why moral behavior is self serving. But at the end of the day right for right’s sake is indispensable for a civil society, without which it would crumble into chaos. Teaching this through God and His goodness is the church’s raisnon d’ĂȘtre.

This is why I am distressed by the recent 84 page apostolic exhortation from Pope Francis. Some of what he says is insightful and of great value to us all. But much of it shows a complete blindness to economic and social history, and no understanding of the dynamics of either. He is seeking a Utopian dream instead of advocating capitalism, the only path for the material betterment of mankind.

The paper refers to unfettered capitalism as “a new tyranny.” It criticizes the “idolatry of money” and beseeches politicians to guarantee all citizens “dignified work, education and healthcare.” If ever there was an argument against papal infallibility, the certain abuses to come from these ideas would make a compelling case.

In the movie Wall Street Gordon Gekko said, “For lack of a better term, greed is good.” He was right. Instead of condemning greed and unfettered capitalism, the Pope should be condemning theft, fraud, misrepresentation and dishonesty in all its forms, but pursuing wealth through honest means should be celebrated. To condemn greed is to condemn most men’s call to greatness. Would the Pope condemn Beethoven for wanting to write great symphonies, Michelangelo’s want to create unfathomable beauty, or Newtons rewriting of the laws of physics? Was their push for the perfection of their craft a sin? If they pursued it seeking fame and fortune, was what they did any less valuable to society? Why then would the Pope condemn a man’s want to create more and more wealth? The creation of wealth is as important a public good as the works of any of the great men listed above. It rewards its creator, but it rewards society far more.

Bill Gates, his employees and shareholders made untold billions. But that is trivial when compared to what the people using his products made. His work lifted people out of poverty and improved the lives of everyone. None of the goodness Microsoft did could have been done without profits. The magnitude of those profits reflect the magnitude of what society gained. Walmart is the richest largest retailer in the world, making more money than probably the next 10 retailers combined. But the impoverished are the biggest beneficiaries of their high quality and low prices. Would Pope Francis want Walmart to cease operations? Profits are the life blood of these wealth producing machines. This is a debate about capitalism, unfettered as the Pope would say, and socialism, the anti-christ of economic prosperity.  

Look at history. In every case capitalism has fed the poor while socialism has created more of them.
Thanksgiving calls to mind one such example. The first arrivals here from England set up a socialist system in the Plymouth Colony of New England in 1623. It failed miserably. Food and other essentials were scarce and everyone suffered. Out of desperation the Governor switched to a free market system (privatized property, eliminated collective farming etc.) and the colony flourished. It produced more food and staples than could be consumed, and was the start of our great economic machine, the greatest  in history.

Chile was destitute in 1973 under it’s socialist system. Pinochet took over and changed it to a capitalist one and Chile quickly became the economic miracle of South America. Is there poverty still in Chile…of course. But far less than before, and everyone, even those still impoverished, are far better off than before. In 1945 under a capitalist system Argentina had a standard of living equal to France. Then the communists took over and a country blessed with more oil and minerals than most languished in economic purgatory. In China Mao Zedong promised Utopia to the people, but instead gave them poverty and death… 60 million to be exact. Stalin promised the same, and like Mao, delivered death, 80 million. Castro has promised a workers paradise for over 50 years but instead created a police state that survives on denial, lies, and locking its people in this impoverished island prison. Beacons of capitalism like Hong Kong and Singapore support their children, elderly and infirmed as well as any country on earth.

With this record why is the siren song of Sir Thomas More’s Utopia sung by many great men like Pope Francis? Utopia values the group over the individual, and assumes that everyone can be indoctrinated to share that perspective. This has never and will never be done. Man will always act in his own individual interest…period. The idea of working for the collective has wonderful outcomes in story books, but in the real world it always ends tragically. It is an unachievable fantasy.

The goals and aspirations of this apostolic exhortation are laudable. Who could disagree? But the Pope’s tacit endorsement of socialism and condemnation of capitalism has plotted a road not to those ends, but one that undermines what he is seeking to achieve. Socialism breeds tyranny, misery and death. Unfortunately, the Pope is a spokesman with a huge megaphone, and advocating for these ideas gives currency to those who appeal to the masses with impossible dreams, while leading them towards disaster.

The inequality of income the Pope condemns is a symptom of good, not evil. A healthy economy is an expanding universe. It is not, as the Popes statements and those on the Left suggest, finite. A finite economy requires someone to lose a dollar for every dollar someone else gains. There is no creation or destruction of wealth. That is not the real world. An expanding economic universe, which is real, increases wealth for everyone. Wealth production is greater for those at the top, but this concentration of wealth allows investment by those people creating even more wealth. That is a gift to us all. One just needs to think about the Microsoft and Walmart examples to understand. The same applies to every business, large or small. In this real world there are only two choices. We can expand the gap between those of great means and those of little, while raising both up, or reduce the gap, while driving both downward.

