who's your nanny?

GM to Begin Paying Back Loans from US Government

GM will begin paying back the $6.7 billion loan it received from the Federal Government by the end of 2009 and could pay of the loan entirely in 2011. The company plans to accomplish this despite a $1.3 billion third-quarter loss. This article reports

Under the plan to pay back the $6.7 billion, the Detroit automaker will make quarterly payments of $1 billion to the U.S. government and $200 million to the Canadian government beginning in late 2009. GM would be on track to pay off the $6.7 billion U.S. debt and a $1.4 billion debt to Canada by the middle of 2011, well ahead of a mid-2015 deadline to repay the two governments.

The person said GM was in a position to make the payments ahead of schedule because the company performed better than expected during the bankruptcy and the company's sales and overall performance since then have been modestly better than expected.

The automaker will draw on about $13 billion that remains deposited in escrow by the government to help make the payments. (emphasis added)

So let me get this straight? GM will pay back part of its $6.7 billion loan from the government by drawing on about $13 billion ($16.4 billion according to this article) which was given to it by the same government which lent the company $6.7 billion?

GM Chairman Ed Whitacre said last week that GM was committed to repaying its government loans.

"Can GM pay back its loans? You bet," Whitacre said during an address at Texas Lutheran University in Seguin, Texas. "I can't tell you when, but it won't be very long."

Well, duh! If my mortgage company simply gave me $500,000 in escrow as a gift, I would have no problems paying off my $150,000 mortgage, either.

This point has not been lost on all congressmen: "What is the logic in repaying government loans with taxpayer dollars?" asked Brooke Buchanan, a spokeswoman for Republican Sen. John McCain.

But at least one person sees a method for this madness:

Brad Coulter, director of O'Keefe and Associates, a financial consulting firm near Detroit, said using government money to pay off the government debt is partly a public relations move. But it also indicates rising confidence at GM, which may feel it won't need all the contingency money, he said.

Who am I to question such an irrefutable assertion by Mr. Coulter? I am but a lowly loser libertarian writing from his one-bedroom condo who was invited by Trevor as a guest blogger. I simply do not have the pedigree as a director of financial consulting firm.

Nevertheless, I do wonder how giving GM $13 billion ($16.4 billion according to this article) as a contingency in case car sales do not pick up to assist in paying off a $6.7 billion loan designed to aid GM which is foundering due to mismanagement and falling car sales is supposed to be a good PR move. I also don't understand how giving GM $13 billion ($16.4 billion according to this article) as a contingency in case car sales do not pick to assist in paying off a $6.7 billion loan designed to aid GM which is foundering due to mismanagement and falling car sales is supposed to indicate rising confidence at GM. If private investors really thought that GM were making a comeback, wouldn't they come to the rescue and bailout GM themselves? If the management at GM really thought that the company was on the verge of making a comeback, wouldn't the company ask for private investment which does not have government restrictions?

But what do I know? I waste my time reading useless books on economic theory like What Has Government Done to Our Money, The Mystery of Banking, Economics in One Lesson, Meltdown, The Case Against the Fed, The Politically Incorrect Guide to Capitalism, and Economic Science and the Austrian Method. These books have compelled me to purchase Man, Economy, and State, Human Action, The Theory of Money and Credit, Socialism. I waste even more time reading articles on Mises.org like Anatomy of a State, The Politics of Obedience-The Discourse on Voluntary Servitude and Our Enemy, the State to gain some insight into political theory. Clearly I am wasting my time with all of these books because one does not have to know sound economic theory or understand politics to become a director of a financial consulting firm.

The Public Option and Education

As I continue to battle the economic ignorance infecting the health care debate, I offer this essay by Randall Holcombe at the Beacon:

In President Obama’s address on health care reform to Congress last night (September 9) he argued for a public option to private health insurance as an alternative, to compete with private insurers and give them an incentive to be responsive to their customers.

Some critics have argued that with the advantages of government backing and the taxes the president is advocating on private suppliers, the public option would crowd out private insurers and most people would end up on the government’s plan.  President Obama responded to this criticism by noting that despite the existence of public universities in every state private universities remain an option.  Interesting analogy!

Looking at higher education enrollment, 75% of students are in public colleges and universities and 25% are in private.  The census bureau reports that about half of 18-22 year olds are enrolled in higher education, so if we include those outside the system, the private sector covers only about 12.5% of that age group.

For Those Not Completely Brainwashed by the State

Trevor's recent post drew the attention of one disgruntled commenter who clearly does not understand economics at all. When Trevor and I write pithy rebuttals of Obama's and Bush's economic policies, we rely upon a foundation of economic thought which we do not always discuss explicitly. Nevertheless, there are still people who lack economic reasoning yet feel empowered to make comments concerning economic policy. As Murray Rothbard wrote:

It is no crime to be ignorant of economics, which is, after all, a specialized discipline and one that most people consider to be a "dismal science", but that it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance.

I seriously doubt that someone this ignorant of economic theory and boastful about it would be open to the economic logic of Mises or Rothbard or Hayek. But for those not completely brainwashed by the State, here are some articles which use rigorous economic logic to demonstrate why Obamacare (or HillaryCare or BushCare or ReaganCare, etc.) will only make our health care system worse (unless you're an insurance company like BlueCrossBlueShield which benefits from the reduction in competition).

Why Obamacare Can't Work: The Calculation Argument-Gabriel E. Vidal

A Four-Step Healthcare Solution-Hans-Hermann Hoppe

Socialized Healthcare Is Not Cheaper Than Free Market Healthcare-Mark R. Crovelli

Socialized Healthcare vs. The Laws of Economics-Thomas DiLorenzo

Health Care Through Central Planning: A Helpful Analogy-Karen Kwiatkowski

National Socialist Fascist Communist Healthcare-Bill Huff

Healthcare Is a Good, Not a Right-Ron Paul

My Canadian Healthcare Horror Stories A Message for Americans-Cathy LeBoeuf-Schouten

Why Computers Work and Health Care Doesn't-Bill Walker

The Health Plan's Devilish Principles-Murray Rothbard

This is a good start. For those who want a solid introduction to economic thinking, I recommend Henry Hazlitt's Economics in One Lesson. For those who wish to be challenged immediately and dive into the reasons why socialism cannot work, I recommend Socialism by Ludwig von Mises. And if our dear angry commenter finds this post discourteous, I would recommend that he read all of these articles, Hazlitt's book and Mises' book, and refute them.

The Feckless FAA

Southwest Airlines is facing the wrath of the FAA. What is Southwest's crime that could cost the company millions of dollars? They used "unapproved parts" on some of their planes. To illustrate just how useless the FAA is, FAA officials admit that these unapproved parts "didn't pose an immediate safety hazard." FAA spokeswoman Beth Harbin "called the parts 'perfectly safe' but acknowledged they were made by a subcontractor who wasn't approved for the work by the FAA. The subcontractor was hired by a maintenance company hired by Southwest" (emphasis added). Thus, Southwest's real "crime" was using a contractor not approved by the FAA. A contractor who used parts which the FAA itself says were "perfectly safe."

In March Southwest agreed to pay $7.5 million to "settle FAA allegations that it operated nearly 60,000 flights using planes that had not been examined for structural cracks as required by federal regulations." Again the presumption of the FAA is that Southwest Airlines, which started operations in 1971 and earned a total revenue of $9.861 billion and a profit of $645 million in 2008, would intentionally neglect its aircraft and put its customers, pilots and flight staff in jeopardy to make a profit. A profit which would evaporate through lawsuits should it become clear that the reason an accident occurred was due to neglect by Southwest's upper management. Thanks to this bureaucracy and the violence which backs its edicts, Southwest must divert resources to address this foolishness rather than improve its business. It cannot lower prices for consumers or add meals or increase employment or increase its employees' salaries. It is silly to think that Southwest would deliberately put customers on planes which might crash. The company could go bankrupt if this were to happen. ValuJet, for instance, never recovered from the crash of flight 592 in 1996. Although the company merged with AirTran in 1997, the name of ValuJet was forever spoiled.

