Some Thoughts on the Markets

In thinking about how to best navigate my investment portfolio away from the rocks and shoals it's currently aground on, I've been looking at the Dow's performance since the crash of '29. One thing that strikes me when looking at a logarithmic graph of the DJIA over time is that from the end of WWII until 1965 or so, market growth was fairly steady. Then, from '65 until about '85 it was flat, returning to its previous growth rate from '85 until the bubble burst last fall. Okay, I know this is a VERY simplistic look at things, but it sure seems to me that the market was flat from the Great Society era until the Reagan Revolution. Since we seem to be hell-bent on returning to those halcyon days of the war on poverty, I think that we're in for a flat market (being ever the optimist) at roughly the 7000-8000 level until we have a tax revolution and kick the current bums out of office. Something tells me I'll be moving my investments off-shore for a few years.

State of the Union, Part 2

Returning to the discussion of health care costs.

This is a cost that now causes a bankruptcy in America every thirty seconds. By the end of the year, it could cause 1.5 million Americans to lose their homes. In the last eight years, premiums have grown four times faster than wages. And in each of these years, one million more Americans have lost their health insurance. It is one of the major reasons why small businesses close their doors and corporations ship jobs overseas. And it’s one of the largest and fastest-growing parts of our budget. Gee, do you think that all might have anything to do with having to absorb the cost of emergency care for the twenty-plus million people living in the country illegally? Or maybe the decreasing caps on Medicare/Medicaid reimbursements that force the rest of us to pay higher rates for the same procedures? It certainly couldn't have anything to do with having to absorb the costs your trial-lawyer friends have added to the burden of doing business as a doctor in this country. Oh, it's also a bogus number according to the Corner.

Already, we have done more to advance the cause of health care reform in the last thirty days than we have in the last decade. When it was days old, this Congress passed a law to provide and protect health insurance for eleven million American children whose parents work full-time. Our recovery plan will invest in electronic health records and new technology that will reduce errors, bring down costs, ensure privacy, and save lives. It will launch a new effort to conquer a disease that has touched the life of nearly every American by seeking a cure for cancer in our time. And it makes the largest investment ever in preventive care, because that is one of the best ways to keep our people healthy and our costs under control.

Where to start? SCHIP coverage for children up to age thirty? No, that's low hanging fruit. How about electronic health records and new technologies? We are to be assured that electronic health records will bring down costs. Take a look at the cost of the ongoing efforts to upgrade the nation's air traffic control system. Chronically overdue and over budget. Health care's got vastly different data needs, and we're to think that a) the government can properly identify those needs, b) get all the players to agree on a standard, and c) actually implement the plan in a way that works better than paper. I don't think so. As to ensuring privacy, ask Joe the Plumber how well those government data secrecy laws worked for him. Do you honestly think that if you raise your courage and challenge the .gov that your college STD, your bout of depression after your parents died, or your treatment for hemorrhoids won't come back to haunt you in the most embarrassing way possible? You can also forget about that “saving lives” bit. The whole point of the exercise is to allow the new bureaucracy, staffed by the same folks who make going to the DMV such a pleasant experience, to exercise control over your health care by “suggesting” that your doctor choose cheaper alternatives or forgo a less “effective” but potentially life-saving treatment. They fully intend to ration your access to care. They also fully intend to pay less for the services they do authorize. That will also inevitably lead to fewer services being available. We already see many practices that won't accept new Medicare/Medicaid patients. The trend will accelerate. One other point, preventive care postpones health care costs, but doesn't eliminate them. You just need them at a later age.

This budget builds on these reforms. It includes an historic commitment to comprehensive health care reform – a down-payment on the principle that we must have quality, affordable health care for every American. It’s a commitment that’s paid for in part by efficiencies in our system that are long overdue. And it’s a step we must take if we hope to bring down our deficit in the years to come.

The plan they propose will, in the end, reduce access to care and increase costs. Ask the Brits how well the NHS works for them. Ask the next Canadian you see how easy it is to get an MRI.

The third challenge we must address is the urgent need to expand the promise of education in America. You mean beyond providing a free primary and secondary education in state mandated curricula by highly trained professional educators to any and all comers? That promise needs expanding?

In a global economy where the most valuable skill you can sell is your knowledge, a good education is no longer just a pathway to opportunity – it is a pre-requisite. No argument with this at all.

Right now, three-quarters of the fastest-growing occupations require more than a high school diploma. Note that this is not synonymous with saying that three-quarters of all jobs require post-secondary education. And yet, just over half of our citizens have that level of education. We have one of the highest high school dropout rates of any industrialized nation. And this is the fault of the system? No, it's a fault of the students who choose not to learn. And half of the students who begin college never finish. In large part because they realize that they were not suited to it. My freshman Aerospace Engineering intro class had 120 students. I graduated with about a tenth that number. If you ask me what class I wish I had taken in High School that I didn't, the answer would be auto shop. Not everyone needs a college degree. I know for a fact that our local IBEW hall is recruiting retirees to come back to work because they don't have enough younger members in the trade.

This is a prescription for economic decline, because we know the countries that out-teach us today will out-compete us tomorrow. That is why it will be the goal of this administration to ensure that every child has access to a complete and competitive education – from the day they are born to the day they begin a career. They already do if they decide to avail themselves of it. Do you really think our urban schools would be cesspools if the kids in them really wanted to learn?

Already, we have made an historic investment in education through the economic recovery plan. We have dramatically expanded early childhood education and will continue to improve its quality, because we know that the most formative learning comes in those first years of life. We have made college affordable for nearly seven million more students. And we have provided the resources necessary to prevent painful cuts and teacher layoffs that would set back our children’s progress. And this is the job of the federal government according to which part of the Constitution?

But we know that our schools don’t just need more resources. They need more reform. That is why this budget creates new incentives for teacher performance; pathways for advancement, and rewards for success. I'm positive the NEA/AFT folks will get solidly behind this plan. They've just always been so supportive of efforts like this in the past. We’ll invest in innovative programs that are already helping schools meet high standards and close achievement gaps. Like No Child Left Behind? I thought that was an evil Bush program. And we will expand our commitment to charter schools. Notice the lack of any mention of vouchers for private schools?

It is our responsibility as lawmakers and educators to make this system work. But it is the responsibility of every citizen to participate in it. And so tonight, I ask every American to commit to at least one year or more of higher education or career training. This can be community college or a four-year school; vocational training or an apprenticeship. But whatever the training may be, every American will need to get more than a high school diploma. And dropping out of high school is no longer an option. It’s not just quitting on yourself, it’s quitting on your country – and this country needs and values the talents of every American. That is why we will provide the support necessary for you to complete college and meet a new goal: by 2020, America will once again have the highest proportion of college graduates in the world. Try finding a good plumber in 2020.