Wealth creation fuels new and better cures for illnesses, feeds more people, builds better housing for less money, protects the environment, and generally helps us all.  Capitalism works because that very greed that the Pope refers to (I would call it self interest), in a capitalist society is harnessed so that the “greedy” man’s interest and society’s interest are aligned. Henry Ford said, “A man gets rich thinking how much he can give for a dollar, not how little.”

The Pope’s paper suggests that we need a group of well intended politicians. We have a few, a very few. That is because self interest is a stronger force than altruism. I would suggest we might sooner find a benevolent dictator than politicians so disposed, with both being very unlikely.

A capitalist must entrust his survival to the consumer. That consumer votes with his dollars every day with every purchase. The capitalist can never relax and rest on his laurels, no matter how successful he has been. He must win every election every day by producing improved products for less money, for if he fails, if someone else does that job better than he, he will cease to exist. The magic of capitalism is its ability to direct mankind’s survival instinct in a way that works for us all. If only Pope Francis understood that.





Wednesday, November 6, 2013

Nobel What?

Schiller got the Nobel prize and I am floored. Not because he got it. Not because the work he did is shoddy or wrong. I don't even know what it is about. I am amazed because due to the award, he has been in the news talking about a variety of things. He has made clear that he has absolutely no understanding of basic economics, no idea of the principles that guide economic development.

On CNBC he railed against the income gap. He said that the debt is unsustainable (true), the day of reckoning is coming (true), and that since raising taxes on the rich is the only way to correct it (false by lightyears), raising them now will be less painful than after the crisis occurs (maybe). When asked about the philosophical differences between himself and the other Nobel Prize in Economics winners he said that the difference is more political, their coming from University of Chicago and his being from Yale.

Is not economics supposed to be a scientific inquiry? If so, is empirical evidence political? Is Newtonian physics left or right leaning? How about relativity? His statement is an absurdity. Yes, supply side economics is commonly referred to as from the right and Keynesian economics from the left. But they are mutually exclusive. One is correct and one is wrong. Political ideology is a total irrelevancy (the exception being climate change, which was spawned by political goals, nurtured by political agitation, and falsely promoted as science in a way that would make Marx, Goebbels and Freud blush).

Needless to say, "leftist economics" are completely wrong. Ir assumes that people act the same regardless of what is imposed (taxes and regulations) by government. Worse, it assumes that the economic pie is finite. Therefore raising taxes raises government revenue. Again, this is absurd. Increased revenue comes from an expanding economy. Bleeding wealth producers of the currency needed to expand the economy and imposing senseless regulations decreases revenue to everyone, the producers, government and the poor as well. See Cuba, the former Soviet Union or Venezuela for details. The entire Keynesian idea makes no sense and it's failure has been demonstrated every time it has been employed. Conversely, supply side has never failed. There is no argument.

The question about Schiller is why is he so blind. Another idea he supports is the efficient market theory. That is just more garbage. If it were true, how would certain individuals make money year after year investing while others consistently underperform? It wouldn't happen. It does because companies get mis-priced, people have varying degrees of talent, understanding and work ethics. People buy and sell with differing amounts of information, different macro assumptions, and different personalities allowing some to be patient while others cry our in pain every time things go against them. I won't answer why Schiller is blind because it is off topic. I will say that maybe his left and right political ideas should be looked at.  

Tuesday, July 10, 2012

Multiplier Myth


Capitalism has allowed the citizens of the United States to live better today than any people at any time in human history. The economy of a country is the single most important factor in determining the population's lifespans, environmental health, the size of the middle class and the degree of social unrest. We would love to make economic predictions with some degree of accuracy. The problem is that the ability to predict the movement of a system is inversely proportional to the number of variables affecting that system, and the number of variables affecting an economy are infinite. The best we can do is develop policies based on observations of what generally increases or stifles growth.

There are two mutually exclusive theories dealing with the government's proper role in an economy; Keynesian economics and supply side economics. The one our nation adopts will determine whether we continue our prosperity, or if we become another failed grab at a Utopian dream. Democrats such as Wilson, Roosevelt and Obama have generally subscribed to Keynesian theory (JFK being an exception), and their policy decisions have been guided by it. Republicans such as Coolidge, Reagan, Bush and Kennedy (D) generally have supported supply-side.

In 1936 John Maynard Keynes published The General Theory of Employment, Interest and Money. It says that during an economic downturn if the government stokes the demand side of the demand/ supply equation through increased spending, there will be a stimulative effect on the economy. Keynes proposed that this government induced momentum would create a "multiplier effect" (the term he used to describe the process), increasing economic activity, creating jobs and creating wealth. The idea is that the direct recipients of the increased spending will themselves spend more, as will the recipients of their spending etc. The whole idea rests on notion that if by any means consumption is increased, the economy will grow in a sustained way.