The problem with the FAA and all government regulators is that their incentives are not aligned with the firms they regulate because they are government monopolies which receive their income through taxation. An airline regulatory agency in a free market would receive its income either by contracting with an airline company to inspect its fleet or selling its findings to consumers like Consumer Reports. In both cases the reputation of the regulatory agency would be at stake if there were any accidents or plane crashes. Consumers would blame not only the airline company but also the regulatory agency which told consumers that the airline company's planes were safe.

This Is a Libertarian Economist?

Libertarian economist Tyler Cowen asks the question Were the bailouts a good idea? His answer is Yes, in fact they were:

Without the bailouts we would have had many more failed banks, very strong deflationary pressures, a stronger seize-up in credit markets than what we had, and a climate of sheer political and economic panic, leading to greater pressures for bad state interventions than what we now see.  Milton Friedman understood all this quite well, which is why argued bailouts would have been a good idea in the 1929-1931 period. 

But wait...there's more. To those libertarian economists who like to see both what is seen and what is not seen, he outlines the following possible chain of events:

Maybe you think that the bailouts will have disastrous long-run consequences.  And maybe they will, I worry about this too.  But if anyone should know that modern politics can only stand so much short-run panic, it is libertarians and fans of Bryan Caplan's book.  If we had not done the bailouts we did, we would, within a few months' or weeks' time have received a much worse and costlier bailout run by Congress and Nancy Pelosi.  How does that sound?

By calling this potential bailout by Congress and Nancy Pelosi "worse and costlier", Cowen tacitly admits that the current bailouts are bad and costly. But nevermind this subtle admission. Let us utter those magic words, "All things considered, the financial bailouts were a good idea." Therefore, without the bailouts "we would have had many more failed banks, very strong deflationary pressures, a stronger seize-up in credit markets than what we had, and a climate of sheer political and economic panic, leading to greater pressures for bad state interventions than what we now see." But based on this reasoning, does this not mean that the "much worse and costlier" bailouts would saved even more banks, counteracted deflationary pressures more strongly, loosened credit markets even more, lead to economic and political serenity and reduced the pressure for worse state interventions than we now seee? So why object to the possible costlier bailouts? Based on this reasoning a "worse and costlier bailout" sounds like good idea this time around.

A View from the Abyss

As Trevor pointed out, we're going down, down, down, down but probably even faster than forecasted. Take Obama's health care plan, for instance. The plan is estimated to cost $1.5 trillion over ten years. As we all know, governments tend to underestimate the true costs of their expenditures. As Robert Higgs points out:

The federal government's health programs also turned out to be fiscal time bombs. Between 1970 and 1994, in constant (1987) dollars, Medicare outlays increased from $16.4 billion to $109.3 billion; the federal portion of Medicaid from $7.7 billion to $63.5 billion. Like the old-age pensions, these programs achieved rates of growth that could not be sustained indefinitely.

This means that Medicare grew by a factor of approximately seven and Medicaid grew by a factor of approximately eight over this 24 year period. Using these factors as lower and upper bounds and applying them to the estimated $1.5 trillion, we get a lower bound of an upper bound of $10.5 trillion and an upper bound of $12 trillion over 24 years.

Statisticians and mathematicians will find much to criticize in my quick and dirty estimates, but I do this just to make a point. Our government cannot forecast the costs of anything health-related (well, anything at all) accurately. The costs are always exponentially more than forecasted. So when the White House forecasts a $9 trillion deficit over the next ten years, about $1 billion of which is supposed to fund health care, it's probably a good idea to scope out other countries to immigrate. Or at least stock up on guns and gold.

Local 'Cash for Clunkers' Ignorance

I dropped off my Tundra at the Toyota dealership this morning to have a broken plastic clamp replaced along the side of the driver's seat. One of the employees gave me a ride to my office and in the course of small talk mentioned they'd been working until midnight or 1 a.m. some nights just to keep pace with people turning in their cars as part of the "Cash for Clunkers" program.

The employee, no doubt coached by management, was preoccupied with how much this program will "help the economy." However, despite this display of ignorance -- you can't stimulate an economy by stealing one person's spending money and giving it to someone else to spend -- he did note something rather interesting: customers are beginning to have a hard time finding replacement parts for their cars because these "clunkers" are simply being crushed and disposed of once they're turned in.

In other words, the federal government is artificially increasing the scarcity of used cars and car parts, thereby driving up prices, instead of allowing the market to determine when their usefulness has expired. As usual, folks on the lower end of the economic spectrum disproportionately bear the burden of this program as the quantity of affordable used cars decreases.

In what is nothing more than a wealth transfer from taxpayers to the car manufacturers, the "Cash for Clunkers" program is a huge success in the eyes of the corporatist state and its connected beneficiaries. The poor, on the other hand? Well, they'll just have to be satisfied listening to mouthpieces for the state tell them how much the government cares about them.

Big Business and ObamaCare

John Stossel on why drug companies and insurance providers are backing Obama's health care plan.

HT to Robert Wicks.

Has the Tipping Point Been Reached?

The White House as turned to town-hall style meetings to convince Americans that more government control of health care will be good for them, but apparently many Americans are angry about it. Karen DeCoster links to a protest in Dearborn, Michigan over the proposed health care bill. In Tampa, FL a protest against health care turned violent. The video shows several protesters screaming "You work for us!" at the local politicians. One man who says he was simply trying to get information on the health care plan was assaulted by police.

This outrage has not gone unnoticed by the White House. MSNBC reports that

[t]op White House officials counseled Democratic senators Thursday on coping with disruptions at public events on health care this summer, officials said, and promised the party and allies would respond with twice the force if any individual lawmaker is criticized in television advertising....

The officials spoke on condition of anonymity, saying they were not authorized to discuss details of the closed-door session that took place hours before lawmakers headed to their home states for a month long vacation. (emphasis added)

Democrats have accused the Republicans of sanctioning mob tactics to defeat the health care bill. Senate Majority Leader Harry Reid, D-Nev., said

These are nothing more than destructive efforts to interrupt a debate that we should have, and are having...They are doing this because they don't have any better ideas. They have no interest in letting the negotiators, even though few in number, negotiate. It's really simple: they're taking their cues from talk show hosts, Internet rumor-mongerers ... and insurance rackets.

The Republicans countered that these protests reflect genuine resentment of the President's policies:

"All the polls show there is serious concern, if not outright opposition, to the president's health care plan," said Antonia Ferrier, spokeswoman for House Republican Leader John Boehner of Ohio. "Democrats are ginning up this cynical shell game."

House Speaker Nancy Pelosi, D-Calif., is not worried about the protest:

"What you see, I think, is a display of the democratic process," Pelosi said. "We all respect that."

It is possible that this health care plan will be the tipping point for the American people. In spite of what Pelosi and Reid believe, there is genuine anger and outrage festering among the American populace. I think that much of it is simply conservative outrage at liberal policies and as such I believe that this opposition is not as principled as I would like it to be. Conservatives oppose centralization in certain areas of the economy, but not all. They love the police-state and have a fetish for the US military. They support some regulation of the market because they fear a true free market. They believe that a territorial monopolist of law and ultimate decision-making is necessary and they continue to believe in the myth of the rule of law. They worship the Constitution and still believe in democracy. As such what we are witnessing is a true civil war in which conservatives and liberals fight for control of the State.

Gubmint Groceries

Tom DiLorenzo speculates as to what we can most likely expect to see just as soon as we allow the federal government to monopolize health care (which, of course, will have to be written "health care" from that point forward).

You know, you can almost forgive people of earlier eras for falling victim to the evils of socialism and fascism. After all, they didn't have access to the internet, which in mere minutes would have allowed them to google any number of historical examples capable of explaining the insufferable ramifications of tyrannical political philosophies.

But what's your excuse?

Ron Paul Pwns Ben Bernake

DC Government Officials Say to Their Residents: Our Welfare Is More Important Than Yours

The government of the District of Columbia has decided to repeal its August Tax Holiday.

