28 January 2010

Mr. President, you have it all wrong

Mr. President,

In last night's speech, all of the vaguely proposed items were more government distortions of the economy to attempt to correct for grievous errors created by other government distortions. Let me make a few distinct points;
First, if you were serious about creating productive jobs in the United States, you would instruct the FTC to stop punitive and pecuniary actions against the most successful companies in the country. These companies provide tens of thousands of high paying jobs and export billions of dollars worth of goods every year. Your tariff proposals will, in the end, hurt American companies more than they will help. The economic distortions caused by tariffs have been well documented throughout history.
Second, you assert that ninety five percent of Americans received tax cuts. While this may be true, you fail to recognize that the remaining five percent pay seventy five percent of the personal income tax in this country to begin with. If you are truly interested in allowing Americans to make a better life for themselves and their children, you would demand a restructuring of the tax code that did not punish people who have toiled their entire lives to "get ahead" only to have the fruits of their labor expropriated by the government.
Third, the government "initiatives" for green energy are no more than hand-outs for pet projects. Corn based ethanol is the direct result of government incentives in the energy market. It consumes more energy than it produces while depleting arable land. Ask any farmer what happens if they plant corn in the same area year after year. They end up having to fertilize heavier every year and most of those fertilizers are made from the petroleum that you find so distasteful. If you are truly concerned with making this country world class, instruct the NRC to give the green light to nuclear power plants. Your own appointee, Stephen Chu, stated that nuclear energy is the only viable alternative for electricity production for the next ten or twenty years. And while you are at it, tell Harry Reid that Yuccca Mountain is a completely viable and logical storage facility for nuclear waste.
While I am on the subject of government initiatives, where in the Constitution does it allow for tax money from all over the country to be funneled into a single, high electoral count, state for a train? A train for the East Coast should be paid for by the states that it is going to service. Better yet, let the market determine if it is financially viable and build it if it is. The most successful railroad in history was built with private capital, not government handouts.
Fourth, while it is popular to blame Wall Street for all of the speculation that led to the housing bubble, the root cause of this issue was The Federal Reserve monetary policy and the mortgage market distortions caused by Fannie Mae and Freddie Mac. A majority of distressed mortgages in this country are due to people buying more house than they could afford, or more houses than they could afford. The speculation that I am referring to is the homes purchased by individuals as rental properties, which as the market starts dropping start becoming a burden as opposed to a source of income. These people walk away from these home creating a deflation in home prices. Yes, home prices are down a distinct amount in most markets, yet a little historical analysis will show that they were over-inflated and this is simply a market correction. If you buy a house to provide shelter for your family, the deflation hurts, but you get on with your life understanding that you are still providing shelter. When an individual buys a house purely as an investment, or better yet buys the bigger house with the twisted mortgage to show their friends how well off they are, and that investment goes sour, it is like any other investment, it comes with the territory. I didn't see big government handouts flying about when the dot com bubble burst. It's fundamentally the same thing.
Fifth and finally, if you want to see the greatness of this country in action, take steps to significantly reduce the size of the Federal Government. Greatness will only be recovered through the productive use of capital in a free society. While you claim that economists on both sides of the aisle agreed that the bailout was the right thing to do, you are looking at the wrong aisle. Your promotion of Keynesian economics will not recover this economy, it will only make things worse over the long term. You are currently setting up for another round of "stagflation" that was seen during President Carter's administration. That will hurt the American people significantly more than a bubble bursting. The only way to get this country on a long term healthy road to recovery is by embracing the Austrian economic principles.
When the political class in this country realizes that they have done more harm than good over the last hundred years, we will finally be on the road to real recovery. Honest, hard working Americans are not looking for a handout or some magical government program, they simply want to live their lives free of interference.