Keynes thought that during a recession government should prime the economic pump regardless of where the money gets spent. This idea was stated in the extreme when he said that if the government paid to have dirt moved from one hole to another, the resulting multiplier effect would build economic activity and the economy. Think about what he is saying. The mere expenditure of money will in itself create wealth. In the mid nineteenth century this fallacy was debunked by Frederic Bastiet in his Broken Windows parable. But I digress.

This liberal economic theory is the basis on which Hoover (R) and Roosevelt made most economic decisions trying to get us out of the depression, the theory which Japan has been employing for more than 30 years, and the theory on which the current administration is basing their entire economic policy. They have been trying to spin straw into gold. They will not succeed.

Instead of thinking about supply and demand, think about what really is going on; wealth creation and wealth destruction, better known as consumption. The foundation of supply is wealth creation, just as the foundation of demand is wealth destruction. Wealth creation is the process whereby work, investment, imagination and perhaps a little luck come together to create something of utility that did not exist before. Unlike the physical universe where matter and energy can neither be created nor destroyed, wealth is continuously created and destroyed, or as economists say, consumed. 

The purpose of wealth creation is to consume. At a minimum it is necessary to survive. The idea is not pejorative. It is simply a fact. We eat food and it is gone. We drive a car, and after a few years it no longer works. Clothing, housing and most everything has a finite lifespan and must continuously be replaced. Think of what Keynes is proposing in the light of wealth creation and wealth destruction. He says that destroying wealth in any form will create more wealth. 

Poker is a zero sum game. Total losses and gains are always equal. If the economy were like poker, society could never advance economically. We would simply be redistributing wealth in different ways, but with no net advance. The good news is that the economy is not a zero sum game, but rather an expanding universe.  The most difficult concept to grasp about capitalism and wealth creation (even though it occurs every day right in front of our noses) is that unlike poker, the process really does create things. Something is truly created from nothing. This phenomenon explains how it is possible that many economic transactions profit all the participants; owners, employees, customers and even people on their periphery. Through work and investment wealth is continuously created in every way imaginable. Unlike poker, wealth creation allows for infinitely more winners than losers.

A tree has a certain value. If work is invested and it is harvested and delivered to a mill, because it has more utility than it did as a tree, its value goes up. When the sawmill strips the bark and cuts it into manageable pieces, allowing it to be used for many more things than it did when delivered, the value again increases. And when a carpenter forms those pieces into a chair, he has created even more value. Transporting the chair, advertising it, and retailing it all add value. Should any of these steps be improved on, such as a cheaper way to transport it or advertise it etc, a small bit of more wealth has been created. The retailer, the money provided by the bank to finance all the operations listed above, and many other components all join in so as to create value, aka wealth.

The information age that developed in the last 40 years is a prime example of enormous wealth creation. When compared with the present day, communications devices hardly existed 100 years ago. Those that did were crude by today's standards. Modern devices have created untold trillions in wealth. Mankind has taken grains of sand and created silicon chips, on which inconceivable amounts of information are stored and accessed by millions. Calculations that were unimaginable 20 years ago are done in milliseconds. Exponentially more information is available instantly on your cell phone than was available 20 years ago in all the libraries in the world combined. Voice communications go around the world, cost pennies, and do it with an ease that nobody thought possible until recently. The benefits of this extend into almost every facet of business and our personal lives. New drugs, new airplane designs, and much more can be modeled on computers which allow development to take place in a fraction of the time, at a fraction of the cost, and far more safely than just a few years ago.

Throughout history society has learned more and more about this process, and the rate of wealth creation has increased far faster than society's ability to consume it. Advances in one field allow for others to piggy back on the new found knowledge and accelerate their own advancement. This has yielded exponential growth, and it continues accelerating today at a record pace. Over 25% of the goods and services that have been created in the history of the world have been created in the last decade. Many scientists claim that scientific information, which oftentimes translates into wealth, is doubling every decade. Think of that. In the next 10 years we will learn twice what was known in all of science in 2010, 4 times what was known in 2000, and 8 times what was known in 1990. All of it serves as a spring board to better, longer, more bountiful lives, at least in a material sense.

To understand the effects of wealth creation think of Microsoft. Bill Gates and his employees made vast amounts of money for themselves and their shareholders. In addition his products enabled businesses to provide new and better products and services thus creating far greater wealth than they ever could have without Microsoft, benefiting every consumer alive. Think about Walmart. It is the largest most profitable retailer in the world. A family of four earning $60,000 per year that lives near a Walmart will save about $2,500 per year when compared to a similar family not having one of their stores available. Walmart's efficiencies and expertise create wealth for everyone; shareholders, employees and their customers. Contrary to liberal economic thinking, Henry Ford had it right when he said that a man gets rich thinking how much he can give for a dollar, not how little. Walmart's success puts money in everyone's pockets. Almost all successful companies create wealth for everyone. The total amount of money that shareholders and employees at Microsoft and Walmart made is minuscule when compared to the wealth that other businesses and the public enjoyed because of them. And that is the magic of capitalism.

