Posts Tagged ‘socialism’

ObamaCare

Obamacare becomes law on 3/22/10

OK. I let this settle for a couple of days as I usually do. One of the problems with Internet news groups is too many people popping off instantly in reaction to another post. A little reflection is better.

Unconstitutional

I think the law is unconstitutional. That is not to predict the U.S. Supreme Court will agree with me. I have no idea about that.

It violates the Tenth Amendment:

The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.

The public seems to think the federal government outranks the state governments and the people. No. The opposite is true.

The Dems claim they can pass Obamacare under the “Commerce Clause.” But that says nothing about individual Americans. It states, in Article I, Section 8 that Congress shall have power “To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes.” Its purpose is to prevent states from charging import duties on stuff coming in from other states or countries. It’s a stretch to extend it to forcing citizens to buy a private product or service. But the Supreme Court is famous for stretching the commerce clause in the past.

Ironically, I think the federal government may have the right to establish a single-payer health insurance system, which is somewhat similar to social security, a mandatory pension plan for all workers in the U.S. I actually think social security is unconstitutional, but that question has already gone through the Supreme Court and they upheld it.

There are also provisions that seem to me to violate the Fourteenth Amendment “equal protection” clause. You have to treat everyone the same. NE, FL, and LA do not get a better deal than the other 47 states.

ObamaCare may be a tax on the states that is not permitted by the Constitution. The original Constitution allowed only a head tax. Income taxes were declared unconstitutional as a result. The Sixteenth Amendment allowed Congress to tax“ incomes.” But Southern states have paid lesser Medicaid benefits than Northern states. ObamaCare forces Southern states to pay more for medicaid. As such, it is neither a head tax nor an income tax.

‘The process’

There was much talk in the media about the Dems violating House and Senate rules. That did not happen. The law that was signed was passed by 60 Senators on Christmas eve. The House passed that bill according to their normal majority rule. Deeming was not used. I do not know what they are going to do to “fix” the Senate version to make it more like the House wants. Normally, they go to conference then the resulting compromise has to pass both houses which subjects it to the Senate 60-vote cloture rule.

I surmise they are going to use reconciliation to pass the compromise version to avoid the need for the 60 Senate votes they no longer have. That arguably violates the rules pertaining to reconciliation, but the Vice President can overrule the Senate Parliamentarian and he will. The Constitution says the House and Senate can pass their own rules. The Vice President’s power to overrule the parliamentarian is one of those rules. No unconstitutionality.

All that all of this means is the Dems are darned lucky Harry Reid met one of their arbitrary deadlines on Christmas eve.

Were the bribes to get those 60 votes sleazy? Absolutely. The whole Congress is sleazy. You get in there by winning a best- liar contest back in your district or state.The president is sleazy. He won the best-liar-in-the-country contest.

Hey, the Dems squeaked it through. If the Supreme Court does not overturn it, those who do not like it need to elect a new Congress and President to repeal it. It’s as simple as that. Read the Constitution.

‘Doing nothing was not an option’

Obama kept saying that the Republicans wanted to do nothing. He lied. The Republicans CAN do nothing because they are in the minority and do not control the White House.

Obama also said that health care as now operated in the U.S. is unsustainable.

That is correct. The costs are way too high compared to other countries and the rate of increase has been way too high.

Then Obama said the fact that current costs are unsustainable means we have to do “something.”

“Something?” What does that mean?

To Obama, it seems to mean “anything” as in “Anything is better than nothing.”

That is not correct. The action we need to take is to change the way medical care is purchased and paid for in ways that reduce the costs to more appropriate levels without causing new problems.

It is not clear what that would mean. I would expect we would need to study health care systems around the world and either copy the best one or a least use ideas from the best. I have read that Germany and Singapore have universal health care systems that work pretty well. Germany’s was started by Otto von Bismarck in the late 1800s and has survived two world wars, Weimar Republic hyperinflation, and more than a century. It works through private insurance companies. Basically, Germany helps its citizens buy private insurance. Germany and Singapore also have very successful economies. The rest of Europe is a mess being bankrupted by their versions of ObamaCare.

The premier of Newfoundland, Canada recently came to Florida for medical care rather than use his country’s universal system. I am told the affluent in Canada do that to avoid Soviet-style customer service and lowest-common-denominator, we’re-all-equal treatment of people who are used to going first class. Apparently, one of the unwritten ways Canada pays for its health care is to charge the rich for it, then drive them to pay again for better service in the U.S. like what’s done to those who send their kids to private schools in the U.S. (By the way, did you know Newfoundland used to be its own country. It could not pay its bills so the U.K. annexed it into Canada.That was called gunboat diplomacy. Apparently, they still cannot pay the bill for quality health care service.)

Was Obama’s version of “doing something” better than doing “nothing?

Are you kidding? The “problem” was high costs. What does ObamaCare do to lower costs? Absolutely nothing. Part of it spends billions on attacking waste, fraud, and abuse. They should have attacked waste fraud and abuse in 1965 when Medicare started. The anti-fraud billions raise costs. Whether the money will produce a a net benefit when you achieve savings and subtract the cost of the achieving them remains to be seen. Actually, I do not need to wait. There is not a snowball’s chance in La Jolla that waste, fraud, and abuse will be eliminated or even reduced. It is endemic to all government activity. Indeed, I am certain that the bureaucracy created to stop waste, fraud, and abuse will itself have the usual amount of waste, fraud, and abuse, thereby making the waste, fraud, and abuse worse.

ObamaCare is to fixing the high-cost problem of U.S. health care what shooting gasoline from a fire hose is to putting out a fire.

Socialism?

Is ObamaCare socialism? Yeah, of course. So are Medicare, Social Security, and Medicaid. Socialism is not a pass-fail question. It is a matter of degree. Pure socialism is government spending is 100% of GDP. Pure capitalism is 0%. Our spending in 1903 was about 17% of GDP and is now about 45%.

Here is a Web site that says the U.S. spends 19.9% of GDP, 144th out of 160. This is 2006 data. Other major countries on that table come out like this:

Japan 103rd 30.9%
Switzerland 76th 37.8%
Germany 41st 48.8%
U.K. 37th 50%
France 7th 61.1%

Single payer

Obama denies it now, but in the past he said he was a single payer guy. That means total government takeover of health care. All doctors, pharmaceutical companies, hospitals, and medical equipment manufacturers are paid by a single payer: the federal government. That’s the Soviet, Cuban model.

Here is a YouTube of Obama saying this. I saw him confronted with it by a media interviewer. His response: He claimed he could not hear what he was saying on the video they played for him.

That’s lame and he knows darned well what he said. Transcripts of it are all over and Obama and his advisers have discussed it behind closed doors. “I can’t hear it” is the best they could come up with? “I changed my mind” might, I repeat, might be believable. “I can’t hear it,” is not believable.

In the video, he says, “we may not get there immediately.” ObamaCare 2010 is not getting there immediately. But make no mistake, every single hard- core proponent of ObamaCare regards it as merely the camel nose inside the tent. They are not stopping with ObamaCare. They will push for moving to single payer or closer to it as soon as they think they can get away with it. And they will not stop pushing for single payer until they get it. Shame on the American people who believe the Dems have abandoned their dreams of single payer. 2010 ObamaCare is to the left what Czechoslovakia was to Hitler. The British agreed to let Germany have Czechoslovakia to get an agreement that they would seek no more territory. It was called appeasement. The Peace in Our Time Munich Agreement was signed by the British and Germans on 89/30/38. Germany invaded Poland starting World War II in Europe on 9/1/39. Americans who oppose single payer but who are OK with 2010 ObamaCare are clones of British prime minister Neville Chamberlain who sold out the Czechs for a worthless agreement that Germany would seek no greater territory. The left will pursue single payer until they get it and they will use ObamaCare to get American addicted to government health care so they can later get single payer.

The next step will be leftists using ObamaCare rules and law to drive all health-insurance companies out of business. Then they will say, “See!? We told you those people were no good. We’ll take care of you now. And be sure to vote Democratic in the next election—if you know what’s good for you.”

Effects of government intervention

Socialism doesn’t work. Government intervention makes things worse. Here is what I expect will happen as a result of ObamaCare:

• The best and brightest Americans will stop going to medical school.
• Medical students interns and residents will abandon medical school and medical careers.
• Current American doctors will quit the profession or retire early.
• More hospitals and doctors will refuse to take Medicare patients. The Mayo Clinic refused to take them before ObamaCare.
• Your heath insurance plan, and doctor, whom Obama assured you that you would be able to keep, will shut down and no longer be an option.
• The addition of 32 million new insureds and the reduction in the number of doctors will result in a severe doctor shortage that will be partially taken care of by importing Third World doctors who cannot speak or understand English well enough to adequately understand your symptoms, adequately explain your situation and therapies to you, or establish any sort of cultural or personal rapport with you.
• The same will be true of nurses.
• The U.S., which is the last country to aggressively seek new medicines and medical devices, will stop doing that because of lack of profit incentive. The number of new patents for new medicine and equipment will flat line worldwide. Tenured University personnel will putter around continuing efforts to develop new therapies, but without the profit motive, they will do so only at glacial speed. Recently, the rest of the world has gotten away with not doing medical research cause they could count on us to do it for the whole world. When, we, too, allow a government takeover of all health care, neither we nor the rest of the world will be able to benefit from technological progress.
• All prescription medicine will become generic in about 17 years (patent term)
• Hospitals will deteriorate and age more than in the past. As in rent control, the building owners will have no incentive to rehab or replace them.
• Waiting lines will get unbelievably long. Waits for appointments will get longer.
• Many therapies and diagnostic tests will be rationed because the equipment or medicine is expensive.
• All medical personnel from doctors to nurses to orderlies to janitors to administrators will unionize and seek and get generous benefits like retirement when they are in their 40s, suspiciously high rates of disability, cost-of-living adjustments to pensions, high pensions.
• the best people and managers will leave health insurance companies to be replaced by gum-chewing, union, it’s-not-my-job, bureaucrat drones

Author of Is the Welfare State Justified?

On 3/28/10, I heard a brief interview with Professor Daniel Shapiro of WVU. He wrote the book Is the Welfare State Justified?

Basically he said that those who favor government health care and all that are even wrong when judged on their own priorities. Liberals say their priorities are right and those of the right wrong. Shapiro says, OK, let’s use your priorities. He then shows that the priorities of the liberals—like social justice, fairness, and egalitarianism—are better served by letting the market run health care. His evidence is to show how actual market and government health care systems around the world work. For example, in government-run health care systems, the poor end up at the back of long lines and waiting lists for health care. The rich pull strings, use connections, or spend money to get better health care and better service. Plus, the government-run system costs more so there is less health care for everyone, especially the poor, than in a market system.

Shapiro agrees with me that the proper health care delivery system is the 1970s and before approach. You pay out of your own pocket for routine and semi-routine and moderate cost care—like car insurance. And, as in car insurance, you have major medical insurance that only covers catastrophically high-cost care.

Essentially, that is what we will have, either because we are smart enough to recognize it, or because we act like idiots and bankrupt ourselves in which case we will be forced into the pay-your-own-way plus major medical system because we cannot get anyone to lend us the deficit spending necessary to offer Santa Claus level universal health care with no deductible.

Pre-existing conditions

Both Republicans and Democrats agree that pre-existing conditions have to be covered by health insurers. Good for them, but they’re nuts.

By definition, insurance cannot cover pre-existing conditions. Insurance covers risks. There is no risk in a pre-existing condition.

The answer to pre-existing conditions is pre-existing insurance. My sons were covered from birth. That ought to be the case with everyone.

What about people who for one reason or another did not do that or had gaps in coverage which caused them to be disqualified when they attempted to get new insurance?

1. Pay out of your own net worth for the needed health care. Your pre-existing condition is certainly not any one else’s fault.
2. Seek charity from relatives, friends, organized charities.
3. When you run out of money or private charity, go to Medicaid.

A bigger picture solution is to end government and employer involvement in health insurance. This was sort of done with pensions. It used to be that those who lost their job lost equity they had built up in company pensions. The pension was switched to the person, not the company, with 5401(k)s, IRAs, SEPs, and so on. Good law.

