Everyone must see Milton Friedman in this two minute clip. http://pajamasmedia.com/instapundit/69117/
You have to feel sorry for Tom Daschle. He paid $134,000 in back taxes he never would have paid were it not for his job application, and he still wasn't hired. Oh well..he already made 5 million dollars since getting voted out of congress by using all that acute business expertise he developed while championing socialism.
The so called stimulus package is sailing through congress with the support of two imbecilic senators from Maine and Senator Specter from Pennsylvania (a RINO-Republican In Name Only). Senator Specter's ship never had a flag flying, but what he's doing here is almost as bad as when he helped stop the Robert Bork nomination to the supreme court. I predict that a conservative challenger for the nomination will unseat him in the 2010 primary.
It was interesting to hear John McCain complain about the defections in that he did exactly the same thing, repeatedly, on a whole series of issues- global warming, campaign finance reform, tax cuts, drilling offshore, drilling at Anwar etc. Those defections, often with his being the only Republican, allowed the congressional Democrats (and the press Democrats) to claim bipartisan support.
The Republicans have ceded an astounding amount of territory on this so called stimulus package, and it will come back to haunt them. They talk as if the "correct" stimulus would help the economic crisis, and that all we really need to do is change the bill. Instead they should argue against any stimulus other than tax cuts. Spending of any kind won't help us with the economic crisis, but what the Democrats are passing doesn't even qualify as spending under their definition. The bill is no more than a socialist wish list, brought to us under the false banner of a stimulus to save an economic meltdown. Infrastructure etc. is about 10%, whereas pork and entitlement expansion is 90%. Nothing the Republicans can do will deter them, but they should still go on the record opposing all of the spending. Sure, some infrastructure spending might be OK, but expanding government in a permanent way, which this bill is guaranteed to do, will certainly do permanent damage.
Instead of arguing for changes in the bill, the Republicans should be challenging the Democrats to point to one instance where, anywhere in the world, such a policy has worked. It certainly has been tried. Roosevelt tried and failed. We came out of the depression well after he unleashed his massive spending, and that was because of saner monetary policies and the second world war. Even his Treasury Secretary, Henry Morgenthau, said that we tried stimulus and it didn't work. In the 1990s Japan used massive spending trying to stimulate their economy and failed. Their government debt ballooned from 45% of GDP (gross domestic product) to 170% of GDP. In doing so they created an unmanageable bureaucracy and their economy has stagnated ever since.
Tax cuts would help, and Obama is claming the Democratic bill includes tax cuts. He even has the nerve to claim 42% of the bill is tax cuts. No no! Calling a pig a beauty queen will not win any blue ribbons. Here, Obama is renaming welfare payments as tax cuts. He did the same thing during the campaign and the press ignored it. 45% of Americans pay no taxes, even though he promised to cut taxes on "95%" of Americans. What the stimulus bill does is give more money to that 45% who don't pay taxes. They may call it tax cuts, but it sure sounds like welfare to me. The press has concealed this and I expect it, they will lie cheat and steal to support Obama. But why the Republicans are not pointing it out, letting him get away with it, boggles the mind.
Monday, February 9, 2009
Tuesday, February 3, 2009
Two's Company
Tom Daschle became the third on a match. Supposedly, during World War Two, the third soldier to light his cigarette on the same match could be shot because the enemy had sufficient time to see the flame, aim and fire. It seems that today that Daschle, not a soldier but the third tax cheat, got shot.
Charlie Rangel (congressman from Harlem) was shown to have cheated on his taxes for years, yet nothing was done to him. Tim Geitner cheated as well, but was approved as the Treasury Secretary. Tom Daschle didn't fare so well. I suppose his compatriots thought the public might see a pattern there. He withdrew his name today as the HHS nominee. I guess three cheats and you really are out. btw.. None of the three paid a penny in penalty when the taxes finally did get paid.
The press (aka the right arm of the Democratic Party) has allowed all three to claim without contradiction, inadvertent oversights. While it is true that with the complexity of the tax code many oversights are legitimate, in these cases that dog don't hunt. They didn't simply take an aggressive stance in classifying their income or deductions..that is perfectly reasonable. They just didn't pay taxes when money was clearly due. But the fourth estate could care less. Right now they are lionizing Daschle. I listen to the main stream media and all I hear is how this "simple mistake" sank a respected, much loved, public servant.. Respected by whom, loved by whom? I always found him to be an extreme partisan who had difficulty with the truth, constantly hammering away with a velvet glove..Oh well..it's just another day in the socialist/ MSM / Democratic complex.
Charlie Rangel (congressman from Harlem) was shown to have cheated on his taxes for years, yet nothing was done to him. Tim Geitner cheated as well, but was approved as the Treasury Secretary. Tom Daschle didn't fare so well. I suppose his compatriots thought the public might see a pattern there. He withdrew his name today as the HHS nominee. I guess three cheats and you really are out. btw.. None of the three paid a penny in penalty when the taxes finally did get paid.
The press (aka the right arm of the Democratic Party) has allowed all three to claim without contradiction, inadvertent oversights. While it is true that with the complexity of the tax code many oversights are legitimate, in these cases that dog don't hunt. They didn't simply take an aggressive stance in classifying their income or deductions..that is perfectly reasonable. They just didn't pay taxes when money was clearly due. But the fourth estate could care less. Right now they are lionizing Daschle. I listen to the main stream media and all I hear is how this "simple mistake" sank a respected, much loved, public servant.. Respected by whom, loved by whom? I always found him to be an extreme partisan who had difficulty with the truth, constantly hammering away with a velvet glove..Oh well..it's just another day in the socialist/ MSM / Democratic complex.
Tuesday, January 27, 2009
The Economic Crisis and Government
The dictionary defines a recession as "An extended decline in general business activity, typically two consecutive quarters of falling real gross national product." It defines a depression as "a period during which business, employment, and stock-market values decline severely or remain at a very low level of activity." Ronald Reagan said a recession is when your neighbor loses his job, and a depression is when you lose your job. Michael Sall defines a recession as the down trajectory of the business cycle, and a depression as a recession combined with government help.
We are in never never land. What are they doing? We learned from the depression that government intervention, raising taxes, make work programs (aka economic stimulus) and protectionism only make the economy worse, and a recession much worse. Yet that is exactly what we are doing today.
In the early 1950s the US State Department decided to send our excess food supply to African as a gesture of American largess. We sent vast quantities of food that we were buying from farmers and warehousing in order to keep domestic prices higher (or seen another way, in order to get the farm state votes). It cost us nothing to give it away, and in theory the Africans would be helped..Sure..right..African farmers couldn't compete with free food, prices there declined, and many gave up and moved to the cities. Whatever farm system they had completely broke down. Only a fraction of the domestic crops were grown, and famines ensued. Our "largess" destroyed their imperfect, but viable farming system.
How does this relate to the cause of our current economic crisis? Fannie Mae and Freddie Mac were created to make home ownership more broad based in America...certainly a laudable goal. But like every political attempt (aka folly) to do business in a rational way, it led to the current bank failures and breakdown of our financial system.