Growth in a society requires security, protection of private property, a court system, roads, etc. Those and certain other government functions are the infrastructure that allows wealth creation to occur, and in a broad sense they can be conceived of as wealth creation. However, as necessary and valuable as they are, they make up only a tiny percentage of overall government expenditures. Welfare, Medicare, Social Security, and the EPA, are all agencies designed to consume. I am not being critical if as a society we choose to spend money on them, although I would point out the cost of government doing them is far greater than if they were done by the private sector. The debate here is not what government should or should not provide, but whether or not those expenditures or additional government spending has a positive effect on the economy.

When the government spends it claims to increase economic activity. Their spending not only does not stimulate growth, but actually retards it. The government creates only negligible wealth. It mostly redistributes money and a consumes a great deal in the process. The money the government spends can only come from two places, taxing or borrowing from the private sector. The same dollar can't be spent twice. Whether a dollar is consumed by the government or invested by the private sector, Keynes's imagined multiplier effect created by spending that tax dollar is the same (government versus the private sector spending it).

There is one notable difference. Although a dollar in the governments hands only gets consumed, in the private sector that dollar will be partly consumed, and partly invested in an attempt to create more wealth. Work and investment are the sources of wealth creation. Money is stored and transferable work. Investment is the transfer of work (money) in order to create wealth. I submit that an invested dollar has a dramatically different and far more positive effect on the economy than does a consumed dollar. Investment (stored work) is trying to create more wealth than what it is consuming in the process. Work (investment) is the only means of creating the goods and services needed for consumption, thus it is the only thing that creates economic activity. Consumption does no such thing. Baking a pie increases economic activity, not eating it. Keynes and his multiplier effect suggest the economy is some kind of perpetual motion machine. There is plenty of heat and light given off from a bulb so long as the electricity is on. But turn the power off and the heat and light stop.

Of course many attempts at wealth creation fail and end up becoming wealth destruction. Investments often turn sour and become worthless. But history has shown that the value of the successes dwarfs the combined losses from the failures. Suppose there were a million failed attempts at designing a hammer before one succeeded? Wouldn't that single success create millions even trillions more times the wealth than the total of the failed attempts destroyed? There are few if any changes in science, commercial development or anything that have not been built on the knowledge gained from previous failures. Still, immeasurably more wealth gets created than all the losses combined. And heretofore this has been accomplished in spite of the foolishly destructive economic restraints imposed by governments that simply don't understand.

Since taxes are the main source of revenue for increased government spending, particularly stimulus spending, one must ask what the effect of higher taxes is on corporations and individuals. Increasing taxes on consumption or investment takes money from the private sector, although taxing consumption has a smaller negative effect on the economy than taxing investment. Investment taxes takes money away from wealth creation and everyone loses. The individual or corporation being taxed obviously loses, but the public and  the government itself gets less money. Raising taxes on investment may raise revenue in the short term, but because it reduces investment (wealth creation), in the long term it cuts consumption and growth, and therefore reduces revenue. The seedlings of investment never get planted. If revenue for the government were raised only from consumption (not investment), and the less the better, we would all be richer. The government would be much fatter with one quarter of a sixteen inch pie rather than an entire six inch pie. 

The wealthy only have three things they can do with their money; consume it, invest it, or donate it to charity. I would argue that although charity is wonderful and often helpful, it can be an inefficient use of money, and worse, it can be a destructive force (see The Ford Foundation and The Pew Foundation for details.) But that discussion is for another day. For my purposes here, I have limited the discussion to two choices, consuming and investing. The truly wealthy in America could not consume all their wealth if they tried. No matter how ostentatious they may be, they simply have too much money to spend it all. Because of this, they must invest, and that is a blessing to us all.

One liberal argument is that saving is neither consumption nor investment, and that it creates no economic activity. They couldn't be more wrong. Unless savings are in the form of putting one's money under a mattress, ultimately all savings get invested in an attempt to create wealth. Trace the "safest" of savings devices, US government insured savings accounts. If one deposits money in a bank, the bank adds about ten percent of its own cash to the amount deposited, and lends that entire amount out at a higher interest rate than it is paying to the depositor. That is how it makes money. Some borrowers use the money for consumption, but many use it to finance business and investment, aka create wealth. The point is that even money in pass book savings accounts finds its way into investment.

