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 Hawley Tariff 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 are made with a legislatively mandated method of calculation. It 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. Coolidge 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 the junker 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, new car sales slumped below average as soon as the program ended. All Congress succeeded in was moving some new car sales forward in time, but not increasing total sales at all. Of course they gave away billions of taxpayer money in the process.

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.


Friday, April 27, 2012

State of the Election

This election will be the first of its kind in my lifetime, and possibly in all American history. The President has a failed record on economic and foreign policy issues. Naturally, he and his surrogates (ABC, NBC, CBS, NY Times, NPR, Hollywood elites etc) would rather avoid the topic, and when they do discuss it they casually lie. They say he's had the most foreign policy successes of any president this far in his term (a total fiction..in reality he has failed miserable).

He has failed on the economy as well, but the main stream media is assisting him by certifying his lies and distortions. He says he created 2 million jobs. At least there is a seed of truth in that. However, 2 million is far fewer than any recovery in US history, it is fewer than the jobs lost during his term, and his "job producing" policies have caused the national debt to skyrocket by literally trillions of dollars.

No wonder he would rather not discuss these things. He can no longer do the "vision" thing, or the "can't we all get along" thing, having attacked every opponent on every issue and painting them as cold and heartless. Representative Paul Ryans budget is "social Darwinism", doctors would rather operate than give a drug because they make more money, insurance companies, oil companies, banks, are all evil enemies of the working man. These wealth producers are the enemy of every man in America, and if only they are brought to heel life will be good once again. uggg...

As if this isn't bad enough, it has entered a new, even more scary phase. If one listens to what he is saying, it is east to imagine the words of Stalin, Mao, Marks, Lenin, Castro, Chavez or Engels. I'm not kidding. Obama's ideas are the very ideas sold to the masses in Russia, China and elsewhere which took over the governments and destroyed whatever economic system the countries had.

He says that imposing a jobs destroying tax on the rich will somehow solve our economic woes. "From those according to their means, to those according to their needs." The top 1% of earners pay 40% of the taxes, and the top 10% pay 70% of the taxes. Half the nation pays no taxes at all. And for good measure, if the tax passed, and if it raised the projected revenue (highly unlikely), it would account for 1/10 of 1% (.001) of our annual budget. Doesn't sound like an answer to anything to me.

How can Obama win on a series of lies and distortions, most having nothing to do with the country's problems? If California is representative of the nation as a whole (I pray it is not), he will win in a heartbeat. California has lost 1,200,000 net people in the last ten years. Actually, about 4 million left and 3 million came into the state. Now..33% of Californians are on welfare. Ask yourself. Did any of the people who left the state come from the welfare rolls? Very few. Did any of the people who came into the state join the welfare rolls? Quite a few. That means the percentage of voters dependent on the government increased, and the percentage of productive wealth producing people decreased.

What does this portend? More Democrats elected in California. Those people voting for whoever promises them the most has increased, making this obscene state government even more entrenched. There is only one outcome. California will go the way of Detroit. It is richer, and therefore will take longer, but Detroit, it will become.

The more important question is, nationally, have Obama and the Democrats succeeded in demonizing the wealth producers enough to get elected? Have they promised the non producers enough freebies to get them to vote for the destruction of the greatest nation ever on God's earth? Stay tuned. The answer will appear on November 6, 2012.    

Thursday, March 15, 2012

Inflation: Hell to Pay

I have a problem with the methodology used to measure inflation. In business we segregate operating expenses, those costs that recur on a regular basis, and capital expenses, costs that are non recurring and are better understood as a longer term "investments," such as equipment purchases, real estate purchases etc. In our personal lives, rent, food, gasoline etc. might be considered operating expenses. Buying a house (not the mortgage payment,) a computer, television etc would be more like capital expenses, not rapidly recurring costs.

Last year we had had 10% food inflation in our home operating expenses, probably 30% energy inflation, health care and education inflation are still running at 6% or higher, and things like airline tickets have gone way up. But we are told by Bernake and company that inflation is running at around 2%. The reason is that he is combining reduced capital expenses with increased operating expenses, a methodology which would cause endless bankruptcies if used for decision making in business.

The value in your home went down the last few years, computers are cheaper, as are TVs and many other large ticket items. When those declines are combined with increases in day to day expenses, the net is about 2%. Well, I don't need the latest model computer or TV to survive, and I don't need a new car or home. But I do need food, energy and health care. And they take up the largest percentage of most household budgets. Cheaper houses, TVs and computers offset very little, and they certainly don't help pay household bills. The inflation rate is probably closer to 6% than 2%.

