The truth about AIG's payments to "foreigners," and Glenn Beck is a moron

Conservatives are up in arms about AIG paying tens of billions to foreign banks. Conservatives are wont to do that when they think wealth is leaving the country. Glenn Beck blathered, in a perfect impersonation of protectionist Pat Buchanan:

GLENN: $58 billion has gone to foreign banks. Now, why isn't America outraged by that? Because America doesn't know that fact. America isn't talking about that fact. If we would have let AIG fail, then these other banks would have had to come to us and said, hey, what are you going to do on these. And we would have then had to have the discussion, do we send money over to France, do we send money over to Germany, do we send money over to England? And that we couldn't have won. The people in Washington, they would have never gotten that past you.

STU: We're not that into stimulating.

GLENN: We're not that into stimulating. We're not into shifting wealth from our continent to other continents.

STU: That's where we draw the line.

GLENN: That's where we draw the line.

STU: Of all the stuff we do, that's where we draw the line.

Beck is nothing more than a 21st century mercantilist, who thinks that keeping "wealth" within one's country is the way to prosperity. He doesn't understand that international trade, from goods to financing, allows everyone to prosper. He doesn't even understand that when he talks about "wealth," he's confusing it with "money."

As I explained first here, AIG paying foreign banks was not money laundering. Does Beck even know what money laundering is? He obviously doesn't understand what AIG was doing.

Like any insurer, AIG writes lots of policies. But AIG's unprecedented woes are because, unlike most insurers, it sold a lot of policies, specifically credit default swaps, that it couldn't cover. Its people knew they couldn't cover them, actually: they figured that while the economy was good, and bank revenues and tax receipts stayed high, AIG could collect nice premiums and not have to pay out relatively much. But despite their stupidity, the fact remains that AIG had to meet its contractual obligations to everyone, regardless of nationality. No money was being "hidden" at any time, so there was no money laundering done.

It's immoral to make the U.S. taxpayer pay for AIG's massive losses, but I'm putting that aside here to talk strictly about the nature of AIG's debts. AIG just happened to owe more to foreign banks than it did to American ones, that's all. If the bailout had been accomplished privately, AIG still would have had to pay foreign firms. Can you imagine if AIG had paid American creditors first, and foreign firms with whatever was left (if anything)? Any firm who does this will find its reputation quickly shot to hell, and it would soon cease doing business internationally. Foreign firms and governments would start retaliating by pulling business from the United States, exacerbating things for everybody.

Were it UBS that owed tens of billions to non-Swiss banks in a similar situation, would Beck be so adamant about defending it if it said it wouldn't pay American creditors?

I didn't think so.

Dissecting James Baker

I wasn't going to comment on Baker's recent op-ed in the Financial Times, but Boulder Refugee mentioned me by name, so I felt compelled.

Unfortunately, the US may be repeating Japan’s mistake by viewing our current banking crisis as one of liquidity and not solvency. Most proposals advanced thus far assume that, once confidence in financial markets is restored, banks will recover.

Good. He seems to recognizes that there was always plenty of liquidiy.

Evidence – a mountain of toxic assets, housing market declines, a sharp economic recession, rising unemployment and increasing taxpayer exposure through guarantees, loans, and infusion of capital

Ahem, and federal laws and regulations that continue to force banks into insolvency despite having capital, and federal mucking of market forces that prevent people from determining true "fair value" of assets.

We should act decisively. First, we need to understand the scope of the problem. The Treasury department – working with the Federal Reserve – must swiftly analyse the solvency of big US banks. Treasury secretary Timothy Geithner’s proposed “stress tests” may work. Any analyses, however, should include worst-case scenarios. We can hope for the best but should be prepared for the worst.

No. It's far easier to, gee, let things fail on their own.

Next, we should divide the banks into three groups: the healthy, the hopeless and the needy. Leave the healthy alone and quickly close the hopeless.

Why bother? The healthy will succeed on their own. The hopeless will fail on their own. The needy will succeed or fail depending on what private individuals deem is better: if there's a good chance for profit, or if they're just throwing good money after bad.

Stein's law about current accounts also applies to this: if something cannot continue forever, it will stop. Despite Paul Krugman's outright misrepresentation, Stein used it to say that active steps need not be taken to stop something that will on its own.

The needy should be reorganised and recapitalised, preferably through private investment or debt-to-equity swaps but, if necessary, through public funds. It is time for triage.

Private investment only. Leave government out of it. Stop the immoral raping of taxpayers to save institutions they don't care about.

To prevent a bank run, all depositors of recapitalised banks should be fully guaranteed, even if their deposit exceeds the Federal Deposit Insurance Corporation maximum of $250,000 (€197,000, £175,000).

Actually, a bank run should be allowed to happen. If a bank has been so imprudent, it should be allowed to fail.

But bank boards of directors and senior management should be replaced and, unfortunately, shareholders will lose their investment. Optimally, bondholders would be wiped out, too. But the risk of a crash in the bond market means that bondholders may receive only a haircut. All of this is harsh, but required if we are ultimately to return market discipline to our financial sector.

Again, let them fail on their own. Failure will ensure that bad managers are fired.

This is not a call for nationalisation but rather for a temporary injection of public funds to clean up problem banks and return them to private ownership as soon as possible.

Yes, yes, and similar things "This is not what you think this is" were said about the Anschluss.

If it were the Bush 43 administration, I'd figure they'd be incompetent at worst. But the agenda of Obama's administration is nationalization, and driving our entire financial industry into the ground will soften up enough Americans into accepting a federal takeover.

As president Ronald Reagan’s secretary of the Treasury, I abhor the idea of government ownership – either partial or full – even if only temporary. Unfortunately, we may have no choice. But we must be very careful. The government should hold equity no longer than necessary to restructure the banks, resume normal lending and recoup at least a portion of taxpayer investment.

"There are no necessary evils in government. Its evils exist only in its abuses."