Liberal economists argue that the rich can afford more taxes and must "pay their fair share," as if this is an ethics debate. They point to increasing income disparity, saying the rich should "give back." It is true that the rich can better afford increased taxes, but it is the middle and lower classes that can not afford to have the rich taxed more. We can not afford to strip these job and wealth creators of much needed capital. I for one could care less about the motives of the rich. It could be greed, self aggrandizement or anything else. Neither can we afford to strip them of incentives. The effect of their investment benefits us all. Some people are willing to work for nothing, but I wouldn't want to bet everyone's economic future on it. I can't remember which great American said this but it is ever so true that, the brewer, the butcher and the baker sell food not for your survival, but for their own.

This whole liberal notion of fairness is dangerous and destructive. It undermines the very goals we all seek to achieve. What is fair about bringing income levels closer together if doing so demands that everyone, especially the poor and middle class, lower their standard of living? JFK said he was cutting taxes on the rich because, "A rising tide raises all ships." He was right. Helping the poor is a laudable goal, and if they are to be helped there are only two possibilities. The rich will get richer as the poor get richer, or everyone will go down hill together. History teaches us there is no third way.

In the US every time taxes were reduced total tax revenues to the government increased. This happened  under Coolidge, Kennedy, Reagan and Bush. Every time taxes on the rich were reduced, the rich paid more total tax dollars, and they paid a higher percentage of the total tax revenue. Which is better; having higher taxes with fewer jobs and less money coming into the government, or increasing jobs and revenue with lower taxes? Which is better; having the government tax and borrow money, distributing a small portion of the receipts while eating up the rest in the bureaucracy, or having that money used to let the job creators and producers do what they do best?

I can not find one historical example where government spending helped any economy. It has been tried in the US, Europe and Japan, and growth was anemic when measured against those times taxes were reduced without stimulus spending.  After the Japanese market crash in the late '80s (the market lost 75% of its value), the country tried stimulus..and they tried again..and they tried again..and is still being tried today. Yet the economy has not grown. There has been no job creation and no increase in wages. The only discernible change is what always happens when stimulus is tried. They ran up the national debt to 240% of GDP.

Supporters of Keynes's theory generally credit the highest government spending in US history, that which resulted from World War II, with the post war expansion (1945- 1973) and our emergence from the Great Depression. The commonly accepted story of this and the depression are seriously at odds with the facts surrounding them.

The Cliff Notes version of the depression starts with Woodrow Wilson. When the 16th amendment was passed in 1913 (authorizing the federal government to collect income tax) politicians said the top tax rate would never go above 7 percent.  By the end of Wilson's term 7 years later it was at 77 percent. In 1917 we entered WWI (30 days after Wilson was re-elected on a promise to keep us out of the war). The war, tax increases and other redistributive, anti business policies led to a near depression in 1920. When Wilson left office the economy had shrunk by 25 percent, government debt had skyrocketed (in part due to WWI, but not all), and unemployment was at 20 percent.

In 1920 President Harding (and then Vice President Coolidge who assumed the Presidency when Harding died shortly after taking office) lowered government spending by 50 percent over 8 years. Think about that when today's politicians tell us that one percent cuts would be draconian. Coolidge began a series of tax reductions unprecedented in US history. In 1928 when he left office, he had lowered the top rate from 77 to 20 percent, but more impressive is that the top rate was paid by only 2% of Americans. Let me repeat that. Only 2 percent of Americans paid the top 20% rate. When he left office unemployment was the lowest in American history, one half of one percent. It had averaged 3.3 percent during his eight years, dropping from 20 percent when he entered the office. After unwinding much of the pro union legislation, real wages went up at an unprecedented rate across the board. Revenue to the government skyrocketed and the national debt was reduced by one third. Needless to say economic growth was record setting. The nominal growth may not have looked very impressive, but that is because there was so little inflation. Real growth (nominal growth minus inflation) was spectacular.

A more accurate history of the depression is that the Hoover's and then Roosevelt's attempts to bring us out of what would probably have been no more than a severe economic downturn, actually exacerbated the problems created by the1929 stock market crash. They turned a recession into a the great depression, and the country mired in it for over a decade. In part the 1929 stock market crash occurred because of central banks around the world providing easy money (known in the US as an accommodative fed policy). That and the market bubble created by the euphoria of the exceptionally strong economy in the roaring 20s both played a part. In those days bank policy allowed 10 times leverage on stock purchases. Investors needed $100 to buy $1,000 worth of stock. People were betting 10 times their entire worth on the market. When stock prices declined, this leverage forced massive selling, which in turn drove the market down farther, causing even more severe price declines. In a free market bubbles occur, and they burst. But if policy makers leave the economy to its own devices, it always heals itself and grows beyond the last high point it achieved. It never fails however that when politicians intervene, the healing process is extended well beyond what it otherwise might have been, just as our current President's ill-advised policies are extending the time to recover from the housing crash.