These education policies will open the doors of opportunity for our children. But it is up to us to ensure they walk through them. In the end, there is no program or policy that can substitute for a mother or father who will attend those parent/teacher conferences, or help with homework after dinner, or turn off the TV, put away the video games, and read to their child. I speak to you not just as a President, but as a father when I say that responsibility for our children's education must begin at home. So, if there's no substitute for mothers and fathers, explain to me again why we need these massive new programs. I must have missed something.

There is, of course, another responsibility we have to our children. And that is the responsibility to ensure that we do not pass on to them a debt they cannot pay. With the deficit we inherited, the cost of the crisis we face, and the long-term challenges we must meet, it has never been more important to ensure that as our economy recovers, we do what it takes to bring this deficit down. And that's why I've doubled our deficit this year, am massively expanding the scope and reach of the federal government and borrowing as much money as I possibly can from the Chinese and Saudis.

I’m proud that we passed the recovery plan free of earmarks, and I want to pass a budget next year that ensures that each dollar we spend reflects only our most important national priorities. Okay. We just know that one of our most important national priorities is to build a mag-lev train between LA and Vegas. Nope, no earmarks, not a one.

Yesterday, I held a fiscal summit where I pledged to cut the deficit in half by the end of my first term in office. My administration has also begun to go line by line through the federal budget in order to eliminate wasteful and ineffective programs. As you can imagine, this is a process that will take some time. But we’re starting with the biggest lines. We have already identified two trillion dollars in savings over the next decade. Hell, I can do better than that. Eliminate every cabinet department created since 1949, then take out Agriculture and most of Commerce.

In this budget, we will end education programs that don’t work and end direct payments to large agribusinesses that don’t need them. We’ll eliminate the no-bid contracts that have wasted billions in Iraq, and reform our defense budget so that we’re not paying for Cold War-era weapons systems we don’t use. Such as? Surely you're not suggesting we eliminate our strategic deterrent forces, our carrier battlegroups, strategic airlift and sealift capabilities, etc. We will root out the waste, fraud, and abuse in our Medicare program that doesn’t make our seniors any healthier, and we will restore a sense of fairness and balance to our tax code by finally ending the tax breaks for corporations that ship our jobs overseas. Anyone want to make any bets on how that works out?

In order to save our children from a future of debt, we will also end the tax breaks for the wealthiest 2% of Americans. Yeah, those folks that already pay 40% or so of our taxes are just getting SUCH a good deal now. But let me perfectly clear, because I know you’ll hear the same old claims that rolling back these tax breaks means a massive tax increase on the American people: if your family earns less than $250,000 a year, you will not see your taxes increased a single dime. I repeat: not one single dime. That's right, you won't see it, but you'll be paying it in the form of increased costs for any goods and services which use energy in their creation.In fact, the recovery plan provides a tax cut – that’s right, a tax cut – for 95% of working families. And these checks are on the way. You know what I want to say here. Just fill it in.

To preserve our long-term fiscal health, we must also address the growing costs in Medicare and Social Security. Comprehensive health care reform is the best way to strengthen Medicare for years to come. And we must also begin a conversation on how to do the same for Social Security, while creating tax-free universal savings accounts for all Americans. In other words, we're driving down the value of your 401k so we can nationalize the assets and stick you with another “savings” program trust fund that we can raid to pay our expenses. We're also going to make sure that you don't receive the Social Security and Medicare benefits we've been promising you all these years because we couldn't be trusted with the money you've been giving us, but don't worry, we'll be good this time.

Finally, because we’re also suffering from a deficit of trust, I am committed to restoring a sense of honesty and accountability to our budget. That is why this budget looks ahead ten years and accounts for spending that was left out under the old rules – and for the first time, that includes the full cost of fighting in Iraq and Afghanistan. For seven years, we have been a nation at war. No longer will we hide its price. I don't think the 4000 families who've lost loved ones in the GWOT would consider the costs hidden, you cretin.

And with our friends and allies, we will forge a new and comprehensive strategy for Afghanistan and Pakistan to defeat al Qaeda and combat extremism. Because I will not allow terrorists to plot against the American people from safe havens half a world away. Yeah, that W, he was such a softie when it came to al Qaeda. I notice you're also playing footsie with Syria and Iran. At least you're consistent, they both are closer than Pakistan.

As we meet here tonight, our men and women in uniform stand watch abroad and more are readying to deploy. To each and every one of them, and to the families who bear the quiet burden of their absence, Americans are united in sending one message: we honor your service, we are inspired by your sacrifice, and you have our unyielding support. To relieve the strain on our forces, my budget increases the number of our soldiers and Marines. And to keep our sacred trust with those who serve, we will raise their pay, (the statutory minimum 2% and not a penny more while we cut the overall defense budget 10% and grow the overall federal government 8%) and give our veterans the expanded health care and benefits that they have earned.

To overcome extremism, we must also be vigilant in upholding the values our troops defend – because there is no force in the world more powerful than the example of America. That is why I have ordered the closing of the detention center at Guantanamo Bay, and will seek swift and certain justice for captured terrorists – because living our values doesn’t make us weaker, it makes us safer and it makes us stronger. And that is why I can stand here tonight and say without exception or equivocation that the United States of America does not torture. Nor have we throughout the GWOT, but we have noticed that you'll continue the rendition procedures started under the Clinton administration so other people can do it for us.

In words and deeds, we are showing the world that a new era of engagement has begun. No, you're showing them a weak, feckless foreign policy they've been missing for eight years. For we know that America cannot meet the threats of this century alone, but the world cannot meet them without America. We cannot shun the negotiating table, nor ignore the foes or forces that could do us harm. Unless, of course, we need their money. In that case, we'll suck it up and shut up. We are instead called to move forward with the sense of confidence and candor that serious times demand.

To seek progress toward a secure and lasting peace between Israel and her neighbors, we have appointed an envoy to sustain our effort. Because I just know that I can accomplish what the God of Abraham couldn't. You can't secure a lasting peace until you've broken the will of the people. Get rid of the Team of Rivals crap and try a little Clausewitz. You're the damned Commander in Chief, try learning the job. To meet the challenges of the 21st century – from terrorism to nuclear proliferation; from pandemic disease to cyber threats to crushing poverty – we will strengthen old alliances, forge new ones, and use all elements of our national power.