After replacing bank management with new private managers, the government should have no say in banks’ day-to-day operations.

Say this in your best Captain Kirk voice: "Riiiiight."

Riiiiight. Obama and his Cabinet won't try to inject "social justice" agendas into bank decisions, I'm sure.

The FDIC can assist. Just this year, it has placed more than a dozen American banks – admittedly all small – into receivership. We might also consider setting up something akin to the Resolution Trust Corporation, created in 1989 to liquidate the assets of failed savings and loans. The RTC eventually disposed of almost $400bn in assets of more than 700 insolvent thrifts.

Only a bureaucrat could propose even more bureaucracy. Liquidating a failed business needs no more than a regular bankruptcy court.

To avoid bank runs and contain market disruption, the Treasury should announce its decisions at one time.

That's just the problem: every time Obama or one of his minions opens a mouth, the stock markets tank because consumers lose even more confidence.

Washington will also need to co-ordinate its actions with other major capitals, especially in western Europe and east Asia. At best, this will encourage other countries to take similar steps with their own banking systems. At a minimum, other governments can prepare for the financial turmoil associated with the announcement.

Uh, has Baker been paying attention to the news? Europe can't even get itself together on the bailout.

This approach is not pretty or easy. It will cost a lot of money, with the lion’s share coming from US taxpayers, at least in the short to medium term. But the alternative – a piecemeal pumping of more public money into insolvent banks in the vague hope that things will improve down the road – could truly be historic folly.

Heads, the U.S. taxpayer get sodomized. Tails, the U.S. taxpayer has to perform fellatio. Yeah. Either way, the U.S. taxpayer gets screwed.

Eventually our banks and economy will start to recover. When they do, we would be wise to avoid another Japanese mistake – raising taxes. To counter mounting debt created by government stimulus packages, Japan increased taxes in 1997. Consumption dropped and the country’s economy collapsed.

This much is true at any part in any economic cycle. Raising taxes has historically not produced as much revenue as cutting them.

Our ad hoc approach to the banking crisis has helped financial institutions conceal losses, favoured shareholders over taxpayers, and protected senior bank managers from the consequences of their mistakes. Worst of all, it has crippled our credit system just at a time when the US and the world need to see it healthy.

What did you expect from government action taken to "fix" a crisis that it caused through its short-sightedness and ineptitude?

Hypocrisy, thy new[est] name is Bill O'Reilly

"When you're a "culture warrior" and you're pissed off by something sexy on the TV, what do you do? Why show it again, in its entirety!"

Indeed! Despite all his self-righteous ranting that this Guitar Hero commercial, featuring Heidi Klum in her underwear, could be seen by children, he found the, ahem, personal integrity to play it twice. It's like when my father would joke about eating a new ice cream: "I don't recommend this. I'm eating it only to build my character."

"I don't know what [Guitar Hero] is. Is that a, is that a video game? Is that a video game? ... Oh it is. Those things frighten me."

Here's a man who's still stuck in the 20th century. The mid-20th century. You don't have to like something to know what it is.

"No one cares if you're offended. Is that appropriate for broadcast TV?"

He said the two sentences as if they're unrelated. He stated the first to whatever-her-name-is, then asked the second sentence in an absolute sense. That's because he is offended, and he must therefore stop it: he might as well told her bluntly, "Who cares what you think, it's what I think that's important!"

I suggest that if O'Reilly is truly bothered by offensive imagery, and he can't bring himself to change channels, then let him move to Singapore, where the government will "protect" him from all forms of harmful speech and images.

The Reichstag fire of the financial world

Wake up, people!

I haven't seen anyone compare today to 1933 Germany, but I told a friend on Tuesday -- i.e. before the latest developments that only proved me correct -- that what we're looking at really is a Reichstag fire: an excuse for government to declare an "emergency" and assume totalitarian powers in response to the "crisis," with the vast majority of the people so blind to the real story that they wholeheartedly embrace the new tyranny.

The simple truth: there is no liquidity/credit crisis, other than what's been engineered. But the U.S. and several European governments want us to believe this myth of a "crisis," so that we'll turn to them as our saviors.

Their motive is so obvious now: the U.S. and these European governments have the ultimate goal of nationalizing their respective banking systems. Iceland has already nationalized its three largest banks, while Germany and the other major economies have already established "shields" that are ostensibly to protect account holders. And now the U.S. Treasury might start "injecting liquidity" into banks -- in exchange for ownership. This article has a nice picture of Chuck Schumer, who knows all about spreading rumors to spur the collapse of an otherwise solvent bank -- so that the feds could take it over in the name of "protecting" depositors. George W. Bush and Hank Paulson have now taken that to a new level that even FDR would envy.

As I've explained here and here in comments at friends' blogs, there is in fact no shortage of money to lend, only a lack of lenders' willingness to lend it out -- that might seem semantics, but there's a big difference!

It won't matter who wins the election. Under Bush, we've already trudged enough on the road to nationalization of education, health care, energy and now finance. Soon it will all be complete. Good heavens, people, wake up.

Sigh, sometimes I feel like the few of us who understand are Cassandras, who won't be believed until too late. But I did reach someone tonight, a friend who's been wondering about these economic happenings and asked for my opinion. Now he sees. But we aren't enough.

Not just irony, but hypocrisy: liberals criticize McCain's socialist proposal

During last night's debate, McCain proposed a $300 billion plan that will buy up mortgages and refinance them. Some call it "ambitious," while Obama and his supporters say it won't work. But why the criticism from the same people who supported the $300 billion "housing bill" (which, unfortunately, already has begun -- one week ago today)? Congress eagerly passed it and Bush even more eagerly added his signature. McCain's proposal is merely an amplification, expansion, whatever you want to call it, of what the FHA is doing. If McCain's plan "won't work," then how can we expect the existing one to work when it does the same thing? Albeit on a smaller scale, and perhaps not with precisely the same details, but both have the same bottom line: Peter and Paul get to pay taxes to pay off part of Mary's mortgage, never mind that Mary alone got herself into the trouble.