After the '29 crash unemployment jumped from near zero to 15%, and the economy began to shrink quickly. It took a little over a year for the first legislation designed to "help" the economy to get passed. During that year, the pre-legislation period, when things were able to heal on their own with no "help" from the government, the economy began to grow and unemployment came down to 9%. When the "help" from the Hoover administration arrived, (for example The Smoot Coolige Act which imposed tariffs on imports sparking a world wide trade war) everything went to pieces, unemployment jumped past 20% and the economy began to shrink. The policies of first Hoover and then Roosevelt in 1932 (higher taxes, more spending, protectionism) kept a boot heel on the neck of the economy, preventing any type of resuscitation until after WWII.

Keynes type stimulus was tried repeatedly between 1929 and 1940 and it failed miserably. Henry Morgenthau, Roosevelt's Treasury Secretary, famously said, “We have tried spending money. We are spending more than we have ever spent before and it does not work. After eight years of this administration we have just as much unemployment as when we started, and an enormous debt to boot!” Those who believe in Keynes theory also fail to acknowledge our post war emergence from the Depression included large tax and spending cuts along with massive deregulation in 1946 and 1948. We supply-siders would argue that was the real engine of growth. Truman's spending/ stimulus plan was rejected and replaced with what we now call supply-side incentives; lower taxes, lower regulation and lower government spending.

Keynes supporters and liberal economists often point to Bill Clinton's tax increases in 1993 and the following economic expansion as a successful example of applied liberal economic theory (spell that tax increases and spending increases). I would argue that the income tax increases probably hurt the economy, but they were dwarfed by other positive factors introduced under Clinton. He signed a capital gains tax cut into law, a far more important tax on investment than the earned income tax that went up. He signed the North American Free Trade Agreement into law, creating a massive increase in trade. Along with congress he cut government spending (not increases as Keynes might have liked) eventually balancing the budget. And lest we forget one of the largest wealth creation events in history occurred on his watch, the internet explosion, which is the bridge that is taking us from the industrial age to the information age, fundamentally transforming the entire world's economy. The tax increase impact was minuscule compared with these accomplishments.

Another argument liberal economists make is that tax cuts will "blow a hole in the budget." Their claim, is based on CBO (Congressional Budget Office) estimates, which say that the permanent extension of the Bush tax cuts would cost the government 3.7 trillion dollars over 10 years. This is wrong on so many fronts it's hard to decide where to begin.

The CBO estimates are most often way off because they must make them with a legislatively mandated method of calculation. This method assumes a patently false premise; that people don't change their behavior with changing tax rates, as if we will all make the same investments, take profits and losses at the same time, and act in the same manner no matter whether rates are 20% or 70%. An extreme example of this delusional thinking is the luxury boat tax in 1990. It imposed a 10% tax on all boats costing over $100,000. The CBO projected a huge tax revenue increase based on 10% of the prior years boat sales. They were 180 degrees off the mark. People simply stopped buying boats. When the dust settled, the government collected tens of millions less than the CBO estimate, 100 boat manufactures went out of business (about 75% of them), 25,000 boat industry jobs were lost, and an additional 75,000 other jobs were estimated to have been lost as a result of the industry decline. The CBO is a political tool allowing politicians to make ridiculous statements under the false banner of something official and nonpartisan.

The language used in the debate favors the Keynesians because we supply-siders often fail to point out the false assumptions embedded in many of their assertions. Words like stakeholders imply that the consumer is somehow a part of the production process, and has rights because of it. They have the right to expect truthfulness about the product, product safety, and that environmental and other laws be complied with. But they are not entitled to make business decisions for the company or co-opt the wealth the company creates. All manner of wealth transfers occur under the compassionate sounding euphemism of social justice, moving money from producers to consumers. Real social justice, something that really benefits everyone, is respect for private property, the oxygen that allows capitalism to provide the most bountiful material harvests ever known to mankind.

It is clear that if you want less of something, tax it. More taxes on wealth mean less wealth for everyone. When the Democrats say that Republicans want tax cuts for the rich and rich corporations, and it would "punch a hole in the budget," the Republicans should answer yes they certainly do want the cuts. They want them because the economy will expand, increasing tax revenue. They want lower taxes because they want more jobs and higher wages, and lower taxes (especially for the rich) mean people will invest money doing exactly that. High tax and spend governments simply choose which non producers should consume the fruits borne of the real producers efforts. Not surprisingly, the recipients of this largess are usually groups that benefit political decision makers.

The Keynesians and their followers (main stream media for one) love to assert that "everyone agrees" that cutting spending during a recession is a recipe for disaster. No, everyone does not agree. In fact I would argue that among the people who have no political interests to serve, the overwhelming majority disagree. Margret Thacher cut spending to the bone (and taxes) during one of the worst recessions Great Britain ever endured, and when the dust settled the country enjoyed the greatest economic expansion in their history. Pinochet did it in Chile during one of the most successful economic transitions in history. Coolige also did it with phenomenal results and there are numerous other examples. History shows that over time, reduced government spending may initially reduce economic activity, there may be some pain, but shortly after the economy blossoms, increasing economic activity, jobs, and wealth.