And to respond to an economic crisis that is global in scope, we are working with the nations of the G-20 to restore confidence in our financial system, avoid the possibility of escalating protectionism, and spur demand for American goods in markets across the globe. For the world depends on us to have a strong economy, just as our economy depends on the strength of the world’s. Let me get this straight, you're going to make it vastly more expensive for American companies to do business in this country, or anywhere else in the world, suck up as much private sector capital as you possibly can to pay for your programs, and that's going to spur investment in our economy and make our goods more competitive. Yeah, that'll work. Oh, and you've put Biden in charge of the recovery. Nope, not a chance anything'll go wrong.

As we stand at this crossroads of history, the eyes of all people in all nations are once again upon us – watching to see what we do with this moment; waiting for us to lead.

Those of us gathered here tonight have been called to govern in extraordinary times. It is a tremendous burden, but also a great privilege – one that has been entrusted to few generations of Americans. For in our hands lies the ability to shape our world for good or for ill. Exactly why those of us who'll have to pay for what you do would prefer you to sit on them.

I know that we haven’t agreed on every issue thus far, and there are surely times in the future when we will part ways. But I also know that every American who is sitting here tonight loves this country and wants it to succeed. That must be the starting point for every debate we have in the coming months, and where we return after those debates are done. That is the foundation on which the American people expect us to build common ground. Unless we disagree with what you want to do, in which case you've told us that you won and get to do whatever you want.

And if we do – if we come together and lift this nation from the depths of this crisis; if we put our people back to work and restart the engine of our prosperity; if we confront without fear the challenges of our time and summon that enduring spirit of an America that does not quit, then someday years from now our children can tell their children that this was the time when we performed, in the words that are carved into this very chamber, "something worthy to be remembered." Thank you, God Bless you, and may God Bless the United States of America. May God give us mercy and deliver us from fools.

State of the Union, Part 1

Last night I promised more on the State of the Union speech. Over all, I'd have to say that I wasn't impressed. There was little that hasn't been said in other State of the Union speeches I've heard over the years, and in the final analysis, they're little more than political theater anyway. Regardless, I promised, so here we go. I've heavily excerpted from the speech below in italics and added my comments as normal text.

Madame Speaker, Mr. Vice President, Members of Congress, and the First Lady of the United States:

Nice of him to neglect the Supreme Court, Joint Chiefs of Staff, his cabinet, and of course, us. Right off the bat, he's pushing my buttons.

I know that for many Americans watching right now, the state of our economy is a concern that rises above all others. And rightly so. If you haven’t been personally affected by this recession, you probably know someone who has – a friend; a neighbor; a member of your family. You don’t need to hear another list of statistics to know that our economy is in crisis, because you live it every day. It’s the worry you wake up with and the source of sleepless nights. It’s the job you thought you’d retire from but now have lost; the business you built your dreams upon that’s now hanging by a thread; the college acceptance letter your child had to put back in the envelope. The impact of this recession is real, and it is everywhere.

Frankly, no, the recession is not my overarching concern. The dramatic and unprecedented expansion of the federal government and the administration's ongoing attempts to ram socialism down our throats without debate would be number one on my list. An adequate national defense would be a strong number two. I guess I'm old fashioned, but I really want my President to stick to his constitutionally mandated duties. I don't care who he is. I don't care which party he belongs to. I just want him or her to stick to the script the founders wrote.

Speaking of sticking to the script, I thought the President was a little off his game last night. Even with the teleprompter, he stumbled on the text several times. I certainly don't hold it against him, but it is unlike him.

But while our economy may be weakened and our confidence shaken; though we are living through difficult and uncertain times, tonight I want every American to know this:

We will rebuild, we will recover, and the United States of America will emerge stronger than before.

Of course it will. Even though his friends in Congress are largely responsible for the mess we're in, we American's are a hard bunch to keep down. Nothing the government can do will get us out of the recession. It can make things worse, certainly, but it only helps by getting out of the way. Every time government gives to one group, it has to take from another. Picking winners and losers isn't in the job description. We'll come back to this later.

The weight of this crisis will not determine the destiny of this nation. The answers to our problems don’t lie beyond our reach. They exist in our laboratories and universities; in our fields and our factories; in the imaginations of our entrepreneurs and the pride of the hardest-working people on Earth. Those qualities that have made America the greatest force of progress and prosperity in human history we still possess in ample measure. What is required now is for this country to pull together, confront boldly the challenges we face, and take responsibility for our future once more.

Notice the conspicuous absence of government from that list? Care to place any bets it stays out of the discussion? Didn't think so.

Now, if we’re honest with ourselves, we’ll admit that for too long, we have not always met these responsibilities – as a government or as a people. I say this not to lay blame or look backwards, but because it is only by understanding how we arrived at this moment that we’ll be able to lift ourselves out of this predicament.

Does anyone out there really think that he understands how we arrived here? Stand by for it to start getting deep.

The fact is, our economy did not fall into decline overnight. No, in large measure it was pushed by the people in the room he was speaking to. Nor did all of our problems begin when the housing market collapsed or the stock market sank. I'd put that particular marker somewhere in the first Roosevelt administration, others Wilson, still others the second Roosevelt, and there's probably an argument to be made for the Nixon administration as well. We have known for decades that our survival depends on finding new sources of energy. Yet we import more oil today than ever before. So, let me get this straight, he's blaming the economic collapse on our dependence on foreign oil? Give me a break, he's head of the same administration that just shut down the baby steps the Bush administration took to open up domestic production, and speaking to the group that's kept us from reducing that dependence for the last forty years. The cost of health care eats up more and more of our savings each year, yet we keep delaying reform. Maybe because the democrats in Congress keep us from instituting tort reform needed to keep malpractice rates in check, and the .gov keeps distorting the market with tax policy on health insurance premiums that haven't made sense since World War II? Our children will compete for jobs in a global economy that too many of our schools do not prepare them for. That's right, despite our spending more per student than any other government in the developed world. So, perhaps it might be due to other factors like, oh, I don't know, an urban, yes, black culture that deprecates learning as too white, or a union stranglehold on education policy that makes it almost impossible to create incentives for good teachers and rewards bad ones with tenure? And though all these challenges went unsolved, we still managed to spend more money and pile up more debt, both as individuals and through our government, than ever before.