The same should be done with health insurance. You buy it from an insurance agent like car insurance or fire insurance, not through your employer. The stupidity of employers providing health care started during World War II as a way to get around another stupidity called wage and price controls. It was a way to give raises. Employers have better things to do than provide health care or insurance, like employ people. The requirement that they provide health insurance deters starting new businesses and expanding them. Everyone should buy their own health care and health insurance the way they buy food, clothing, housing, and so on. That would fix the high cost and rapid price increases too. Only bureaucrats tolerate high, rapidly rising costs. Consumers would shop around and refuse overly expensive treatments.

Letting people with pre-existing conditions buy health insurance that covers that condition is like letting you buy life insurance on dead people or letting people at the race track bet on races after they are over. It’s stupid on its face. People with pre-existing conditions don’t need insurance. They need to pay for their care themselves or get charity.

Essentially, people with pre-existing conditions have long been covered for health care by Medicaid. The real problem is that middle class and affluent people want someone else to pay for their misfortune. They do not want to have to burn through their net worth until they qualify for Medicaid. I understand the economics of their motivation. What I do not understand is why they do not see the economics and fairness in mine. Sorry about your pre-existing condition, but no you may not bankrupt me, my children, or my country to pay for it. You pay for it until you are bankrupt. Then become a ward of the state.

With ObamaCare, the law will now “cover” them, but only briefly before trying to do that bankrupts the insurance companies and the country.

End lifetime policy limits

Another “we can all agree” provision is prohibiting insurance companies from putting a lifetime cap on health care coverage.

Why don’t we repeal the law of gravity while we are at it? That would eliminate injuries from falls.

We cannot force insurance companies to end limits on the amount of are they will provide. They are not bottomless pits of money. All insurance policies have limits.

Of course, ObamaCare went ahead and outlawed lifetime limits anyway. Enjoy it while it lasts. It will bankrupt the companies then the country.

Bankruptcy of the U.S. government

We have been told for decades that Social Security alone will bankrupt the country. It will. The first of the 78 million Baby Boomers still have not yet started collecting. They have to be 67 to get full benefits that are not reduced by their other income. Social Security went into the red—outlays exceeded inflows— in 2008 for the first time in history. The first Baby Boomers turn 67 on January 1, 2013. You have to be 65 to get Medicare. The first Baby Boomers turn 65 on 1/1/11. The 12/9/09 Daily Paul—Congressman Ron Paul’s web site—says,

The 2009 Social Security and Medicare Trustees Reports show the combined unfunded liability of these two programs has reached nearly $107 trillion in today’s dollars! That is about seven times the size of the U.S. economy and 10 times the size of the outstanding national debt.

Actually, the current national debt is http://defeatthedebt.com/debt-clock/?gclid=CJTN99-U06ACFRlRagodeCcRsw.

An Internet article said his about Medicaid unfunded liabilities:

In the next 50 years, Medicaid, the program for the poor — broadly, sometimes very broadly defined — could become a bigger threat than Medicare to the nation’s prosperity.

Even Barack Obama says current U.S. fiscal behavior (spending, taxing, and borrowing) is “unsustainable.” He’s right. Everyone says that. They are all right.

But no one, I repeat, no one, is doing the slightest thing about it. Obama says ObamaCare will reduce the deficit by $118 billion in the next ten years according to the Congressional Budget Office. If you believe that, you are too dumb to vote. Please stay away from the polls. Second, even if it were true, it is a drop in the bucket. The problem is over $100 trillion. $118 billion is one tenth of one percent of the $100 trillion problem.

Basically, the bond market and/or foreign exchange market will go on strike with regard to the dollar at some point. It’s called a run on the dollar. Anyone who owns dollars or dollar-denominated assets like U.S. government or corporate bonds worldwide will frantically try to sell them. That will drive up interest rates dramatically. It may be that no one will buy dollars or dollar bonds at all. In that case, the Congress and the President will not be able to deficit spend. They will have to raise taxes or cut programs drastically to pay the government’s bills. In fact, they will simply not have the money to pay pensions, bond interest and principal, government employee salaries, government bills for ammunition, fuel, electricity, and so on.

That was going to happen without ObamaCare. ObamaCare greatly accelerates it.

So in the end, the issue is not how Obama Care will hurt health care. The issue is when will ObamaCare and all the prior entitlement programs stretching back to 1933 cause the world financial markets to say “No more.” I saw a Harvard economist get asked when that will happen on Charlie Rose or some similar show in 2009. He thought a moment and said,

Five years—not ten.

In other words, he expects the U.S. to go bankrupt in 2015, 2019 at the latest. It’s really not possible to tell. It depends on events worldwide.

ObamaCare, therefore, is not something that you will experience in a hospital or doctor’s office. It is something you will experience on Fox Business TV, Wall Street, at your bank, your 401(k), your IRA, and, after the bankrupt federal government figures out how to pay the judges and bailiffs, in your recently re-opened local bankruptcy court.

Can the “greatest country in the world” actually go bankrupt?

YES WE CAN.

Obama job creation claims and plans

A job is a civilian private sector job. A government job is nothing but the echo of a private sector profit that is partly taken as tax revenue then paid out for government expenses like salaries of government employees. If there were zero private sector jobs in the U.S., there would also be zero public sector jobs.

So the only jobs to be created are private sector jobs.

Government’s only involvement with private sector jobs is to get in the way of creating them or get out of the way of creating them. If they get out of the way, more will be created. If they increase the ways in which they are in the way, fewer will be created.

To say that Obama and his Democrat allies are getting in the way of private sector job creation would be the understatement of the year. Democrats love jobs, but they hate employers. They love jobs, but the hate the profits that motivate and enable private sector business owners to create new jobs.

Obama and his allies have either increased taxes on small business owners or promised to do so. He has promised unspecified change which translates to uncertainty in the minds of businesspeople and investors. Uncertainty, in turn, means “wait” to businesspeople and investors. Waiting means those seeking jobs must also wait until Obama stops confronting job creators with uncertainty that makes them afraid to expand or start new businesses.

Blue and red neon ‘OPEN’ signs

You know those blue-and-red “OPEN” signs you see everywhere nowadays in store windows? Those are the physical, visible manifestations of jobs created. Almost all private sector new jobs are created by brand new private businesses. A typical example would be a family of immigrants from China who work initially in the Chinese restaurants of others then save up enough to open their own. The new jobs created would typically be the waiters, cooks, and busboys they hire.

Do they encounter obstacles to doing that? Yes. They need capital equipment which often requires borrowing. They need permits to sell food and liquor. They may need zoning changes. Are all of the obstacles government? No, but many are. Are the obstacles necessary? Some are. Some are not. Can the federal government help? Yes, they can remove unnecessary obstacles to starting business caused by federal regulations and laws.

Is Obama doing that? Hell, no! He is doing the opposite.

The following are generally favorites of Obama and unfavorites of those who want to expand their business or start a new business:

• unions
• higher taxes
• increased regulation
• more mandates forcing business to adopt pet policies of the left like healthier eating, alternative energy, save the planet, higher mileage

What about those who say healthier eating and saving the planet are good things? So proselytize the public to do that. But don’t force them down people’s throats through those who create new jobs. Creating new jobs is a good thing, too.

No one is opposed to having officials at football games or umpires at baseball games. But sensible people are opposed to either too little or too much regulation of those games. Yet in the context of business, the debate changes to whether regulation, as a generic abstraction, is good or bad. The correct answer is that every human activity needs Goldilocks regulation: not too much, not too little, but just the right amount. Democrats are not seeking the right amount. They are seeking more. Republicans tend to want less, but not so mindlessly.

Going bankrupt

If all regulation were instantly eliminated—say, by the nation going bankrupt—there would instantly be more jobs. But we would also become Somalia.

By the way, I believe it is fair to say that the U.S. is headed toward bankruptcy. Obama himself said so, albeit as a scare tactic to get health care passed. He said we would go “bankrupt,” using that precise word, if his health care was not passed. He is right that the nation will go bankrupt if social security, Medicare, and Medicaid benefits are not cut drastically. But his statement that his health care reform would head off the bankruptcy is the opposite of the truth. His expansion of health care entitlements radically accelerates our financially suicidal path.

The number of observers and experts predicting U.S. bankruptcy is reaching a crescendo. In addition to describing the behavior of the Congress and White House using various words for “crazy,” I also hear words like “unsustainable.” Can it be a self-fulfilling prophecy? Yes. But, if anything, there appears to be a bias in the other direction. That is, people who believe it are reluctant to say it. No intelligent person believes we can continue doing this. No legislator nor Obama is willing to breathe the slightest hint of stopping it. If any Republican gives the slightest hint of reforming Medicare, the Democrats immediately smirk and ask, “So you’re going to cut Medicare?” The Republican instantly swears eternal allegiance to never cutting Medicare.

Medicare will be cut all right, but by the domestic and international bond markets who are currently financing it, not Congress or Obama.

Only a question of when

When will the U.S. go bankrupt? The consensus appears to be five to ten years from now—2015 to 2020. But such predictions are not an exact science. Obama, Pelosi and Reid keep dropping anvils on the camel’s back. At some point, the bond market is going to panic and there will be a run on the dollar and a run on U.S. bonds. You can already see the precursors in gold prices rising in relation to the dollar, foreign currency prices rising in relation to the dollar, China tongue-lashing U.S. fiscal policies and buying commodities instead of U.S. bonds.

What will the run on the dollar and U.S. bonds mean? Higher interest rates. Higher prices on imports which means almost every stitch of clothing on your body, many cars, a large percentage of our food. Probably a deeper, longer recession or depression.

Hyperinflation and financial repression

The U.S. government will probably resort to hyperinflation and financial repression to deal with their inability to deficit spend. Inflation is no longer a powerful enough scam—too many amounts that the government has to pay out (e.g., social security) and collect (e.g., tax brackets) are now indexed, which nullifies the government’s ability to surreptitiously steal from the taxpayers via inflation.

They now need to use hyperinflation which moves too fast for the CPI index to stop it.

Financial repression means force you to put your money in banks that pay below-market interest rates on deposits then force those banks to put your deposits into risky, below-market-interest-rate U.S. government bonds. Essentially, they will force you indirectly to put your cash into unacceptably risky, below-market-interest-rate U.S. bonds. Ultimately, the U.S. will have to eliminate Medicare and Medicaid and cut social security to keep government expenditures within tax receipts. They will try to raise taxes on the rich, but they have gone to that well about as many times as they can. They need to raise taxes on the people whose taxes they have been cutting: the middle class and lower class. It’s called broadening the tax base.

I doubt anyone currently in Congress or the White House is capable of that. If so, the U.S. government will force you to buy its bonds directly or indirectly, then default on them.

The right amount of regulation reduces jobs somewhat, but it gives us an appropriately civilized country. Too much regulation, as now, gives us 10% unemployment. The additional regulation and taxation pushed by Obama in health insurance mandates and cap & trade would dramatically reduce the number of existing jobs and the number of new jobs created.

The government, at all levels, needs to remove all unnecessary or not cost-effective barriers to entry (starting a business) and barriers to exit (going out of business). They need to remove all barriers or discouragements to hiring (like minimum wage, mandatory employee taxes and insurance) and to firing (like requirements that a plant give notice before closing).

What Obama really wants

Obama does not give a rat’s rump about job creation. All he cares about is persuading the American people to believe that he has created jobs. It’s not that he believes perception is reality. He just thinks reality, truth, and all that are irrelevant. FDR wrecked the U.S. economy and turned a recession that would normally have last a year or so into a permanent depression that only ended when World War II arrived. 75 years later he is still beloved by tens of millions. Obama looks at that and concludes that the mere perception of job creation is close enough for government work to actual job creation.

Obama wants the U.S. public to believe he has created millions of union jobs. He talks about private-sector jobs, but if he can get away with it, he will create nothing but government jobs for SEIU members.

Economist Milton Friedman once observe thousands of Indians with shovels digging at some government construction project in India. He asked why they were not using more efficient motorized backhoes, bulldozers, road graders, and so on. The official wearily explained that it was a jobs program. Using heavy construction would reduce the number of jobs. Friedman then suggested they replace the shovels with spoons.