Currently the Europeans are cutting spending and increasing taxes on a discredited theory that this will reduce the size of government and increase revenue at the same time. This will not work. They have their foot on the accelerator (spending cuts) and the brake (tax increases) at the same time. Cutting both is needed. 

John F Kennedy was a committed supply-sider. One of his signature achievements has all but been written out of the history books (academics are generally liberal and since the facts here contradict their economic theories/ bias they simply ignore them). About a month after his death the tax plan he had promoted for a year got enacted. It quickly produced jobs and wealth just as he predicted. Here are a couple of his numerous quotes on the subject. 

"In short, it is a paradoxical truth that ... the soundest way to raise the revenues in the long run is to cut the (tax) rates now. The experience of a number of European countries and Japan have borne this out. This country's own experience with tax reduction in 1954 has borne this out. And the reason is that only full employment can balance the budget, and tax reduction can pave the way to that employment. The purpose of cutting taxes now is not to incur a budget deficit, but to achieve the more prosperous, expanding economy which can bring a budget surplus."
– John F. Kennedy, Nov. 20, 1962, news conference

"The largest single barrier to full employment of our manpower and resources and to a higher rate of economic growth is the unrealistically heavy drag of federal income taxes on private purchasing power, initiative and incentive."
– John F. Kennedy, Jan. 24, 1963, special message to Congress on tax reduction and reform

Up until now I have tried to contain at least some of my considerable bias. But I really think that Keynes theory has as much validity and makes about as much sense as a perpetual motion machine. It reminds me of the joke about a businessman who would buy watermelons for $3 and sell them for $2, but figured he could make up for the loss with more volume. Winston Churchill said, "We contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle." Isn't that exactly what Keynes has proposed? He is saying the more we consume, no matter how wasteful, the more wealth we will have to consume. This is bizarre at best. Yet in the face of repeated and consistent failures, our politicians continue to appropriate money for just such folly.

Of course Keynes is not alone in developing crackpot economic theories. One seemingly everlasting fiction is that minimum wage increases help people earn more. Not only does it make no sense (if it had merit we should raise everyone's wages to $1,000 per hour, or better yet, $10,000 per hour), but the history of implementing minimum wages has always resulted in the loss of jobs, productivity, and thus wealth.

Another continuously repeated foolishness is the hubris that government can control inflation with wage and price controls. Nixon and Carter tried to employ this nonsense. It resulted in an entire dislocation of economic forces giving us some of the highest inflation in our history and one of the severest recessions. Obama is trying the same failed approach with the health care bill through government imposed prices and regulations, and with the financial regulation bill, mandating what banks can and can not charge. I can't be sure exactly how this will play out, but I am certain it will end badly . It always does. Who would have thought that mandating gasoline be 10% corn based ethanol would cause food inflation in Mexico, but it did.  

Some results of government tampering are easily predictable. What makes it frightening is that often times failure is obvious to everyone except those making the decisions. For anyone who doesn't realize that taking away someone's incentive to work will result in their not working, we now have almost 50 years of history proving it. In this land of plenty there are 4th generation welfare recipients. If your mother and grandmother were on welfare, and that was the only universe you were exposed to, what chance would you have of even seeking much less finding gainful employment? Welfare does not serve the poor. It is an economic and spiritual maximum security prison from which few ever escape.

Finland used to give 5 years of unemployment benefits. They lowered it to 4, and then 2. They found that the shorter the benefit time the faster people found work. Is that a surprise? People will focus and compromise a lot more when they face an uncertain future. Roosevelt began unemployment benefits with 16 weeks worth. Obama has increased it from 6 months to 2 years, prolonging this economic agony. 

Congress gave money to homeowners who are underwater with their mortgage in an attempt to bail them out. The result after spending billions; most re-defaulted. The worse part is that until a bottom to the housing market is reached, no new construction/ job creation/ wealth creation in that industry can begin. In their infinite wisdom congress has delayed the market from reaching bottom, and thus delayed the recovery. It was clear to anyone paying attention that this would happen, but congress proceeded anyway.

Politicians were positively giddy at the "success" of the "Cash For Clunkers" program. They congratulated one another claiming the success was beyond their wildest dreams. What happened? The government said that if you owned an old junk car, and if you traded it in on a new car, they would buy it from you at somewhere between 2 and 20 times its market value (up to $5,000). No surprise, people took them up on it. Inducing people into selling their car for much more than it is worth seems like a no brainer to me, but in Washington it is called an astonishing success. And for the record, car sales slumped as soon as the program ended. Congress succeeded in two things. They moved sales forward in time without increasing total sales at all, and they gave away billions of taxpayer money.