20 January 2010

Perspective on terminology

In this post, I would like to revisit common claims of the major political parties and challenge the basis of those claims. The Republicans claim to be "conservative", but what does that really mean? The Democrats claim to be "liberal", but does anyone understand what that means? Finally, I would like to propose a method by which this country can once again achieve the greatness that it once had, staving off the imminent economic decline and bitter infighting that is inevitable given our current trajectory. This will require challenging some basic notions.
A "conservative" today tends to be a social conservative that would like to have their particular morality become the status quo. (This happened somewhere between Barry Goldwater and George W. Bush.) They are very quick to point out that the documents of The Founding Fathers refer to God and take that as meaning that this country was intentionally designed to be an extension of the Christian faith. They parlay this to having the right to make rules against what they view to be immoral, even if it is a personal choice that has no direct impact on anyone else, like their choice of partners. A little research reveals that The Founding Fathers were primarily Deists, they believed that there was a higher power that set things in motion, but expected man to take control of his surroundings through the use of observation and reason without the need of faith and religion. They explicitly rejected the concept of divine intervention and miracles. The life to focus on was this one, not the one after you are dead, and the resulting discourse was focused on the proper interaction between men and between men and their government.
Liberals, on the other hand claim to be atheists, yet what they have really done is trade one religion for another. Their deity is now "the public good", yet there is no entity defined as "the public". Every individuals' definition is different yet overlapping so each will claim validity. Society is a combination of individuals, not an entity in itself, and has no more rights than the individuals it contains. If you don't think that liberals are religiously attached to their doctrines, try challenging the fundamental ones like welfare, the environment, or better yet, their views on capitalism. They will likely respond with statements made by someone with the appropriate pedigree (which makes them the expert and exempt from dissenting views) or attempt to provide a specific example and expand it beyond where it is reasonably applicable.
As a result of the ideologies mentioned, we have two party political system which, with some notable individual exceptions, push for state control over individual lives and any issue arising from that state control is only to be corrected with more of the same. Rather than having a clearly defined set of objective laws protecting the individual from having their rights infringed upon by others, we now have a federal register that is full of random laws, most of which are created by appointed officials not elected ones, that are "subject to interpretation". The result is that any random individual in the United States today probably breaks at least one of these "laws" every twenty-four hours (this is my individual opinion, that I have not been able to verify factually).
The career politicians in this country now view themselves as the elite ruling class and the rest of us as their serfs. Notice that opposition to proposed legislation is met with "well these people obviously don't understand all of the details" or "we know what is best for this country". The condescending attitude and the fact that neither party believes that a grassroots opposition to their agenda is possible and must be organized by members of the other party provides the evidence of that claim. The only difference between the parties at this point is what part of your life they intend to define and control. Both are interested in taking larger and larger portions of your hard earned pay since they believe that it is their right to determine the best way to dispose of the product of your labor. We now have a distinct class of individuals in positions of authority that are convinced that they have inherited some perverse version of "The Divine Right of Kings" and it is time for individuals in this country to stand up, assert their rights as citizens, and find representatives at all levels of government who understand what the proper role of government is, and value the rights of the individual.
Keep in mind, however, that with rights comes responsibility. You will be responsible for planning and managing your own life (and your child's until they are adults). It is not the responsibility of the government, your neighbors, or your countrymen, to make sure that you can retire comfortably, educate your child, or keep a roof over your head. This does not exclude benevolence and charity, this excludes forced income redistribution. When people are not forced to assist every whining entity, they are more prone to assist those that they believe to be deserving. It will not eliminate taxes as there are proper roles for government and those need to be funded, but it should significantly reduce them eventually. These things will take time to come to fruition and most of us will likely not live to see the final fruits of our labor in this endeavor. It will be our children and grand-children who benefit the most. If this generation is successful in turning the tide, the best we can hope for is to see the deficits at all levels of government decline as we pay off the transgressions of the last century so that our progeny will not inherit it like we did.

14 January 2010

Worst economy since when?