In other words, we have lived through an era where too often, short-term gains were prized over long-term prosperity; where we failed to look beyond the next payment, the next quarter, or the next election. A surplus became an excuse to transfer wealth to the wealthy instead of an opportunity to invest in our future. And just who does he think actually invests? The government doesn't. It removes money that could be invested in the economy as taxes. Regulations were gutted for the sake of a quick profit at the expense of a healthy market. Yup, those pesky government sponsored entities at the heart of the matter were definitely lacking in oversight. Perhaps if the democrats in Congress had been paying attention to the Bush administration any of the seven times it warned of the impending problem we might have stayed afloat. Or better yet, if the government just stopped trying its hand at social engineering, we might have avoided a recession. People bought homes they knew they couldn’t afford from banks and lenders who pushed those bad loans anyway. I don't remember anyone holding a gun to my head as I was signing my mortgage. Silly me, I actually read the damn thing and understood I was signing a binding contract. Oh those bad, evil, wicked lenders. They all need a spanking. (And we know at least one of the congress-critters was getting the oral sex, but I digress.) As an aside, how much did Franklin Raines make again? And all the while, critical debates and difficult decisions were put off for some other time on some other day. I know I'm getting old, but I have a vague memory of several previous administrations trying to reform social security and being thwarted by whom? Yeah, those democrats in Congress for whom Saint Franklin could do no wrong.

Well that day of reckoning has arrived, and the time to take charge of our future is here.

Call me a cynic, but I have serious doubts that a guy with no previous executive experience and who barely got his seat warm in the Senate is going to be able to roll Nancy and Harry. I'd love to take charge of my future, but somehow, I think the government might have other plans.

Now is the time to act boldly and wisely – to not only revive this economy, but to build a new foundation for lasting prosperity. Now is the time to jumpstart job creation, re-start lending, and invest in areas like energy, health care, and education that will grow our economy, even as we make hard choices to bring our deficit down. That is what my economic agenda is designed to do, and that’s what I’d like to talk to you about tonight.

Note: this would be a good point to pause and wrap your head in duct tape.

As soon as I took office, I asked this Congress to send me a recovery plan by President’s Day that would put people back to work and put money in their pockets. Not because I believe in bigger government – I don’t. And the Pope's not Catholic either. Not because I’m not mindful of the massive debt we’ve inherited – I am. I should hope so, you've just doubled it and are heading for the record books yourself. I called for action because the failure to do so would have cost more jobs and caused more hardships. Now see Barack, if you read a little more Von Mises or Hayek, you might have a different opinion. In fact, a failure to act would have worsened our long-term deficit by assuring weak economic growth for years. Sure, doubling down on the deficit's going to make it much smaller. That makes sense. That’s why I pushed for quick action. No, you pushed for quick action because you didn't want anyone to actually have a chance to read the bill and conduct an informed debate. And tonight, I am grateful that this Congress delivered, and pleased to say that the American Recovery and Reinvestment Act is now law. Gee, thanks Congress. I guess those ten to one against calls you were getting from your constituents just couldn't get in the way of doing the bidding of The One.

Over the next two years, this plan will save or create 3.5 million jobs. Remember, he started out claiming the plan would create those 3.5 million jobs. Someone must have realized just what the actual likelihood of that was and the wording changed to the non-falsifiable “save or create” shtick. More than 90% of these jobs will be in the private sector – jobs rebuilding our roads and bridges; constructing wind turbines and solar panels; laying broadband and expanding mass transit. Thank you ever so much for those 350,000 additional public sector employees at roughly $100k/yr a pop. That's surely going to help the deficit.

Because of this plan, there are teachers who can now keep their jobs and educate our kids. Health care professionals can continue caring for our sick. There are 57 police officers who are still on the streets of Minneapolis tonight because this plan prevented the layoffs their department was about to make. I just checked my Constitution again. I couldn't find teaching kids, caring for the sick, or policing the streets anywhere among the responsibilities of the federal government. Barack, here's a hint, if the federal government took less money out of our pockets, our state and local governments might be better able to afford their responsibilities. Try reading the ninth and tenth amendments sometime. I know you're a constitutional scholar and all, but those to seem to have escaped your notice. [Here's a news flash for some of my readers, I actually think the states could be doing more. They just need to be mindful of the consequences of what they do in the marketplace. California, New York, and Massachusetts are you listening? Florida, are you listening? You've gone too much the other way, and I hated living there when I did because you didn't take care of kids.]

Because of this plan, 95% of the working households in America will receive a tax cut – a tax cut that you will see in your paychecks beginning on April 1st. Yeah, a whole ten bucks a week according to the new withholding tables. They picked the right day to launch this little nugget, didn't they?

I know there are some in this chamber and watching at home who are skeptical of whether this plan will work. I understand that skepticism. Here in Washington, we’ve all seen how quickly good intentions can turn into broken promises and wasteful spending. And with a plan of this scale comes enormous responsibility to get it right.

That is why I have asked Vice President Biden to lead a tough, unprecedented oversight effort – because nobody messes with Joe. Well, now I feel better. We've put the plagiarist gaffe-omatic in charge. What could go wrong? I have told each member of my Cabinet as well as mayors and governors across the country that they will be held accountable by me and the American people for every dollar they spend. I have appointed a proven and aggressive Inspector General to ferret out any and all cases of waste and fraud. And we have created a new website called recovery.gov so that every American can find out how and where their money is being spent. And I'm sure that it'll be every bit as complete as that list of executive orders you've posted, and there's just no way that there's any incentive to not list a wasteful project when you've told all the agency heads, mayors and governors that they'll be held accountable if there's any waste. Nope, I'm absolutely sure that the bastion of integrity heading the Treasury will make sure that everything's properly accounted for.

I want to speak plainly and candidly about this issue tonight, (that would be nice, wouldn't it?) because every American should know that it directly affects you and your family’s well-being. You should also know that the money you’ve deposited in banks across the country is safe; your insurance is secure; and you can rely on the continued operation of our financial system. That is not the source of concern. No, you're the source of my concern, but I repeat myself. Sorry.

The concern is that if we do not re-start lending in this country, our recovery will be choked off before it even begins.

You see, the flow of credit is the lifeblood of our economy. The ability to get a loan is how you finance the purchase of everything from a home to a car to a college education; how stores stock their shelves, farms buy equipment, and businesses make payroll.

But credit has stopped flowing the way it should. Too many bad loans from the housing crisis have made their way onto the books of too many banks. With so much debt and so little confidence, these banks are now fearful of lending out any more money to households, to businesses, or to each other. When there is no lending, families can’t afford to buy homes or cars. So businesses are forced to make layoffs. Our economy suffers even more, and credit dries up even further. No, you see, the credit marketplace responded exactly as it should and stopped throwing good money after bad. People stopped buying because they realized they were over extended. There's a reason why Dave Ramsey has one of the most popular shows on the radio, but I forget, you don't listen to talk radio, do you?

That is why this administration is moving swiftly and aggressively to break this destructive cycle, restore confidence, and re-start lending. Yup, you're going to take almost 900 billion dollars out of the private sector that desperately needs it to fund growth by borrowing or taxing it, filter it all through a government bureaucracy that adds no value, and give it to your friends for projects of dubious worth. That sure restores my confidence in the economic recovery.