If Obama thought he could get away with it, he would switch to union spoon-ready, rather than shovel-ready, government make-work projects. That’s what FDR’s Civilian Conservation Corps was. It was out in the boondocks only because the unions demanded that no such non-union jobs be near populated areas where their unions were. My Uncle Frank was killed when he was in the CCC by a truck backing over him—in Sitka, AK—far from any objecting union.

Poor countries recover faster

Page 169 of the 2009 book This Time Is Different: Eight centuries of financial folly, says developed countries take longer to recover than poor ones. Why? During crises, like wars and depressions, rich countries turn socialist with stimulus packages and such which they finance by borrowing.

Why don’t poor countries do that? They can’t.

In one of his movies, actor Richard Burton had a memorable line,

She believed in free love and, at the time, it was the only kind I could afford.

Poor countries resort to free-market solutions to crisis because it’s the only kind they have the money to pay for. They get better faster than rich countries because socialism doesn’t work.

If Obama really wanted to create jobs, he would emulate the poor countries who lack the credit cards to play welfare state. He said he was going to make sure not one dime of taxpayer money was wasted. In fact, Obama is more interested in making sure he does not leave one dime of unused credit on the United States credit card for his successor.

Productivity growth

The sole source of prosperity in the post war U.S. has been productivity growth. That’s an economist word. It just means learning more efficient ways to do things. For example, I attended a panel discussion on stopping piracy in Somalia. They said one of the problems was the merchant vessels have tiny crews. The government-run ship the U.S.S. Ronald Reagan has a crew of 5,700. It is 1,000 feet long. The biggest oil tankers are five times as big as the Ronald Reagan in terms of weight. If I recall correctly, the panel said those huge oil tankers have a crew of 28 or so. At least one-third are sleeping at any given time. Pirates attack at night.

But I digress. The fact that modern, private enterprise, non-union, non-U.S. flag ships can operate with 28 guys contrasts dramatically with the lack of productivity improvement on the government navy ship. Socialists would say that the U.S.S. Ronald Reagan is more of a job creator. Actually, the opposite is true. Wasting money on too many people doing a task inefficiently raises prices of the goods or service in question which, in turn, means less money to hire more workers elsewhere. America and the world are far more prosperous than 40 years ago precisely because it now only takes 28 guys to staff an oil tanker and similar productivity gains have occurred all over our economy. (In the interest of full disclosure, some new U.S. Navy ships have much smaller crews than they did several decades ago. Fletcher class WW II 3,000-ton destroyers had 330 men. The proposed DDG-100 class of new 14,000-ton destroyers will have 150 crew members and in some respects are more powerful. On the other hand, I believe all navy surface ships have been obsolete since about the mid 1950s. But I digress again.)

So how do we improve productivity? Innovation. Automation. De-unionization. Stronger patent and copyright laws. Grant more H1b visas. Make it easier to fire workers (productivity means doing more with fewer workers). Treat capital expenditures more favorably taxwise for businessmen who invest in productivity-enhancing plant and equipment (generally, productivity gains come from employing more capital, that is, plant and equipment and automation, per worker). Get rid of tariffs and other trade barriers to maximize competition thereby giving our businesses more incentive to innovate than any other country in the world. Reduce penalties for business failure and barriers to entry into and exit from business.

Any of that sound like Obama? No. It is all the opposite of Obama. He is the president of the unions who are Luddites. They hate productivity gains. They want to be paid more for less work. Productivity gains mean more production from fewer workers. They hate almost everything on this list and Obama’s attitude is the enemy of my friend is my enemy. Same is true of Democrat politicians in general. They love jobs but they hate employers. And they cannot, or will not, see the big picture that free trade and innovation and the rest of it ultimately mean more jobs for all in spite of the creative destruction that it causes to specific easily identified small vocal unionized groups.

The green movement is really the red movement in disguise

The new book Superfreakonomics by Steven Levitt and Stephen Dubner tells two quick, cheap ways to end global warming. I saw the authors interviewed in person at the Fairmont Hotel in San Francisco and on various TV shows.

Garden hose to the sky and puffy clouds solutions

According to the results of what I call an unethical experiment, we can lower the temperature of the earth by 1 degree fahrenheit, the amount by which it heated up during the entire 20th century, by putting sulfur dioxide into the high atmosphere.

An unethical experiment is one that no ethical human would have initiated, but which gets initiated accidentally or by nature. For example, much of what we knew about the brain before World War II came from study of persons who survived severe brain injuries, like a javelin that accidentally went through their head. Doctors could see the part of the brain the javelin went through and test the person in question to see how their brain function had changed. Another is identical twins being separated at birth which helps identify human characteristics that stem from DNA versus how you were raised.

In the case of chapter 5 of Superfreakonomics, the unethical experiment was the eruption of volcanoes. We know that after big volcano eruptions, the earth cools. We also know it’s because volcano eruptions hurl sulfur dioxide into the high atmosphere. The sulfur dioxide reflects about 1% of the sun’s heat rays away from earth.

Nathan Myhrvold, former chief technology officer at Microsoft, says we can artificially create the volcano cooling by putting an 18-mile long long “garden hose” at the north and south poles that goes straight up to the stratosphere and pumps liquefied sulfur dioxide into the high altitude air. Yes, sulfur dioxide causes acid rain. But the amount coming out of the “garden hose” would be a tiny fraction of one percent of the amount normally produced by natural and man-made sources. The difference is getting it up into the stratosphere rather than the troposphere, the layer at the earth’s surface.

Puffy white clouds

Clouds also reflect the sun’s heat away from earth, thereby lowering earth’s temperature. There’s plenty of data on that unethical experiment, too.

Can humans make more clouds? Sure. Ever seen the contrails of a jet? The grounding of most U.S. jets after 9/11 for just three days raised the earth’s temperature a measurable amount by reducing the contrails.

The cheaper way to make clouds is to spray salt water out in the middle of the oceans a few yards up in the air. It then rises on its own up to cloud level. Myhrvold proposes doing that with a fleet of wind-powered boats that would cost a few billion total.

Reaction of the green movement

Al Gore’s reducing-carbon solution is questionable as to its effectiveness. Plus it would take hundreds of years to work. Carbon dioxide is a tiny fraction of one percent of the atmosphere. Myhrvold’s approaches are proven and would work immediately. Plus, they cost next to nothing compared to cap and trade taxes.

So the stop-global-warming people are thrilled with Myhrvold and Superfreakonomics, right?

Au contraire. They reacted with green road rage. Levitt discussed it extensively at the Fairmont.

Why? I thought they wanted to save the planet?

Apparently not. What they want is a way to jerk capitalists around. They hate the garden hoses to the sky and boats that make puffy clouds solutions because they do not let them jerk capitalists around for 400 years.

OOgo Chavez gets biggest applause at Copenhagen ‘climate change’ summit

At the 12/09 Copenhagen U.N. Climate Change Summit, Hugo Chavez, the nutty quasi dictator of Venezuela got huge applause. What new scientific data did he provide? Why was he even there at all?

He said the process in Copenhagen was “not democratic, it is not inclusive, but isn’t that the reality of our world, the world is really an imperial dictatorship…down with imperial dictatorships.” [Rousing round of applause]

[There was a] “silent and terrible ghost in the room” [a ghost called capitalism] [even louder applause]

“our revolution seeks to help all people…socialism, the other ghost that is probably wandering around this room, that’s the way to save the planet, capitalism is the road to hell….let’s fight against capitalism and make it obey us.” [standing ovation]

The green movement is the red movement in disguise

Like I said, the green movement is nothing but the red movement in disguise. If you pay attention, the truth leaks out in unguarded moments—especially when they gather in large groups and feed off each other. The anti-climate change movement is supposed to be scientific. So how come its conference looks, indoors and out, like the Socialists Workers Party Convention?

Because it is.

Nathan Myhrvold, a respected scientist, has come up with cheap instant solutions to the alleged problem. So why aren’t the global hot air people thrilled to death? Why aren’t they at least calling for trying his solutions to see if they work?

Because they have no interest in the physical planet. They are only interest in controlling the planet politically.

Obama’s stash

Obama promised the Copenhagen meeting $100 billion to help poor countries cut their emissions.

Where’s he gonna get that? His stash

What the ObamaCare and Cap & Trade laws are really about

Why don’t they understand that socialism does not work?

Ever since I became old enough to figure out that socialism doesn’t work—at around age 22—I was perplexed that liberals still want it. Why don’t they see capitalism is better and that economic freedom is necessary for all the other freedoms?

People who work for the government do not have freedom of speech. They are afraid they won’t get promoted or may lose their pension and other benefits. Similarly, a nation that gets all its health care from the government is a nation that is afraid to criticize the government out of fear that they or their relatives or friends may be retaliated against by the rationers.

Joseph Schumpeter

Joseph Schumpeter was a Harvard economist. He invented the phrase “creative destruction” to describe the effect of entrepreneurs. He also said entrepreneurs and their innovations were the engines of prosperity Liberal Harvard economist John Kenneth Galbraith said Schumpeter was the most sophisticated conservative of the twentieth century. Schumpeter was the subject of the 2007 book Prophet of Innovation by Thomas K. McCraw.

Schumpeter was the polar opposite of John Maynard Keynes. Both were born in 1883. As a young professor in Europe, Schumpeter was perplexed by intelligent leftists not recognizing that capitalism was infinitely superior to socialism as a way to organize a society and an economy. Indeed, one of my Harvard Business School section mates, Michael Rothschild, wrote the book Bionomics which says capitalism is analogous to the way the plant and animal kingdoms are organized and operate. In other words, capitalism is the all-natural, organic way of organizing living things.

Schumpeter finally figured it out. As have I reading about him and seeing other evidence of it.

Social justice

The left does not care which system produces the most prosperity or freedom. They want power. Dictatorial power. They are not in favor of anything. They hate capitalism because it lets the “wrong” people win. People like Sam Walton, founder of nonunion Wal-Mart. He was the richest man in the world for a while. His company is still the biggest in the U.S.

The left does not want maximum prosperity for all. They want all rich people who disagree with them to be stripped of their money. They understand that this will impoverish all but the government apparatchiks. That is what they want. They plan to be government apparatchiks. The left wants to wipe off the face of the earth anyone of whom their side is envious.

Journal editorial

The 11/10/09 Wall Street Journal has an editorial titled “Confessions of an ObamaCare backer.” It is about remarks recently made by leftist John Cassidy of the New Yorker magazine.

Cassidy, the Journal said, “let the mask slip” briefly and revealed the “real political motivation” behind ObamaCare. I add that the same motives are behind cap and trade and a great many other leftist initiatives. The green movement is nothing but the red movement in disguise.

Cassidy continues:

The Obama Administration…is creating a new entitlement program, which, once established, will be virtually impossible to rescind. [The reason is] making the United States a more equitable country

The Journal says the “…purpose is to further redistribute income by putting health care under government control, and in the process making the middle class more dependent on government. As the party of government, Democrats will benefit over the long run.”

The Journal says this explains why the Democrats are not afraid of angering the public by going against their will and even losing many purple district seats in the 2010 election. They figure if they can get this law enacted, they will be like drug dealers living off a nation of entitlement addicts within the next ten years and the few losses in 2010 will be irrelevant ancient history as the U.S. becomes a one-party nation.

The nation is going bankrupt because of Medicare, Medicaid, and Social Security, but there are no Americans who want to reform any of those three programs. Indeed, the mere suggestion of such reform is the “third rail of American politics.” Even the slightest criticism of any of those programs dooms the Republican who dared to suggest it. The Democrat program is to make their party platform in its entirety the third rail of American politics. And there is no indication whatsoever that they will not succeed after the push they got from George W. “TARP” Bush and the Wall Street plutocrats in 2008.

More Cassidy:

Putting on an amateur historian’s cap, I might even suggest that some subterfuge is historically necessary to get great reforms enacted.

Translation: Our noble end of turning America into a Democrat party dictatorship justifies our means, namely, lying about our motives.