The common perception is that this is the worst economy since The Great Depression (I saw one article that referred to this as The Great Recession), yet if I look at commonly published statistics, it looks a lot like the early eighties when President Reagan and Treasury Secretary Volcker determined that it was necessary to bring inflation from the Carter administration down. In 1981-82, the unemployment rate was right around 10% for about 15 months (see the BLS web site for data). Sound familiar? The unemployment rate in the Great Depression was over 20% with a second spike happening after The New Deal had been in place for 5 years. We are not even close. As a matter of fact, there are more people employed in the United States now than in any year prior to 2000. By the way, what became of all of the doomsayers that were lamenting the lack of employees in the next decade with more people retiring than entering the workforce.
As for the "credit crunch", how about 30 year mortgages at 18%. Most of us would be beside ourselves if we applied for a mortgage and were told that the rate was going to be anywhere above 6%, let alone three times that. This also happened in the early eighties when inflation was being reigned in. This is in our future with the rate that the government is currently printing and spending money. The majority of companies and individuals that I see hit by the so-called credit crunch are the ones that continually over-extended themselves for over a decade. There is a new proposal to "fine" financial companies for having too much risk in their portfolios to recover TARP funds, yet it explicitly excludes the four biggest offenders of over-extension (GM, Chrysler, Fannie Mae, and Freddie Mac), not to mention that a large number of the banks that received TARP funds have repaid that money only to have the government divert it to other uses rather than paying down the incurred debt. Nothing like leading by example.....
The only item that I can see that makes this period equivalent to The Great Depression is the amount of government deficit spending and all of the new government programs and jobs. The only thing that pulled this country out of the Depression was the massive productivity of the American people in the years following World War Two. If our current government officials would simply look at the history, they would realize that the longest periods of prosperity in this country (and around the world) are when the government backs off and lets the rest of us do what we do.
The literal translation of laissez faire is "let do" or, more popularly, "let it be". It is viewed by many as the evil capitalists trying to "get away" with whatever they can to make a buck. In reality, laissez faire capitalism is society by contract, which is how this country became the land where the "streets were paved with gold" and drew productive immigrants into this country looking for the opportunity to run their lives and businesses as they deemed appropriate. That is what will allow this economy to recover and be something we can all be proud of passing on to our children. Government intervention in our lives over the last century is leading to more of society by coercion, which is why lobbyists have as much sway as they do. William Graham Sumner phrased it best when he interpreted laissez faire as "mind your own business".

05 January 2010

New Year Equality Wishes

Let me begin this post by wishing all a Happy New Year. I would like to see this be the year of the reawakening of American Liberty, that is the liberty of equal opportunity under the law, not equal results.
The fallacy propagated over the last century is that “equality” means that everyone should have the same comforts without the same effort. This is simply not equitable. An individual who puts forth more effort deserves to get more rewards. As a culture, we do not question the salary that a premium professional athlete acquires, yet we vilify premium professionals (medical specialists, CEO’s, top companies) when they acquire similar salaries and profits. The individuals in the “premium” category have worked their way into that position and have to maintain their skill level to maintain their premium status.
There will be those who expound the evils of profit motive in the medical profession, “greedy” executives, and “unfair” business practices. To those individuals, I would like to lift a phrase from Ayn Rand and invite them to “check their premises”. Professionals of every type (including medical) have invested large amounts of time and, in some cases, money to acquire the skill that they are sustaining their lives with. People will typically grumble about the cost of hiring skilled labor (plumbers, electricians, mechanics), but they never accuse them of being “greedy” since they are “making a living”, yet when it comes to professionals, the vilification never ceases. Are they not simply highly skilled labor? Are they not “making a living”? At this point, there will be those that argue that “it’s not the same since the wages are so much higher”, yet it truly is. The cost of hiring skilled labor is inversely proportional to the possibility of having the ability to perform the same function yourself. What most consider to be “typical” skilled labor is grossly under-appreciated (a subject for another post), yet the “For Dummies”™ series of books covers the basics of what a particular trade specializes in. They are categories of labor that the individual, with some basic aptitude, could manage to get through themselves. You will not, however, find “Appendectomies For Dummies” or “Microprocessor Design and Manufacturing For Dummies” or even “Running a Multinational Company For Dummies”. That is because the skill level required goes well beyond a couple of hundred pages of text and pictures. Therefore, if you accept that skilled labor can command a wage five to ten times higher than unskilled labor, then why is it “evil” for highly specialized labor (even if it is behind a desk) to command another multiplier of five to ten?
In a truly “fair and equitable” society, the reward received is commensurate with the effort expended, whether it be physical or mental. The society that we have in America today is designed to punish those who expend the most effort, from the manual laborer up to the corporate executives. The laborer who is working more hours to provide a better life for themselves is punished whenever the wages received cross the threshold to the next tax bracket. That laborer will find that there is a point where working one more hour actually decreases the amount of money in his or her pocket on payday. The individuals who increase their skill level to a point where they receive premium wages also find that a larger percentage of their effort is expended toward taxes.
It is time for Americans to stand up for equal treatment under the law. As Herbert Spencer so eloquently states in Social Statics, that is defined as “Every man has freedom to do all that he wills, provided he infringes not the equal freedom of any other man”. Heavy taxation on people who excel at their chosen fields without infringing on others is a gross violation of equal treatment as such.