With a looming revenue shortfall of an eerie $666 million, the District is repealing the August sales tax holiday.

The move will save the District from losing an estimated $640,000 in sales tax revenues, most of which comes from back-to-school shoppers hoping for some added savings.

D.C. is reminding businesses that usually participate in the holiday to reprogram cash registers so the tax remains, and to not advertise the holiday to customers.

The August sales tax holiday usually provided a nine-day exemption from the 5.75 percent sales tax on purchases of clothing, accessories, shoes and school supplies for $100 or less.

This program was supposed to bring some financial relief to the poor and bring shoppers into the District. Don't believe me? Just read this press release dated July 23, 2007 (I've included it in case the DC Government takes it down):

(Washington, DC) The District of Columbia will offer a Sales Tax Holiday beginning 12:01 am Saturday, August 4, through midnight Sunday, August 12, to provide buyers an exemption from the 5.75 percent sales tax for shoes, clothing, accessory items and school supplies. The exemption covers each item costing $100 or less.
 
The sales tax exemption will apply to each eligible item regardless of how many items are sold on the same bill to a customer. It will also apply to layaway sales if the retailer and customer enter into a layaway agreement or the customer makes the final payment on the layaway order during the exemption period.

“The District’s Sales Tax Holiday comes at the perfect time of year as parents around the Washington-Metropolitan area prepare to send their kids back to school,” said Mayor Adrian M. Fenty. “Not only does it offer savings for families buying school supplies and clothing, it draws more consumers to the District as a boost to local business.”

"This break from sales taxes should come as a welcome relief, particularly to parents shopping for back-to-school bargains," said DC Council member Carol Schwartz, whose legislation created the District’s two sales tax holidays. “I hope everyone, including our suburban neighbors, will take advantage of this opportunity to shop in DC and, at the same time, save money.”

Retailers who use the Sales-and-Use tax forms for filing their monthly or annual tax returns should enter the total amount of tax exempted because of the Sales Tax Holiday, along with any other exempt taxes on the sales tax portion of the return (line no. 13). Retailers are also encouraged to clearly state in their records the type of item sold and the sales price of tax-exempt merchandise sold during the Sales Tax Holiday period.

For more information about the Sales Tax Holiday, the public and businesses should call the Customer Service Center at (202) 727-4TAX (4829).

In addition, there will be a second tax holiday held in November, beginning the weekend following Thanksgiving, November 23, and continuing through midnight December 2. The estimated fiscal impact for fiscal year 2007 is $1.14 million for both holidays.

Thus, the DC government is ending a program designed to help the poor and bring shoppers into the city to save approximately one-tenth of one percent of its budget deficit. The city might also repeal the tax holiday it usually has in November which it says will save it another $600,000 dollars. If it does so, the city will have ended a program designed to help the poor and bring shoppers into the city to save approximately two-tenths of one percent of its budget deficit. Many people are upset at this, of course.

When I discuss anarcho-capitalism with people who are unfamiliar with it, the biggest fear they express is that the rich will gang up and exploit the poor. Thus, we need the State to protect the poor. If they call this protection, I would hate to see what they call exploitation

Power Continues to Corrupt

I didn't think that it was possible for me to despise someone this much. Every time I think Obama has reached the zenith of chutzpah, he ascends to new heights. 

 

This passage hit me the hardest:

 

“Even in the most trying times, amid the most difficult circumstances, there is a generosity, a resilience, a decency, and a determination that perseveres; a willingness to take responsibility for our future and for posterity,” he said.

The tasks of cutting federal spending, resuscitating the nation’s banking system, and reviving the moribund auto industry would be daunting, he acknowledged.

“None of this will come without cost, nor will it be easy. But this is America. We don't do what's easy,” he declared.

Yet there was a paradox at the heart of his speech.

These tough-minded Americans, so willing to take responsibility, the people who “don’t do what’s easy” were also the same people he blamed early in the speech for being guilty of utter irresponsibility.

An inventory of irresponsibility
“Short-term gains were prized over long-term prosperity… we failed to look beyond the next payment, the next quarter, or the next election… difficult decisions were put off for some other time on some other day,” he declared.

Obama carefully used the word “we” not “they” in his indictment of Americans' irresponsibility.

The unanswered question in the speech was: Are such people now capable of exercising the responsibility that the president says is needed?

What the hell does he mean by "we"? "We" did not fail to protect the American public on September 11, 2001. "We" didn't start two wars. "We" did not inflate the money supply in an effort to fight a recession and create a bubble in the housing market.

Also not to be ignored is the writer's unanswered question. The tacit answers is "No, they are no capable and the State must intervene for their own good." Humanitarians with guillotines are truly the worst tyrants.

I don't know how a President whose administration is breaking records for spending money can look the American people in the face and say "we" are the problem.

I know I have said this many times, but I will repeat this until learning takes place. The election of the president is a competition among liars, thieves, and potential murderers to crown the best liar, thief, and potential murderer. Barack Obama proved himself to be a better potential criminal than John McCain and blatantly false statements like this are evidence that he was the "correct" choice.

As Lord Acton once said, "Power tends to corrupt, and absolute power corrupts absolutely." Every individual who has ascended to the presidency has found himself in a propitious position: he now has all of the powers of the previous administration at his disposal and will use those powers to increase his own and the power of the presidency. This power continues to corrupt each new president and the process began the first day he entered politics. The president and his underlings will continue to lust after and exercise this power until they destroy everyone or until the people collectively withdraw their consent.

Treasury Cancels Plans to Hire Cartoonist

From AP writer Anne Flaherty

 

WASHINGTON – The Treasury Department is scrapping plans to hire a cartoonist to lighten the mood of its employees who manage the nation's $1.2 trillion debt, after a senator questioned its merits.

The cartoonist would have been hired by Treasury's Bureau of Public Debt, which accounts for borrowed federal spending, at a time Congress is embroiled in a debate about increased government spending.

"Our training staff felt that at a time when employees are working extra hours, it might have been helpful," said Kim Treat, a spokesman for the bureau.

But the effort was canceled because it had become "more of a distraction than an opportunity," he said.

In a federal solicitation issued earlier this month, the bureau said it was looking for a contractor to conduct two, three-hour presentations for its employees on the benefits of humor in the workplace and the connection between humor and stress relief.

The contractor would have to be able to "create cartoons on the spot" about jobs at the bureau, the solicitation stated.

Treat said the solicitation was intended to collect more information, including how much it would cost, and that no money had been allocated toward the effort. The bureau's annual budget is $187 million.

The office of Sen. Byron Dorgan, D-N.D., contacted the bureau after the solicitation was posted on The Drudge Report.

"Of all the agencies, the Bureau of Public Debt should know that there is very little that is funny about today's economic conditions," Dorgan said in a statement released Friday.

********************************************************************

Perhaps the Treasury employees should watch this cartoon instead.

Another Example of Conservative Fecklessness

Sen. Tom Coburn (R-Okla.) released a report critizing the Holy One's stimulus plans. In the beginning of the report, Coburn writes

There was no question that the nation’s economic condition demanded bold action. Nor is there any question that the massive amount of stimulus spending so far has created some new jobs. Yet, as recent statistics have shown, the jobs that may have been created or saved from the stimulus are not offsetting the millions of jobs that our economy is still hemorrhaging. In my estimation, Congress chose the wrong approach to stimulating the economy by spending money we don’t have on things we don’t need. Real stimulus includes lowering the tax and regulatory burden on hardworking families and businesses, which creates good jobs for the long term. (emphasis added)

The fact that he says "Real stimulus includes" is his way of saying "some spending is necessary." But if lowering tax and regulatory burdens creates good jobs for the long term (and it does), why does the government need to spend any money at all? Why not make a principled economic argument that spending is not necessary to combat the recession and in fact makes things worse? Spending money during a recession in hopes of stimulating the economy is like, to paraphrase Robert Higgs, taking water out of the deep end of the pool and pouring it into the shallow end with the expectation that the water level will rise.