If you think that is bad, the following is far more depressing. BBB, aka Banana Ben Bernake (banana republics have been printing money excessively for decades,) has repeatedly told us that he sees no sign of inflation, and as soon as he does he will raise interest rates and tamp it right down. Nothing to worry about. Laurence Meyers, Federal Reserve Governor from 1996 until 2002, similarly said that controlling inflation is simple. We know how. If the inflation rate pushes above 3%, we will raise rates and it is easily controlled. The arrogance by both of these men is only exceeded by their blindness.

Below are excerpts from a Bloomberg piece by Amity Shlaes listing inflationary cycles and assigning causes. The speed with which they occured was like a fire spreading through a dried timber building. "When you see the flood, it is too late to build the arc." I make no claim to understand all the dynamics governing inflation, and neither do I know when the cycle will occur. It could be one, 3 or 5 years, but the seeds have been planted. This is all going to end very badly.

Consumer price index for urban areas, went from 1 percent in 1915 to 7 percent in 1916 to 17 percent in 1917. How did it happen? The Treasury spent like crazy on the war, creating money to pay for it, then pretended that its spending was offset by complex Liberty Bond sales and admonishments to citizens that they save more.

 In 1945, all seemed well: Inflation was 2 percent, at least officially. Within two years that level hit 14 percent.

All appeared calm in 1972 too, before inflation jumped to 11 percent by 1974, and stayed high for the rest of the decade, diminishing the quality of life for all Americans.  

The thing about inflation is that it accelerates. The acceleration hit storybook levels in the most sudden case of all, that of Germany in 1922. Many financial analysts thought the Weimar authorities weren’t producing enough money. “Tight Money in German Market: Causes of the Abnormally Rapid Currency Deflation at Year-End,” read a New York Times headline. The Germans didn’t know it, but they had already turned their money into wallpaper; the next year would see hyperinflation, when inflation races ahead at more than 50 percent a month. It moved so fast that prices changed in a single hour. Yet even as it did so, the country’s financial authorities failed to see inflation. They thought they were witnessing increased demand for money.

Germany in the 1920s is always the extreme example. But one form of denial then warrants comparison to the U.S. today. Bernanke talks about prices in one area - energy, for example -- as different from those in the rest of the economy. The Germans, in their denial, thought their problem was limited to exchange rates, and that their domestic economy had hope. Risibly, Chancellor Joseph Wirth tried to tie down prices by regulating foreign currency. The equivalent, and equivalently risible move today is the Ralph Nader effort to get the administration to push down oil prices.

Based on his study of the Great Depression, Bernake has justified printing vast amounts of money (The largest lender to the US government by far is the Federal Reserve) by pointing to that "evil" genius deflation. The currency did deflate then, but perhaps he should look at the period preceding the depression. Deflation also punctuated the Coolidge administration, arguably the most prosperous economic period in American history.

Mankind has been in search of perpetual motion machines, a loom to spin gold from straw, and many other impossible dreams. Bernake and company (liberal economists) hopes that they can boost the economy with currency manipulation is just another in a long line of  fools dreams. Their result will be the same as all the others.

Wednesday, February 29, 2012

Responsible Government...lol

The city of Stockton California is about to go bankrupt. Now Californians have done some wacky self destructive things in the past, like the state spending billions on global frauding...oops...warming. Their hubris is staggering. Even if this was a real problem, what they did by spending a few billion would have been the equivalent of trying to extinguish a five alarm fire with a water pistol. Another example of their past insanity is around 1998, after a year where Silicon Valley executives exercised record stock options and the corresponding tax revenue to the state hit record levels, the legislature did a budget that assumed the same amount of money and more would be coming in year after year. Surprise surprise... when the money didn't appear, they raised taxes.

But Stockton takes the stupidity award, and this is only one example of many. For a period of time any city employee who worked for as little as 30 days, was given health care for him and his family for life, and for free. If we assume that a married man 30 year old with two children worked for a month, and the average inflation adjusted cost of health insurance over his lifetime would be $7,000 per year, also that he lives to 78, that would be a $336,000 benefit. If that number gets brought back for present worth, at today's interest rates it comes to around $140,000. If there were 20 work days in the month he worked, forgetting the employees pay or other benefits, he would be receiving $7,000 per day from this alone. And these are the people running our government. BTW Another shocker... the city council that passed this were liberal Democrats.