The reason it won't work, the critics say, is because it will buy up or refinance homes at greater than their true value. Gee, as if the first $300 billion wasn't doing that? As if the federal government isn't already doing that with the absurd $700 billion to buy up "distressed" securities that nobody would buy at the prices the federal government is offering?

And the federal government in the housing and securities bailouts is using its own subjective valuation methodology it can, while imposing mark-to-market on private lenders. As my ThreeSources friends and I recently discussed, the FDIC forces lenders to stop lending, despite any cash deposits on hand that could easily be lent out, if the lenders suddenly find themselves with negative net assets under mark-to-market -- notwithstanding that subjective valuation could very well mean that what's worthless today could be worth a lot in the future (tomorrow, next month, in 20 years, any time frame that buyers and sellers use when making a voluntary trade). Subjective valuation means that a piece of land might be worth $1 per acre today, because that's what neighboring land has been selling for, notwithstanding oil deposits that today's technology cannot reach or extract. Yet a bank might be willing to lend money today based on the land's possible future value, as is the bank's right to take such a risk (and depositors can pull their money out if they don't like the risk).

Hypocrites all around. They're not arguing over how much to spend, only how. May they all drown in their own bile.

Even without McCain's addition to this year's socialism, the sheer amount of new federal spending means that the next president, Republican or Democrat, will likely hike taxes by the most ever. I can't see how bond markets will support the massive debt required to fund everything, putting aside the immorality of making our children and grandchildren pay for our profligacy today! There will be a point at which investors will balk at buying more U.S. bonds -- yes, even ours! They'll judge that the U.S. economy couldn't possibly withstand the higher tax rates required to pay off all the debt. We might be at that point sooner than we'd like to think. Thanks to Bush rubber-stamping Democrats' social spending, and Democrats reciprocating by funding his wars, federal debt has surged over $4.3 trillion since Bush took office. And we still have a few months left, God help us.

When will conservatives get a clue?

Q: How do you know when a conservative is saying something stupid?

A: His lips are moving.

Now, many of my friends are conservative, and some do "get it" as far as economic freedom (just not social freedom), but sadly they're a minority. Liberals aren't the only ones who fail to grasp basic principles of economics and business. Conservatives, regardless of any claims to believe in "markets" or "capitalism," are often just as ignorant.

For example, "see-dubya" griped about poor "airline service," specifically that many no longer offer "free" food:

What really chaps your hide about that isn't the five dollars so much as it is that something that you think ought to be free suddenly sets you back some change.

What a fool! Provided meals are hardly "free" -- they're part of the ticket price. I find Cathay Pacific's provided meals aren't too bad and much better than on other airlines, and snacks are "complimentary" throughout the flight, but I'm not naive enough to think I haven't somehow paid for the better food. Conversely, see-dubya is like many modern consumers, having fallen for the fallacy of his self-worded "ought to be" service (a form of liberals' "entitled" mentality). Didn't he ever learn that if you want service, you'll have to pay for it?

Airlines can't force him to be a customer, so he doesn't have to be one if there's no included meal. He can always bring his own food, buy something at the terminal before boarding, or go with something like SkyMeals. Perhaps he goes without. Whichever he does, his complaint still isn't severe enough to deter him from airplane travel. The lack of a meal, really, deters few who travel longer distances: bringing your own food, or relying on any provided snacks, is a small price to pay for the convenience of speed. The first airlines to cut meals correctly determined that passengers tend to prioritize the combination of fares and schedules above "free" meals. That's why they lost fewer customers by eliminating "free" meals and keeping prices the same than had they raised prices to cover the cost of the meals.

Most people know that most airlines are struggling to cut costs, but most people don't realize that meals can be significant savings. It isn't just the materials and putting them together, but also refrigeration and transportation. Then on board, a sandwich costing several dollars is the price that the particular airline decided will maximize profit. Like in other industries, there's no standard markup: the bean counters attempted to construct a curve (just like Laffer's) of how many people would buy food at a certain price. Increase the price, and you'll get more revenue up to a point, after which revenue will decrease. The airline can't just bring enough food for each passenger, because not everyone will buy.

Because I am a rational person who understands that I'm not being "forced," my "hide" doesn't "chap" at all at what many airlines are doing. American Airlines will soon start charging economy passengers $15 for the first checked bag, unless you bought the full-price fare, but nobody's being forced into it. What it really is is a $15 across-the-board increase for economy passengers who buy discounted tickets, but with a $15 discount for bringing only carry-on baggage. Take the difference between 50 and 15 pounds, multiply it by a few hundred people, and that saves fuel.

What gets me is that if people are so angry about it, why are they still going to fly American? And why should this create "chaos" at ticket counters? If people want to argue, they should (but probably won't) be reminded that they don't have a "right" to fly. It's not even a contractual right, because buying a ticket didn't mean an included charge of checked luggage. Again, people are not being forced and can go to a different airline. And frankly, I don't think much of someone's writing skills if he uses "frankly" more than once in an article. It's frankly annoying how often people say "frankly" when other words will do.

This explanation is rather simple and nothing new; you don't need an economics or business degree to understand it. The solution, as in the case for everything, is simple: let the free market work, or more properly stated, free the market. But so many conservatives just don't fathom that.

Then take the two dimwits I met a few nights ago at the Young Republicans social. I'm a member of the independent New York Young Republican Club, not because I'm a conservative, but because of the friends I've made there and the occasional great speakers at the monthly events. Twenty bucks a year isn't much, but there's an additional cost, a very high one, of meeting the occasional schmuck. Now, these two epitomize everything wrong with Republicans and conservatives today. Our argument was primarily one of free speech, which they clearly don't understand -- or cherish.