Coburn continues

For example, what kinds of jobs are being created? Are these permanent jobs or seasonal and temporary jobs that will soon be gone when the project is completed? What are the merits of projects being funded with stimulus dollars? Will these projects make real improvements in the lives of taxpayers and communities or are they simply pet projects of politicians and lobbyists that never got off the ground because they are a low priority? Are some stimulus projects actually making matters worse for ordinary Americans?

All government jobs are temporary in the sense that none become self-sufficient. All government jobs depend on taxation and inflation because they don't produce goods and services which are traded on the free market. This does not mean that there would be no market demand for some of these goods and services. People would still demand roads, schools, and arbitration services. But the State prohibts or hampers competition in these areas. It forces people to use its arbitration and justice services and its roads. It makes private schooling expensive because families have to pay for both the private schooling out-of-pocket and public schooling out of taxes. But since these services are not traded on the free market, the only way to fund them is through the coercive power of the State, i.e., taxation and inflation.

Moreover, some of these goods and services would not even exist because there is no viable market for them. The only way such goods and services can continue to exist is through the coercive power of the State. They could not survive on their own.

Coburn then says in the introduction

By offering 100 examples of questionable stimulus projects, worth $5.5 billion, this report does not attempt to prove that the stimulus is not working. Rather, the intent is to educate taxpayers, policymakers and the media on lessons that can be learned from some of the early missteps and prevent other questionable projects from moving forward. (emphasis in original)

So now we see the real purpose. Coburn is not happy with the projects the Obama adminstration is spending money on. In his mind they are waste. The Obama administration responded to Coburn's critique with a point-by-point rebuttal, but for our purposes, this doesn't matter. By accepting the premise that some government spending is necessary to stimulate the economy, Coburn has already given away the principled high-ground. The debate is now about which projects should get the money which is pure politics which will continue in perpetuity.

If conservatives really want restore prosperity to the US, they must diabuse themselves of their belief that the State should intervene in a free market for any reason. A free market must be free from coercion in order to be free; any intervention by the State will produce unintended results which will lead to more interventions which will lead to more untended results, etc. This will middle-of-the-road policy will lead to socialism. As long as conservatives accept the premise that the State, i.e., a territorial monopolist of ultimate decision making, should play any role in the market, they will always traveling on the road to serfdom.

Robert Higgs on the Feds' Financial Fiasco

This is an excellent essay by Robert Higgs on the Obama administration's reforms for the financial system.

The Worst of Two Evil Isms

Thomas DiLorenzo writes about our new economic system: Fascialism.

Richard Ebeling on Our Collectivist Economy

Inputs or Individuals

I stopped reading Neocon Review regulary a while back, but every so often a really good article appears on economics. Here's an excellent piece by Kevin Williamson on socialized medicine and the calculation problem. If the Holy One has his way, my advice to you is never get sick.

G(overnment)M(otors): The Face of the Corporate Welfare State (For Now)

It would be impossible not to laugh at the Obama administration's supposed attempt to manufacture a symbiotic relationship between itself and General Motors if the economic repercussions for the majority of Americans weren't so grave.

GM needs the federal government and the federal government needs GM, or so the story goes. The flailing auto manufacturer presumably is content to accept federal handouts in the attempt stave off bankruptcy; Obama is happy to hand out taxpayer dough if that means taking credit for saving or creating American jobs. It all sounds so nice, but both history and basic economics tell us that artificially subsidizing corporate losses doesn’t magically create profits.

And of course, it doesn't help matters when you're not allowed to cut dead weight and take realistic measures to generate those profits either.

GM, which has already made its deal with the devil by cashing federal welfare checks just to keep the lights on in plants that haven't closed yet, is now facing heavy criticism from the usual mob bosses union leaders and politicians over reports that the company plans to increase the number of vehicles it imports from overseas in an attempt to cut costs.

The gall of some business leaders to conduct their affairs as if they can't just steal money from people at gunpoint.

The United Auto Workers charged last week that the Detroit automaker intends to almost double over the next five years the number of vehicles it imports to the U.S. from Mexico, South Korea, China and Japan.

"GM should not be taking taxpayers' money simply to finance the outsourcing of jobs to other countries," Alan Reuther, the union's Washington lobbyist, wrote in a letter to U.S. lawmakers.

Of course, Reuther should've stopped at "GM should not be taking taxpayers' money," but then he wouldn’t be a union lobbyist, would he?

The tragic irony of this entire fiasco is that in attempting to get its financial affairs in order by accepting federal bailout money, GM has prostrated itself before the Obama administration and effectively surrendered its management authority to bureaucrats tasked simply with "protecting jobs," thereby eliminating the ability to make cuts in the one area responsible for significant losses: labor (and the related union benefits rivaled only by federal government employees).

Unlike true symbiotic relationships in nature, where two seemingly incompatible species interact to their mutual benefit, GM stands only to lose in this arrangement, and lose big. While the company reportedly faces a June 1 deadline to cut costs, it's helpful to remember that these requirements are being made by federal officials who retain the authority to micromanage how these supposed cuts will be made.

As I have written before, these bailout measures are hardly intended to help GM recover financially; they are a ploy by the president to nationalize one of the largest American manufacturing industries so he can turn it into a staging ground for the launch of his tyrannical green agenda.

It remains to be seen whether Barack Obama will rebrand GM as Government Motors -- that just might be too brazen even for the American public -- but I wouldn't be at all surprised to see His Holiness introduce the first national car. Say, the "Obamobile" has a nice ring to it.

The Purpose of Government

Writes Thomas DiLorenzo

The purpose of government is for those who run it to plunder those who do not. Throughout history, governments have used violence, intimidation, coercion, and mass murder to enforce this system. But governments' first line of "defense" is always a blizzard of lies — about its own alleged benevolence, altruism, heroism, and greatness, along with equally big lies about the "evils" of the civil society, especially the free market.

Read the whole thing.

What's Wrong with the U.S.?

Writes Mark Thorton:

The answer to the question--what is wrong with us?--is actually simple and straightforward. We are collectively stupid and brainwashed. We have been taught and conditioned that government can solve our everyday problems at no cost so the more the merrier.

As Nathan said to David, "You are the man!"

Don't Want to Be an American Idiot

I have found myself becoming less and less tolerant of the amount of outright idiocy which has become more prominent during this depression. People who know absolutely nothing about economic theory pontificate as to how "greed" and the pursuit of wealth have led to our situation. Such risible ruminations inevitably lead to calls for more State intervention to save the free market from itself. Here is yet another example of such ignorance. Trevor Corson believes that Finland can teach the US something about true luxury. Apparently some American ex-pats have moved there and now enjoy living off of the State (or to speak the truth, they are now living off of the remnant of productive people in Finland):

"I'll never become rich in Finland," one explained, "the taxes are just too high." But for him it was a trade-off worth making. "Great healthcare, basically free. My kids get one of the best educations in the world, free." By the way, that includes college, free. He had no plans to move back to the States.

Clearly in the mind of this ex-pat, the government is like Santa Clause. It provides all of these wonderful services like healthcare and college, free of charge. It doesn't seem to dawn on this person that high taxes in Finland are the reason why healthcare and education can be provided to everyone "free of charge." Nothing in life is free; all goods and services must be provided by someone. The fact that this ex-pat is not paying out-of-pocket for healthcare and education does not mean that no one is paying for these services. They really believe that the government can provide these goods and services free to the public with no adverse consequences. These are the types of people who vote and determine the future of our country. Yet another reason why I despise democracy.

Here's another excerpt from our socialist traveler:

Finland doesn't pay lip service to providing a level playing field for all its citizens. It really does give the vast majority of its citizens a fair and equal chance in life, in a way that the US just doesn't, no matter how much Americans like to think it does.