Tuesday, February 28, 2012

Nobel Prize: Once Again, the Hate Award

PFC Bradley Manning, the WikiLeaks leaker, has been nominated for a Nobel Prize. I thought the Nobel Prize committee hit bottom when the gave the prize to Yasser Arafat (terrorist and murderer of women and children), after his transparent ploy where he refused a peace deal that gave him everything imaginable, while claiming he wanted peace. Really, he wanted what every Palestinian wants, then and now...to drive the Jews into the sea.

The Nobel Prizes have awarded many offensive prizes, as in Jimmy Carter (currently holding the dual distinctions as the worst President of the United States and the worst ex President of the United States), Paul Krugman (a political operative dressed up as an economist), and Barack Obama, POTUS, with no discernible accomplishment in his lifetime other than getting elected POTUS. 

Well, as difficult as it may be to sink even lower, the prize committee has done it. Manning is a traitor, has endangered many loyal Americans and their surrogates, and is likely responsible for the deaths of many others. Certainly he compromised our security more than any other person since 9/11. Hating George Bush used to put nominees on the inside tract for awards, but since he left office I suppose the new criterion is hating the United States.                 

Tuesday, February 21, 2012

An Average Week For a Radical Administration

You have all read enough about the Obama administration's attack on religion, and their attempt (with MSM help) to twist the debate (distorting the right's position) from religious freedom to contraception. However, you may not know about he latest insanity from the left, a growing movement supported by the head of Obama's National Economic Council, Gene Sperling, for a Global Minimum Tax. I kid you not. They want all the industrial countries to agree to install a corporate tax of at least 30%.

Several years ago Ireland became the economic miracle of Europe by cutting taxes over 20 times and experiencing unprecedented growth as a result. Their legislature proposed taxing corporations doing business in Ireland at a new lower rate of 18%, and corporations doing exclusively offshore business at 13%. There were howls from every capital in Europe, claiming a two tier system would be predatory. They said corporations would leave the mainland and relocate on the Emerald Isle. They stomped their feel and said it was simply unfair! So, Ireland agreed, and decided to drop both rates to 13%. Never having imagined they would adopt the lower rate, Paris and Brussels were left red faced.

A similar argument is being used to support this Global Minimum Tax. It isn't "fair" they say to incentivize companies to relocate in a favorable tax environment. It is interesting that the anti trust enforcers in liberal economic regimes (like Obama's) claim to understand the idea that monopolies do not create much wealth, and they provide poorer products and services at higher prices than if they had competition. Of course when these anti trust zealots are dealing with the private sector, they see bogey men behind every rock. Microsoft was investigated for anti trust so many times in so many areas it would make your head spin, and by the time the adverse rulings came down, there was already a competitor beginning to eat their lunch, proving government action was (as usual) a solution in search of a problem. Microsoft's crown jewels, Windows OS and their browser, Internet Explorer, have been losing ground for years to iOS, Safari, Firefox, Google Chrome, Android, Linux and others. And guess what? The competitive process left the consumer with better products at cheaper prices. 

These same people however, seem to relish the idea of government monopolies. Given the power of the sovereign, government monopolies are very real. What would the effect of a Global Minimum Tax be? Why would the left even suggest it? Because they want a the power to tax without leaving the payer anywhere to go.

The left opposes school vouchers, which would create competition for the now monopolistic public school system. As a sop to the union Obama recently trashed the highly successful voucher program in DC, effectively telling poor children to drop dead. This is to protect the Teachers Union monopoly, Similarly, the left wants to monopolize where companies do business, insuring taxes are high across the board. They are afraid of those countries which would provide a healthy business environment. Competition demands companies/ people/ countries have to work and innovate to stay ahead, and knocking off the competition is easier than working to provide these things. Believe this. If you think western governments are fat and sloppy now, and this passes, you ain't seen nothing yet. It is a disaster waiting to happen.

A couple of months ago the Obama administration complied with US law (for a change, unlike immigration enforcement and other selective pursuits by the justice department) and because UNESCO recognized a Palestinian State, funding was withheld (United Nations Economic Scientific and Cultural Organization). The effect was great. Other UN organizations who might have followed suit stopped in their tracks, and even seemed to take a step back from their hard anti Israel pro Palestinian stand. So what does out State Department do after this rare success? Last week they recommended restoring funding to UNESCO. What is more astonishing is how many Jews think the left in general and the Obama administration in particular are not anti-semitic and anti Israel.