Here at home the creation of Freddie and Fannie (F&F) carried an implied credit guarantee by the US government. The government would make good on any money F&F borrowed. That meant F&F could borrow more cheaply than their competition, and as a result the competition all but stopped making loans. Competitors decided instead to originate loans, earning fees for doing so, and then sold them to F&F. The originators had no concern if the loans were paid, only that they could be sold off. Does that sound dangerous to you?
Later congress mandated that credit be eased (Community Reinvestment Act), and the mortgages were placed at an even faster pace, often to unworthy borrowers. The CRA mandated that F&F loan to sub prime (aka unqualified) borrowers. It also said that banks not doing business in poor neighborhoods and making these loans would not get federal approvals needed if they wanted to merge or buy another bank. Still, the originators were making money, Fannie and Freddie were complying with the law, the system was causing home prices to rise, and so long as that happened everything seemed fine.
The Wall Street Journal, the New York Times and many others warned that this was a dangerous game and could result in a catastrophe. The Republican congress tried to reign in F&F but capitulated to the Democrats when they were painted as having contempt for the poor. So, for several years all seemed well in in this fantasy land where money descends on people with just the passage of laws dictating it.
One might ask where F&F were getting the money to lend. They borrowed it. But who you ask, would lend to someone taking such imprudent risks. Everyone did, and the reason was that the US government was guaranteeing repayment. F&F couldn't have gotten into nearly the mess they did if they had to go out and borrow the money on their own credit. Not a fraction of the losses could have occurred.
But the plot thickens. The investment banks and others saw what was going on and wanted to expand the party. Voila! The use of credit insurance for mortgage backed securities was expanded. The players would accumulate a large number of mortgages, say $200,000,000 worth, and sell bonds backed by the entire pool of mortgages. The bonds were broken into small dollar increments, and could now could be bought and sold in the after market. In order to entice bond buyers, insurance was purchased (supposedly guaranteeing repayment of the bonds) which was underwritten by several large AAA companies. This way the bonds were able to get a AAA rating themselves, paying lower interest, and creating larger profits for those bundling the mortgages.
The bonds became an attractive place for life and other insurance companies to park money they needed to hold for their reserves. The problems here were first, the originator could care less if the loan was repaid so long as he was able to sell it off in these packages, and thus gave far less scrutiny to the loan than he would if it were his money, and secondly, the underwriter (mortgage insurance provider) wrote more policies than he could ever hope to pay if the system broke down.
I must admit not realizing this while it was happening, but the insurance purchases were a total waste of money. Individual pools of mortgages were not going to default. They were diverse enough that without a systemic breakdown, they would pay. If however there was a systemic breakdown, most of the pools would default, in which case the insurance companies didn't have nearly enough reserves to pay. Witness the bankruptcies of many of them and stock prices of the others.
The underwriters and buyers of these mortgage backed instruments looked only at the history of borrower repayment. Based on the worst of economic times in the past, excepting the depression, the insurance companies could cover any losses. The problem is that economic history is different every go round, and the past only shows a very small part of what might happen. In this case the cheap money from F&F (aka our government), produced higher and higher home prices, then the new instruments and credit insurance provided even more money, and once again home prices rose etc. and the bubble expanded.
But like any bubble or Ponzi scheme, at some point people begin to understand the system is walking on a tight rope with a hurricane kicking up and there is no net. People began to sell the bonds, and as the prices of the securities fell a bright light was shined on the problem. People there to fore unaware of the risk began to sell, and in this case the whole house of cards collapsed.
The exact reverse of what happened creating the crisis now occurred. Credit dried up, so even quality borrowers couldn't borrow. That drove home prices down. Declining prices cause defaults. Why pay a mortgage of $300,000 on a house worth $250,000? It is cheaper to walk away. Foreclosures occurred with the weak borrowers as well, and each house the banks foreclosed on and put on the market made every other house worth a little less, and as the avalanche of declining prices picked up speed, the would be buyers stepped aside and decided to wait and find how low prices would go. So here we are and no one knows where the bottom is. What I have described doesn't even take into account the effect these declines have on every other business. That's for another day.
The business cycle often carries things to excess and destroys wealth in the process. Business can be corrupt, and sometimes downright stupid or blind. That is the nature of capitalism. People take chances and sometimes things work out well and sometimes not. But left to it's own devices, the business cycle will take two steps forward and one step back. No one denies that these steps back are painful, but left alone business recovers in short order. Government involvement however (other than it's proper role as a referee and enforcer), either initiates problems or exacerbates them.
The first myth the government spread was that "predatory lenders" caused the problem. Sure..I con you into taking a loan you can't repay, and I make a profit..umm..sounds like a perpetual motion machine to me. The new myth that the government is promoting is that deregulation caused the problem. Regulation may have prevented a small part of the problem, but on balance the growth that regulation prevents from happening is far more costly than any accidents it prevents. The government should insure transparency, prevent theft, and enforce the law. It should not however, make what are basically business decisions.
For those of you who wonder why government is so bad at this, just ask yourself what ingredient is the most important in a financial success. How about desire..the desire to make money? In a capitalist system, one only makes money when he meets the public needs better and cheaper than anyone else. Is the government motivated by the same thing? Absolutely not. Politicians want to get reelected, and for them public perception is everything. If they can fool people into thinking they are helping, they get votes. The reality of what they are doing, or the damage, means nothing. Most politicians don't understand economics, and worse, don't care to. Their "expertise" is in getting votes. Certainly most people have lives far too busy to understand what supply side economics is, or most any other economic theory. So they are reduced to voting on sound bites and emotional appeal. And here we are.
Our current financial problems are primarily the result of government "help." The insanity I referred to in the first paragraph is that the government now plans to give more "help," to solve the problem created by the original "help" (for homeowners in forming F&F). It is as if a patient had an allergic reaction to a medication and the doctor decided that he would give him more of it to stop the reaction.
We are in never never land. What are they doing? We learned from the depression that government intervention, raising taxes, make work programs (aka economic stimulus) and protectionism only make the economy worse, and a recession much worse. Yet that is exactly what we are doing today.
In the early 1950s the US State Department decided to send our excess food supply to African as a gesture of American largess. We sent vast quantities of food that we were buying from farmers and warehousing in order to keep domestic prices higher (or seen another way, in order to get the farm state votes). It cost us nothing to give it away, and in theory the Africans would be helped..Sure..right..African farmers couldn't compete with free food, prices there declined, and many gave up and moved to the cities. Whatever farm system they had completely broke down. Only a fraction of the domestic crops were grown, and famines ensued. Our "largess" destroyed their imperfect, but viable farming system.
How does this relate to the cause of our current economic crisis? Fannie Mae and Freddie Mac were created to make home ownership more broad based in America...certainly a laudable goal. But like every political attempt (aka folly) to do business in a rational way, it led to the current bank failures and breakdown of our financial system.