One of them is from Queens and is running for City Council (just when you thought its collective IQ couldn't get any lower!). He believes that elected officials should be respected always, because of the office. I counter, why? Just because enough my neighbors elect some sonofabitch (nowadays for the typical purpose of taxing me to benefit them) doesn't mean I should express or harbor the slightest bit of respect for him, let alone the morons who used "popular vote" to make him lord over me. Because of the power they wield over the non-consenting, office-holders should be accustomed to no respect whatsoever.

Freedom of speech is fundamental and sacred. If I want to call Barack Obama a "boy," it doesn't matter whether I use it as a slur, or as a disparaging observation of his naive foreign policy. My usage happens to be the latter, which I was explaining to a new acquaintance when the aforementioned two invited themselves into the conversation and aggravated what had been pleasant. But even if my usage were the former, that's still protected speech. It's "debated" today, but it still is, regardless of what the "offended" or courts decide. A minority, majority or government can declare something right or wrong, but that doesn't make it so.

The other played the geography card: "I'm from the South, where that has a very bad meaning." Notwithstanding Miami is hardly the hotbed of racism he'd like to imply, being from there doesn't make him automatically correct or an authority; it wouldn't matter even if he were from Birmingham. The other even tried to disparage me with, "I can tell you haven't lived here very long." Notwithstanding my eight years in the NYC metro area are completely irrelevant, does he say that because my supposed "racism" means I couldn't possibly be from this "multi-ethnic" city? Then how does his logic explain Al Sharpton and Charles Barron? Or perhaps my skin tone and accent don't happen to fit his concept of "New Yorker"?

Like many conservatives, they confuse what is right with what is proper. It wasn't the point whether it's appropriate to call someone an insult (whether or not it's "racist" in connotation); I was telling the other person that it's a right to say it. Furthermore, "boy" is so appropriate for Obama, who has a child's understanding of foreign policy in wanting to disarm the United States' nuclear weapons (complete with "negotiating with Russia"!) and proposing peace talks with terrorist nations. But the two twits who barged in are so concerned with not offending anyone and winning popular support -- as if that's been helping Republicans in elections! It's no secret that Republicans gravitating to the "political center," talking like Democrats, will still lose to Democrats.

I tried to reason with them (big mistake). Why are they so concerned about winning debates and elections? Those are based solely on popular support. What if the masses are wrong? The majority of Americans today are so ignorant that the rest of us, those who believe in freedom, should shudder every time we consider that they can vote on our lives. Why should I be so focused on diluting or even ignoring my principles so that others will approve of what I say? I'd rather focus on being right, on being true to myself. Henry Clay is sometimes mocked for saying, "I'd rather be right than President," because he ran four times. His statement is a principled one, however. Ron Paul campaigned this time, though he must have known he didn't have a chance, but he didn't once change his message to win more support. He wanted to win support because he was right.

Egads, the two's stupidity exceeds mere ignorance of freedom of speech. The candidate made an incorrect definition of libertarian and then proceeded to tell me I'm not one: "A libertarian is a fiscal conservative and a social...moderate." Yes, he did pause there, I think because he just couldn't bring himself to say "liberal," as some have described libertarians. It's still a wrong definition.

A real libertarian believes in individual liberty: the rights to life, liberty and property, limited only by the same freedom of others (somewhat imprecisely contained in "Your freedom to swing your fist ends at my nose"). Liberty includes freedom of speech, which I champion it no matter how offensive it may be. In fact, I personally hold that the best use of speech is to offend: only state-worshippers should fear that freedom. The God I worship took on a human body, then was eventually arrested by the Sanhedrin and executed by the Romans. Why? Because Jesus said an awful lot that threatened the religious hypocrites (such as in Matthew 23), and calling himself a "king" amounted to treason, though Jesus was never truly harming anyone. Should Jesus have refrained from condemning the scribes and Pharisees, so that he'd appeal to them and win their support? According to these two conservatives' argument, yes.

Candidate-boy even said Ron Paul would never support me. He's flatly wrong. Ron Paul might disagree with what someone says, but as has been wrongfully attributed to Voltaire, Paul would defend a person's right to say it. Ron Paul would say that he doesn't care what someone else says, because he has no authority over the person's speech, so therefore the other person is responsible only for himself. On that I can safely assume what another person would say, but what about these two Republicans who presume to correct me on my own political philosophy? Conservatives do themselves a great disservice when they display such ignorance, but it's becoming less and less surprising.

Federal "fiscal responsibility" nonsense

"Bush Warns He'll Veto Runaway Spending" proclaims the headline.

Let's see. In the aftermath of Hurricane Katrina, Bush couldn't wait to hand out $62 billion of other people's money. It didn't matter if they were able to work or if they weren't really victims in the first place: all Bush, Congress and the bureaucrats cared about was buying support from half of the voters who don't pay taxes, hoping more of them will vote than from the other half who do pay taxes.

Bush had no resistance whatsoever to signing "The Energy Policy Act of 2005". It had a price tag of "only" several billion dollars, depending on the extent of the "tax breaks": such "incentives" for specific people mean the rest of us just pay more taxes to compensate, and who knows how much government would give energy companies in the end? The problem with government spending is that it's almost always just an estimate, whereas the rest of us budget our lives within the confines of definite incomes.

Bush likewise was too eager to sign the 2005 transportation bill, which delivered pork to just about every Congressional district, not just "for [Bush's] right wing buddies" as certain morons believe. Bush initially said he'd veto anything over $284 billion, so what did he do? He signed one that's $286 billion. What's $2 billion? A lot. What's $2 billion of other people's money? Not a lot.

Lest you think I'm cherry-picking only specific examples, I'll remind you that Bush's only two vetoes were a stem-cell bill, not because of the spending but because of his "moral" opposition, and a military spending bill pushed by Democrats, not because of the spending but because it included a timetable withdrawal from Iraq. As one of my friends said when I sent him the link to the article, "What's he been doing the last fucking 7 years?!"