Rush and Sean

The main guys who have figured this out and who are condemning it for what it really is are Rush Limbaugh and Sean Hannity. I have trouble finding fault with Limbaugh. Hannity, on the other hand, is not quite smart enough to hold the position he does, and he admits using tedious repetition of his propaganda phrases, like “unrepentant terrorist Bill Ayres,” to brainwash his listeners and viewers. He is also often incorrect, for example, with regard to his worship of Ronald Reagan. Reagan’s actual record is far more mixed than Hannity understands or admits.

You can measure the preeminent effectiveness of these two men by how hard Obama and his people are trying to stifle them through proposals to bad mouth them and to censor them through misleading proposals like the one to require local ownership of radio and television stations.

The problem with these two men being the main leaders in our nation against what the Democrats are trying to do is they are both ratings-seeking entertainers. They do, indeed, maximize their ratings by their mixture of humor and exaggeration, relative to other entertainers or headline news-type programs, but they simultaneously limit their audience in the wider population. Most importantly, their entertainment focus causes the majority of American to not take seriously the evidence they present and the logical conclusions they draw from that evidence.

I am a libertarian, not a conservative or a Republican.

The solution to all this is a third party. The libertarian ideas are generally the right ones. I do not endorse their actual platform in its entirety. It includes stuff like opposition to the draft and recreational drug regulation.

Are the Libertarians as a party poised to start winning elections? Not at all. They are talkers, not doers. They almost never elect a Congressman, let alone a president so they do not really have the organization or skills to win a majority. They have the ideas. I think most Americans today are actually libertarians but they either do not realize it or refuse to admit it. My mom was a Catholic, but I call her a social Catholic. I think she was actually an atheist based on knowing her for 47 years, but she would have vehemently denied that out of fear of it harming her relationships with her friends and relatives—who were probably also actually atheists. People who do not admit to being libertarians are afraid it might adversely affect their social status.

But ultimately, socialism does not work. Ultimately, the Democrats, with plenty of help from Republicans, will bankrupt the country. Best guess as to when? 10 to 20 years.

Harvard economist Kenneth Rogoff just came out with a new book This Time Is Different: Eight Centuries of Financial Folly. On Charlie Rose on 11/10/09, he was asked how long until the irresponsible U.S. government fiscal policy (taxing and spending) triggers a catastrophe. He said something like, “Probably five years. Sooner than 20.”

When that happens, the public will turn to a third party. Unfortunately, no third party is currently ready to turn that support into electoral victory in Congressional and presidential elections.

Global warming

It would take an encyclopedia to cover the global-warming debate. I will not write that much, but I want to go on record about it to an extent.

Definition

The phrase “global warming” suggests nothing more than a series of scientific temperature readings. But thanks to Al Gore and others, it has taken on a much larger, political meaning, namely,

The earth is rapidly getting catastrophically warmer because of increased burning of fossil fuels by humans and emergency laws must be passed to reduce that burning of fossil fuels to Nineteenth Century levels.

Warming?

Is the earth warming? According to the Intergovernmental Panel on Climate Change, the temperature of the earth rose a total of .6 degrees Celsius between 1900 and 1999. .6 degrees Celsius is 1.08 degrees Fahrenheit. That’s the total, cumulative 100-year change, not the annual change.

Like many, I wonder how they measure that, and where. If they use a rectal thermometer, my guess is they stick it in Mogadishu.

And excuse me, but how is a 1.08 increase in temperature over 100 years an emergency or even noteworthy?

‘Climate change’

After being embarrassed by numerous incidents of cold weather, the leftists changed the name of global warming to “climate change.” Now they get to bitch about and say “we told you so” in response to any weather other than average. My Harvard Business School classmate, Orit Gadiesh, is head of Bain and famous for the comment, “The average person has one tit and one ball.” There’s also the old chestnut that you can drown in a pond with an average depth of six inches. As any bell curve graph of data can confirm, if you get to use all data other than average to gain political power, you will be powerful indeed.

It’s always warming or cooling

In his book Myths, Lies, and Downright Stupidity, ABC 20/20 reporter John Stossel reproduces a graph of the earth’s average temperatures for the last 4,000 years. The so-called global warming about which Al Gore is so excited is a barely visible, tiny uptick just before the end of the graph. It is the smallest movement up or down on the 4,000-year graph. Earlier periods show much bigger upward and downward movements. They also show that the earth’s temperature has never been stable. The global-warming movement would have you believe it has always been stable until SUVs.

We did have a bunch of ice ages you know. The fact that they all ended indicates there must have been some big-time global warming back then, not just 1.08 degrees in 100 years. And most of that big-time global warming occurred before the human race existed, let alone before suburbanites began driving SUVs.

You can probably find the graph on the Internet. It is from the NOAA Paleoclimatology Program and World Data Center for Paleoclimatology in Boulder, CO.

Man-made

What about the notion that humans caused the 20th Century increase in temperature by driving cars more and having air-conditioning?

According to page 202 of Stossel’s book, since half of the 1.08-degree increase in earth temperature came between 1900 and 1945, and the use of fossil fuels was low then and did not dramatically increase until the 1950s and thereafter, it would appear that the cause is not humans burning fossil fuels.

Politics

Liberals would have us believe global warming is scientific fact. If it is scientific fact, why is it a liberal/conservative debate? Liberals and conservatives are not scientists, they are political advocates.

When politics gets involved, facts and truth go out the window.

It has been well said that the green movement is really the red movement in a disguise. The red movement—Communism and socialism, class hatred, profit hatred, and all that—has been discredited by having been tried in numerous countries. One of the great stories of the last several decades is the collapse of Communist and socialist economies because it simply does not work, and the replacement of those economic systems with capitalist ones. Unprecedented capitalism-created prosperity now characterizes formerly socialist countries like Russia, Eastern Europe, China, India, and Vietnam.

The emergence of the green movement now is an indication that the reds never were in favor of prosperity to begin with. They just hate those who win when competition, not politics, is the criterion as it is in free economies.

So now they are claiming to be green to save the earth, just as they claimed to be red to save the “workers of the world” before. In fact, they were red, and are now green, to jerk around those who succeed when competition decides the winners.

Global warming and the wider green movement is just a disguised effort to establish government control of much of the economy—the same sort of government control that socialism sought, obtained in many countries, then lost because of its massive failures.

Columnist Thomas Sowell calls it “Global hot air.”

6/26/09 Wall Street Journal article

The 6/26/09 Wall Street Journal had an excellent article by Kimberly Strassel. It was titled “The Climate Change Climate Change.” It listed people who dispute the so-called “consensus” of scientists who agree with the leftists on man-made climate change. Here are the noteworthy persons and groups in the article who dispute the existence of man-made, deleterious, reversible climate change:

Steve Fielding, Australian Senator
Polish Academy of Sciences
Vaclav Klaus, President of the Czech Republic
89% of Czech people in polls
Nicolas Sarkozy, President of France
Claude Allegre, French Minister of Industry and Innovation and former global warming supporter who retracted that position
The new parliament of New Zealand which promptly stopped the country’s cap and trade program
700 scientists as counted by Senator Jim Inhofe (OK)
Joanne Simpson, first female PhD meteorologist who revealed her opposition only after retiring out of fear for her job
Dr. Kiminori Itoh, Japanese environmental physical chemist who contributed to U.N. climate report supporting global warming
Ivar Giaver, Nobel Prize-winning physicist from Norway
54 physicists led by Princeton’s Will Happer who demanded that the American Physical Society reverse its position that global warming science is settled
Dr. Ian Plimer, Australian geologist

This is not a comprehensive list.

Melting icebergs

Global warming advocates say the higher temperatures will flood low-lying areas of the world including the coasts of the U.S.

Let me be Mr. Wizard for a moment. Get a glass of water and add ice cubes until it is almost at the top of the glass. Let it melt, then see how much flooding (overflow out of the glass) occurred. As you will see, it will be zero.

Why? Laws of physics.

Ice is frozen water. When it freezes, water in the form of ice takes up more space than the water it is made up of. That’s why frozen pipes or soda bottles burst when they freeze. Icebergs occupy more space than the water they are made up of occupied before they froze or will occupy after they melt. That’s why ice floats. It is less dense than the water it is in.

Furthermore, the tip of the iceberg that sticks above the water is precisely the amount of the increased volume. In other words, when the ice in your full glass of ice water melts, even though the ice stuck above the top of the glass, it will still precisely fill the glass, no less and no more.

Like a boat, ice floats by displacing its weight in water. Since it is less dense than water, it goes to the surface. But when it melts, it becomes water again so it occupies precisely the same volume of water as it displaced when it was ice. Melting water changes (reduces) its volume, but not its weight. When it goes back to being water, it occupies the exact same volume as the water it displaced when it was ice, therefore there is no flooding.

This applies to all floating ice including the entire Arctic (north) polar ice cap. The north pole has no land under it. Global warming advocates say the north polar ice pack will entirely melt in future summers. Whether it does or not will have no effect whatsoever on sea level. All of that water, whether in the form of ice or not, is already in the sea.

Glaciers

Glaciers and other ice and snow that are on land are another matter. When they melt and run into the sea, the sea levels can rise. That’s because they were not in the sea at all until they melted. Antarctica (South Pole) has some land under it.

Carbon?

The global warming people keep talking about carbon. How many tons of it we awful humans are putting into our air? Carbon offsets. etc.

Carbon?

Carbon is a black powder. Charcoal briquettes are carbon. It’s actually used to clean air in gas masks, kitty litter, and to clean water in filters.

Global warming is caused mainly by water vapor (clouds) (Here is an article about that aspect of it. ) and to a slight extent by carbon dioxide. To talk about carbon dioxide as if it were the same as carbon is like talking about lightning bugs as if they were the same as lightning.

Carbon dioxide is an odorless, colorless, non-poisonous gas. Plants need it to thrive. It comes out of your mouth and nostrils every time you exhale. Dry ice, which is white not black, is frozen carbon dioxide.

By speaking of carbon dioxide as carbon, they make it sound like dirt. That’s dishonest.

Components of air

How much carbon dioxide is now in the air after 100 years of it increasing “catastrophically?”

Would you believe 383 parts per million? European leftists were forming the number 350 with mobs of people in late 2009. Why? That’s what they want the number of parts per million of carbon dioxide reduced to. Why? It’s an excuse to take billions from corporations and spend it on their pet, and not cost-effictive, “alternative” energies.

Air is about 78% nitrogen, 20.95% oxygen, .94% argon, 1 to 4% water vapor, and .04% carbon dioxide. See the Wikipedia article on it for more details.

If you drew a pie chart of the components, carbon dioxide’s slice would be invisible unless the pie chart were enormous.

Lawn watering

The same liberals who are now out to get carbon dioxide out of the atmosphere are the ones who live in the city and got my suburban neighbors and I to pay punitive rates for the water we put on our lawns. Those lawns convert carbon dioxide to oxygen. Those lawns remove carbon dioxide from the air. They remove “carbon” from the air if you want to play the “carbon dioxide = carbon” semantic game. Why are my suburban neighbors and I not getting medals for our fight against global warming instead of being punished for our cultivation of beneficial plants like grass?

Drowning polar bears

The claims that polar bears are drowning because they cannot swim to the increasingly-far-apart ice floes are ridiculous.

The before and after aerial photos showing glaciers moving north only show hundreds of yards or a couple of miles movement. The polar bears wouldn’t even notice such things over 100 years. Plus they are not going to sit on a piece of ice until it gets out of sight of all other ice or the main ice pack. That has always been a danger to them throughout their existence, global warming or not. If the ice is really melting, all it will mean for polar pears is that they move north at an imperceptible rate over decades.

The ‘right’ temperature

Underlying all the global-warming doomsdayism is the notion that the temperature of the earth in 1900 was the “right” temperature.

Says who? Based on what? Seems to me the right temperature, if humans are going to get into the business of setting the planet’s temperature, would be the one that produces the highest world-wide crop yield on land masses and the minimum need for heating and air-conditioning where humans live.

Go continent by continent. The widest mass of land in South America is between the equator and 15º below the equator. Here is the complete list:

Continent
Latitude of greatest width
South America equator to 15º south
North America 30º north to 70º north
Europe 45º north to 60º north
Asia 25º north to 70º north
Africa 5º north to 30º north
Australia 15º south to 35º south
Antarctica Forget about it. We’re not going to grow crops or live there

As this table shows, the greatest earth land mass is between 25º and 70º north. OK. If we humans are going to decide the planet’s temperature, optimize those latitudes for growing crops and minimizing heating and air-conditioning cost.