Here at home the creation of Freddie and Fannie (F&F) carried an implied credit guarantee by the US government. The government would make good on any money F&F borrowed. That meant F&F could borrow more cheaply than their competition, and as a result the competition all but stopped making loans. Competitors decided instead to originate loans, earning fees for doing so, and then sold them to F&F. The originators had no concern if the loans were paid, only that they could be sold off. Does that sound dangerous to you?
Later congress mandated that credit be eased (Community Reinvestment Act), and the mortgages were placed at an even faster pace, often to unworthy borrowers. The CRA mandated that F&F loan to sub prime (aka unqualified) borrowers. It also said that banks not doing business in poor neighborhoods and making these loans would not get federal approvals needed if they wanted to merge or buy another bank. Still, the originators were making money, Fannie and Freddie were complying with the law, the system was causing home prices to rise, and so long as that happened everything seemed fine.
The Wall Street Journal, the New York Times and many others warned that this was a dangerous game and could result in a catastrophe. The Republican congress tried to reign in F&F but capitulated to the Democrats when they were painted as having contempt for the poor. So, for several years all seemed well in in this fantasy land where money descends on people with just the passage of laws dictating it.
One might ask where F&F were getting the money to lend. They borrowed it. But who you ask, would lend to someone taking such imprudent risks. Everyone did, and the reason was that the US government was guaranteeing repayment. F&F couldn't have gotten into nearly the mess they did if they had to go out and borrow the money on their own credit. Not a fraction of the losses could have occurred.
But the plot thickens. The investment banks and others saw what was going on and wanted to expand the party. Voila! The use of credit insurance for mortgage backed securities was expanded. The players would accumulate a large number of mortgages, say $200,000,000 worth, and sell bonds backed by the entire pool of mortgages. The bonds were broken into small dollar increments, and could now could be bought and sold in the after market. In order to entice bond buyers, insurance was purchased (supposedly guaranteeing repayment of the bonds) which was underwritten by several large AAA companies. This way the bonds were able to get a AAA rating themselves, paying lower interest, and creating larger profits for those bundling the mortgages.
The bonds became an attractive place for life and other insurance companies to park money they needed to hold for their reserves. The problems here were first, the originator could care less if the loan was repaid so long as he was able to sell it off in these packages, and thus gave far less scrutiny to the loan than he would if it were his money, and secondly, the underwriter (mortgage insurance provider) wrote more policies than he could ever hope to pay if the system broke down.
I must admit not realizing this while it was happening, but the insurance purchases were a total waste of money. Individual pools of mortgages were not going to default. They were diverse enough that without a systemic breakdown, they would pay. If however there was a systemic breakdown, most of the pools would default, in which case the insurance companies didn't have nearly enough reserves to pay. Witness the bankruptcies of many of them and stock prices of the others.
The underwriters and buyers of these mortgage backed instruments looked only at the history of borrower repayment. Based on the worst of economic times in the past, excepting the depression, the insurance companies could cover any losses. The problem is that economic history is different every go round, and the past only shows a very small part of what might happen. In this case the cheap money from F&F (aka our government), produced higher and higher home prices, then the new instruments and credit insurance provided even more money, and once again home prices rose etc. and the bubble expanded.
But like any bubble or Ponzi scheme, at some point people begin to understand the system is walking on a tight rope with a hurricane kicking up and there is no net. People began to sell the bonds, and as the prices of the securities fell a bright light was shined on the problem. People there to fore unaware of the risk began to sell, and in this case the whole house of cards collapsed.
The exact reverse of what happened creating the crisis now occurred. Credit dried up, so even quality borrowers couldn't borrow. That drove home prices down. Declining prices cause defaults. Why pay a mortgage of $300,000 on a house worth $250,000? It is cheaper to walk away. Foreclosures occurred with the weak borrowers as well, and each house the banks foreclosed on and put on the market made every other house worth a little less, and as the avalanche of declining prices picked up speed, the would be buyers stepped aside and decided to wait and find how low prices would go. So here we are and no one knows where the bottom is. What I have described doesn't even take into account the effect these declines have on every other business. That's for another day.
The business cycle often carries things to excess and destroys wealth in the process. Business can be corrupt, and sometimes downright stupid or blind. That is the nature of capitalism. People take chances and sometimes things work out well and sometimes not. But left to it's own devices, the business cycle will take two steps forward and one step back. No one denies that these steps back are painful, but left alone business recovers in short order. Government involvement however (other than it's proper role as a referee and enforcer), either initiates problems or exacerbates them.
The first myth the government spread was that "predatory lenders" caused the problem. Sure..I con you into taking a loan you can't repay, and I make a profit..umm..sounds like a perpetual motion machine to me. The new myth that the government is promoting is that deregulation caused the problem. Regulation may have prevented a small part of the problem, but on balance the growth that regulation prevents from happening is far more costly than any accidents it prevents. The government should insure transparency, prevent theft, and enforce the law. It should not however, make what are basically business decisions.
For those of you who wonder why government is so bad at this, just ask yourself what ingredient is the most important in a financial success. How about desire..the desire to make money? In a capitalist system, one only makes money when he meets the public needs better and cheaper than anyone else. Is the government motivated by the same thing? Absolutely not. Politicians want to get reelected, and for them public perception is everything. If they can fool people into thinking they are helping, they get votes. The reality of what they are doing, or the damage, means nothing. Most politicians don't understand economics, and worse, don't care to. Their "expertise" is in getting votes. Certainly most people have lives far too busy to understand what supply side economics is, or most any other economic theory. So they are reduced to voting on sound bites and emotional appeal. And here we are.
Our current financial problems are primarily the result of government "help." The insanity I referred to in the first paragraph is that the government now plans to give more "help," to solve the problem created by the original "help" (for homeowners in forming F&F). It is as if a patient had an allergic reaction to a medication and the doctor decided that he would give him more of it to stop the reaction.
Wednesday, January 21, 2009
Tax Policy
It has been a while..but I am back. Read and learn. I'll be more attentive hereafter, or at least until I run out of wisdom to share.
The debate on taxes between liberals and conservatives is insane. Lowering taxes serves everyone's objectives. The government realizes more revenue, and individuals keep more of what they make. Lower taxes create more incentive for investors, thus more economic activity, and it keeps capital in private hands versus under inefficient government control. Consequently more wealth is generated. Why are we arguing?
Over the last 50 years the jury (history) watched and heard both sides of the tax debate. They returned a unanimous verdict. Cuts help everyone. John Kennedy, Ronald Reagan and George W Bush lowered taxes and the economy skyrocketed every time. Herbert Hoover and FDR raised taxes and we had a depression. People say Bill Clinton raised taxes and the economy was great. That's true. But the marginal rate increases were modest, whereas his capital gains tax cut was substantial. Also the tech boom and his passage of NAFTA helped a lot.
There is a concern on the left that tax reduction dis-proportionately helps the wealthy, and it does. We can all agree that wealth creation in a capitalist system is top heavy. But capitalism still creates the greatest amount of wealth in every individual quintile of the income scale. If you are in the bottom 20% of earners, would you rather your income stagnate but remain proportional to someone in the top quintile, or would you rather earn more yourself and have the top earners gain disproportionally? I would care less about what was happening at the top so long as I was moving forward.