This is verbal ledgermain that all socialists use when promoting their nonsense. They intentionally conflate equal opportunity with equal outcomes. People have different degrees of ability and desire. Even if people have access to the same opportunities, their success will vary because their abilities and desire vary. This is an outcome of freedom; people can develop their talents in their chosen fields and be rewarded accordingly. The reason there are so few CEOs and entrepreneurs is that very few people want to take such risks and work that hard. And that's fine. But the socialist cannot tolerate freedom because it leads to unequal outcomes. He suffers from envy much more than the average person. Thus, the socialists covets the power of the State to force all of us to be "equal."

Karen DeCoster on the Social Costs of Inflation

From Ms. DeCoster's personal blog:

The Federal Reserve, with its money-pumping machine distorting credit markets and interest rates, along with creating piles of debt among the citizenry, is a totalitarian and destructive force. The Fed destroys time preferences because it turns people into consumption-oriented, gotta-have-it-now debt addicts. The Fed has wrecked the housing market and turned homes into leveraged bets. The Fed has sucked people into revolving debt, student loan debt, and miscellaneous personal debt, all with the promise that the boom was never going to end. The Fed perverted the stock market, baiting pension funds, 401k funds, and personal investments, and thus has wiped out much of the wealth of American retirees and the middle class. The Fed has turned the latest generation of children into a consumption-only class who do not know of the production side of the market, nor do they care. The Fed has established a financial dependency on government that has destroyed the self-sufficiency of an entire generation. Today's bread and circuses is tomorrow's lack of saving, invention, and production. The Federal Reserve is a criminal organization and the destroyer of lives.

The latest victim of this system that takes Americans captive is the man who shot his wife and three children to death before committing suicide in Middletown, Maryland. He was $460k in debt on a mortgage and credit cards on a salary of less than $100k per year. The debt, dependency, and financial disintegration drove him insane. Here is Guido Hulsmann from one of my all-time favorite articles, "The Cultural and Spiritual Legacy of Fiat Inflation."

The net effect of the recent surge in household debt is therefore to throw entire populations into financial dependency. The moral implications are clear. Towering debts are incompatible with financial self-reliance and thus they tend to weaken self-reliance also in all other spheres. The debt-ridden individual eventually adopts the habit of turning to others for help, rather than maturing into an economic and moral anchor of his family, and of his wider community. Wishful thinking and submissiveness replace soberness and independent judgement. And what about the many cases in which families can no longer shoulder the debt load? Then the result is either despair or, on the contrary, scorn for all standards of financial sanity.

Gary North on the Gold Wars

If you take Trevor's advice and buy gold, know that you are a target of the State.

The Real Fear of the State

The Holy One has realized that there is a real threat to the State. During his first Cabinet meeting of his administration, he said

"We also have a deficit — a confidence gap — when it comes to the American people," [President Obama] told reporters. "And we've got to earn their trust." (Emphasis added).

To earn this trust the Holy One ordered his Cabinet to find ways to trim spending by $100 million. This is like saying we're going to drain a pool using a teaspoon and bucket. However, the Holy One, being one of the best manipulators of human emotion I have seen as president, immediately stated

"None of these things alone are going to make a difference. But cumulatively, they make an extraordinary difference because they start setting a tone ... $100 million there, $100 million here — pretty soon, even here in Washington, it adds up to real money."

The Holy One starts small and lowers the expectations of the people and then gives them false hope so that they will easily submit to their own destruction. If I had no moral scruples, I would applaud such wiliness. 

But the my point is that the Holy One has exposed the Achilles' Heel of the State for all to see. ThisCabinet meeting came shortly after the "Tea Party" demonstrations across the country. As Trevor and other commenters have pointed out, the Tea Parties were really ruses for big government conservatives to kvetch about losing power. Nevertheless, the weight of heavy taxation can compel many citizens uncommitted in their political ideology to seek relief and such seekers may find LewRockwell.com or Mises.org or Karen DeCoster or this blog among other radical and libertarian blogs. They may read Our Enemy, the State or The Criminality of the State or On the Impossibility of Limited Government or The Song That Is Irresistible: How the State Leads People to Their Own Destruction or The Income Tax: The Root of All Evil or The Discourse on Voluntary Servitude. They may become convinced through such writings that taxation is robbery; that the government(s) they live under are dishonest, insane, and intolerable; and they may begin to sow seeds of discontent within the populace which could lead to an intellectual revolution in which a majority withdraws its consent. No violence is necessary. If suddenly the majority no longer obeys the dictates of the State, our rulers will become noisy gongs whose boisterous cacophonies will quickly fade into a serene hush.

Grow Up, America

So says Gerald Celente in an interview regarding the American fascist State:

We are telling people, just as the doctor would tell a patient, “Look, there are ways out of it but first we have to recognize what the disease is. And then we are going to have to be very inventive about trying to attack it in a number of different ways. We could go through complementary medicine, we could go through traditional… we could even go through a combination of things.” But you respect what the doctor is saying, and you don’t call him a gloom-and-doomer. It is a childish response that people have that want to believe that they have a new leader, and that the new leader would lead them down the yellow brick road of happiness. Rather than understanding that there is nobody behind the curtain. It’s the Wizard of Oz. They’d better grow up; nobody is going to save them.

Ron Paul Rips the President's Spending Plan

Deliberately Misplaced Blame

Sean W. Malone has written a very good article detailing the blatant attempts of the State and State-worshipping sycophants to blame the free market (as if we actually have a free market) for our current financial troubles.

Perhaps the Editorial Writers at the Examiner Read this Blog

An Examiner editorial puts the AIG bonuses into perspective:

There is nothing quite so ridiculous as a bunch of Washington politicians running at break-neck speed to get in front of an American public frothing in a righteous uproar over something in the news. The first casualty in such episodes is invariably a clear picture of who actually deserves the public’s anger, and so it is with $165 million in AIG executive bonuses. Leading the charge now are members of the same Congress that approved the $700 billion bailout and the $787 billion economic stimulus bill that authorized the bonus payments without reading either of the 1,000-page monsters. These same people are screaming to confiscate a bonus amount that equals one-tenth of one percent of the $1.5 trillion total they blindly approved for the bailout and stimulus legislation. The lack of proportion here is staggering. (emphasis added)

Perhaps some of the editorial writers have been reading my posts. Unfortunately, the editorial's math is incorrect. As I pointed out last week, the bonus amount is one-tenth of one percent of the $170 billion that AIG received from the Federal Government. This bonus amount is approximately one-hundredth of one percent of the approximated $1.5 trillion total from the Bush and Obama plans. And that's only the estimate on paper. Some have argued that the actual cost will be around $3 trillion. Given that the Federal Government tends to underestimate the costs of its own programs, $3 trillion is not an implausible guess for the true cost. In fact, $3 trillion might be an underestimate as well.

The editorial points out that this brouhaha diverts attention from the role of Goldman Sachs in this robbery:

Goldman Sachs alumni have been in the forefront of the government’s response to the crisis under both the present and former presidential administrations. Tim Geithner served in multiple roles at the Treasury Department in the Clinton administration when long-time Goldman Sachs head Robert Rubin was Treasury Secretary. Geithner then worked closely with Bush Treasury Secretary Henry Paulson, another long-time Goldman Sachs executive, in crafting the $170 billion AIG bailout. Also among the many other Goldman Sachs alumni who have served in key Treasury Department positions under recent presidents is Assistant Secretary of Treasury Neel Karshkari, who heads the Office of Financial Stability.

Moreover, the editorial reports that Goldman Sachs received $12.9 billion of the AIG bailout money.

But this is a conservative paper, and alas, the editorial writers still hold to the naive belief that Congress ought to pay closer attention to Goldman Sachs. I can think of at least 1,035,095 reasons why that won't happen.

Channeling Anger

In Crisis and Leviathan, Robert Higgs describes how the Federal government got away with implementing a draft during World War I. Leviathan understood that if it sent soldiers to the homes of citizens and dragged men off to war, there would be outrage. Instead the War Department assigned the lowest level of administration of the to local civilian boards rather than military personal. Writes Prof. Higgs, "Grass-roots administration had enormous utility in focusing effective moral pressure on those selected for induction." These boards were corrupted by local prejudices; Southern boards, for instance, discriminated against blacks and "the obligation of service fell disproportionately on the powerless and the poor."