I have experienced and read about many destructive, radical administrations in American history. Teddy Roosevelt, Woodrow Wilson, Franklin Roosevelt and Lyndon Johnson come to mind. But the Obama administration is an order of magnitude more radical, and more destructive than even these. God help us if he is reelected. Given what he has already shown he is capable of, imagine this radical chic leader with no reason to disguise his intentions for fear of losing the next election.

Impossible Things

Alice did six impossible things before breakfast. The Obama administration seems to be trying to outdo her.

I will call the most recent attempt the Immaculate Payment. For those who haven't kept up with the administration outrages, it seems that Obamacare requires that Catholic institutions provide contraception in their employee health care policies, which is a violation of Catholic teachings and conscience. The first attempted "accommodation" by the administration was permission for the Catholic institutions to take a year beyond the intended initiation date to allow them time to prepare and make adjustments. How does one prepare for or make adjustments to a violation of conscience?

After an ocean of public outrage the administration's fall back position was that the institutions would not have to provide insurance covering contraception services, but the insurance companies that sold them health care would, and for free. Get it? Blue Cross would sell insurance to a Catholic hospital without contraception coverage, but would simultaneously give contraception coverage for free to the recipient of that health care. Now you get it... don't you?

In justifying the "need" for contraception coverage the administration falsely claimed the cost of such coverage ran up to $600 per year. Using that number, we are being told that insurance companies will provide $600 extra coverage for free. The part of the constitution that permits the feds to mandate such payments doesn't pop right out in my mind. Should this Obama fantasy occur, it would be a truly immaculate payment.

The debate is about government overreach, not contraception. Should government have the power to force religious based institutions to violate their conscience? Not only does the mandate require conventional contraception, but also the morning after pill and the week after pill. That sounds like abortion to me, in spite of the administration spokesman's bogus claims to the contrary. Also, the "settlement" fails under any interpretation for those Catholic institutions that self insure, like the archdiocese of Washington DC.

The good news is that the administration believes this is a political winner. They are so wrong it is laughable. They want to make it appear that Republicans are against birth control, rather than the real objection which is the government's attack on religious liberty. Those who comprehend the real issue almost uniformly oppose this unprecedented intrusion, and unlike the others, they are very passionate about their beliefs.

The bank mortgage settlement is another administration impossible thing. The banks were found guilty of robo-signing foreclosure documents. The law requires personal review by a bank employee to move foreclosure forward, and the banks had computers sign without review. They were guilty of a technical but real violation. A fine was the appropriate remedy, although you can count on one hand the people who were truly injured by it. Many people were put out of their homes, but the paperwork for 99% of them was correct. The fine for this injustice was 25 billion dollars. 5 billion will go to people forced out of their home (99% of whom would have suffered the same fate had the violation not occurred,) and the the balance will be used for mortgage adjustments for people who owe more than their house is worth.

What you see at work is the heavy had of government, designed not to help homeowners, but to score political points. In fact homeowners will be hurt. Banks will impose stricter requirements for mortgages, there will be higher costs to the lender and consumer, and a justifiable exit from any area  the government is involved in..aka..maneuvering for political advantage.

More impossible things to come.

Wednesday, February 8, 2012

Santorum for the Defense

Imagine being charged with multiple offenses... raping the environment, causing disease and famine, taking wealth from the poor in order to enrich a few (mostly the strong and well connected,) starting wars for profit, keeping the masses uneducated, and general disregard for anyone or anything that does not provide you with personal benefits. But unlike a  trial where the accused is innocent until proven guilty, these charges carry the assumption of guilt, and guilty until proved innocent not once, but repeatedly, and not proved in one way, but in multiple ways. At the trial the facts become secondary, because the prosecutor has no ethical boundaries, is willing to lie and distort whenever he deems it beneficial, and he has a huge microphone. Worse, if your defense team is able to overcome all of these hurdles, the jurors will be offered bribes to rule the opposite of what their charge dictates (aka wealth redistribution.) These are the challenges that the defense of capitalism, freedom and democracy face ever single day.

There are lots of people defending capitalism, but they are small in comparison to the number prosecuting it. Given the defenders conviction that the ends do not justify the means, and the truth will win the day, they limit themselves to facts, even ones that weaken their argument.  Add to that the media, the armed forces of the left, who give the prosecutors the largest possible forum and routinely swear to the fidelity of their lies.

The prosecutors of capitalism are given phony awards for imaginary accomplishments in order to make the nonsense they spew seem credible. Undeserved academic degrees, Nobel prizes and other such garbage are commonplace. See Paul Krugman, Al Gore and Barack Obama for details. And then the refrains like "Everyone agrees," "Almost all authorities agree," etc. are repeated ad naseum until a totally false premise becomes "common knowledge."