20 years ago Ireland's economy was one of the worst in Europe. They passed a law allowing artists to settle there and pay no taxes. Needless to say many people extended the meaning of artist (isn't a plumber creative?), and all of a sudden immigrants were coming from throughout Europe. The Parliament noticed that the economy was growing in a way they had never seen before, so they passed a general tax cut. Voila! There was more economic activity, more jobs, more net personal income, and more tax revenue. Since then they cut taxes 13 times. 13 times the economy grew, and 13 times the government realized more tax revenue. Ireland has gone from one of the worst economies in the EU to the second best, behind Luxembourg. Before the reductions they had 50,000 people a year leaving the country looking for work. Today they have 200,000 coming into the country looking for work.
Over the last 50 years Hong Kong has been the fastest growing of all western economies. They also have the lowest tax rate. In fact it even "favors the rich," in that it is a 16 percent flat tax. Still, the lowest rate among western economies not only produces the highest growth rate among them, but also produces the highest tax revenue per capita.
In about 1970 Communists won elections in Chile and nationalized industries and of course raised taxes. Needless to say the economy ground to a halt, there was high inflation, and despair ruled the country. Colonel Augusto Pinochet (head of the army) took control of the government, and his advisers (a group of free market economists from University of Chicago known as The Chicago Boys) had him privatize industry and lower taxes and regulations. There were huge job losses and more economic contraction at first, but within a couple of years the economy began to grow, and like Ireland, Chile became the economic miracle of their continent.
In 1945 Argentina had a standard of living higher than France. In the succeeding years the communists/ socialists took over, raised taxed and did all the things socialists do (including severely curbing personal freedoms). As a result the country went from vibrant growth to a stagnant second rate economy. Even France, with all its oppressive taxes, has grown faster and larger than Argentina.
The Heritage Foundation (a conservative think tank) and the Wall Street Journal compile statistics annually called the Economic Freedom Index. They quantify with a point value each area they think is important to the growth of an economy. The total point score gives an overall rating to each country gauging their economic freedom and growth potential. Taxes are the most important, but things like regulation, the judicial system, respect for private property, infrastructure etc are included. If you graph the ratings of each country, and placed it next to a graph of each countries economic growth, or per capita income, or living standard, or government revenue, or most anything we hope to get from our economy, you will see a mirror image. The higher the rating in the Economic Freedom Index, the higher the economic growth rate and overall prosperity.
Government is the problem, not the solution. Obviously we need government. We need a protector and an enforcer (police and armed forces). We also need a referee (settle disputes, insure transparency etc.). But mostly we need government to stay out of the way. Ironically, one might think lower taxes would starve the beast (government), but counter intuitively, lowering taxes actually produces more money. Eventually we will reach a point where the rate goes so low that revenue does begin to decline. Then we can argue. But please, not now..
The debate on taxes between liberals and conservatives is insane. Lowering taxes serves everyone's objectives. The government realizes more revenue, and individuals keep more of what they make. Lower taxes create more incentive for investors, thus more economic activity, and it keeps capital in private hands versus under inefficient government control. Consequently more wealth is generated. Why are we arguing?
Over the last 50 years the jury (history) watched and heard both sides of the tax debate. They returned a unanimous verdict. Cuts help everyone. John Kennedy, Ronald Reagan and George W Bush lowered taxes and the economy skyrocketed every time. Herbert Hoover and FDR raised taxes and we had a depression. People say Bill Clinton raised taxes and the economy was great. That's true. But the marginal rate increases were modest, whereas his capital gains tax cut was substantial. Also the tech boom and his passage of NAFTA helped a lot.
There is a concern on the left that tax reduction dis-proportionately helps the wealthy, and it does. We can all agree that wealth creation in a capitalist system is top heavy. But capitalism still creates the greatest amount of wealth in every individual quintile of the income scale. If you are in the bottom 20% of earners, would you rather your income stagnate but remain proportional to someone in the top quintile, or would you rather earn more yourself and have the top earners gain disproportionally? I would care less about what was happening at the top so long as I was moving forward.
20 years ago Ireland's economy was one of the worst in Europe. They passed a law allowing artists to settle there and pay no taxes. Needless to say many people extended the meaning of artist (isn't a plumber creative?), and all of a sudden immigrants were coming from throughout Europe. The Parliament noticed that the economy was growing in a way they had never seen before, so they passed a general tax cut. Voila! There was more economic activity, more jobs, more net personal income, and more tax revenue. Since then they cut taxes 13 times. 13 times the economy grew, and 13 times the government realized more tax revenue. Ireland has gone from one of the worst economies in the EU to the second best, behind Luxembourg. Before the reductions they had 50,000 people a year leaving the country looking for work. Today they have 200,000 coming into the country looking for work.
Over the last 50 years Hong Kong has been the fastest growing of all western economies. They also have the lowest tax rate. In fact it even "favors the rich," in that it is a 16 percent flat tax. Still, the lowest rate among western economies not only produces the highest growth rate among them, but also produces the highest tax revenue per capita.
In about 1970 Communists won elections in Chile and nationalized industries and of course raised taxes. Needless to say the economy ground to a halt, there was high inflation, and despair ruled the country. Colonel Augusto Pinochet (head of the army) took control of the government, and his advisers (a group of free market economists from University of Chicago known as The Chicago Boys) had him privatize industry and lower taxes and regulations. There were huge job losses and more economic contraction at first, but within a couple of years the economy began to grow, and like Ireland, Chile became the economic miracle of their continent.
In 1945 Argentina had a standard of living higher than France. In the succeeding years the communists/ socialists took over, raised taxed and did all the things socialists do (including severely curbing personal freedoms). As a result the country went from vibrant growth to a stagnant second rate economy. Even France, with all its oppressive taxes, has grown faster and larger than Argentina.
The Heritage Foundation (a conservative think tank) and the Wall Street Journal compile statistics annually called the Economic Freedom Index. They quantify with a point value each area they think is important to the growth of an economy. The total point score gives an overall rating to each country gauging their economic freedom and growth potential. Taxes are the most important, but things like regulation, the judicial system, respect for private property, infrastructure etc are included. If you graph the ratings of each country, and placed it next to a graph of each countries economic growth, or per capita income, or living standard, or government revenue, or most anything we hope to get from our economy, you will see a mirror image. The higher the rating in the Economic Freedom Index, the higher the economic growth rate and overall prosperity.
Government is the problem, not the solution. Obviously we need government. We need a protector and an enforcer (police and armed forces). We also need a referee (settle disputes, insure transparency etc.). But mostly we need government to stay out of the way. Ironically, one might think lower taxes would starve the beast (government), but counter intuitively, lowering taxes actually produces more money. Eventually we will reach a point where the rate goes so low that revenue does begin to decline. Then we can argue. But please, not now..