My blogfather and friend Don Luskin has said for a long time that we knew all along Bush is a "compassionate conservative" who isn't for limited government. Be that as it may, it doesn't mean we have to believe Bush when he starts talking like a limited-government conservative. Today's Day By Day is pretty accurate, and it would be completely spot-on if "on immigration" were excised.

Watch your pocketbook when government "compromises"

"Compromise" among government officials is never about how much, but simply how.

Senators compromising on FEMA expansion

September 16, 2006

WASHINGTON --Senators have agreed on a compromise to restructure and expand the Federal Emergency Management Agency, restoring some of its responsibilities. The FEMA director, currently David Paulison, would have direct access to the president in a crisis, but the agency would remain a part of the Homeland Security Department. The compromise will be included in a budget bill Congress is scheduled to vote on this month.

Sen. Susan Collins, who heads the Senate Homeland Security and Governmental Affairs Committee, worked out the compromise late Friday with Sen. Joe Lieberman of Connecticut, the committee's top Democrat.

"This legislation will provide FEMA with the authority, resources, and leadership necessary to help us be better prepared for the next catastrophe, whether it is natural disaster or a terrorist attack," Collins, R-Maine, said Saturday.

More truthfully stated: "This legislation will coerce taxpayers into further funding FEMA with the authority, resources, and leadership necessary to blunder again."

Democrats have criticized the Medicare prescription drug bill, but for not spending enough. Their criticism of FEMA has the same basis, and Republicans are only too eager to accept the challenge of spending more of other people's money.

Buying votes

Republicans are looking to raise the minimum wage before a five-week vacation, even to the absurd $7.25 per hour that Democrats are pushing.

The chairman of the House Education and the Workforce Committee said the GOP would embrace the increase to $7.25 per hour and probably attach a proposal passed last year that would make it easier for small business to band together and buy health insurance plans for employees at a lower cost. Rep. Howard McKeon, R-Calif., said the minimum wage bill probably will not include tax cuts such as a repeal of the estate tax.

It was not clear what other potential add-ons might soothe unhappy lawmakers and GOP opponents of a wage increase such as the small business lobby.

Like raising the minimum wage, a law to "make it easier for small business to band together and buy health insurance plans for employees at a lower cost" sounds good, but it's utter bullshit. Health insurers, as part of competing with each other, would already offer discount packages if it were possible. All the Republicans' bad idea would do is give discounts to small businesses at everybody else's expense: because insurers would be forced by law to give the discounts, they'd have to hike premiums for everyone else.

Republicans have to raise the minimum wage, but not because it's constitutional, not because it's economically sound, and not because it's the moral thing to do (if anything it is immoral). It's the politically expedient thing to do in this very tough election year: the Tradesports contract for a GOP Senate after the 2006 elections may still be 76.0 bid/77.0 ask, but the contract for a GOP House has fallen to 45.5 bid/46.0 ask. As Professor Bainbridge noted, a recent poll shows 48% of Americans want the Democrats to win back Congress, as opposed to 38% who favor Republicans.

There are a lot of mixed signals. The Democrats can't be consistent on the issues, and there's a lot of infighting that will only drain their campaign coffers. However, there's too much of a risk that Republicans could be defeating themselves, hence Republicans' move on the minimum wage. For the same reason, President Bush finally addressed the NAACP last week. Conservatives like Michelle Malkin and our friend Karol were more than upset, but Bush is a politician, so his loyalties are first and foremost to his party, and his speech was nothing more than stumping for his party. Bush may have gained among blacks in 2004 (both in absolute numbers and a percentage), but Republicans can't count on riding his coattails there. There's a real possibility they'll lose votes elsewhere, so it's critical they don't lose any of the black vote. Perhaps they'll even pick up a few from President Bush's "goodwill" visit, where he naturally denounced racism.

Both parties ignore the Constitution, so as part of buying the people's votes, they feel free to offer this program and that entitlement to every strata of society. In the end, though a particular socioeconomic group might think it benefits from its own special giveaways, it gets screwed as much as the rest of us.

The big government traditions of the Republican Party

The following is what I just sent to the Life, Liberty, Property community e-mail list, in response to someone who said, "I'm going to have to stop telling people I'm a Republican with libertarian leanings. The Republican Party is leaving me. Like the Democratic Party did with Reagan. They may have different goals, but their solution is still government."

I've been meaning to write an entry about this for a while. The Republican Party was just a reincarnation of the Whigs, who were big-government types that believed in "internal improvements" and tariffs. Thus Republicans have always been about big government from the beginning. Abraham Lincon, Thomas DiLorenzo has pointed out, was "The Great Centralizer" in how he expanded federal powers during a time of war -- just like today. Teddy Roosevelt was a progressive, Herbert Hoover tried proto-Keynesian attempts to stimulate the economy, Nixon was a self-professed Keynesian, and then there's GWB. He has more than disappointed me because I still support him about Iraq, and I applaud his 2001 tax cuts as having come at the perfect time (keeping the recession from getting worse). But he's just a big government believer who is loyal to his party -- he's "conservative" when it helps the GOP, and he's an LBJ-class spender when it helps the GOP. If anyone had doubts, Katrina's aftermath proved that he doesn't think twice about new big government programs.

Reagan once said in an interview with Reason magazine that "libertarianism is the heart and soul of conservatism," but conservatism has never been the heart and soul of the Republican Party. Modern conservatives (genuine conservatives who are libertarian-leaning because they promote limited government) are actually a relatively new to the GOP in terms of having a major influence. Coolidge was quite free-market and worked with Congress to slash taxes, but Republicans as a whole didn't really emphasize limited government (Russell Kirk's 7th and 9th principles in particular) as the ideal until Goldwater and Reagan. That revolution didn't last long, because most Republicans hypocritically touted "limited government" only as a way to criticize Democrats and regain control of Congress. What's happened since 1994? After retaking Congress on a platform of limited government principles, Republicans learned that they can create more and more big government programs (which they always loved at heart) to stay in power.