For these reasons this onslaught is never easy to defend. The question is, which Republican candidate is best qualified to do so? Is it Mitt Romney, who recently said he wants to link the minimum wage to inflation? FYI The minimum wage is a naked political ploy to garner votes for Democrats, who know themselves that it is job destroying, socially repressive, keeps the poor from training and bettering themselves, and is generally wealth destroying. Or maybe it is the Mitt who recently said that he would fix the safety net for the poor. Does he not know that the safety net is an economic prison from which few escape, and many caught in its' web become infected with a range of social pathologies? Does he know that the antidote for these social diseases is family, work and productivity instead of dependency and entitlement? Mitt might do a credible job defending collectivism, but he is the wrong man to defend capitalism.

What about Newt? He has been on the wrong side of capitalism too often to be comfortable, but still he is far better than Mitt. If he chooses to defend it, he would articulate the message better than most. The thing is we don't know when some whim will change his mind, or change the subject, leaving capitalism to be defined by the left.

Ron Paul is actually the best by far to defend capitalism. He understands it and is unapologetic about his passion for it. His problem is that he doesn't understand the national defense challanges of the 21st century, and that is the first job of government. This failure makes him almost unelectable (We can never say 100% unelectable after a community organizer with a 20 year mentoring relationship with an American hating, racist pastor, a terrorist friendship, and lifelong support for every radical cause, particularly the destruction of Israel, got elected President.)

So we are left with Rick Santorum. His economic plan betrays a lack of understanding for the proper role of government generally, and particularly when it comes to the economy. However, he has many of the right ideas as well, and he makes no apology for them. He does at least understand capitalism will save mankind from some of his own failings, he is honest about his beliefs and has been consistent in articulating them. He understands that traditional American values, Judeo Christian values, are what allows capitalism to flourish and defends our freedom. His compassion transcends political opportunism, and he knows that the President must help everyone, including political opponents, and even if help means denying them the laundry list of narcotics the welfare state has addicted them to.

I guess former Mayor Koch of New York was right. He said, ""If you agree with 80% of what I say, vote for me. If you agree with 100%, see a psychiatrist." Rick is my 80% candidate, and that's good enough...it will have to be.

Monday, January 30, 2012

Some Common Sense Please

There should be a central talking points unit for conservatives that puts out concise rationals for our positions, answers the lies or misleading statements by liberals, and answer questions by the public.

How often have you heard centrists or liberals (often disguised as independents or middle of the road voters) say they only wish congress would compromise. The President uses this "failure" by congress to justify his extra legal appointments and executive orders, as well as a basis for reelection. Someone should infuse some common sense to this.

When two ideas are diametrically opposite, when both suggest that the other will not only not gain the objective, but will rather drive us farther from it, then how is any imaginary compromise possible? It's as if we reach a crossroads, knowing our destination is either to the right or left, but because we can't agree on which way to go we proceed straight ahead, insuring that we will fail. If higher spending and taxes, a.k.a. a welfare state, is the best thing for the voters, then lower taxes and less redistribution would not only not help, but would be harmful. Of course we know that the tax and spend agenda is destructive, the collectivist mentality is worse, and if conservatives don't have the power to lower taxes and spending, preventing increases is the next best thing. This is not rocket science, but one might think it is given the conservative failure to clearly respond.

When Newt attacked Romney because of his wealth, Romney was given the perfect tool to amplify the message that wealth creation benefits everyone. It provides jobs, as well as lowering prices. Wealth for everyone expands when created (as he has done), and contracts when destroyed as the government routinely does. Instead he cowered in the corner, making up a list of excuses, until the public pressure to release his tax returns grew too great. I assume he had a poll number saying people would resent it. His advisers should take note. Most of the resentment of success comes from people whose votes he could never win. Others like those of us on the right not only have no problem with it, but celebrate it. The voters who could be affected are in that theoretical middle. Doesn't he see that if those voters really want to understand, he can win their votes with a common sense explanation about the nature of economic activity. His attempt to hide however, leaves the collectivist argument unchallenged, and a voter who doesn't understand the issue but could be swayed, will gravitate to the argument by the left, however idiotic.

I will repeat myself. Ronald Reagan taught us the principled is also the political. Newt....Mitt..try the truth. It works. 