Saturday, December 13, 2008
A Deal With the Devil
Congress set up criteria to bail out the auto industry and the unions said no. They were unwilling to agree to a date certain where they would reduce their pay to what foreign companies operating in the US are paying their workers. The union seemed to be gambling that Bush would once again ignore capitalist principles and use TARP funds to keep the companies alive, and unfortunately, I think they are right.
In the press release the union president said those evil right wing Senate Republicans wanted the workers to shoulder the entire burden. This would be a reasonable complaint if only it were true. Actually the Republican plan required that all unsecured creditors reduce the amount of their debt by two thirds, costing several billions of dollars and replacing it with equity. If they didn't agree by March 15, the companies would declare bankruptcy (in which case the creditors would get far less, if anything). It sounds like they were shouldering part of the burden to me. The equity holders would get diluted beyond recognition, all but wiped out, because of the plan to replace debt with equity. That sounds like they would have done their share.
OK..So the UAW president lied. Still I have a problem with congress financing any bailout, but the argument may be correct that a chapter 11 bankrupcy is not practical. The argument is with the complexities involved at GM Chrysler and Ford, bankruptcy as a viable option that could create healthy companies (the normal procedure) is all but impossible. It would result in chapter 7 liquidation. Plan B (aka the Republican plan) has congress acting like a bankruptcy judge, and therefore it could work.
But Bush's weakness will undermine that plan getting passed. Unions are betting he will fund the autos with TARP, and the money will flow from the government through the companies to the union. Of course in two or three years and 40 or so billion later everyone will return to the scene of the crime..and they will go bankrupt.
This brings up an interesting question. Do the workers in Detroit live better than those in Mississippi (Mercedes plant) even though Detroit earns 50% more money? The answer is no. Because the cost of living is so much higher in Michigan, their workers probably don't live as well.
The sales tax, state income tax, state corporate taxes that pass through to consumers, school taxes, fees etc. are all higher in the north. People pay more taxes, pay more for consumer goods (because of taxes and regulations foisted upon them), pay more for services (because the service providers pay more taxes), and pay more for health insurance (because of mandates, regulations and their support for trial lawyers).
The point is, if government were more responsible and spent less, a 50% reduction in wages might be acceptable. But under present conditions, given the same amount of money, the lifestyle in Michigan is far inferior to that in Mississippi. This is because long ago the unions chose to throw in with the socialists/ Democrats, and like any deal with the devil, it looked great, had momentary benefits, but now the devil is calling in his note.
Marx and Lenin said the workers should revolt, they have nothing to lose but their chains, and I agree. But the revolt should be against a government that uses its power to tax unconscionably, pick and choose winners and losers, use massive amounts of money attempting to stop the creative destruction of capitalism, thereby inflicting far more pain than would otherwise occur, and in the process squanders the fruit from the labor of millions.
An addendum..Ben Stein weighed in on TV today and said those of us opposed to a bailout are un-American..This from a would be conservative who gave Al Franken money for his senate campaign (now that's really un-American), whose father was an economist but he can not even understand supply side economics. I kid you not. With every financial crisis, or crisis of any sort, he advocates raising taxes, buying into the Democratic insanity that money can be extracted from the economy without any effect. Earth to Ben: The life blood of an economy is capital...raising taxes is no different than bleeding a sick patient. Every economy in every part of the world proved this. It is not only that he is wrong, but he is arrogant and has now slandered those of us who disagree.
In the press release the union president said those evil right wing Senate Republicans wanted the workers to shoulder the entire burden. This would be a reasonable complaint if only it were true. Actually the Republican plan required that all unsecured creditors reduce the amount of their debt by two thirds, costing several billions of dollars and replacing it with equity. If they didn't agree by March 15, the companies would declare bankruptcy (in which case the creditors would get far less, if anything). It sounds like they were shouldering part of the burden to me. The equity holders would get diluted beyond recognition, all but wiped out, because of the plan to replace debt with equity. That sounds like they would have done their share.
OK..So the UAW president lied. Still I have a problem with congress financing any bailout, but the argument may be correct that a chapter 11 bankrupcy is not practical. The argument is with the complexities involved at GM Chrysler and Ford, bankruptcy as a viable option that could create healthy companies (the normal procedure) is all but impossible. It would result in chapter 7 liquidation. Plan B (aka the Republican plan) has congress acting like a bankruptcy judge, and therefore it could work.
But Bush's weakness will undermine that plan getting passed. Unions are betting he will fund the autos with TARP, and the money will flow from the government through the companies to the union. Of course in two or three years and 40 or so billion later everyone will return to the scene of the crime..and they will go bankrupt.
This brings up an interesting question. Do the workers in Detroit live better than those in Mississippi (Mercedes plant) even though Detroit earns 50% more money? The answer is no. Because the cost of living is so much higher in Michigan, their workers probably don't live as well.
The sales tax, state income tax, state corporate taxes that pass through to consumers, school taxes, fees etc. are all higher in the north. People pay more taxes, pay more for consumer goods (because of taxes and regulations foisted upon them), pay more for services (because the service providers pay more taxes), and pay more for health insurance (because of mandates, regulations and their support for trial lawyers).
The point is, if government were more responsible and spent less, a 50% reduction in wages might be acceptable. But under present conditions, given the same amount of money, the lifestyle in Michigan is far inferior to that in Mississippi. This is because long ago the unions chose to throw in with the socialists/ Democrats, and like any deal with the devil, it looked great, had momentary benefits, but now the devil is calling in his note.
Marx and Lenin said the workers should revolt, they have nothing to lose but their chains, and I agree. But the revolt should be against a government that uses its power to tax unconscionably, pick and choose winners and losers, use massive amounts of money attempting to stop the creative destruction of capitalism, thereby inflicting far more pain than would otherwise occur, and in the process squanders the fruit from the labor of millions.
An addendum..Ben Stein weighed in on TV today and said those of us opposed to a bailout are un-American..This from a would be conservative who gave Al Franken money for his senate campaign (now that's really un-American), whose father was an economist but he can not even understand supply side economics. I kid you not. With every financial crisis, or crisis of any sort, he advocates raising taxes, buying into the Democratic insanity that money can be extracted from the economy without any effect. Earth to Ben: The life blood of an economy is capital...raising taxes is no different than bleeding a sick patient. Every economy in every part of the world proved this. It is not only that he is wrong, but he is arrogant and has now slandered those of us who disagree.
Friday, December 12, 2008
Capitalism 101
A few weeks ago Treasury secretary Paulson told the congress that if he didn't have 750 billion dollars that weekend catastrophes would occur. The implication was if he got it, the economic ship could be righted. He got it, and then a couple of weeks later completely trashed the plan he was going to implement, and decided on an entirely new one. Think about it. We were "on the precipice," but had a plan to save the world. Congress appropriated an astronomical amount of money for it, and then Treasury rethought things and decided the first plan wouldn't work, but a new one they dreamed of would....sure..
The economic insanity has reached record levels. Nearly every state, municipality, industry and home owner is looking for a bailout, and every politician, pundit and economist has an idea how to save us from the pain of the recession. None of them have a clue.