Would that, by great coincidence, be the temperature of the earth in 1900? I doubt it. Probably it would be a warmer temperature.

In other words, the earth would likely better off if it were warmer. Maybe not the Maldives Islands, who recently held a government meeting in SCUBA gear underwater. But then dopes who build cities almost at sea level, or below sea level like New Orleans, deserve the floods they get.

Permafrost turning to mud

On 6/2/07, news accounts said that some Alaskan village built on permafrost was having trouble because the permafrost melted. The permafrost turned to mud. They had to build wooden sidewalks and the houses were tilting because the permafrost had been their “foundation.” So move. That was a stupid place to live to begin with, not unlike locating New Orleans on the Gulf of Mexico and below sea level.

What’s more important, letting some strange people live in a village on top of a previously frozen swamp or growing more crops in Canada and Siberia?

Never give a date

Economists joke about their predictions that they frequently give a number or a date but never both.

The idiot global-warming advocates should have followed that con-man advice. But they have given a number and a date. They say that widespread flooding and disaster will occur in 2020. That’s just 10 years away. I expect we will be done with them then as a result of their prediction not coming true.

Global warming reminds me of the fall-out shelter craze of the 1950s and 1960s, the OPEC oil “crises” of the 1970s, and the millennium bug hysteria of the late 1990s. Its dupes are going to be embarrassed. Don’t be one of them. I have a couple of Web articles about the recurring prophets of doom in finance and other areas like food shortages, oil, population, and so forth at http://www.johntreed.com/doomsday.html.

Religious discussion

I generally do not get into religious discussions because there is no convincing the true believers to change their minds. Global warming is a religious discussion. That is, its advocates will listen to no logic or facts that do not support their position. But when religious nuts, whether they go to church or not, start to change public policy in ways that affect me, I have to speak up.

8/13/07 Newsweek cover story about us ‘deniers’

Newsweek used to be generally a great magazine with a well-deserved reputation. But global warming seems to cause yet another derangement syndrome and Newsweek is not immune. Let me just make some comments about the various call-outs in the article. A call-out is a brief summary quote as opposed to the main body of the article.

Newsweek statement Reed response
Swedish chemist quantified how much the earth was warming due to carbon dioxide emissions in 1896 chemists do not measure the earth’s temperature; 1896 science should hardly be a basis for Twenty-First century policy decisions
Senator Al Gore holds hearings on climate change in 1988 patient zero
an unnamed study says climate change was a factor in the extinction of Coast Rica’s golden toads “a factor?” That’s pretty weak. How sure are they? How much of a factor? What were the other factors? Should world policy be set by a Costa Rican toad? Species have been going extinct continuously since the beginning of time, including before humans existed. It’s not always our fault.
Science and Environmental Policy Project pursues a media campaign to discredit evidence of global warming And the liberals are not pursuing a media campaign to credit evidence of global warming!? They won a freaking Oscar for their media campaign!
North American tree swallows are laying their eggs an average of nine days earlier than they did in the late ’50s. The article does not say this is due to global warming or how the average date of egg laying relates to the late ’40s, late 60s, or late 20s. In other words, this is pure innuendo; a non-denial denial of the skeptics’ claims.
Exxon gives several groups that question man-made global warming $19 million over the years So? Plenty of money is being given and spent on both sides. If Newsweek had evidence that the groups in question were lying, they should have presented that, not innuendo based on some vague notion that Exxon is evil per se. And that Exxon-haters are virtuous per se. Exxon is being accused of destroying the planet. They need to defend themselves.
mentions record-breaking forest fire season and the hottest year on record in 1997 and 1998 So? The magazine does not offer any evidence or even a statement that either was related to global warming. More innuendo.
Heat wave in 2003 kills 15,000 people in France alone expected to become more common in a greenhouse world No evidence or even statement that global arming caused by man-made carbon dioxide caused the heat wave. Begs the question of whether there is or ever will be a greenhouse world. Just says if there is a greenhouse world, such events will become more common. That is a conditional, tautological (by-definition) statement. Left unanswered is whether man-made warming caused the heat wave. They simply suggest such warming could cause similar events in the future.
2005 Katrina prompts debate over whether hurricane was result of climate change More innuendo. No evidence or statement that Katrina was caused by man-made global warming. Absence of Katrina in 2004 and 2006 not cited as evidence of lack of global warming. It’s heads global warming advocates win and tails global warming skeptics lose. No matter what happens or doesn’t happen, it can be cited as evidence of global warming but not as evidence of lack of global warming.
Senators Olympia Snowe and John D. Rockefeller IV demand that Exxon stop funding groups whose public advocacy has contributed to the small but effective climate-change-denial myth. In other words, stop the heresy. It is not protected by the First Amendment. No longer any need to prove global warming. Any skepticism about it is now officially a myth. Since when do we rely on politicians for scientific truth? Obviously, their constituents believe in global warming and they want to get re-elected.
naysayers vs. consensus Over the years, the consensus said that the earth was flat, the universe revolved around the earth, trauma caused cancer, leeches would make you healthy by removing bad blood, Pluto was a planet, minorities and Jews were inferior, etc., etc.. Basically, the consensus has a poor track record and a bad reputation. Evidence is what matters. We do not take a poll to see what causes cancer.
aerial photo of 1,255 square-mile ice area calving off into the ocean in Antarctica in 2002 No mention of whether any such thing every happened before Al Gore got hot on this subject.

Newsweek also has an economics columnist: Robert Samuelson. Here, from his 2008 book The Great Inflation and its Aftermath, is his nice way of saying that global warming is dangerous bunk.

…an uncritical reaction to the possibility of global warming that may cause us to undertake costly policies that, in the end, do little to affect global warming but do weaken our economy’s performance.

He addresses global warming in detail on pages 237 to 242. He says about the same thing I do, although he tries to be more politically correct in his wording, I assume so he can keep his jobs at Newsweek and the Washington Post.

One of Saumelson’s summary paragraphs on global warming says this,

For now, anything that would sharply reduce the greenhouse gases requires shutting down large parts of the global economy…Measures short of that may be economically costly as well as ineffective. Only major technological advances can break the dilemma. Will we admit this? It seems doubtful. Our politics seem predisposed toward denial. We won’t admit the inconsistence, conflicts and simplicities of many appealing goals. We strive for the impossible and ignore the obvious.

And here is a general comment about do-gooders:

Half the harm that is done in this world is due to people who want to feel important. They don’t mean to do harm– but the harm does not interest them. Or they do not see it, or they justify it because they are absorbed in the endless struggle to think well of themselves.

T.S. Eliot in The Cocktail Party, p.111)

John T. Reed

What Al Gore left out of his movie: the 800 year lag

by Dan Reed

Does CO2 have a strong effect on global temperatures? Al Gore shows a graph in his film An Inconvenient Truth where CO2 levels and global temperatures have a strong correlation to one another (based on the Vostok ice core samples). Both graphs are displayed on the big screen behind them, and he asks "Did they ever fit together?" Yes, Al, they definitely do fit together. He says the relationship is “complicated," but that the correlation shows that CO2 increases cause global temperature increases. That is certainly one possibility when you have a correlation, but it is not the correct conclusion in this case. If you zoom in on the graph, you find the exact opposite of Gore’s claim; the temperature change comes first, then the CO2 follows. CO2 changes in the graph lag 800 years behind the temperature changes.

"The scientists working on the Vostok ice core report that temperature changes PRECEDE changes in CO2 concentration by about 800- to 1,300 years." (TucsonCitizen.com)

In other words, the earth gets warmer first, and that warmth appears to cause CO2 levels go up, not vice versa as Gore asserts. It would be like trying to tell you ocean tides are responsible for the moon’s gravity. Gore has swapped cause and effect. This is the same data from the Vostok ice core research that Gore uses. Search for “Vostok ice core 800 year lag” yourself on the internet to see for yourself. The scientists that collected the data acknowledge the 800 year lag. So the very ice core samples that Al Gore cites as his evidence for why human carbon dioxide emissions are causing warming, in fact, show the exact opposite.

Ice core samples show no evidence that CO2 causes global warming

This phenomenon of temperature changes causing atmospheric CO2 changes is explained in many places online including a British documentary, The Great Global Warming Swindle. The short explanation is global temperature affects the solubility of carbon dioxide in water. In other words, when global temperatures decrease, the oceans dissolve more CO2, lowering atmospheric CO2. When global temperatures increase, the oceans dissolve less CO2, raising atmospheric CO2. The documentary also shows a much better correlation to global temperatures than CO2, which I will discuss below. (Go to timestamp 35:00 in the video to see)

What this means is the entire premise of An Inconvenient Truth is false. With a straight face, Al Gore shows you evidence that suggests heat increases CO2, but tells you the opposite. He just flat out lies about the details of the correlation that he cites as his powerful piece of evidence. The reason he gets away with this is because the x-axis of the graph cover over 600,000 years, so the 800 year lag is to miniscule to see with the naked eye. If you zoom in on the graph, the lag is clear.

You don’t have to be a climatologist to grasp the fundamental fallacy of carbon dioxide’s relationship to the greenhouse effect and global temperatures. As my father pointed out above, and the Swindle documentary as well, water vapor is by far the biggest greenhouse gas, yet most discussions of global warming never mention it. The Swindle documentary goes on to explain how so many scientists and journalists could miss such a glaring fact.

Most importantly, the documentary finds a variable that correlates even closer to global temperatures than CO2, and in the correct direction. Any guesses on what the variable is? SOLAR ACTIVITY. Imagine that. That big ball of exploding fire in the sky is the biggest factor.

-Dan Reed
(dan@johntreed.com)

AIG bonuses

Politicians have been howling in the middle of March, 2009 about AIG paying $165 million in bonuses primarily to the small group of traders in London who created the massive losses at AIG. AIG received $170 billion in U.S. taxpayer bailout money so far.

One tenth of one percent

First, put the amount in perspective. It is one tenth of one percent of the bailout amount received by AIG.

Go over the contracts

Second, lawyers told AIG it is contractually obligated to pay the bonuses. I agree with Senator Mitch McConnell R(-KY) who said the contracts in question need to be looked at to see if AIG can get out of them. It seems dumb to reward the guys who caused these unprecedented losses.

Seems like AIG should be suing them for the massive losses and they should be prosecuted criminally for what they did—not for receiving the bonuses which is a separate act. Any bonuses they received should be subject to a preliminary injunction that irreparable harm would be caused if the bonus proceeds were not frozen now because of the pending litigation’s likelihood of success and the need for the winning party in the litigation to get the bonus money back pursuant to the judgment.

In other words, do not dispute that they are entitled to the bonuses in accord with the contracts, but say separately that they owe more money than the bonuses because of misbehavior that caused huge losses.

Geithner led the bailout

Democrats have blamed this on Bush. However, apparently, Bush let Obama’s Treasury Secretary nominee, Tim Geithner, take the lead in the bailout of AIG. Geithner, who looks more and more like a teenager who has been called on by his teacher on a day when he did not do his homework, apparently did not consider the bonuses when structuring the bailout terms.

Bonuses paid to the perpetrators of the huge losses are different from bonuses paid to executives who turned in above-average performance in other parts of the company in question. The legitimate anger over these particular AIG bonuses should not be extended to every bonus paid by every financial firm that received bailout money.

God bless us every one

Unfortunately, Wall Street long ago got into the Dickensian habit of paying its workers largely in the form of year-end bonuses—like 30% to 50% of annual compensation. So Wall Street bonuses are not always like normal bonuses elsewhere for extraordinary performance. Also, lots of people on Wall Street receive incentive compensation. As this AIG example shows, one must be careful when structuring incentive compensation that the extra money is only paid when the recipient deserves it.