I used to consider myself conservative, even one with libertarian leanings, but I realized that conservatives want limited government only as a means to an end. Prof. Bainbridge, a genuine conservative in the vein of Russell Kirk, has admitted as much. "Classic liberal" would serve well, and in fact that's what my patron saint Bastiat is described as. However, I refrain from using that because most people would confuse that with modern liberalism. So I call myself libertarian, but not a libertarian. Using the word as an adjective, instead of a noun, identifies my general leanings without giving me a label.

I really dislike deleting comments summarily

...but some people don't have a clue. You have raving liberals on one side, whose entire lives are about stealing every last dollar from those who produce (or produced and handed it down to their children, which is their right). Then you have authoritarians on the other side, Mini-Me Giulianis who claim to want "law and order," when in fact they only want to make our lips as boot-blacked as theirs.

Well, Paul doesn't want to give it up. He brought a bunch of friends over to spew their propaganda, which is bad enough, but the vile words was out of hand. Frankly, I'll be damned if I'll let them turn my blog into a playground where they act out their fantasies of being jack-booted thugs. They can bow to authority all they want, but I will not, and they will never make me.

Paul left another comment, but I only had to see the first two lines to know it was time to delete it. He said I should pull up my diapers and be a man. Wow, now that's high philosophy, isn't it? So I ignored the rest, scrolled to the end, and clicked Blogger's little garbage can icon. If only it were so easy to wipe out these little tin-plated, overbearing, swaggering Denebian slime devils with delusions of godhood.

It's cops like Paul claims to be that make me wonder now how many future innocent victims are saved anytime a uniform is killed or left work-disabled. I know that sounds cold and heartless, because it is, but let's start facing the facts of police brutality and harassment against all the wrong people. And what's really sad is that Paul probably isn't even directing school traffic in a 200-person town. It wasn't until the end that he claimed to be one, and he has an awful lot of time to make his diatribes throughout the day.

I saw one NYPD at the northwest corner of 43rd and Vanderbilt this morning, leaning against the corner of the building and watching traffic go by. Don't you love this efficient use of tax dollars in keeping us safe?

Competing to be the party of big government

"Dems Lambast Prescription Drug Benefit" reads the headline. You'd think, considering how the Democrats are trying to reinvent themselves as "fiscal conservatives," that their criticism of the prescription drug behemoth is its size. But they're not criticizing that the program could grow to be the most expensive piece of legislation ever:

WASHINGTON Mar 25, 2006 (AP)— Seniors need another six months to sign up for the Medicare prescription drug benefit, a Democratic congressman who's also a pharmacist said Saturday.

Rep. Marion Berry of Arkansas also said the government needs to think long and hard about meaningful Medicare reform.

Berry said people eligible for the prescription benefit are confused by the various offerings, and some are even paying more for medicine now than they were before they joined the program.

"We need to extend the sign-up period by six months to give seniors more time to make sense of this benefit, and we need to eliminate the Bush administration's prescription drug tax," Berry said in the Democrats' weekly radio address....

"I will never forget one conversation I had with a pharmacist from DeWitt, Ark., who had given away $60,000 in free medications in just one week because he knew his customers might die if they did not receive their refill that day. Medicare Part D is the FEMA of health care," Berry said.

Medicare could bargain for lower drug prices to save money for the government and for the elderly, he said.

"Every American deserves the best health care we can provide. We do not have to accept a failed benefit and we do not have to tolerate a culture of corruption or leaders who are afraid to admit their mistakes. Democrats have the answer, and under a Democratic Congress, we will give seniors the prescription drug benefit they were promised years ago. Together we can do better," Berry said.

The Democrats aren't criticizing the Medicare bill because it's a waste of $700 billion over the first ten years. They're criticizing it because it doesn't go far enough! This is yet another manifestation of Democratic hypocrisy, particularly when Democrats can get all sorts of misleading headlines from sympathetic mainstream media. Once again, "we" must provide this and that, but just who's picking up the tab? Who will bell the cat?

The one thing Berry got right is equating "Medicare Part D" with FEMA: both should be abolished, and that can't happen too soon.

Berry gave a sob story about a pharmacist who gave customers "$60,000 in free medications in just one week." Don't believe it for a second. He simply distributed the drugs, knowing the federal government would later pay him -- by taking money from everyone else. Let's not kid ourselves: the pharmacist knew what he was doing, and he certainly knew he was doing no act of genuine charity. As a matter of economics, government again skews supply and demand curves, because it takes wealth from some people and gives it to others.

It's yet another fallacial notion about the pharmaceutical industry that a government can "bargain" to buy drugs at lower prices. Drug companies can only go so low, because if marginal revenue falls below marginal cost, they will stop selling. Even if marginal revenue still exceeds marginal cost, if it's not profitable enough, then the company will pursue another drug or possibly shift to different endeavors. Let's say that in the natural equilibrium of the free market, consumers might value life-prolonging drugs more than drugs to treat, for example, erectile dysfunction, and pharmaceutical companies are happy to offer the former because of higher profit. So when government makes it too expensive to make Lipitor, which cuts into profit margins because consumers aren't willing to pay the higher prices, then let's not be surprised when we have more Cialis.

If politicians were really serious about making drugs more affordable, they would eliminate all the FDA red tape (preferably abolish the FDA altogether) that drives up pharmaceutical companies' costs. Because of the studies and years required to obtain FDA approval, it costs an average of $800 million to bring a new drug to market. That $800 million used to come from individual customers, but now with the Medicare prescription drug bill, the federal government can pay it via the taxpayer's wallet. Am I the only one who sees the senselessness in government "bargaining" to reduce prices that it drove up in the first place? It's as senseless as the "War on Drugs," one of whose effects is making criminalized drugs more scarce, and hence a much more profitable and attractive business than before.