But these boards served a nefarious fundamental purpose. Provost Marshall General Enoch H. Crowder, who headed the draft, described the purpose as

buffers between the individual citizen and the Federal Government, and thus they attracted and diverted, like local grounding wires in an electric coil, such resentment or discontent as might have proved a serious obstacle to war measures, had it been focused on the central authorities. Its diversion and grounding at 5000 local points dissipated its force, and enabled the central war machine to function smoothly without disturbance that might have been caused by the concentrated total of dissatisfaction.

I thought of that passage in the book after I read these comments by Obama the Blessed and Merciful in The New York Times:

I don’t want to quell anger. I think people are right to be angry. I’m angry,” Mr. Obama said, his voice reaching a peak seven days after learning of the bonuses given to employees of the American International Group. “What I want to do, though, is channel our anger in a constructive way.”

As I pointed out, the President played a direct role in this embarrassment. So far the State has done a good job dissipating the force of resentment and anger. People have blamed the "free-market", greed, lack of regulation, lack of oversight, and corrupt businessmen. The few people I have spoken with personally about AIG and the financial mess in general all believe that the "free market" failed. I have read similar evaluations in mainstream media and some blog forums on reactions to the crisis. Not only do these scapegoats divert attention away from the sole cause of our misery, the State, it has the remarkable side effect of channeling this anger into a generator of favorable public opinion for the State and its interventions. People are not only more tolerant of additional State intervention, they demand it. Such demands only empower the State even more and lead to more misery.

Prof. Higgs evaluates the Provost's comments as follows:

Such frank public admission of Machiavellianism is rare in American history. Clearly the top governmental officials where unmoved by the 'concentrated total of dissatisfaction.' Their ruling imperative was to feed the war machine whether or not people objected to being fed into it.

I believe that you can apply this analysis to anything the State does. The State exists only to serve itself. Any action it takes is designed is to aggrandize itself and accomplish its goals. Just as the governmental officials in 1917 desired to feed the people into its war machine regardless of the human cost, our rulers today desire to feed us to this Financial Frankenstein without regard to the pernicious effects on our economy or our lives.

It Appears that this Administration Really Believes We Are that Stupid

From Yahoo! news:

The White House says new projections of spiraling budget deficits won't stop President Barack Obama from achieving his goals or keeping his promise to cut the country's red ink in half within four years.

White House spokesman Robert Gibbs said Friday that the administration is a bit more optimistic about the nation's economic growth over the long term than congressional analysts. The congressional projections released Friday say Obama's budget would generate deficits averaging almost $1 trillion a year over the next decade.

The Congressional Budget Office figures predict Obama's budget will produce $9.3 trillion worth of red ink from 2010 through 2019. That's $2.3 trillion worse than the White House predicted in its budget.

The White House spokesman Robert Gibbs (Squealer for those familiar with Animal Farm) is hoping to ease the fear through pronouncements, as if The Holy One can speak a prosperous economy into existence. I already wrote about why the Holy One's plans to shrink the deficit will fail. But let's say you think that I am an economic idiot because I don't have a noble prize or a position at the New York Times, and that The Holy One's plan will cut the deficit as he says it will. Can you really trust his administration's estimates when this very administration underestimated its own budget estimate by $2.3 trillion?

Obamanomics Will Fail

I meant to link to this article by Lew Rockwell a couple weeks ago when it was first published, but no time like the present to remind the masses why socialism cannot work.

The article is invaluable for the links alone contained within, but this snippet illustrates the talent Rockwell has for putting even complicated ideas into a format that anyone can understand.

Without market prices for capital goods, accounting is not possible. You don't know if you are making money or losing money, saving resources or wasting them, doing the right thing or not doing the right thing. Think of all the decisions that have to be made on the production end that require you to know whether you are wasting resources or not. With steel, do you make more buildings or trains? Or do you make cutlery or computers? Or cars or cables?

You can't just rely on assessing consumer demand. The demand for stuff is infinite. What matters are choices in light of foregone alternatives. These can't be discerned with polls or intuition. What matters here is the weighting of all alternative uses of resources. They can only be worked out in real time, in light of the choices of consumers and the profitable production decisions of producers.

None of this is possible if you don't have real market prices providing the real stuff that makes cost accounting possible. Collectivize property and you abolish the market for capital goods. No prices emerge. Every choice you make is arbitrary. There is no more rationality remaining. You just end up groping around in the dark.

Read the whole thing.

Why the Left Accepts the Fascist State

Writes Lew Rockwell:

I really think it comes down to this: leftists, in their heart of hearts, hate capitalism more than they fear the total state. They can put up with anything so long as people are not free to make as much money as they want in the service of others. The resulting inequality in wealth distribution in this system, and the manner in which the free society raises up a class of natural aristocrats, is morally intolerable to them. They prefer to risk the creation of the totalitarian society rather than put their core hatreds on the back burner.

Read the whole thing.

Abolish the Federal Reserve

Mises University scholar and economist Robert Murphy believes the government should get out of the money industry entirely. However, if we must have a central bank, "it makes a lot of sense to put in place rigid restrictions on it," he writes today in defense of the gold standard as he debunks the argument that gold-based monetary systems are "overly restrictive" and "volatile."

In countering the claim that gold currency is unstable, Murphy asks rhetorically:

So you tell me: looking at the graph below of the Consumer Price Index, when was the value of the dollar stable and predictable, and when was it really volatile? In which environment could businesses and investors confidently make long-term decisions? Remember that FDR took away private citizens' right to redeem dollars for gold in 1933, and then Nixon finally removed even the ability of central banks to do so in 1971.

   

People who oppose the gold standard have no particular aversion to gold or any other precious metal per se. They are statists, so what they really oppose is the imposition of any standards whatsoever that would at least inhibit central planners from retaining control over the value of our property and, by extension, control over our lives.

Though it's hard to argue with pictures, many people will look at the graph above and still try to convince you that the answer to the current economic crisis is to enable the government to carry on with the same policies that created it -- that is to say, printing paper money backed by nothing more than the thin air out of which it appeared. But this really ought to come as little surprise, for the same types of people will insist that crime can be reduced by increasing government gun restrictions, which tend to encourage crimes in the first place.

Of course, Murphy's article needs no additional endorsement or explanation from the likes of me. He nailed it from the very beginning when he said, "To criticize a monetary system based on gold as 'rigid' only makes sense if you believe that printing green pieces of paper makes a country richer."

Obama and Geithner: "Let's Destroy the World Economy"

They did not quite phrase their comments this way, but if they con the rest of the world's governments into adopting similar profligate spending packages, they will put the world on the express lane to chaos. Fortunately, some world governments are resisting:

"The U.S. challenge highlighted a rift with European nations who are balking at U.S. calls for more stimulus spending, arguing they do not want to pile up huge levels of debt. Some European critics have charged that the U.S. demand for increased stimulus spending was an effort to divert a European call for a major overhaul of regulations governing the financial system to curb the types of excesses in the U.S. that spawned the crisis."

While I applaud these governments for resisting the "Spend everyone else's money to solve a problem we created" mentality, I always find it interesting that so many people believe that deregulation of the financial system contributed to this mess. The financial system is the the most heavily regulated industry in the US and probably the world. We can't even choose our own money for transactions. Moreover, these regulations are written by bankers and former Wall Street executives. Why on earth would any rational person then believe that the purpose of these regulations is to protect the citizens from greedy executives when said regulations have been drafted by greedy executives?

In order to allow the world to spend more money, we need to be able to steal resources from the productive citizens of several countries at the same time. Geithner has a plan:

"Geithner said the U.S. will seek approval to expand a $50 billion fund the IMF maintains to support countries in trouble to as much as $500 billion. The IMF needs much greater resources to be able to provide emergency loans to countries during the current crisis, he said."

Yes, let's give more money to foreign governments to allocate resources. Surely this will lead to higher productivity and economic growth because governments always pick the most efficient firms to produce goods and services and never, ever base such decisions on politics.