We will do so in several ways. First, we are creating a new lending fund that represents the largest effort ever to help provide auto loans, college loans, and small business loans to the consumers and entrepreneurs who keep this economy running. Okay, let me get this straight. You're going to mitigate the consequences of the last government created credit bubble by doing more of the same? No wonder you seemed to stumble while you were giving this speech. I wouldn't have been able to do it with a straight face either.

Second, we have launched a housing plan that will help responsible families facing the threat of foreclosure lower their monthly payments and re-finance their mortgages. It’s a plan that won’t help speculators or that neighbor down the street who bought a house he could never hope to afford, but it will help millions of Americans who are struggling with declining home values – Americans who will now be able to take advantage of the lower interest rates that this plan has already helped bring about. In fact, the average family who re-finances today can save nearly $2000 per year on their mortgage. Not one word about the property rights of those investors funding those mortgages. Nope, screw those folks who invested their savings in other people's homes. I guess I wouldn't have expected a red-diaper baby like Barack to have seen It's a Wonderful Life.

Third, we will act with the full force of the federal government to ensure that the major banks that Americans depend on have enough confidence and enough money to lend even in more difficult times. And when we learn that a major bank has serious problems, we will hold accountable those responsible, force the necessary adjustments, provide the support to clean up their balance sheets, and assure the continuity of a strong, viable institution that can serve our people and our economy. That's right folks, you can count on the very same bank regulators who missed all those signs of trouble the last time to get it right this time. And just how many of them are going to be held accountable? I won't be holding my breath.

I understand that on any given day, Wall Street may be more comforted by an approach that gives banks bailouts with no strings attached, and that holds nobody accountable for their reckless decisions. But such an approach won’t solve the problem. And our goal is to quicken the day when we re-start lending to the American people and American business and end this crisis once and for all. No, actually, I suspect very strongly that Wall Street would prefer you stay the hell out of their business. Now, if you wanted to strengthen the ability of shareholders to hold corporations accountable, I might be able to find some common ground with you.

I intend to hold these banks fully accountable for the assistance they receive, and this time, they will have to clearly demonstrate how taxpayer dollars result in more lending for the American taxpayer. This time, CEOs won’t be able to use taxpayer money to pad their paychecks or buy fancy drapes or disappear on a private jet. Those days are over. Of course, you'll be spending billions of our hard earned cash building nice new buildings for DHS, sodding the National Mall, funding Speaker Pelosi's private jet, buying a new squadron of Marine One's, and taking that multi-aircraft traveling road show known as Air Force One on hundred and fifty mile jaunts to Virginia, but that's all okay, 'cause you're from the government and you just want to help.

I understand that when the last administration asked this Congress to provide assistance for struggling banks, Democrats and Republicans alike were infuriated by the mismanagement and results that followed. So were the American taxpayers. So was I. That would be the last emergency bill that had to be passed NOW or the world would end. So now we're stuck with another abomination that nobody read before they voted for, or signed it, and we're all supposed to think that everything's going to be just fine. Right.

So I know how unpopular it is to be seen as helping banks right now, especially when everyone is suffering in part from their bad decisions. I promise you – I get it. No, you don't. Everybody out here between the coasts understands that it wasn't exactly the fault of the banks, and we're scared to death that you're going to make it worse. In fact, most of us are fairly convinced that Congress can make just about anything worse without breaking a sweat.

But I also know that in a time of crisis, we cannot afford to govern out of anger, or yield to the politics of the moment. No, we can't yield to the politics of the moment. That would be why so many of us are upset with you and Congress doing exactly that. Tell me again why, given the ponderous nature of federal and state procurement processes, you couldn't take a few days to let people, hell, let Congress, read the damn stimulus bill. My job – our job – is to solve the problem. No, your job is to let US solve the problem. Our job is to govern with a sense of responsibility. Amen, now why do I doubt your ability to do that? I will not spend a single penny for the purpose of rewarding a single Wall Street executive, but I will do whatever it takes to help the small business that can’t pay its workers or the family that has saved and still can’t get a mortgage. Right. You're going to make those small businesses pay COBRA rates for employees they've had to lay off, potentially putting them out of business. You're going to try your damnedest to keep the housing bubble inflated, thus propping up home prices and keeping the existing housing stock from selling at market appropriate prices, further delaying the building of those new homes. Perhaps instead of organizing communities, you might have tried creating jobs and putting people to work instead. It might have given you a different perspective.

So I ask this Congress to join me in doing whatever proves necessary. Because we cannot consign our nation to an open-ended recession. And to ensure that a crisis of this magnitude never happens again, I ask Congress to move quickly on legislation that will finally reform our outdated regulatory system. It is time to put in place tough, new common-sense rules of the road so that our financial market rewards drive and innovation, and punishes short-cuts and abuse. It was Congress' common sense rules that got us into this mess. It was only common sense that we provide mortgages to every comer. That's the American Dream after all. It was only the Fed's common sense that mismanaged the money supply, contributing to the credit crisis. It was only your common sense solutions that have resulted in a two thousand point drop in the Dow as the market responded to your plans. And as for rewarding drive and innovation, I guess that means you'll be keeping those Bush tax cuts in place then? Didn't think so.

The recovery plan and the financial stability plan are the immediate steps we’re taking to revive our economy in the short-term. But the only way to fully restore America’s economic strength is to make the long-term investments that will lead to new jobs, new industries, and a renewed ability to compete with the rest of the world. The only way this century will be another American century is if we confront at last the price of our dependence on oil and the high cost of health care; the schools that aren’t preparing our children and the mountain of debt they stand to inherit. That is our responsibility. One wonders if the speech writing shop saw the double meaning in that last sentence. Probably not, they still think Gibbs is doing a great job.

Given these realities, everyone in this chamber – Democrats and Republicans – will have to sacrifice some worthy priorities for which there are no dollars. And that includes me. And boys and girls, that's why we've already passed everything we wanted for the next decade in the stimulus bill!

We know the country that harnesses the power of clean, renewable energy will lead the 21st century. No, it'll be the country with the cheapest, most efficient energy. That's not the same thing. Next time, hire an engineer instead of a physicisy to head the Energy department. And yet, it is China that has launched the largest effort in history to make their economy energy efficient. We invented solar technology, but we’ve fallen behind countries like Germany and Japan in producing it. New plug-in hybrids roll off our assembly lines, but they will run on batteries made in Korea.