Wind at your back

For example, if you set an Olympic 100-meter dash record when there was a strong wind at your back, the record does not count. Similarly, executives should not get bonuses for a rise in the company’s stock price if all similar companies’ stock price went up about the same amount at the some time. But if an executive prevents his company from losing the amount of money other similar companies are losing during hard times, he deserves a bonus, in spite of the fact that his company lost money that year. Paying deserved bonuses is a contractual matter in many cases and it is always wise to avoid losing good people. Good people can switch to other companies that did not receive bailout money leaving only the weak in the company that the taxpayers are hoping will pay back the bailout money. Good people can also start their own much smaller companies and make far more money and bonuses there than the government would allow them to make is bailed-out companies.

Bonus for staying until a certain date

The AIG bonus recipients were guaranteed the bonuses if they remained in their jobs until a certain date, a standard employment arrangement. They did stay until the date in question. Since AIG is an insurance company, not a bank, it was regulated, supposedly, by its state, which happened to be New York. The office that caused all the problems was in London, which seems like tough thing for Albany bureaucrats to monitor. In any event, they did not monitor or regulate it. The Bush Administration never had any authority to regulate AIG because the federal government has no authority to regulate any insurance company. All insurance companies are regulated by states.

Dumb, but maybe legal

In other words, AIG executives, perhaps above the bonus level, made a mistake to offer credit default swaps at all—if they were not hedging it or otherwise properly managing the risk. They also may have made a mistake about how they structured the incentive compensation clause. New York also made a mistake not to reign this in. Then the Feds made a mistake to approve these bonuses when they drew up the bailout contracts. The recipients of the bonuses are being singled out as the only villains in this. I would like to hear their side of the story before I conclude that. They may be too dumb to be culpable. Salesmen often are. The culpable people may not have violated any law because the legal system has not kept up with the changes in the finance.

Should not have bailed them out to begin with

Arguably, what the government should have done going back to last fall is to say the U.S. government is not a co-signer on AIG’s credit default swaps. If AIG needs help, they need to seek it in the bankruptcy court. Had the feds not done the AIG bailout, AIG would have gone bankrupt and the bonuses would not have been paid because the recipients would have made the stupid mistake of bankrupting the company from whom they were seeking to get the bonuses. The people who would have suffered would have been those who trusted untrustworthy companies.

There should have been a law

When I was a kid, there was a King Features newspaper comic strip by Al Fagaly called “There oughta be a law.” The cartoons depicted various annoyances and frustrations like bad drivers who went too slow. With regard to the AIG bonuses, there should have been a law. The fact that there was not is the fault of the pertinent legislators in New York State and DC. Instead of denouncing AIG and the bonus babies, they should be denouncing themselves for screwing up. But politicians NEVER do that. They find scapegoats for all bad news and take credit for all good news.

We have been told repeatedly that the bailout was necessary because the world would have come to an end if they did not. I am not convinced of that. Plus the world seems to be coming to an end with the bailout, that is, the market keeps declining and unemployment keeps going up.

Government involvement drives away competence

Driving away competent executives is what the government has been doing for centuries. I originally intended a career as an Army officer after graduating from West Point. When I saw what the Army was like, a federal bureaucracy, not a John Wayne war movie, I could not wait to get out. Most of my West Point class did the same. There are dozens of articles about all that at my Web page www.johntreed.com/military.html.

Tax it back?

Democrat Senator Chuck Schumer of New York says if the recipients of the AIG bonuses do not return the money, Congress will tax it back. That sounds unconstitutional. Bills of attainder are forbidden by Article I, section 9, clause 3 of the United States Constitution. A bill of attainder is a law that declares a person or group of persons guilty of some crime and punishes them without benefit of a trial. That same clause prohibits laws, “impairing the obligation of contracts.” The last 12 words of the Fifth Amendment to the Constitution: “nor shall private property be taken for public use, without just compensation.” The Fourteenth Amendment contains the equal-protection clause that says everyone has to be treated the same.

The Constitutional prohibition against ex post facto laws (same article I, section 9) may also be triggered. Here is what Wikipedia says about that:

An ex post facto law (from the Latin for "after the fact") or retroactive law, is a law that retroactively changes the legal consequences of acts committed or the legal status of facts and relationships that existed prior to the enactment of the law. In reference to criminal law, it may criminalize actions that were legal when committed; or it may aggravate a crime by bringing it into a more severe category than it was in at the time it was committed; or it may change or increase the punishment prescribed for a crime, such as by adding new penalties or extending terms;

Judge Anthony Napolitano wrote several books that said the federal government has increasingly been behaving in unconstitutional ways. Constitutional Chaos, The Constitution in Exile, and A Nation of Sheep.

AIG still exists. It is a huge company—the biggest insurer. Except for a 12-man credit-default swap deparment, it appears to be well-run and profitable. The U.S. taxpayers need it to be well-run and profitable. Yet the U.S. government is currently doing everything it can to destroy the company and its reputation.

Welcome to socialism where governments tell private companies how to run their businesses.

I appreciate informed, well-thought-out constructive criticism and suggestions. If there are any errors or omissions in my facts or logic, please tell me about them. If you are correct, I will fix the item in question. If you wish, I will give you credit. Where appropriate, I will apologize for the error. To date, I have been surprised at how few such corrections I have had to make.

Tax cheating will increase under Obama

The amount of tax cheating will increase significantly during the Obama administration—both with regard to the number of people who do it and the amounts by which they underpay their income taxes.

Why?

It’s not primarily because Obama famously nominated several tax cheats to be administration officials (Tom Daschle, Nancy Killefer)—including Treasury Secretary Geithner whose department includes overseeing the IRS.

Why cheating will increase under Obama

There are three reasons why tax cheating will increase under Obama:

• He is making the tax law palpably unfair

• He is increasing the amount tax cheats save by increasing the tax rates people pay

• He is not increasing the IRS enforcement budget or staff

In the U.S., income taxes are an honor system. America has had an unusually high degree of compliance by its citizens. European countries have marveled at our compliance rate and asked how we do it.

Here is a quote from an academic paper on that issue (Culture differences and tax morale in the United States and in Europe):

Our results again indicate that individuals in the United States have the highest tax morale across all countries, followed by Austria and Switzerland. We also find a strong negative correlation between the size of shadow economy and the degree of tax morale in those countries.

The fact that Americans have been more willing to comply with income tax laws than the citizens of any other country is a great asset to the U.S. It makes it much cheaper to collect tax dollars per thousand dollars of taxable income.

Obama is turning America into Europe

Critics of Obama have accurately alleged that Obama and his supporters are Europhiles who believe the European approach to government (huge) and the economy (universal health care, heavy unionization, socialism) is better than the American one and they are now taking us straight to the European approach. In fact, Europe is chronically sick economically, and they will be sicker now that the United States is no longer a strong economy to provide them with international trade and tourist dollars.

European unemployment

Here are some 2004 comments on European unemployment from the U.S.-based National Bureau of Economic Research:

Until the end of the 1960s, unemployment was very low in Europe and the talk then was of the "European unemployment miracle." The miracle came to an end in the 1970s, when unemployment steadily increased. It kept increasing in the 1980s. It appeared to turn around in the mid-1990s, but the decline is (temporarily?) on hold. For the European Union as a whole, the current unemployment rate is still very high, around 8 percent.

Second, the evolution of the average European unemployment rate hides large cross-country differences. In the four large continental countries — France, Germany, Spain, and Italy — the unemployment rate has increased steadily and remains very high, around 10 percent. (The Spanish unemployment rate has been cut in half since its peak, but remains above 10 percent.) In a number of smaller countries, notably Ireland and the Netherlands, unemployment increased until the early 1980s, but has steadily decreased since then. Unemployment is less than 5 percent in both countries today. In a number of other countries, notably Sweden and Denmark, unemployment has remained consistently low — except for a bout of high cyclical unemployment at the start of the 1990s. Unemployment is below 5 percent in both countries today.

Third, at a given unemployment rate, individual unemployment duration is substantially longer, and flows in and out of unemployment substantially lower, in Europe than in the United States.(2) And, the increase in European unemployment reflects an increase in duration rather than an increase in flows. As a result, duration is high. In Germany and Italy for example, more than half of the unemployed today have been unemployed for more than one year.

Class warfare

Europeans have long viewed the world as a struggle between classes in which workers are the heroes and the wealthy are villains. One reason they cheat more on their income taxes is that they believe their tax systems are nothing but Robin Hood theft with a political spin: socialist politicians in Europe use their tax systems to rob from the rich and give to the socialist voters. High-income earners understandably feel no moral duty to cooperate with such a system. Obama has adopted that approach, copying the Depression-era anti-rich rhetoric of FDR and, earlier, of Karl Marx.

Using the Internal Revenue Code as a political weapon

There is no question that Obama and his current Democrat allies in Congress are taxing Republicans to give to Democrats and doing so for purely political purposes. Indeed they have been doing it for so long that it is now generally true that Republicans pay taxes and Democrats do not. Someone needs to do a survey of the amount of taxes paid by registered Democrats and the amount paid by registered Republicans. No doubt, the discrepancy is already stark and getting starker. Indeed, a major part of Obama’s “stimulus” law gives people who paid no income taxes a “refund” which is simply a transfer of wealth from Republican voters to Democrat voters. Critics have called it “welfare.” It’s worse than welfare. At least with welfare, you have to tell a sad story to get the money. With the Obama “refund” to voters in the Democrat demographic, you don’t have to do anything. There is no means test at all. Some of the people who received that money are no doubt well off but they do not happen to have taxable income because their money is in tax-free municipal bonds or some such.

During the campaign, Obama told Joe the Plumber that he would “spread the wealth.” That means confiscate the life savings and/or income of Republicans and give it to Democrats.

The underlying moral rationalization is that the rich stole the money from the poor to begin with so it’s moral to steal it back and get credit at the polls for doing so. That’s a myth. In fact, the majority of the rich are simply hard-working people. They stole from nobody. The moral code they are likely to adopt in the near future—that Obama, Pelosi, et al are stealing their hard-earned money through the Internal Revenue Code to buy votes with it—will be based on an accurate depiction of what’s really going on.

To those who point to true crooks among the rich, “Prosecute them.”

Tax cheating by using a sleazy accountant or lawyer

One form of tax cheating is to seek out accountants and tax lawyers who advocate new ways to use parsed wording of tax laws to reduce the taxes of the wealthy. From time to time, you see media stories where a particular adviser’s methods were declared illegal and a court upheld the IRS decision. [I am the author of the book Aggressive Tax Avoidance for Real Estate Investors which is now in its 19th edition. That book tells the legal ways to minimize taxes. I was audited in 1988 by the IRS—many suspect because of my book. The IRS auditor asked for a copy of it and I gave it to her. She read it. She told me when she was done that she, “learned a lot” from it. The audit was a Taxpayer Compliance Measurement Program (TCMP) audit. That means they audited every single line of my 23-page return. The result was I owed no additional taxes and I got a letter of commendation from the IRS.]

Cheating by using sleazy accountants and lawyers as cover will increase under Obama.

Cheats are rational

At Harvard Business School, we learned that you make economic decisions using expected value. Expected value is simply the amount you will get or save multiplied by the probability that you will get or save it. In my Aggressive Tax Avoidance… book, I show the calculations with regard to the probability of being audited, losing the audit, and the interest you have to pay. I did not do those calculations with regard to violating the law, that is, tax deficiencies where the taxpayer owes penalties in addition to interest and back taxes. Nor did I do them with regard to criminal violations that impose fines and/or prison sentences. But tax cheats will do those calculations either formally as I do in my book or informally along the lines of, “The amount I save is huge, the chances of getting caught is low, screw Obama and Harry Reid and all that crowd!”

In his 2008 book The Logic of Life, economist Tim Harford explains with extensive data how criminals calculate, informally, the odds of getting caught and the benefits of not getting caught. When they conclude crime pays, that is, the expected value of committing the crime is positive, they commit crime. The best-selling book Freakonomics draws similar conclusions about drug dealers.

You also see it in other taxation like taxes on cigarettes and diesel fuel. The higher they push the taxes on cigarettes and diesel fuel, the greater the incentive to sell black market cigarettes (usually bought in a low-tobacco-tax state like North Carolina and resold under the table in high-tobacco-tax states) or diesel fuel (which is chemically the same as untaxed Number 2 heating oil) and the more black market trafficking goes on. By definition, the black market sales would disappear if the taxes did.