While environmental activists suggest we can find cures for cancer in the rain forests, it would be more effective to let pharmaceutical companies do the research without having to jump through all the bureaucratic hoops. And if a particular drug has certain dangers, whether it's a "clot-buster" for stroke victims or a drug that suppresses a transplant patient's immune system, then caveat emptor. Let the buyer beware and assume the risks, because someone might consider the possibility of death worth the chance at life. You, I and no one else -- and that includes government -- have no moral right to deny someone that choice.

Tyrants disguise their actions by distracting the people

Here's another thing I've wanted to blog about but haven't had time. By convincing the poor that they're victims in a new "class struggle," China's leaders hope to distract them from the real issues.

China Premier Vows Protection for Farmers

Mar 14, 2006, BEIJING - China's premier pledged on Tuesday to crack down on seizures of farmland for redevelopment, a source of rising rural anger, but stopped short of saying whether the communist government might allow farmers to own land.

The comments by Premier Wen Jiabao came as the parliament endorsed a five-year plan to close the growing and volatile gap between rich and poor.

Chinese leaders are trying to defuse increasingly violent rural protests over complaints that local officials are seizing land to build shopping malls, factories and other projects and are failing to adequately compensate for the loss in farmland....

The five-year plan endorsed by the ceremonial parliament calls for billions of dollars of new spending this year on rural schools, health care, roads and aid to farmers....

Of course, Beijing will never make any real promises regarding their style of "eminent domain." I would say that government officials can seize land as they desire, as the people have no Constitution as we do, but our Fifth Amendment didn't seem to help us much, did it. Government officials will delay as much as possible, then make only the most vague and hedged statements. One wonders about this chicken-or-the-egg puzzle: did they learn this tactic from Ted Kennedy, or is it vice-versa?

Meanwhile, the leaders will continually speak of "the growing gap between rich and poor," which is a natural progression as a society grows wealthier, and not a bad thing at all. Read my explanation of how wealth does "trickle down" in an economy, meaning if my neighbor grows far wealthier than I do, then that's more money he can spend on goods and services I provide, or more money for him to invest in my business.

After fomenting strife between the classes, China's leaders then engage in massive social spending, hoping it will pacify and distract most people so that they won't perceive the tyranny over them. Why wouldn't it work on the Chinese, when it works so well on Americans who have a tradition of freedom?

"Is life so dear or peace so sweet as to be purchased at the price of chains and slavery? Forbid it, Almighty God!" Patrick Henry's cry rings true for all people, and he would be sad to see today how even Americans largely prefer life and peace at the very high cost of subservience to despotic government. The chains may be light, and they may be invisible, but they are still chains. The subservience may not be a regional governor ordering you into a particular job, or deciding what your food rations will contain, but it is still subservience when most of your life is influenced to some degree by laws and regulations. Are you really free when you must seek government's permission to build or even raze your own home? What about the FDA determining how much blood you can donate, whether a life-saving medical operation is too dangerous for you, or if a new inhalable form of insulin is safe for you to use?

Our friend Josh Hendrickson expressed how "dissatisfied" he is with Republicans, who since 1994 have become the enemy they once assailed. However, to paraphrase the Bard, though their actions seem madness, yet there is method in them. They regained control of Congress by inciting a lot of proper anger against the Democratic machine, but that won't work after a couple of election cycles. Republicans realized they had to win votes by bragging at re-election time how they did this and that for their constituents, just like Democrats did.

Why else did the GOP-leaning New York Post endorse Charles Schumer in 2004? Because, the editorial said, he was doing so much for New York -- bringing home the bacon. Why else did President Bush push so hard for the prescription drug boondoggle, but to convince enough seniors that if they voted? Not only that, he was especially trying to win seniors' votes in Florida, a critical battleground he nearly lost in 2000.

So how can we stop "politics as usual"? Jefferson's advice was, "In questions of power, then, let no more be heard of confidence in man, but bind him down from mischief by the chains of the Constitution." But when courts ignore or completely misread the Constitution, how can we use it to restrain government? We have bad courts because the bad justices were appointed by bad elected politicians, who were likely elected for promising things to the voters. We the people must learn, all over again, the immorality of big government: that all the nice-sounding programs are paid for by others' coerced taxes.

Until then, we get the government we deserve. The Chinese have no tradition of freedom like Americans do, let alone any arms with which to revolt. So what's Americans' excuse when we vote for most of our leaders?

The NYC mayoral race: how about "None of the above"?

New York City Mayor Mike Bloomberg, up for re-election this November 8th, has a radio ad that always catches my attention. It features an alleged New York couple who sing his praises, among which are:

• "He created jobs in all five boroughs."
• Getting two property tax rebates passed.

Those are downright misleading once you look at the facts. When Bloomberg "created jobs," does that mean he used part of his $4-plus billion net worth to hire people? Clearly not: the claim is that his policies have created jobs. But government cannot create jobs without destroying jobs elsewhere. Remember what Bastiat said: government spending is only a transfer of spending, because it necessitates that someone, somewhere, has less money to spend. Government may create a $40,000 per year job, but only by taking an aggregate of $40,000 elsewhere. So we can rule out Bloomberg "creating" jobs via government hiring.

Did Bloomberg's policies encourage the creation of jobs? This applet at the Bureau of Labor Statistics website can detail New York City's unemployment rate: it was 7.6% in January 2002 (when Bloomberg entered office), peaked at 8.6% in early 2003, and didn't fall below 8% until January 2004. There has been an overall drop in the city's unemployment rate during Bloomberg's first term, and it's true he inherited a struggling economy like Bush did, but the difference ends there. Bush fought for tax cuts that have spurred the U.S. economy into sustained expansion. Bloomberg's initial tax-hike policies actually worsened New York's post-9/11 economic woes. The city's employment eventually improved from natural economic recovery and a partial reversal of the tax increases. Does a doctor brag about saving a limb that he had accidentally amputated in the first place?