Well I do not accept a future where the jobs and industries of tomorrow take root beyond our borders – and I know you don’t either. It is time for America to lead again. And that's why I'm proposing to reform our corporate tax rates and capital gains taxes to be the most competitive in the developed world. Oh, wait, that's just what I wanted to hear. Sorry.

Thanks to our recovery plan, we will double this nation’s supply of renewable energy in the next three years. That's right, we're going to go from what, five percent to a whopping ten, and at what cost? Oh, and we're going to wave the magic wand so the wind always blows and the sun never sets so we don't have to worry about the energy storage issues with either of these technologies. We'd never want to have to pump water into reservoirs or any of those other large scale things that might be nasty for the bugs and bunnies. We have also made the largest investment in basic research funding in American history – an investment that will spur not only new discoveries in energy, but breakthroughs in medicine, science, and technology. Color me a skeptic. We've only been hearing this crap since Nixon.

We will soon lay down thousands of miles of power lines that can carry new energy to cities and towns across this country. And we will put Americans to work making our homes and buildings more efficient so that we can save billions of dollars on our energy bills. Because we know there's just been no incentive to be efficient until now.

But to truly transform our economy, protect our security, and save our planet from the ravages of climate change, we need to ultimately make clean, renewable energy the profitable kind of energy. So I ask this Congress to send me legislation that places a market-based cap on carbon pollution and drives the production of more renewable energy in America. And to support that innovation, we will invest fifteen billion dollars a year to develop technologies like wind power and solar power; advanced biofuels, clean coal, and more fuel-efficient cars and trucks built right here in America. In other words, because you know that renewables can't compete on their own, you have to make everything else MORE EXPENSIVE. Some innovation. One more news flash for you Barack, when you make cars lighter and more fuel efficient two things happen, people drive more because individual trips are less expensive, and more people die because they're less well protected. Some estimates I've seen put the numbers at several thousand additional deaths each year just due to the standards already in place. As James Montgomery Scott, PBUH, might say, Mr. President, you canna' fight the laws of physics.

As for our auto industry, everyone recognizes that years of bad decision-making and a global recession have pushed our automakers to the brink. We should not, and will not, protect them from their own bad practices. But we are committed to the goal of a re-tooled, re-imagined auto industry that can compete and win. Millions of jobs depend on it. Scores of communities depend on it. And I believe the nation that invented the automobile cannot walk away from it. No, my fellow Americans, you've made the wrong choices buying those import cars which better met your needs. You shouldn't be supporting those non-union workers down South because they've all got confederate flags in their pickup trucks, and don't contribute dues to our campaigns. You should have been giving your money to the good democrats in Detroit that wasted the seventies, eighties and most of the nineties learning how to make a decent car that you might want.

For that same reason, we must also address the crushing cost of health care. And here is where I'm going to call it a night. We'll return here tomorrow.

State of the Union

While he's often sounding like a republican, I think the net effect on the economy will be negative. Cap and trade is likely to make the market tank even further. We'll see. More tomorrow.

Atlas' Itchy Shoulders

Well, color me surprised. It seems I was being optimistic with my earlier prediction of a 7250 close today. The market didn't close at 7250, it lost 250 and closed at 7114.78, the lowest level since May 1997. And with that continuing proof of his wisdom, here's a little Hayek for your edification:

The economic freedom which is the prerequisite of any other freedom cannot be obtained only by relieving the individual at the same time of necessity and of the power of choice; it must be the freedom of our economic activity which, with the right of choice, inevitably also carries the risk and the responsibility of that right.

We are not being taught new lessons.

There's Nothing New under the Sun, or is that the One?

To constrain the brute force of the people...governments deem it necessary to keep them down by hard labor, poverty and ignorance, and to take from them, as from bees, so much of their earnings, as that unremitting labor shall be necessary to obtain a sufficient surplus barely able to sustain a scanty and miserable life. And these earnings they apply to maintain their privileged orders in splendor and idleness, to fascinate the eyes of the people, and excite in them an humble adoration and submission, as to an order of superior beings. -- Thomas Jefferson

Jefferson was talking about European governments in his day. I'm not.

Monday Dow

Friday's Dow Jones Industrial Average closed at 7365.67. Saturday, major features of the President's budget were leaked, including a package of business and higher income personal taxes, and a pledge to halve the deficit by the end of his term. I would not be surprised to see the Dow tickling 7250 tomorrow. People are seeing there's no incentive to invest in American business, but lot's of incentive to be an American bum. Tax cheats seem to fare even better.

Two Thousand

The DOW has dropped roughly two thousand points since it became clear that Mr. Obama would become president. In the past weeks we have seen precipitous drops when the "stimulus" package was passed, and when the Treasury Secretary unveiled his "plan" for the banking industry. If all these plans are intended to save us from ourselves, one has to wonder why the markets, a predictor of future economic performance, would be declining. James Madison had an answer in 1788 that is applicable today:

It will be of little avail to the people that the laws are made by men of their own choice, if the laws be so voluminous that they cannot be read, or so incoherent that they cannot be understood; if they be repealed or revised before they are promulgated, or undergo such incessant changes that no man who knows what the law is today can guess what it will be tomorrow.

Expect the downward trend to continue while hubris exists in Washington. (And, boy, ain't that pessimistic.)

Be Prepared

Some lessons learned early in life are worth repeating now and then. The necessity to be prepared is one of them. Be prepared for what? That's hard to answer. Some things are pretty easy to anticipate: a flat tire while you're out in the boonies, an unexpected overnight on that 'day hike' you had planned, a lost job, or and auto accident. The larger things, the high consequence, low probability things, like the odd encounter with one of society's wolves, a complete economic collapse, a wmd attack, etc. are harder. Whatever the threats are to your life, at least give them some active thought. You may decide that you don't need much in the way of plans or supplies, etc., but the very act of making those decisions will better prepare you if you do have to face the unexpected. Above all, remember that it's your responsibility, and no one else's to take care of you and yours, so plan accordingly.

What's Missing?

Reading this article on health care "reform" do you notice anything missing? How about any mention of tort reform as a component of cost reduction? Let's see, what's one of the biggest blocks of contributors to the Democrat party made up of? Oh, yeah, trial lawyers. That's right, the .gov is perfectly willing to take over responsibility for health care decision making, but you can bet the farm that if those decisions go south, your doctor will take the blame, and we'll all continue to pay those inflated malpractice insurance premiums, only now through our tax dollars. We wouldn't want our [strikeout]bribes[/strikeout] political contributions to go down, would we?