What we are witnessing is the failure of middle-of-the-road policy on a worldwide scale so accurately described by Ludwig von Mises. Government interventions lead to unintended consequences which then lead to more government interventions to fix those unintended consequences which then lead to more unintended consequences which then lead to more government interventions until we become a socialist economy. This is not true communism where the government officially owns all property; there are still private "owners" who have title to their property. But the government has so regulated the owners as to how they may dispose of their property, that the government owns it.

Governments all over the globe have been incessantly intervening in the voluntary exchange of goods and services and created the very chaos to which they present themselves as the solution. This administration's plans to have all the governments of the world join forces with the US to spend and inflate will only speed up the rate at which the world economy disintegrates.

Greenspan Doesn't Understand the Credit Crisis

Via Karen De Coster, I've come across this article today in the WSJ by Alan Greenspan, who insists the Fed isn't responsible for the housing bubble (and subsequent bust).

There are at least two broad and competing explanations of the origins of this crisis. The first is that the "easy money" policies of the Federal Reserve produced the U.S. housing bubble that is at the core of today's financial mess.

The second, and far more credible, explanation agrees that it was indeed lower interest rates that spawned the speculative euphoria. ...

I certainly wouldn't want to contradict King Alan, but does Greenspan really not realize that the Fed's "easy money" policies led directly to lower interest rates? When you want to find people to absorb all the new credit, you generally need to entice them with low interest rates.

The more stuff I read from people like Greenspan and Krugman, the more I realize their strategy is to say things that are so utterly absurd that it leaves us too dumbfounded to even respond.

It's like we're living in the Twilight Zone. But then again, I was no Fed chairman, so what do I know?

Economic Ignoramuses

Critics of the spending stimulus plan are starting to ask the quite obvious question, Where is the money coming from? According to Obama's plan, the rich people will pay for it:

To pay for the spending, Obama’s budget relies on revenue from raising taxes on the wealthy, eliminating tax breaks for business, cutting defense spending, and a new program charging companies for exceeding emissions caps.

Obama’s tax plan includes allowing former President George W. Bush’s tax cuts for wealthier Americans to expire — a move affecting more than 2 million taxpayers making over $200,000 a year. In addition, Obama calls for increasing the top tax rate from 35 percent to 40 percent. His advisers said that would generate about $1 trillion over 10 years. The budget also calls for increasing the capital gains tax from 15 percent to 20 percent.

These idiots act as if people will continue to produce the same amount of wealth if taxes go up. But they won't. They will hide their wealth if they can or they may just work less. So we can be sure that this increase will generate less than $1 trillion dollars. We also know that businesses do not pay taxes. Consumers pay in the form of higher prices if merchants can get away with raising them. If merchants cannot raise prices, they may cut costs in other ways, including reducing pay or bonuses or hours or benefits. I seriously doubt that Obama will cut defense spending much, but even if he does, unless he plans to withdraw all troops from Iraq and Afghanistan and the rest of the world, I doubt such a reduction will help.

His latest eco-fascist plan is simple robbery:

Another significant new source of revenue for the administration would come from a proposed “cap and trade” program, forcing polluters to pay a fee for their carbon emissions. Obama’s budget plan anticipates collecting more than $645 billion from power companies, manufacturers and other carbon producers by 2019.

The global warming hoax has been a windfall for the communists/socialists who needed an excuse to impose central planning. It's also been a boon to those firms who can now use the State to expropriate money and privileges because their green technology is, at this moment in history, unprofitable. Expect your heating and electric bills to rise in the future.

The reason the administration thinks that they can implement these measures and pay for this extravagant spending is because it believes that this stimulus plan will eventually lead to sustained economic growth:

Peter Schiff's Reply to Obama's Speech

See it here.

For the Record Republicans Are Collectivists, Too

Mike Tennant simply destroys the idea that the Republican Party is for free markets and individual liberty.

Another $1.3 Trillion. Who's Counting?

I mentioned yesterday that Obama wants to cut the deficit in half. From what I read in the article I linked, I see nothing that would actually reduce the deficit. Today I read that the US is planning to give more than $900 million for the reconstruction of Gaza. I also read that House Democrats are proposing a $410 billion spending package in addition to the $787 billion robbery stimulus package. The Democrats say that such a spending package is necessary "to make up for cuts enacted in recent years or proposed a year ago by then-President George W. Bush in health, education, energy and other programs."

Translation: President Bush cut our programs to pay off his supporters. Since we (the Democrats) won the presidential election and now are the majority in Congress, we must pay off those special interests which helped us get elected.

All of this spending leads to the question Where will the money come from? Taxes may be raised slightly, but the State does not wish to face a tax revolt. Thus, there are limits on taxation. This means the money will be created by the Federal Reserve bank ex nihilo. My advice to all: use your tax return to buy some gold.

Perhaps Math Is Not His Strongest Skill

Trevor commented last week on The Holy One's plan to cut the deficit in half. According to this article on Yahoo!, The Holy One wants to have "'a frank conversation' about the problem and [he] said the deficit, projected to total $1.3 trillion this year, must be brought under control." I love how politicians talk about solving problems that they created. They act as if these problems are like hurricanes or tornadoes; the problems are acts of God and fortunately we have the State to help us through them.

The better question is How does The Holy One plan to cut this deficit in half? According to the article he wants to "reinstate a pay-as-you-go policy on federal spending programs, get rid of programs that do not work and end tax breaks for companies that ship jobs overseas." Pay-as-you-go rules, if they were to actually work, would not reduce the deficit. They simply make sure that the State has X-amount of dollars to pay for Y-amount of programs. Generally this increases the deficit, but for sake of argument, let's say that PAYG rules work. This means that the government breaks even.

He wants to get rid of programs "that don't work." Since the State receives its money through inflation and taxation, it cannot evaluate whether these programs work. The State cannot engage in cost-accounting and does not know if it is wasting scarce resources. If any programs are ended, the decisions will be based on political considerations and not efficiency and certainly not cost. For instance, the two biggest sources of the US deficit, Medicare/Medicaid and Social Security will absolutely not be reduced or cut during this administration because political outcry would be too much. Hence, the idea that this will put a dent into the deficit is illusory.

Finally, The Holy One wants to end tax breaks for companies who ship jobs overseas. If companies decide to keep workers here, this plan will not raise any additional tax revenue. It might encourage some companies to move their entire operations overseas. This would lead to even less jobs in the US and less tax revenue. At best, the deficit will stay the same and at worst it would increase due to the loss of tax revenue.

Moreover, The Apostle, Joe Biden, says that there is a need to reform the health care system and wean the US off of foreign oil. Both of these plans require even more federal dollars and regulations, and will lead to less private prosperity which will lead to less tax revenue. This will lead to an increase in the deficit, not a decrease.

The plans on the table so far require far more federal spending and will lead to less private wealth to tax. Hence, the gap between expenditures and revenue will increase even more. Perhaps addition and subtraction are the Achilles' Heel of our Prophet.

Another Perspective on the "Stimulus" Package

Writes Bill Bonner:

In the bubble era people spent too much money they didn’t have on too many things they really didn’t need. Then came the credit crunch. Now, they hallucinate that if they spend even more money they don’t have, on things they hardly even want, they will get what they really need – jobs, growth and inflation. Even respected economists say they believe in miracles. Resources have been made “idle” by the depression, they claim, like strong backs in an unemployment line. Government spending is just putting them to work. By this reasoning, things that were too expensive even in the boom years miraculously become cheap at any price. And things that weren’t worth spending money on in the fat years become miraculously indispensable in the lean ones. It is like a man who didn’t care for caviar when he had a good job; now that he is unemployed, he must have it every night. They are only taking up "idle resources" that would otherwise go to waste, explain the miracle workers. In their minds, an umbrella is useless unless it is actually raining.

Read the rest.

The 'Stimulus' Plan Can't Work

Given that Barack Obama has signed his $787 billion economic "stimulus" bill into law, I thought I'd go on record to say that this federal spending spree not only won't stimulate the economy, but it can't.