Raising various taxes was Bloomberg's solution to the gigantic budget deficits he faced as soon as he was inaugurated, and it's been said that he raised taxes more than any other New York City mayor. A November 2002 Wall Street Journal op-ed (reproduced here at the Manhattan Institute) warned about what he was doing. It noted that David Dinkins' tax increases destroyed 300,000 jobs, while Rudy Giuliani achieved economic growth by refusing to raise taxes, "relentlessly cut[ting] costs," and trimming the city work force while squeezing every last drop of productivity from the rest. But Bloomberg refused to make the necessary cuts in city employment: "The truth, he will find, is that his refusal to lay off 20,000 from the public sector will cause 200,000 private-sector layoffs."

Whatever happened to the Mike Bloomberg that said in March 2002, helping Gov. Pataki's campaign, "We are so highly taxed already that if you raise taxes, you will drive jobs and people out of this city and the total tax revenues will probably decline. ... Doesn't anybody read history?"

On November 11, 2003, the New York Daily News observed that "New Yorkers pay the highest taxes in the nation - by far. On average, New York state residents pay $141 in state and local taxes for every $1,000 they earn, the most anywhere. The main culprits are local income taxes that are a whopping 72% above the national average." The burden also hit businesses. Those fortunate enough not to close permanently were still shaky from 2001's terrorist attacks and recession, and many elected to leave the city rather than pay higher taxes. These were primarily smaller and mid-size businesses, not big firms that were established in Manhattan to the point of being iconic.

The surge in property taxes certainly didn't help, driving more residents out of the city (especially up here to Westchester). In November 2002, New York City faced a projected $6 billion budget deficit for the July 2003-July 2004 fiscal year. Bloomberg and the City Council hammered out a deal: an 18.5% hike in the city's property tax rate with about $800 million in spending cuts. The compromise was that Bloomberg would not cut $50 million in "services" spending that the Council wanted to maintain. This brings us to the third claim I cited: how can Bloomberg dare to take credit for two property tax "rebates" (a mere $400 each, the first of which went out last September), when only a couple of years before he was a major party in raising property taxes?

Incredibly, Bloomberg had been seeking a 25% increase in the property tax rate, with $844 million in spending cuts. Yet he insisted there was no government waste. The Daily News quoted him: "I find it offensive, those that say, 'Oh, there's a lot of waste.' There isn't. I don't know of any programs where some people don't benefit." Of course someone will benefit from any government spending, even if it's completely wasteful like trying to grow fruit and berries in rural Alaskan villages. Clearly Bloomberg does not understand that it's "waste" even when someone gains, because everyone else is economically injured more than the benefits.

The New York Metro had a favorable article defending Bloomberg's various decisions. One big contention between Bloomberg and Albany is Medicare. Bloomberg has wanted to shift part of the city's Medicare costs to the state, claiming that NYC sends $11 billion more to the state treasury than it receives in state spending. Well, it's certainly unjust for New Yorkers to pay a higher share of state taxes just because they tend to have higher incomes. That last link (to the Gotham Gazette) talks about New York City "saving $425 million" in the next fiscal year, but forgetting that the state will lose $425 million. Remember another thing Bastiat said: "The state is the great fictitious entity by which everyone seeks to live at the expense of everyone else."

Let's be honest and objective. Except for reversing tax increases that he initiated, Bloomberg's policies have had minimal effect on New York City's economic growth since he took office. The city recovered naturally along with the rest of the U.S., though it lagged behind the nation in things like unemployment. (That's not really too surprising, since the tax hikes made some people too expensive to employ. What a concept!) And Bloomberg got lucky with this year's tax revenues, which were not from tax increases, but increased tax revenues, mostly from the generally stronger performance of Wall Street firms. Their tax payments account for about one-third of the city's tax revenues.

Bloomberg's chances for re-election look very good: his approval ratings have been above 60% for the last while, and his Democratic opponents are too busy squabbling among each other. Virginia Fields destroyed her already slim chances with a scandal this July involving a doctored campaign photo (never publicly released, but leaked). It showed Fields at a rally, surrounded by people of various ethnicities; attempting to increase her appeal to all ethinic groups, someone put two Asians' faces over the faces of a Caucasian-looking man and woman. None of the four had any knowledge of the alteration, let alone gave consent. Then there was a twist: the "re-faced" man is a Latino, and an aide to Congressman Charlie Rangel -- who has endorsed Fields. The New York Post reported that "Rangel said he didn't recognize anyone in the [original] photo." Now, someone tell me how a Congressman doesn't recognize his own aide from a quite clear picture?

City Council Speaker Gifford Miller and Congressman Anthony Weiner just don't have the popularity to win the Democratic primary. The front-runner is still former Bronx Borough President Fernando Ferrer, a classic tax-and-spend-and-spend-some-more liberal. And let's be realistic: being Latino and emphasizing his humble roots, he has an immediate appeal to minorities that Miller and Weiner will never have. Ferrer's commercials promise he'll do something about minorities' high rates of school dropouts, but what does he have in mind, throwing more money at something that throwing money has never solved before? Similarly, his platform includes a promise to reduce class sizes, though recent studies have shown smaller class sizes have no benefit at all to student performance. (Consider that New York City has about 28 students per class, but just 14 students per teacher. [edited - thanks to ScottM for pointing out I had reversed them]. So what are the teachers doing half of the time?) Ferrer will nevertheless advocate hiring more teachers, as it will give him the very important backing of the teachers unions. More members mean more dues, and thus more money flowing into the unions' powerful coffers.

I don't live in the city and thus can't vote in the mayoral election, but I do work in Manhattan and have an economic interest. My choice between Bloomberg and Ferrer would be...neither. Imagine a voter option to reject the entire ballot: "None of the above - give me some more choices!" This presents problems like having to start a new campaign, which means holding elections long before inauguration, but it helps alleviate the problem of voters feeling obligated to vote for major-party candidates, otherwise they "waste their votes."