I'm Just a Guy

If governments derive their just powers from the consent of the governed, isn't it implicit that the government cannot have more rights than those conferring those powers? If that's the case, would someone please explain to me why it's permissible to coerce labor from one group of people to "invest" in firms they would not otherwise invest, or to pay the mortgages of people to whom they shouldn't have been given in the first place? Why is it necessary to have the productive work at the behest of the unproductive, dishonest, stupid or lazy (and here I'm just talking about Congress)? And if you say, but Captain, no one's coercing labor, I would ask you where you thought the money came from.

I am not an anarchist. I'm just a guy who sees his house being reassessed upward in a down market, feeling he's being played for a chump, and expecting his already 28% federal tax burden to go up shortly, his retirement income to disappear, and the .gov to further trample his rights as a free-born American. I'm just a guy who wants to be able to take care of himself and his family and who doesn't appreciate the government making that harder. I want to be able to choose my own doctor and insurance company without having to worry about some bureaucrat deciding I can't be treated cost-effectively. I want to be able to freely invest my money in companies without worrying about whether the government is going to decide that company loses because its competition is better connected politically. I'm just a guy that doesn't want to worry about going to the bank for a car loan and getting a different interest rate for a car from a company the government has a stake in as one for a car from a company that isn't on the dole because the government owns the bank too. I'm just a guy that wants to compete for work on my own merits without having to worry about whether the competition belongs to some "preferred" group. I'm just a guy that doesn't understand why it's fair for someone's tax rate to depend on how much money they make. I'm just a guy that wants his grandkids to live in a free country without having to pay for debts my generation saddled them with.

The Constitution that I swore an oath to defend is being shredded, and I'm not a happy camper.

LA Gun Rights Examiner: Gun Control: the very first pig with lipstick on it.

LA Gun Rights Examiner: Gun Control: the very first pig with lipstick on it.

Posted using ShareThis

As the article says, it's about control, not about guns. The sovereignty of We The People is under assault.

More Welcome to Chicago

And this is the guy that was supposed to be clean? Look away folks, absolutely nothing to see here.

First...

1. Get elected. Check
2. Destroy property rights. Check (What, you didn't think that's what the "stimulus" and TARP do?*)
3. Destroy free speech. Working
4. Destroy the right to bear arms. Working
5. Eliminate opposition. Working

*What else would you call it when the government can arbitrarily abrogate a legal contract between two parties? Ask yourself the next question, how does this restore trust to the economy? And if it doesn't, why pass the legislation?

From the moment when labor can no longer be converted into capital, money, or rent, into a social power capable of being monopolized, i.e., from the moment when individual property can no longer be transformed into bourgeois property, into capital, from that moment, you say, individuality vanishes.

You must, therefore, confess that by 'individual' you mean no other person than the bourgeois, than the middle-class owner of property. This person must, indeed, be swept out of the way and made impossible. -- The Communist Manifesto

What's next? An enabling act? And yes, I am serious. Somewhat tongue in cheek, but serious.

33 Minutes

A little bit of searching will let you find out that Iran has practiced launching ballistic missiles from container ships, and coincidentally practiced using trajectories that would be optimal for an EMP weapon.

Personally, I think we're more likely to see a full-blown nuke or a dirty bomb exploded dockside in a container port. Long Beach would be my guess, but Seattle or Tacoma would be high on the list as well. Downtown ports in both cases. West Coast ports rather than East Coast to maximize fallout contamination across the countryside.

If you're not worried, you're not paying attention.

Read it

http://smallestminority.blogspot.com/2009/02/confidence-part-iii.html I've been working on something similar, but this'll do for now.

Hope and Change

Trotsky? Never heard of him. Yet another instance of The One discovering the airbrush.

H/T Instapundit

What Kills a Skunk?

Indispensable Steyn

Read the whole article. I wish I had Steyn's wit to say it myself, but here's the money quote:

America has a choice: It can reacquaint itself with socioeconomic reality, or it can buckle its mandatory seatbelt for the same decline most of the rest of the West embraced a couple of generations back. In 1897, troops from the greatest empire the world had ever seen marched down London’s mall for Queen Victoria’s diamond jubilee. Seventy years later, Britain had government health care, a government-owned car industry, massive government housing, and it was a shriveled high-unemployment socialist basket-case living off the dwindling cultural capital of its glorious past. In 1945, America emerged from the Second World War as the preeminent power on earth. Seventy years later . . .

Let’s not go there.

I have a great deal of faith in an informed electorate to do the right thing. That is not synonymous with faith in our electorate to do the right thing.

QOTD

De Tocqueville, as so often, has some words for us tonight:

Providence has not created mankind entirely independent or entirely free. It is true that around every man a fatal circle is traced beyond which he cannot pass; but within the wide verge of that circle he is powerful and free; as it is with man, so with communities. The nations of our time cannot prevent the conditions of men from becoming equal, but it depends upon themselves whether the principle of equality is to lead them to servitude or freedom, to knowledge or barbarism, to prosperity or wretchedness.

Let us pray to choose well.

You Can't Make This Stuff Up

From The Buffalo News:

02/13/09 12:28 PM
Prominent Orchard Park man charged with beheading his wife
By Gene Warner
News Staff Reporter

Orchard Park police are investigating a particularly gruesome killing, the beheading of a woman, after her husband -- an influential member of the local Muslim community -- reported her death to police Thursday.

Police identified the victim as Aasiya Z. Hassan, 37. Detectives have charged her husband, Muzzammil Hassan, 44, with second-degree murder.

"He came to the police station at 6:20 p.m. [Thursday] and told us that she was dead," Orchard Park Police Chief Andrew Benz said late this morning.

Muzzammil Hassan told police that his wife was at his business, Bridges TV, on Thorn Avenue in the village. Officers went to that location and discovered her body.

Muzzammil Hassan is the founder and chief executive officer of Bridges TV, which he launched in 2004, amid hopes that it would help portray Muslims in a more positive light.

The killing apparently occurred some time late Thursday afternoon. Detectives still are looking for the murder weapon.

"Obviously, this is the worst form of domestic violence possible," Erie County District Attorney Frank A. Sedita III said today.

Authorities say Aasiya Hassan recently had filed for divorce from her husband.

"She had an order of protection that had him out of the home as of Friday the 6th [of February]," Benz said.

Muzzammil Hassan was arraigned before Village Justice Deborah Chimes and sent to the Erie County Holding Center.

gwarner@buffnews.com




Find this article at:
http://www.buffalonews.com/494/story/578644.html

Shameful

Congress will probably vote tomorrow on the largest spending bill in the country's history. That few of those voting will have read it is absolutely shameful. That none of the rest of us will have seen it is a breach of promise. Not only has the President promised us five days in which to read and comment on all legislation, Congress voted unanimously to give us 48 hours to review this one. Is anyone surprised? Will anyone who voted for Hope and Change ever wonder what happened to their country?