The higher Obama and the Democrats raise tax rates on the rich, the greater the incentive to cheat and the greater will be the incidence and amount of the cheating. As always, the more cheating, the more others will be forced to pay either in the form of higher-still tax rates or in the form of cuts in government programs or higher interest on government bonds used to borrow money to make up for cheating shortfalls.

I have heard of no increased IRS staff in Obama’s programs. I suspect he opposes that because the IRS is unpopular and Obama wants to be popular. Maybe he will announce a new part of the IRS—the Special Enforcement Division to Stop Republican, I mean, High-Income Tax Cheats, thereby avoiding the enmity of his Democrat tax cheat supporters—whom he has to see frequently at cabinet meetings and such.

Wealthy tax cheats versus Democrat IRS auditors

Even if he increases enforcement, America will be worse off because the greater the incentive to cheat, the greater the cost of stopping cheating. But America will probably become a nation of wealthy tax cheats and an army of Democrat IRS auditors before anyone wises up. And this sort of social compact—“tax morale” as the academic study above calls it—is like virginity. It cannot be restored once lost.

The 3/2/09 Forbes magazine list on its cover the page 32 article: “Taxes, How to cheat like a pro!”

John T. Reed

I appreciate informed, well-thought-out constructive criticism and suggestions. If there are any errors or omissions in my facts or logic, please tell me about them. If you are correct, I will fix the item in question. If you wish, I will give you credit. Where appropriate, I will apologize for the error. To date, I have been surprised at how few such corrections I have had to make.

Debt is the problem, not the solution

There is a worldwide financial crisis. It was caused by borrowing and spending too much and saving too little. (Borrowing too much is the flip side of lending too much. It takes two.)

The real solution is to borrow and spend less and save more. The American people and the people of the world—having far more common sense and sense of responsibility than their governments—have done exactly that. Borrowing and spending are down significantly in the last six months. Saving is up significantly.

Those changes in behavior patterns will atomatically fix the problem, in time, without government interference. Prior to the 1930s, there were lots of recessions and even panics, but they all fixed themselves. In the 1930s, politicians figured out they could get elected by claiming to be the solution, thereby causing our first prolonged depression. Now they are going to repeat that mistake.

The problem is government is not interested in solutions that work. They only want “solutions” that put them center stage. Keynseianism doesn’t work. That was established in the 1970s and early 1980s. In one Congressional hearing back then, a congressman jokingly asked a witness, “Are you now, or have you ever been, a Keynesian?” a take off on the “Are you now or have you ever been a Communist?” question that was asked of congressional witnesses during the McCarthy Era.

But politicians love Keynseianism because it puts them center stage. Socialism, which is Keynseianism gone wild, really puts politicians center stage. The free market, that is the people, will fix the problem, but then politicians cannot take credit (not that they won’t try).

Now, governments all over the world, led by the U.S. are going to “solve” the problem by borrowing record, unprecedented amounts of money (from whom is a whole other question) and spend it on stuff we don’t need. This is the equivalent of a morbidly obese man who eats way too much and exercises way too little deciding that his solution is to go on an eating binge like never before. He tried diet and exercise, but they were no fun. Pass the pork.

The U.S., led by its Community Organizer in Chief*, and the world are committing credit suicide. Of course, Obama and the politicians will not feel the pain. We will.

Neither the American people nor the people of the rest of the world will ever tax themselves enough to pay off, or even pay the interest on, their new, much higher national debts. That means they will either default on their bonds, or they will use inflation to reduce the real value of them. Both will cause such huge disruptions that revolution might be in store. Hyperinflation in Germany in the 1920s contributed to Hitler being elected president. The worst hyperinflation in U.S. history was during the Revolutionary War and in the Confederacy toward the end of the Civil War. In both U.S. cases, hyperinflation was accompanied by the goverment responsible being replaced by a new form of government.

Default might be a good idea. The voters will never wise up enough to stop returning these irresponsible, sociopathic clowns to Congress. Their “credit cards” (deficit spending) need to be cut up. The way you do that is to default on U.S. government bonds. Then no one will buy them anymore. Then we will have—wonder of wonders—a balanced budget! Because we will have no choice.

*phrase coined by Andrew Gabel

I appreciate informed, well-thought-out constructive criticism and suggestions. If there are any errors or omissions in my facts or logic, please tell me about them. If you are correct, I will fix the item in question. If you wish, I will give you credit. Where appropriate, I will apologize for the error. To date, I have been surprised at how few such corrections I have had to make.

Franklin D. Roosevelt and Barack Obama on fear

At his first inaugural in 1933, President Frankiln D. Roosevelt famously said,

We have nothing to fear but fear itself.

Actually, here are his exact words,

So, first of all, let me assert my firm belief that the only thing we have to fear is fear itself—nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance.

Obama claims to have taken office in a similar time. In fact, we are not yet in a depression. Roosevelt was in one.

Obama also seems to think he is the second coming of Franklin D. Roosevelt. Indeed, he seems to think he is a new and improved version of FDR.

But Obama sets an entirely different tone. He talks incessantly of “crisis” and “another Great Depression.” He warns that crisis may turn into “catastrophe” if Congress does not pass his “stimulus” bill so fast that literally not a single congressman or senator read it before they voted on it. (The 1,071-page document was printed at midnight on 2/12/09 and voted on 2/13/09—too soon for anyone to have read so many pages.)

In fact, current economic statistics indicate that we are in a similar situation to the recession of 1981-2, not a Great Depression.

Obama has even warned that Congress does not pass his “stimulus” bill right now, the country may fall into a permanent recession.

There has never been a “permanent recession” in the history of the country. The only way to get a permanent recession is to switch from capitalism to socialism—like they did in the Soviet Union or Cuba. Come to think of it, Obama seems to be trying to do just that, in which case passing his “stimulus” bill will be the cause of the permanent recession, not failing to pass it.

His talk of a “permanent recession” reminds me of the conversation between the tourist and the farmer. It was pouring rain and had been for days. The tourist asked the whittling farmer,

Think it’ll ever stop?

“It always has,” answered the farmer.

Where FDR told America,

We have nothing to fear but fear itself,

Obama says, in effect,

Be afraid. Be very, very afraid.

In private meetings with his chief of staff Rahm “A crisis is a terrible thing to waste” Emanuel, he may be saying,

The only thing we in the White House have to fear is that we can’t scare the public enough to force Congress to give us everything we want immediately.

This is the same Barack Obama who, while campaiging, repeatedly condemned “the politics of fear.” He condemns a lot of things, until he does them himself: raising record amounts of money, using lobbyiss, selecting unethical cabinet members, keeping the contens of bills secret until after they are voted on, earmarks, pork, etc..

Obama is trying to talk the country into a depression so he can get more power and be the hero. He will more likely be the villain, but he’s too young and inexperienced and ignorant of economics and governing to recognize it.

FDR knew how horrible a depression was because he had lived through the first couple of years of it. To Obama, it’s just an abstraction that he can use to get what he wants.

The confidence of the American people and the people of the world will be an important factor in ending the recession. Obama is doing the exact opposite of what he should be doing when he tries to scare hell out of everyone.

University of Nevada, Reno economics professor Bradley R. Schiller said in the 2/14/09 Wall Street Journal that,

President Barack Obama has turned fearmongering into an art form.

Obama’s attempts to convince Americans that we are in or headed for a depression may well be a self-fulfilling prophecy. His similarly dangerous talk about “Buying American” and renegotiating NAFTA seems to be contributing to an already underway international trade war. If we do have an international trade war, it will be very hard to avoid a depression. The “stimulus” bill had nothing about preventing a trade war and indeed includes “Buy American” provisions that other countries have cited as possibly forcing them to relatiate against our exports—the definition of an international trade war.

Historians may call such an economic catastrophe “The Obama Depression” because of the huge role his fearmongering and protectionist union pandering played in bringing it about.

I appreciate informed, well-thought-out constructive criticism and suggestions. If there are any errors or omissions in my facts or logic, please tell me about them. If you are correct, I will fix the item in question. If you wish, I will give you credit. Where appropriate, I will apologize for the error. To date, I have been surprised at how few such corrections I have had to make.

Bum’s rush: the Democrat ‘stimulus’ hustle

Obama says Congress needs to pass his “stimulus” package immediately. Nancy Pelosi says we lose “500 million jobs a month” until we pass it. [the population of the U.S. is 310 million]

The Democrats’ message, translated into plain English, is “Stop looking at our ‘stimulus’ bill. Just pass it.”

Since they have the votes, it’ll pass. Since all the votes but two are Democrats, that party will own the bill.

They have said the world would come to an end if it did not pass quickly. Now it has, and the implication of the world-coming-to-and-end rhetoric is that we will be in economic paradise the day after it passes.

More likely, nothing will happen at all. Next month will bring more layoffs. It will become more and more apparent to those who voted the Democrats this power that no one in Washington knows what they are doing or cares about those outside of Washington. The parts of this plan that actually might relate to stimulating the economy are just a guess, but most of the bill assures Democrats of bigger government which is what that party is really all about.

An international trade war has broken out. A front-page story on the 2/6/09 Wall Street Journal was titled “Nations rush to establish new barriers to trade.” There is talk about closing that barn door, but the horses already appear to be gone. And the bad-mouthing of NAFTA by Hillary and Obama in the Ohio primary were a contributing factor, as were the “Buy American” provisions in the “stimulus” package.

An international trade war means we will have a depression. That’s not a macroeconomic prediction. Just a simple two-step action reaction. Trade wars reduce trade—by two-thirds in the 1930s. If you reduce trade by two-thirds, and the current trade war should do that or worse, you create a worldwide depression—one that building a frisbee golf course in Podunk (one of the pork items in the “stimulus”) won’t lay a glove on.

The February, 2009 “stimulus” plan will do nothing but add another $800 billion of debt to our problems.

Payoff to supporters

There are many reasons why they don’t want us to look at it. Mainly, it’s not a stimulus bill. It’s a financial payoff to the various left-wing groups that supported Obama: global warming true believers, unions, environmental extremists, pro-abortionists, corporation haters, and the rest of the usual suspects in the Democrat coalition. Instead of earmarks, which are well, earmarked for a specific project, the “stimulus” package is blank-check pork or wild card earmarks. The Democrats appear to see the recession as a chance to raid the piggy banks of the elementary school kids of today and tomorrow and dump on them the enormous debt that is being created for such projects as improvement of trails in the woods, contraceptives, free health care for affluent children, and so on.

Obama’s chief of staff, the reptilian Rahm Emanuel said,

A crisis is a terrible thing to waste.

That tells you all you need to know about the Obama White House’s perspective on the current economic problems: they are an opportunity to get all the leftist Christmas wish list items for the last 30 years bum’s rushed through hidden in a monster bill disguised as a recession cure.

‘I won’

Obama famously responded to an effort by a Republican to persuade Obama to change one of his legislative positions by saying

I won. I trump you on that.

Trump this. You won the election. You get to live in the White House, period. The November election results do not mean you get your way in everything. They may not mean you get your way on anything. You still have to win the voters over to your side bill by bill. There are no more mandates any more, especially when you get elected on vague promises like hope and unspecified change.

100%

All money for the “stimulus” package and all other government spending like national defense and social security payments, comes from the same source: business profits.

Business profits provide:

• jobs

• employee salaries and wages, a portion of which goes to the government as taxes

• business taxes to the government

ALL tax revenue starts out as business profits. The greater business profits are, the better the economy does and the more money the government has to spend on its activities.

The public thinks government jobs are equivalent to private enterprise jobs. No. Government jobs all require private businesses to fund them. No private business profits, no government.

Business and parasites

The American public can be divided into two groups:

• private business

• parasites on private businesses, namely government

Parasites in the natural world, like leeches and tape worms, are smart enough not to suck so much blood that they kill the host animal. Government is not that smart. For evidence, look at the Soviet Union, Cuba, North Korea, and China and India before they switched to capitalism.

If the federal government wants to spend on a “stimulus” package or anything else, it must get the money by taxing private business either now, or in the case of deficit spending, later.