There is a history of government action, and it isn't pretty. See Freddie Mac and Fannie Mae for details. They were arguably the start of the cancer that grew into the present crisis.
Do you remember the stimulus package a couple of months ago? I do. I just can't see where it helped.
Although Roosevelt is given credit for bringing us out of the depression, the fact is he and his predecessor, Hoover, caused the severity and length of the depression. Obama's public works initiative is modeled on Roosevelt public works policies, and although suggesting that such policies brought us out of the depression makes for romantic liberal storytelling, the reality is that a stock market crash partly due to a bubble created by 10 to 1 leverage began a recession, but failed monetary policy, trade barriers, and increased taxed got us into the depression. The reversal of at least some of these got us out, not Roosevelt's huge public spending.
No one today knows the effect of the policies they are proposing. The forces in the economy are so complex that we can only make educated guesses. History fails us as a guide for the future because new forces constantly enter the equation, and since we don't understand things very well to begin with, we certainly can't understand things with a constant flow of new variables. If we could get it right, we would all be rich. The attempts to influence the economy through government action can never be proved to have failed either. There is no control group to measure it against, so no matter how bad things go, it can be argued it would have been worse without the action.
In Washington perception is reality. If the auto bailout fantasy is to be believed, it will save millions of jobs, it will create a viable healthy industry that will wean the country off fossil fuels, repay bondholders in full, and possible even profit shareholders. I'd laugh out loud except it is so tragic.
This bailout shows that once congress is involved, political considerations trump everything else. The auto executives told congress what they wanted to hear, not what the industry needed to be profitable. The auto companies were going to concentrate on green cars. Right.. they will sell a lot of them with $1.50 or $2.00 gas.
The congressmen said the unions (their consistent supporters and contributors) have already given up a lot, and shouldn't bear the entire burden. This is code meaning the industry must keep the union wages at twice what foreign manufactures pay for their US labor. That will sure help a lot..Not only can't this approach work...it actually will make a bad business model worse.
Fannie and Freddie are a recent example of government involvement in business. Congress created these monsters under the guise of expanding home ownership. They gave them implicit government guarantees on the money they borrowed. This created a squeeze on other lenders because without a similar guarantee they couldn't borrow as cheaply. Congress then used Fannie and Freddie as a depository for their political cronies. In order to beef up bonuses for the cronies (among others), the companies borrowed far too much, were too leveraged, (it couldn't have happened without that government guarantee.. no one would have loaned them the money), and committed accounting fraud. Franklin Raines, a Democratic political operative (Carter and Clinton administrations), was appointed the CEO of Fannie Mae. During his term earnings were overstated by 2.7 billion dollars, and he earned over 90 million dollars for himself. He settled the civil suit filed against him for a couple of million dollars and gave up his then worthless options. It pays to have friends in high places. But I digress. Congress later passed the Community Reinvestment Act. It said that Fannie and Freddie should make every effort to lend to non creditworthy borrowers, with insufficient equity (down payment). They also said that other banks would have to lend in poor neighborhoods (spell that non creditworthy borrowers with insufficient equity) or they would be prohibited from getting federal approval for mergers. As to profits..well really, what does congress care.
It is laughable that now that the entire thing has blown up, congress accepts no responsibility, and instead invents "predatory lending" as the culprit. This fantasy says that lenders who lost huge sums of money, were guilty of conning poor unassuming honest middle class families into borrowing more than they could afford to repay. The lenders may have been stupid, but predatory? No no..The borrowers may have foolish as well.. but victims? I don't think so.
We don't know where our attempts to solve this will lead, but we do know government action always enlarges the problems and creates new ones rather than solving anything. Let us first do no harm. Get the government out. Nationalizing industries has consistently been disastrous. We may not know what allowing these failures to occur would do, but we do know that although the market place is often painful, it corrects bad behavior as quickly and painlessly as possible. I don't know on what course the market will take us, or how bad it will be. I just know that it is the best choice from an obviously bad menu.
The economic insanity has reached record levels. Nearly every state, municipality, industry and home owner is looking for a bailout, and every politician, pundit and economist has an idea how to save us from the pain of the recession. None of them have a clue.
There is a history of government action, and it isn't pretty. See Freddie Mac and Fannie Mae for details. They were arguably the start of the cancer that grew into the present crisis.
Do you remember the stimulus package a couple of months ago? I do. I just can't see where it helped.
Although Roosevelt is given credit for bringing us out of the depression, the fact is he and his predecessor, Hoover, caused the severity and length of the depression. Obama's public works initiative is modeled on Roosevelt public works policies, and although suggesting that such policies brought us out of the depression makes for romantic liberal storytelling, the reality is that a stock market crash partly due to a bubble created by 10 to 1 leverage began a recession, but failed monetary policy, trade barriers, and increased taxed got us into the depression. The reversal of at least some of these got us out, not Roosevelt's huge public spending.
No one today knows the effect of the policies they are proposing. The forces in the economy are so complex that we can only make educated guesses. History fails us as a guide for the future because new forces constantly enter the equation, and since we don't understand things very well to begin with, we certainly can't understand things with a constant flow of new variables. If we could get it right, we would all be rich. The attempts to influence the economy through government action can never be proved to have failed either. There is no control group to measure it against, so no matter how bad things go, it can be argued it would have been worse without the action.
In Washington perception is reality. If the auto bailout fantasy is to be believed, it will save millions of jobs, it will create a viable healthy industry that will wean the country off fossil fuels, repay bondholders in full, and possible even profit shareholders. I'd laugh out loud except it is so tragic.
This bailout shows that once congress is involved, political considerations trump everything else. The auto executives told congress what they wanted to hear, not what the industry needed to be profitable. The auto companies were going to concentrate on green cars. Right.. they will sell a lot of them with $1.50 or $2.00 gas.
The congressmen said the unions (their consistent supporters and contributors) have already given up a lot, and shouldn't bear the entire burden. This is code meaning the industry must keep the union wages at twice what foreign manufactures pay for their US labor. That will sure help a lot..Not only can't this approach work...it actually will make a bad business model worse.
Fannie and Freddie are a recent example of government involvement in business. Congress created these monsters under the guise of expanding home ownership. They gave them implicit government guarantees on the money they borrowed. This created a squeeze on other lenders because without a similar guarantee they couldn't borrow as cheaply. Congress then used Fannie and Freddie as a depository for their political cronies. In order to beef up bonuses for the cronies (among others), the companies borrowed far too much, were too leveraged, (it couldn't have happened without that government guarantee.. no one would have loaned them the money), and committed accounting fraud. Franklin Raines, a Democratic political operative (Carter and Clinton administrations), was appointed the CEO of Fannie Mae. During his term earnings were overstated by 2.7 billion dollars, and he earned over 90 million dollars for himself. He settled the civil suit filed against him for a couple of million dollars and gave up his then worthless options. It pays to have friends in high places. But I digress. Congress later passed the Community Reinvestment Act. It said that Fannie and Freddie should make every effort to lend to non creditworthy borrowers, with insufficient equity (down payment). They also said that other banks would have to lend in poor neighborhoods (spell that non creditworthy borrowers with insufficient equity) or they would be prohibited from getting federal approval for mergers. As to profits..well really, what does congress care.