Monday, January 23, 2012

Newt and Mitt

Ann Coulter eviscerated Newt Gingrich on the Mark Simone radio show Saturday morning, and everything she said was right. She even defended John King and his opening question in the debate about Newt's second wife's claims (talk about strange bedfellows.) There is an endless horizon above the territory where Newt can be criticized. With that being said, he has also done great things for the country and conservative causes.

Now there is no bigger fan of Ann than I. She has repeatedly pointed to liberal hypocrisy, failures, lies, distortions, and about everything else despicable that liberals do. And she does it with humor, facts and logic, presenting common sense and irrefutable evidence.

However, when she criticizes Newt while advocating for Romney, she leaves half the relevant facts in the file. Mitt is not conservative, or if he is we have no evidence pointing to it. The problem is knowing, really knowing Mitt. He has been on both sides of every issue, past and present. If you watch him closely you will see he is willing to go either way on the most trivial of issues. Politics drives him even more than Obama. Did you see the news clip of the CNN debate when he was asked if he would release his tax returns. He said, "I will check with advisers and"....then there were boos from the audience, and instead of finishing as he intended, that he would make the determination after checking, he switched gears and said "and I will release them." My point is the boos made him change. He has no core convictions, and since everything he says is tailored to what he thinks will garner the most votes, we can't determine what he believes or for that matter how much he really knows.

His claim to "understanding how an economy works" rings hollow in the light of his economic plan. The sign of a genius is to make a complicated thing simple. Unfortunately, his plan has 59 points. But the single most frightening part is that he raises taxes on the rich. His explanation is that the middle class have been hurt in recent years and the rich can afford more taxes. The rich create most of the wealth in the economy, and that creates most of the jobs. His plan is Democratic light, and would undermine wealth creation and job creation. Does he not understand this, or is he "only" pandering?  His defense of his totally failed (by every metric) health care plan in Mass. seems to indicate he just doesn't get it. It is as if he is saying, "Government is the answer if we just do it differently than the Democrats."

The question voters must ask themselves, is who is most likely to pursue conservative principles. Santorum actually meets that qualification more than Newt or Mitt. However, he too has a few economic blind spots. He relies too much on the government, and thinks government sponsored rewards and penalties will promote prosperity. He believes that manufacturing, the primary beneficiary of his reward/ tax system, is key to economic success.He is wrong, but that's for another day.

Mitt and Newt could both learn a lot from the Gipper. Anyone who watched Ronald Reagan should know that the principled is also the political. Reagan was eviscerated by the pundits, press and even moderate Republicans every time he made his point in "bold colors, not pastels," but within days the positive public response silenced the critics and made him even more loved and respected than he had been before.

Friday, January 6, 2012

History and Knowing

A poll was released recently showing that 60% of Americans believe socialism is either acceptable or preferable to capitalism. Of course we know this is absurd, but it is what is being taught in our schools, many churches and synagogues, and most of the media. Then again, there is nothing new there.

I recently asked one of my money managers with a law degree from Yale and an MBA from University of Chicago what he knew about American economic history. I was shocked to find out he knew almost nothing apart from a few isolated theories on the depression, mostly liberal mythology. He drew a complete blank when I mentioned the Harding/ Coolidge administration, arguably a better example of the greatness of supply side success and the magic of the free market than even the Reagan years. More shocking is the fact that economic history is not a required course at University of Chicago (it is available as an elective) or any other school I could find. I know of no subject one can truly "master" without knowing it's history. Is it any wonder we have so many liberal, political ignoramuses on Wall Street?

Economic freedom is an absolute necessity for political freedom. Compassion with real help for the poor, and the environment are served infinitely better through capitalism than anything else. At at time when collectivist theories were new there was a basis for reasonable debate about these things. But history in the US and throughout the world has made clear so over and over again that collectivist ideas are antithetical to freedom and prosperity. Any well meaning rational person, informed about US and world economic history, could not help but embrace capitalism.

Many years ago Friedrich Hayek, Milton Friedman, Ayn Rand and Bill Buckley argued that economic interference by the government (aka socialism/ collectivism) retarded economic and individual lifestyle growth. It destroyed freedoms guaranteed in the US constitution, and that collectivism would be left "on the trash heap of history." They had mounds of historical evidence to support their arguments. Today we have another 60 years of the exact same patterns of the success of capitalism and the failure of socialism repeating itself. Nothing has changed. Attempts to hide and distort the record seem to have made historical and socialist falsehoods into accepted truths for some, but the record points to the folly of every single Keynes, Krugman and Obama idea. That is why it is so important that history, particularly economic history, be taught, not just to MBA candidates, but to everyone.