Democrats loves jobs, but they hate employers.

Democrats love housing, but they hate home builders, also called developers.

Democrats love tax revenue, but they hate business profits.

Democrats love leadership, but they hate managers.

Democrats love freedom, but they hate deregulation.

Democrats are congenitally incapable of creating a proper stimulus package because they desperately hate that which needs to be stimulated: profit-making businesses.

Jack Kemp says,

If you want more of something, subsidize it.

If you want less of something, tax it.

In America we tax growth, investment, employment, savings, and productivity and we subsidize non-working, consumption, welfare, and debt. The Democrat “stimulus” bill is more of that. It also subsidizes environmentalist nuttiness like global warming, having sex with strangers (free abortions and STD money), union wages, uncompetitive U.S. corporations, poorly-run banks, getting sick, not paying your debts, failing, and walking around in the woods, the latter being an activity which one would have thought did not need to be subsidized.

Only if they get credit for them

The Democrats are in favor of more jobs, but only if they get credit for them, like government jobs and government construction projects. They can name the structures created after themselves and put bronze plaques with their names on them where the public will see them as they use the building. When private enterprise hires someone or builds a building, no politician gets credit for it.

The Democrats are in favor of more tax revenue, but they hate corporations and business profits so much that they mindlessly discourage businesses from increasing profits, which would mean they would have to pay more taxes. The best example came in a late Democrat debate where George Stephanopoulos and Charles Gibson repeatedly explained to Obama that his plan to raise capital gains tax rates would reduce the amount of revenue coming to the government. We know this because capital gains rates has been raised and lowered in the past. When you raise the rates, people sell before the date of the raise then hold on to the assets in question until a new administration lowers the rates again. And when rates are lowered, many owners of stocks and real estate sell them to take advantage of the new, lower tax rates. When Kennedy (Democrat) and Reagan (Republican) lowered tax rates, Democrat politicians howled at the “unfairness” of rich people paying the same tax rates as the non-rich, but the government got more revenue from the taxes in question as a result.

Obama finally claimed that his reason for raising capital gain tax rates, in spite of the fact that it would lower government capital gains tax revenues, was “fairness.”

There is no such thing as fairness. It is merely a politician’s code word for favoritism to his supporters. What Barack was saying is that he and his supporters hate business and rich people so much they will even raise tax rates on them in a “cut off our noses to spite our faces” manner. Democrats would rather hurt Democrat-enacted government programs by reducing government revenues than let rich people pay lower tax rates even though those same lower rates mean the rich people actually pay more total taxes.

To Democrats, punishing the rich for being rich is a higher priority than improving the economy. The two goals are mutually exclusive which means Democrats will not be improving the economy.

Optimum rate for maximizing tax revenue

There is an optimum tax rate if your goal is to maximize government revenue. If you set the tax rate too low, like 1%, you hardly get any revenue. But the same thing is true if you set it too high, like 99%, because people will quit working or doing whatever it is you are taxing at 99%. Somewhere in between 1% and 99% is the Goldilocks rate, the just right rate that produces the maximum tax revenue.

If Democrats were not more consumed by their hatred of business than their stated goal of good government, they would recognize that no one should ever raise the tax rate above the rate that produces the maximum government revenue. Republicans may want to charge a lower rate than the one that maximizes government revenue because they are not the party of maximizing government revenue. But both parties should easily be able to agree never to go above the rate that maximizes revenue. They cannot because the Democrat voters are too dumb or too consumed with business or rich people hatred to understand this.

This is explained by the famous Laffer Curve. Most people think the Laffer Curve was a Reagan Administration thing. It was. It is also a forever thing that applied to government revenues since taxes were invented and always will. Famed liberal economist John Maynard Keynes identified it before Laffer.

The lesson from lotteries

The Laffer Curve is easy to see in another form of taxation called state lotteries. State lotteries siphon off a certain amount of lottery ticket money to spend on government stuff. The rest of the ticket revenue goes for administration, marketing, and paying winnings to players.

From time to time, stupid politicians try to pass laws that increase the state’s take, which, in turn, decreases the amount of winnings paid out to players. Invariably, many former players stop playing and the higher percentage government take results in lower government revenues because the percentage of people playing goes down farther than the government share percentage goes up. The politicians are then forced to lower the rate back to the one that optimizes the government take. By the way, the optimum winners payout percentage in state lotteries appears to be 60%. That is how much of gross ticket sales Washington State, for example, pays back to its winners.

The basic principle is that incentives matter. When government gets too greedy and lowers incentives too much, people stop doing whatever it is government is overtaxing. Overly high tax rates also encourage extreme legal efforts to find loopholes and increase the amount of illegal efforts, that is cheating.

If Democrats were competent and well-intentioned, they would realize that the only way to fix the economic mess is to encourage businesses to operate as efficiently as possible, to expand, and to innovate. All economic growth comes from businesses innovating better ways to do things and new products and new markets.

How would they do that? Well, it ain’t the Democrats “stimulus” package. It is closer to the opposite of the Democrats “stimulus” package. You would :

lower all tax rates at least down to the ones that optimize government revenue, even lower rates might maximize U.S. prosperity which is arguably a better goal than maximizing government revenue

• eliminate all unnecessary regulations

• encourage foreign businesses to locate in the U.S.

abolish all tariffs and other restrictions on imports to the U.S. and encourage other countries to do the same, which make Americans dollars go farther and gives us more to spend on U.S.-grown products and services

• encourage a brain drain of talented citizens of other countries to immigrate to the U.S. by our offering more opportunity than the more socialist Old World—the story of America—and the basis for our two centuries of prosperity

mimic the economies that have grown the most in recent years, namely China and India, by becoming less socialist, not more as the Democrats are trying to do

• let poorly-run companies like the Big Three U.S. auto companies go bankrupt—it’s like going on a needed diet

end the exemptions in antitrust laws that say unions are allowed to violate those laws

In 1953, the CEO of General Motors Charles Wilson said to a Senate Committee:

…what was good for the country was good for General Motors and vice versa.

That is not true. General Motors is a poorly run company that has made overly generous concessions to its unions over the years. But the following similar statement by another early 20th century figure is correct.

President Calvin Coolidge once said that,

The business of America is business.

That is not currently politically correct, especially among Democrats, but it’s true. Every American, including government employees and welfare recipients, is ultimately living off of business profits. Socialist idiots ought to finally figure that out and do everything they can to maximize the profits of honest businesses.

Do nothing

Will Democrats do any of the things I listed above? Absolutely not. Their hatred of business transcends all other motivations. So how about a Plan B?

OK. Do nothing at all. An op-ed in the Wall Street Journal by an economist was titled “Don’t just do something, stand there.”

Business is cyclical. It always has been. Some years business revenues go up. Other times it goes down. Now is the latter.

It used to be that the public accepted and understood this. When I was a kid in the 1950s, my mom would often urge me to save for a “rainy day.” The current economy is a “rainy day.” Obama wants to borrow trillions that your children and grandchildren will have to pay back to end “rainy days.” It’s a fraud. We will always have “rainy days.” And your children and grandchildren will always have the mountain of debt that Obama laid on them in his efforts to make it look like he was fixing the economy.

Hundreds of mainstream economists oppose Obama ‘stimulus’

The 2/9/09 Wall Street Journal had a full-page ad paid for by the Cato Institute. It quotes Obama saying,

There is no disagreement that we need action by our government, a recovery plan that will help to jumpstart the economy.

Then it has its own headline:

‘With all due respect, Mr. President, that is not true’

How many times do you see a battalion of Ph.Ds unequivocally call the President of the United States a liar?

Then there is one paragraph that recounts the failed efforts to use government spending by Hoover and Roosevelt in the Great Depression and by the Japanese government in their 1990s depression. It further states that,

To improve the economy, policymakers should focus on reforms that remove impediments to work, savings, investment and production. Lower tax rates and a reduction in the burden of government are the best ways of using fiscal policy to boost growth.

It appears to be signed by about 250 economists, almost all associated with U.S. universities. For example, here are those whose names start with U through Z:

Kamal Upadhyaha, U. of New Haven; Charles Upton, Kent State U.; T. Norman Van Cott, Ball State U.; Richard Vedder, Ohio U.; Richard Wagner, George Mason U.; Douglas M. Walker, College of Charleston; Douglas O. Walker, Regent U.; Marc Weidenmeier, Claremont McKenna College; Christopher Westley, Jacksonville State U.; Robert Whaples, Wake Forest U.; Lawrence White, U. of Missouri at St. Louis; Walter Williams, George Mason U.; Doug Willis, U. of Washington at Tacoma; Dennis Wilson, Western KY U.; Gary Wolfram, Hillsdale College; Huizhong Zhou, Western MI U.

Obama is supposedly smart. If he is, then he is a lying son of a bitch who is selling the country down the river to pander to the most ignorant voters.

The alternative explanation is that he is dumb, hasn’t done his homework, and won’t admit it when he has made a trillion-dollar mistake. I thought that was supposed to be a description of George W. Bush? (Actually, it is.) But Obama said he would bring “Change we could believe in.” That brings us back to the same conclusion the economists reached. Barack Obama is a liar who will sell us all down the river to win the votes of the ignorant.

Credit and blame

Then politicians discovered that they could get elected by taking credit for the top of the business cycle and by blaming the other guy for the bottom of the business cycle. It’s well known that the party in power in a down part of the cycle loses the election. The truth is politicians and government are irrelevant to the economy although they do have the power to mess it up with rent control, price controls, gasoline rationing, tariffs, and so forth.

Nowadays, incumbent politicians flail frantically using their powers to prevent or end downturns or to at least bullshit the public into thinking they are doing everything that can be done to fix them. An incumbent who “did nothing” would be pilloried by his opponent. But the truth is doing nothing is the best course of action.

Worst except for all the others

The free market is the worst economic system except for all the others. That applies not only to generally producing prosperity over the long term, but also to recovering from recessions. We will get out of the current recession fastest if the government does nothing. According to the book New Deal or Raw Deal by Burton W. Folsom, Jr., recessions before the Great Depression lasted three to five years. The Great Depression lasted until World War II—about 12 years. Why? Because the government, both Hoover’s Republican administration and FDR’s, flailed incompetently and thereby turned a short recession into a long depression.

They triggered an international trade war which dropped international trade by 66%. There is no way to deal with an international trade war other than to end it. Trade wars increase prices—because you have to buy everything from your own country rather than from the cheapest source—and trade wars decrease jobs because of layoffs in export industries and in domestic industries because of the drop in international business.

They tried to control prices—always disastrously stupid and destructive. They paid farmers not to plant crops—an idiotic practice that never ended after the Depression ended. They built unneeded expensive buildings like the football stadium at my high school. (I did not attend that high school until 1962, but the WPA plaque seeking votes for FDR was still there.) They hired unemployed guys like my uncle Frank to work for the Civilian Conservation Corps. A bunch of make-work nonsense with guys living in tents and wearing military style uniforms. I never got to meet my Uncle Frank. A CCC truck backed up over him and killed him in Sitka, AK. That can happen in private business, but I’ll bet it happened more often in the CCC just like it happens more in the military, another SNAFU government organization.

How does the free market fix recessions? Debts that are too big get reduced by paying them down, renegotiation, or bankruptcy. Inventories that are too big are worked off by slowing or shutting down production. Leases for space no longer needed are abandoned when they end, bought out if they have not yet ended, or cancelled through bankruptcy. Employees not needed because of the drop in sales are laid off. Companies that took too much risk fail. Those that took prudent levels of risk survive. This is fundamentally healthy and necessary, like weeding a neglected garden. Like losing weight, recovering from recessions is painful. But also like losing weight, you are better off for having done it.

John Stossel, who is listed as an unappreciated national treasure on my Web page listing such people, wrote an excellent article about the wisdom of doing nothing called “This is no time to panic” in the February 2, 2009 Weekly Standard.

I appreciate informed, well-thought-out constructive criticism and suggestions. If there are any errors or omissions in my facts or logic, please tell me about them. If you are correct, I will fix the item in question. If you wish, I will give you credit. Where appropriate, I will apologize for the error. To date, I have been surprised at how few such corrections I have had to make.