It is laughable that now that the entire thing has blown up, congress accepts no responsibility, and instead invents "predatory lending" as the culprit. This fantasy says that lenders who lost huge sums of money, were guilty of conning poor unassuming honest middle class families into borrowing more than they could afford to repay. The lenders may have been stupid, but predatory? No no..The borrowers may have foolish as well.. but victims? I don't think so.
We don't know where our attempts to solve this will lead, but we do know government action always enlarges the problems and creates new ones rather than solving anything. Let us first do no harm. Get the government out. Nationalizing industries has consistently been disastrous. We may not know what allowing these failures to occur would do, but we do know that although the market place is often painful, it corrects bad behavior as quickly and painlessly as possible. I don't know on what course the market will take us, or how bad it will be. I just know that it is the best choice from an obviously bad menu.
Monday, December 1, 2008
Racism 101
Many people are making the mistake of thinking an Obama presidency will put the race issue to rest, or at least soften the intensity of feelings. They are wrong..
The race hustlers have already staked out their turf, and lest anyone believe that Obama's election reflects racial progress, every black leader from the left is on the record trivializing the election's racial importance. According to them this shows only modest progress, but a lot more is needed. I disagree.
Black race problems are vastly overstated. What racial problems there are, are not much different than normal problems between any two different racial, ethnic or geographic groups. There are real bigots, but far fewer than the left and most black leaders would have you believe, and those bigots have lots of targets, not just blacks.
My children are more important to me than my brother's children. His children are more important to me than my next door neighbors children. American children are more important to me than European children. Does this make me bigoted towards my brother or my next door neighbor or European children? My point is that the more removed someone is from my life, the less concerned I am about him. This is human nature. There is nothing to be ashamed of, and nothing can change it. When we hear about ten Iraqis killed in a terrorist attack, we are less upset than hearing that one American soldier was killed. If a terrorist explodes a bomb in town near where we live and a dozen people are injured, we will be more distraught than if a tsunami kills 500 people in some far away country. These are examples of the human condition, not bigotry.
Lots of jokes are made about blacks. Lots are made about Jews, Irish and Italians. No group is spared. Snide comments are made which stereotype blacks, but Jews do the same to gentiles, and wasps make them about Jews. Every group makes them about every other group. It isn't nice and it isn't pretty, regardless of who is speaking. But it happens to everyone. We should never accept it, but neither should we act as if the only group that it happens to are black. Are blacks more abused than most? Perhaps, but that is no justification for the growth of the cottage industry of black victimization.
The industry leaders include Reverend Al Sharpton, Reverend Jesse Jackson, Reverend Louis Farrakahan and Reverend Jeremiah Wright. In reality they are themselves hate mongers. Listen to their message. The white enemy/ oppressor (Jews are especially guilty) caused blacks all manner of problems, has prevented their social and economic advancement, and continues to do so.
The hustlers claim to find bigotry everywhere. Harold Ford is a black Tennessee politician from a very successful political family. He ran for an open Senate seat in 2006 and lost by three percent. Every pundit and publication in America decided that he would have won were it not for his being black. It was the accepted wisdom. Of course it is patently silly. None of the facts support the conclusion. The last Democrat elected to the Senate from Tennessee was Al Gore. The state even went Republican when their home boy Gore ran for president. Ford is a very likable, skilled politician, ran in a year when Democrats did very well, and so he did better than any Democrat since 1988. He came closer to winning than any other Democrat since Republicans took over congress. So to suggest he lost because he is black flies in the face of common sense, and all of the evidence.
Obama won 97 percent of the black vote, and large percentages of the white vote. Certainly there is more evidence there that blacks voted just because of race (aka racism). I have no problem with why they voted as they did. Still, I have yet to hear any outcry of bigotry coming from this group of leaders.
In our everyday lives we can only make judgments on the evidence available to us, and sometimes there is very little of evidence to go on. If you were walking down a dark empty street late at night and a man appeared carrying a gun, you would be scared to death and try to get off the street. If you were in the middle of a street and on one side was a man in a coat and tie, and on the other was a man who looked drunk, dirty and threatening, you would cross over to the side with the well dressed man. Are you bigoted towards gun toting or shabbily dressed men? I don't think so. I'd say you have common sense. If a black and a white man are on this street and you have nothing to go on but the color of their skin, for the same reason you reacted as you did to in the prior two examples, you would cross over to the white man's side. The black man might be a high class gentleman, and the white man a rapist, but you don't have enough information to understand that or the luxury of time to find out. You can only act on the information you have.
Black men commit crimes at a higher rate than white men. That alone justifies your decision. Obama recounts a story about his grandmother where she says she was gripped by fear when a black man came near her when her surroundings made her feel vulnerable. He offers this up as racism. I would suggest it is another example of common sense.
Instead of the race hustlers making the absurd argument that this is bigotry, perhaps they should tell the black community that they may have been dealt a bad hand, but how they are viewed by others can only change when their behavior changes. Jews are stereotyped as being money hungry and cheap, Irish as drunks, Italians as mafia members etc. Looking at people as groups, the charges may or may not be true. Individually however they are not. As individuals people have to deal with their group's stereotypes. Such is life for everyone, not just blacks. In the meantime those who suffer most from the high crime rate by blacks are blacks themselves. If instead of blaming whitey for some real or imaginary transgression, the leadership pushed the community to improve itself, everyone would be better off.
Preaching blacks are victims has multiple effects, none good. Shelby Steele discusses one. He describes hypothetical black and white youngsters who go into business (individually). They both fail. The white boy picks himself up and thinks, what did I do wrong and how can I do it better. He then jumps back into the fray. The black boy says, I failed because I'm black. I failed because of whitey. He then decides trying again is hopeless. He thinks this way because that is this deadly message the race hustlers have given him all of his life.
The last thing anyone needs is an excuse for failure. If we provide enough such excuses to anyone, rest assured, he will fail. If however he receives the message that there is opportunity, he has the talent to succeed, and that it is up to him to capitalize on it, he has a chance. Perhaps one group has to try harder than another. So what? There are only two choices. Try to get over that higher bar, or don't try and be assured of failure?
One of the hustler's approaches is to argue that slavery is the cause of slower black social and economic development, the government was complicit in slavery, and therefore the government must do something to correct it. Our constitution protects individuals, not groups, and individuals, not groups, have rights, one being redress. There are no individuals alive who were slaves. Therefore no one is entitled to redress for slavery. Being born with less opportunity than someone else does not create an entitlement. If it did, anyone could find a reason to justify a petition for help. What every citizen is entitled to is equal treatment under the law, and we must be diligent to insure that.