At the beginning of this I said you would decide. It is now time. If I have been convincing, don't allow someone's scholarly credentials or someone's false assertions to sway you. For decades academia has been singing the praises of this false god, Keynes. Everyone has an agenda, everyone has a bias, myself included. Therefore, your best defense against being misled is to apply your life's experiences and a good dose of common sense to the facts, and then decide.

Ronald Reagan said most of the answers are simple, they're just not easy. This is one of the simple ones, but it will still be difficult to sell and then implement. 



Saturday, June 23, 2012

Language of the Left

The language of the Left is designed to push the debate in their direction, even when it conveys false information. The word for spending is spending, not a euphemism like "investment." The word for taxes is taxes, not "revenue enhancements." These words are  brought into the debate for one purpose; to mislead.

Lou Dobbs had Define America co-founder Jose Antonio Vargas on his Fox News show to debate Obama's unilateral declaration rescinding part of our immigration law. Vargas, a prominent writer, had recently announced that he was not a US citizen, even though he has lived here most of his life. Dobbs repeatedly referred to him and others here illegally as "illegals", and Vargas repeatedly corrected him saying they were "undocumented." What is the difference?

Illegal means that the individual is breaking the law. That seems pretty clear. People crossed the border illegally or illegally overstayed a visa (those born here to illegals are US citizens). Undocumented means that the individual has no documents, but may be here legally or illegally. It is the difference between driving without having obtained a drivers license, and driving when you left your drivers license home. If you are guilty of the former, suggesting the latter is simply false.

Recently The New York Times and National Public Radio invented some new terms. They referred to George Zimmerman, the man who killed Travon Martin, as a white Hispanic, or a white Latino. Why? Simple. They wanted to make the tragedy into a race driven incident, even though by all accounts such an assumption is nonsense. Zimmerman is half white and half Latino. There is absolutely no evidence in his past or in the sequence of events leading up to the incident indicating race was a factor. Common verbiage would describe him as Hispanic or Latino. Given those labels, or as the PC crowd says, a person of color, the race element disappears. Did the NYT or NPR, those august institutions, ever refer to Barack Obama as a white African American? Of course not.

"Stakeholder" is one of my favorites. In a capitalist system private property is vigorously protected, and the use of that property (within the law) is directed by its owner. This system has provided us with the most prosperous, most generous, freest nation in the history of mankind. The term stakeholder was invented by socialists to create the false impression that the public at large has the rights to that property. The public has the right to expect an owner to obey the law and to honor his contracts, but that is all. If we don't like the owners choices we are free to not do business with him. If there are enough of us, he will get the message or cease to exist. Were the state to give the public the right to determine the use of that property, all forward economic and social progress would fall victim to the publics insatiable want for something for nothing.

"Social justice" has joined the lexicon of the Left. The words sound very compassionate. Who can be against justice, especially in a social sense? In reality those who use it are simply trying to usurp private property rights to fund a redistributive agenda, one chasing an unachievable, false, utopian dream. The term is used to support and justify every socialist idea under the sun. Real social justice consists of protecting a man's right to the fruits of his labor, not simply because it is ethical, but because it provides the most goods and services, the best environmental care, the best healthcare and the best of everything else that we as a society are capable of producing, and for everyone.

Columbus thought he reached the Indian Ocean when he landed in the Antilles and named the people there "Indians." The term stuck long after the mistake was recognized, and for centuries it referred to the indigenous peoples of the Americas. The PC crowd determined that it was a demeaning term and changed their reference to "Native American." Native American had been used for centuries to refer to anyone born on American soil, regardless of race, regardless of when. Why would they do this? Indian had nothing pejorative associated with it. My theory is that since the Left adapts to change quickly, during the transition it allowed them to claim the moral high ground when those of us with less verbal agility continue to use the newly designated "racist" term, Indian.

There are other reasons the Left change names. In the same way no liberal columnist wants to review any of their past predictions (invariably they are wrong), so too does the Left like to shed its failed past by changing names. Woodrow Wilson led the "progressive" movement until 1920, but his disregard for the Constitution, and such things as the Left's embrace of eugenics soured the public on the movement. So, progressive was renamed "liberal." But the liberals close ties with Communism, as well as other unpopular policies like their softness on crime became a political liability, so in the 1980s they returned to the name progressive (no one remembered the Wilson era, most were dead by then). The problem is, no matter what they call themselves, they continue to champion the same failed policies.

Did anyone notice that all of the old Communist organizations and their members are today avid environmentalists? Same people, same ideas, just a different name. Is global warming science, or a political ploy designed to create world government?

Be careful of the Left and their politically correct language. It is created under the banner of respect or compassion for certain groups or individuals, but in reality it is a naked attempt at forwarding a political agenda.