Money is simply being shifted around -- imagine watching a shell game at the county fair, only this time at the point of a gun -- from one set of people to another. Therefore, by definition alone, there will be no "additional" spending or investment taking place thereafter; it will merely be done by one set of people at the expense of another.

I'm tempted to say this is nothing but a zero-sum game, where the privileged classes are winners and the rest of us are the losers. But that's not exactly right; it's worse than zero-sum.

Given that the unproductive are being rewarded at the expense of the productive, the productive no longer have as much capital to invest in new business ventures -- which, when done wisely, creates additional wealth.

Forget for a moment the immorality of it all -- the fact that this program constitutes theft on an almost incomprehensible scale. Resources quite literally are being confiscated from people who make sound financial decisions and being given to those who have demonstrated an inability to manage their affairs intelligently in the first place.

So from here on out, poorly run companies won't simply squander their own wealth by malinvesting, caving to union demands, or running up their own debts; they'll now have the pleasure of doing the same thing using money that once belonged to individuals and companies who actually produce wealth.

And this isn't even considering the fact that a significant portion of the spending will be funded using the printing press, further taxing the hoi polloi via inflation and indebting future generations.

Sure sounds like a net loss to me.

An Excellent Summary of ABCT

Mark Nugent has written an excellent summary to Austrian Business Cycle Theory. If you have any friends who are open to the explanatory power of this theory, forward this article to them.

Common Sense

Here's Howard Davidowitz of Davidowitz & Associates forecasting a lower standard of living for Americans in the future.

Somewhere in Austria, an Economist Is Laughing

Okay, maybe more like a hundred.

The stimulus package was a huge victory for Obama less than one month into his presidency. But he struck a sober tone and lowered expectations for an immediate turnaround in the severe recession that is well into its second year.

"None of this will be easy," he said. "The road to recovery will not be straight. We will make progress, and there may be some slippage along the way."

Still, he declared, "We have begun the essential work of keeping the American dream alive in our time."

It's not like the bar for president is set very high, but still, I'm not sure any president sewed his fate as a complete failure inside his first month in office.

The Welfare State: the American dream! Rejoice!

By the way, if you have no idea what I'm talking about, get yourself to Mises.org now.

Another Reason Why Public-Private Partnerships Do Not Work

And another reason why justice services cannot and should not be provided by a monopolist. Two Pennsylvania judges have been accused of receiving kickbacks from two private detention centers. In exchange for these bribes, the judges sentenced kids to jail time for even minor offenses. Here is the key passage in the article:

Many Pennsylvania counties contract with privately run juvenile detention centers, paying them either a fixed overall fee or a certain amount per youth, per day.(My italics)

The income of facilities which received a fee per youth per day can be expressed in a very simple formula: revenue(R)=Number of youths(Y)*number of days(D)*fee(F). If a facility had three youths who stayed a week and it received, say, $1,000 per a youth per day, the revenue for the week would be as follows: R=3*7*1000=$21,000 for the week. How can this facility increase its revenue? It has to increase the number of youths or the number or days or the fee it receives? This means that in order to increase its revenue it must lobby the county to increase its fees or increase the number of youths behind bars or the number of days those youths serve. If the facility were to lobby the county, there would be political costs to bear. It would have to make an argument for why it needs more money and convince the people who pay taxes to accept a tax hike or reduced services to pay. That is time consuming. The facility could also encourage the county to create more laws, thus increasing the chance of arresting someone and having said individual sent to the detention center. 

On the other hand, who controls the number of youths and the number of days that each youth serves? The judges in the court. Remember, the judge is a monopolist of law and order and ultimate judge in this county. If anyone were to check the judges decisions, it would be a higher judge, but this judge would also be paid by the same entity as the lower judge so there is no real check. Thus, the judge can pass any sentence that he wishes, even if it seems harsh because the only place a defendant can appeal is to another judge paid by the same institution. This means that a facility that wishes to increase its income has an incentive to bribe judges to pass harsher sentences; it is less time consuming and easier to pass the cost onto the taxpayers (Look, we need the money because the judges are these harsh sentences). There is risk to the facility, of course. The judge may actually have ethics. But if I were head of a facility (and had no moral scruples) it would be easy to ascertain whether a judge were open to bribes. Just take him out to lunch and talk with him.

The point I am making is the following: The State does not receive its revenue through voluntary exchange. Thus, any private firms which contract with the State also do not receive their revenue through voluntary exchange. The only way for such firms to increase their revenue and expand assuming these firms contract only with the State is to compel the State to give them more money. This necessarily means that the State must expropriate more money from its subjects or pass laws to favor the firms at the expense of society. In either case, the State must act in ways which benefits one class of people (the firms) at the expense of another. In this case, justice was perverted and youths who may not have spent any time in jail did so to increase the revenue of the contracted detention centers. Such corruption is entirely predictable; one only has to understand that man acts to better his circumstances and how the State functions. The incentives would become as clear as a full moon on a starless night.

A Summary of Parasites

Those interested in reading the Senate bill which details where the plunder will go can read it here.  A press release from the U.S. Senate Committee on Expropriations Appropriations can be found here. While short, the press release is replete with propaganda designed to hide the fact that the reason our economy is in the tank is solely due to the US government and its vassals, the individual States. It epitomizes Bastiat's essay, What Is Seen and What Is Not Seen, the origin of the broken window fallacy, and disguises the nefarious motives of the State. Here are some examples:

Infrastructure and Science

In order to rebuild our weakening economy, these investments in our physical and cyberinfrastructure will put Americans immediately to work rebuilding our crumbling roads and bridges, and will also enable the creation of a stronger and more efficient infrastructure for the 21^st century economy.

There was a time when roads and telegraphs were privately owned (see Thomas DiLorenzo's How Capitalism Saved America). The US government simply took over the building of bridges and roads. Mainstream economists argue that roads and bridges are public goods and that the State must provide these goods to overcome the free rider problem (for a critique of public goods theory, see Hans Hermann Hoppe's Fallacies of the Public Goods Theory and the Production of Security.) The real reason for the US government's monopoly on infrastructure is to control the movement of its citizens. Through its road monopoly it can control where citizens may travel. If the State declares martial law, it can shut down the roads as it wishes and trap the people in their homes during a curfew. It could not accomplish this if all roads and bridges were privately owned without a blatant attack on the property rights of the owners of bridges and roads. Private ownership of bridges and roads does not preclude a clear attack on property rights, but such an attack may wake up the masses; they may construe such impudence as an exercise of naked power and rebel.

The US government wants to control cyberinfrastructure for the same reason. Our government hates the internet with a passion. It hates the free flow of commerce and especially the free flow of ideas. Ideas make people dangerous. H. L. Mencken addressed the danger of free-thinking men to the government as follows:

The most dangerous man, to any government, is the man who is able to think things out for himself, without regard to the prevailing superstitions and taboos. Almost inevitably he comes to the conclusion that the government he lives under is dishonest, insane, and intolerable, and so, if he is romantic, he tries to change it. And even if he is not romantic personally he is very apt to spread discontent among those who are.

Barackonomics: Debt Is Good!

Last night Barack Obama continued his Chicken Little routine, warning that if Americans don't let him stimulate the printing presses -- and quick! -- we the people will be responsible for economic catastrophe.

Seriously, here's what went down:

He said the recession has left the nation so weak that only the federal government can "jolt our economy back to life." And he declared that failure to act swiftly and boldly "could turn a crisis into a catastrophe."

Roll that around in your head for a couple seconds. Only the federal government can bring an economy back to life (even though it's the feds who've killed it). Only a gang of thieves called politicians is capable of ensuring economic prosperity. Not millions upon millions of people who benefit mutually and actually create wealth when engaging in voluntary trade. Not a free market capable of adjusting prices based on supply and demand. Just robber barons in the nation's capital.

And oh by the way, if we "fail" to let these clowns do as they please, we're to blame for the misery. Because as everyone knows, the only way to get out of debt is to continue to incur more and more!