Obama thinks differently. He says he does not support reparations (payment by the government to descendants of slaves) but he does say that special programs need to be set up for blacks because of slavery. What he means is that cash payments to blacks should not be made, but special services and programs for blacks should. It sounds like "in kind" reparations to me. But the scary thing is he doesn't understand the harm such a policy does to the very group it intends to help. It reinforces the fictional and hurtful idea that blacks are less qualified, they need and are entitled to help. Does anyone think affirmative action has helped anyone other than a very few individuals. I can't get into that here, but affirmative action is not only unconstitutional, but like reparations, like blaming whitey for black individual failures, like anything where the government treats people differently based on race, it hurts everyone, and especially the people it is trying to help.
The race hustlers make their living fanning the fire of racial discord. For those who think Obama's election will ease the problem, just remember, these professional agitators are at the core of his constituency.
The race hustlers have already staked out their turf, and lest anyone believe that Obama's election reflects racial progress, every black leader from the left is on the record trivializing the election's racial importance. According to them this shows only modest progress, but a lot more is needed. I disagree.
Black race problems are vastly overstated. What racial problems there are, are not much different than normal problems between any two different racial, ethnic or geographic groups. There are real bigots, but far fewer than the left and most black leaders would have you believe, and those bigots have lots of targets, not just blacks.
My children are more important to me than my brother's children. His children are more important to me than my next door neighbors children. American children are more important to me than European children. Does this make me bigoted towards my brother or my next door neighbor or European children? My point is that the more removed someone is from my life, the less concerned I am about him. This is human nature. There is nothing to be ashamed of, and nothing can change it. When we hear about ten Iraqis killed in a terrorist attack, we are less upset than hearing that one American soldier was killed. If a terrorist explodes a bomb in town near where we live and a dozen people are injured, we will be more distraught than if a tsunami kills 500 people in some far away country. These are examples of the human condition, not bigotry.
Lots of jokes are made about blacks. Lots are made about Jews, Irish and Italians. No group is spared. Snide comments are made which stereotype blacks, but Jews do the same to gentiles, and wasps make them about Jews. Every group makes them about every other group. It isn't nice and it isn't pretty, regardless of who is speaking. But it happens to everyone. We should never accept it, but neither should we act as if the only group that it happens to are black. Are blacks more abused than most? Perhaps, but that is no justification for the growth of the cottage industry of black victimization.
The industry leaders include Reverend Al Sharpton, Reverend Jesse Jackson, Reverend Louis Farrakahan and Reverend Jeremiah Wright. In reality they are themselves hate mongers. Listen to their message. The white enemy/ oppressor (Jews are especially guilty) caused blacks all manner of problems, has prevented their social and economic advancement, and continues to do so.
The hustlers claim to find bigotry everywhere. Harold Ford is a black Tennessee politician from a very successful political family. He ran for an open Senate seat in 2006 and lost by three percent. Every pundit and publication in America decided that he would have won were it not for his being black. It was the accepted wisdom. Of course it is patently silly. None of the facts support the conclusion. The last Democrat elected to the Senate from Tennessee was Al Gore. The state even went Republican when their home boy Gore ran for president. Ford is a very likable, skilled politician, ran in a year when Democrats did very well, and so he did better than any Democrat since 1988. He came closer to winning than any other Democrat since Republicans took over congress. So to suggest he lost because he is black flies in the face of common sense, and all of the evidence.
Obama won 97 percent of the black vote, and large percentages of the white vote. Certainly there is more evidence there that blacks voted just because of race (aka racism). I have no problem with why they voted as they did. Still, I have yet to hear any outcry of bigotry coming from this group of leaders.
In our everyday lives we can only make judgments on the evidence available to us, and sometimes there is very little of evidence to go on. If you were walking down a dark empty street late at night and a man appeared carrying a gun, you would be scared to death and try to get off the street. If you were in the middle of a street and on one side was a man in a coat and tie, and on the other was a man who looked drunk, dirty and threatening, you would cross over to the side with the well dressed man. Are you bigoted towards gun toting or shabbily dressed men? I don't think so. I'd say you have common sense. If a black and a white man are on this street and you have nothing to go on but the color of their skin, for the same reason you reacted as you did to in the prior two examples, you would cross over to the white man's side. The black man might be a high class gentleman, and the white man a rapist, but you don't have enough information to understand that or the luxury of time to find out. You can only act on the information you have.
Black men commit crimes at a higher rate than white men. That alone justifies your decision. Obama recounts a story about his grandmother where she says she was gripped by fear when a black man came near her when her surroundings made her feel vulnerable. He offers this up as racism. I would suggest it is another example of common sense.
Instead of the race hustlers making the absurd argument that this is bigotry, perhaps they should tell the black community that they may have been dealt a bad hand, but how they are viewed by others can only change when their behavior changes. Jews are stereotyped as being money hungry and cheap, Irish as drunks, Italians as mafia members etc. Looking at people as groups, the charges may or may not be true. Individually however they are not. As individuals people have to deal with their group's stereotypes. Such is life for everyone, not just blacks. In the meantime those who suffer most from the high crime rate by blacks are blacks themselves. If instead of blaming whitey for some real or imaginary transgression, the leadership pushed the community to improve itself, everyone would be better off.
Preaching blacks are victims has multiple effects, none good. Shelby Steele discusses one. He describes hypothetical black and white youngsters who go into business (individually). They both fail. The white boy picks himself up and thinks, what did I do wrong and how can I do it better. He then jumps back into the fray. The black boy says, I failed because I'm black. I failed because of whitey. He then decides trying again is hopeless. He thinks this way because that is this deadly message the race hustlers have given him all of his life.
The last thing anyone needs is an excuse for failure. If we provide enough such excuses to anyone, rest assured, he will fail. If however he receives the message that there is opportunity, he has the talent to succeed, and that it is up to him to capitalize on it, he has a chance. Perhaps one group has to try harder than another. So what? There are only two choices. Try to get over that higher bar, or don't try and be assured of failure?
One of the hustler's approaches is to argue that slavery is the cause of slower black social and economic development, the government was complicit in slavery, and therefore the government must do something to correct it. Our constitution protects individuals, not groups, and individuals, not groups, have rights, one being redress. There are no individuals alive who were slaves. Therefore no one is entitled to redress for slavery. Being born with less opportunity than someone else does not create an entitlement. If it did, anyone could find a reason to justify a petition for help. What every citizen is entitled to is equal treatment under the law, and we must be diligent to insure that.
Obama thinks differently. He says he does not support reparations (payment by the government to descendants of slaves) but he does say that special programs need to be set up for blacks because of slavery. What he means is that cash payments to blacks should not be made, but special services and programs for blacks should. It sounds like "in kind" reparations to me. But the scary thing is he doesn't understand the harm such a policy does to the very group it intends to help. It reinforces the fictional and hurtful idea that blacks are less qualified, they need and are entitled to help. Does anyone think affirmative action has helped anyone other than a very few individuals. I can't get into that here, but affirmative action is not only unconstitutional, but like reparations, like blaming whitey for black individual failures, like anything where the government treats people differently based on race, it hurts everyone, and especially the people it is trying to help.
The race hustlers make their living fanning the fire of racial discord. For those who think Obama's election will ease the problem, just remember, these professional agitators are at the core of his constituency.
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