Congress as Jury Duty?

In light of Nick Gillespie's piece at Reason, I offer a modest proposal for the 28th Amendment to the Constitution:

Section I. The seventeenth article of amendment to the Constitution of the United States is hereby repealed.
Section II. Three Candidates for election to Representative in each district shall be chosen by the same process defined by the laws of the various states to choose potential members of juries. Elections for Representative in each district shall include only these three Candidates.
Section III. Candidates shall be allowed one month prior to the election to make their qualifications known, provided a monetary allowance equal to one month of Congressional pay with which to achieve this aim, and an additional like amount as a living allowance during the campaign period. Campaign funds shall be accounted for to the Treasury and unused funds returned. Only funds provided under this Article may be used for this purpose. Unused living allowance funds shall be retained by the Candidates as an honorarium.
Section IV. Representatives shall serve for one term only.

Note that this would return the States to their intended place as participants in the Federal government via the Senate. The people would continue to choose the most qualified of the candidates, but the harmful effects of faction rightfully feared by the founders would be minimized if not eliminated outright. Fixed public funding would reduce opportunities for outside influence and encourage frugality in our Representatives.

Since most of us think we could do a better job of running the country than our current Congress, let's take charge!

Jimmy Carter II

We appear to be heading into the second term that Jimmy Carter never had. From Iran to the "energy crisis", to the preachy tone coming out of the White House, I feel a strong sense of deja vu. Those that didn't live through it the first time are in for a real treat.

More Armey

Just a link this time, but its explanation of the various economic schools of thought alone make it worthwhile to read. It's not all that long either. If it's not obvious already, I have to admit that the Austrian School arguments make the most sense to me.

Sowell Wisdom

I love this guy.

Our economic problems worry me much less than our political solutions, which have a far worse track record.

For more, go here.

Four Choices

From The Corner today. Some of this I've said myself. The excesses of the last 70 years of government, coupled with the abomination that is the current "stimulus" bill will leave my children and grandchildren with a grim future. Read this carefully.

The Costanza-Hoover Principle [Jim Manzi]

The idea of the stimulus plan is that we get some money directly into our pockets ($200-$300 billion of tax breaks without matching government spending reductions) plus about another $550-$600 billion worth of new bridges, unemployment benefits, electronic patient records, and so on (plus all the jobs required to make all this stuff). Even better, the people who do these jobs have to buy food, shelter and digital camcorders, so that creates yet more wealth. This sounds pretty sweet. The catch, of course, is that we would add over $800 billion—or more like $1.2 trillion if you include interest payments—to the national debt.

And, of course, it’s likely to be much, much more than this. Most of the spending is in the form of increased transfer payments, additions to school budgets, spending on health care, and so on. Does anybody really think that when these programs expire the recipients are just going to say “Hey, a deal’s a deal”? This will likely increase the baseline of future expenditures. Further, we will be setting a precedent that states that run huge deficits will be bailed out by taxpayers in the 49 other states, and thereby create a Prisoner’s Dilemma—we should expect lots more state deficits that become federal responsibilities. And it’s not like we don’t have various other “rescue” packages lined up behind this one. And it’s not like we shouldn’t expect a large decrease in government tax collections over the next coupe of years as incomes, profits and capital gains decline. If the experience of other countries after bubbles like the one we’ve just had is any guide, we should expect an increase in national debt of trillions of dollars.

But what does this really mean, in practical terms? When I hear politicians say that “we’re borrowing this money from our kids” or whatever, this can seem abstract. It turns out that it’s not a metaphor.

If we enact the stimulus legislation, there will people from Beijing to Dubuque who will hold pieces of paper saying, roughly, that on a specified date they can show up at the door of the United States government and demand trillions of dollars. On that day, it seems to me that some combination of only four things must happen:

1. Rollover the Debt: Convince either these specific debt holders to take another piece of paper that says they can come back at a later date for the money, or convince some other party to take such an IOU and use the money that party provides to pay off the original debt. This is kind of like paying off one credit card with another one. It comes with further interest charges. In theory, if your debts are modest enough you can do this forever, just like with your credit card. Of course, you will pay interest forever this way, and this will just spread out the trillions of dollars (in present value terms) over many future generations. Taxes will be somewhat higher forever than they otherwise would be.

But if you don’t want to do this—or more likely can’t, because you’re so indebted—you are left with some combination of the next three options. Each has its own special charms

2. Higher Taxes: Our children’s taxes are trillions of dollars higher than they would otherwise be, but they get no roads, bridges or health care from these taxes, because they are all used to pay down the historical debt for stuff we consumed. This is the most responsible option and would require a large reduction in consumption all at once. It’s like going on a strict budget at home in order to pay down the balance on your card that’s been sitting there for two years from that great vacation you charged. For your parents.

3. Default: The U.S. government refuses to pay it, and as we have the world’s most powerful armed forces and reasonably good civilian control of the military, it’s hard to see how anybody could collect. Of course, this would almost certainly result in a dollar collapse and a loss of economic value of many, many trillions dollars for our children. Think this is inconceivable? Think again. In January, the bond market estimated the probability that the U.S. government will default on at lest some of its debt within the next ten years to be about 6 percent.

4. Devalue the Currency: The government simply prints several trillion dollars and gives them to the debt holders. Inflation gets a lot higher than it would be otherwise, with all the loss of consumption that implies. If inflation gets up to Weimar Germany levels of hyper-inflation, this becomes a default by another name.

As of now, the likeliest result is that we would avoid the true disaster scenarios, and that future generations would “only” have to give up a few trillion dollars of wealth through a combination of much higher taxes and inflation. How could we justify doing this if we claim to care about our kids?

The theory of the case that is the stimulus would not only transfer wealth, but also create wealth by moving the current and future economy to a much higher level of output than it would without achieve without the spending. Future taxpayers could pay more absolute dollars, but still have more after-tax income because of this higher growth. It’s not blowing a bunch of money on ourselves—it’s an investment in the future. Everybody wins!

In effect, we are asking our children for a loan, and promising that we are good for the money because we will pay them back with interest. Only we get to be both the person asking for the loan and the loan officer at the same time. My guess is the loan officer has a lot of faith in us.

Should he?

Many leading economists believe that the stimulus will create value by driving higher output, and is therefore a good idea. Paul Krugman and Joseph Stiglitz, both Nobel laureates in economics sure think so. In fact, they think the stimulus should be bigger. On the other hand, Nobel laureates in economics James Buchanan, Edward Prescott, Vernon Smith and Gary Becker all think it’s a bad idea. The only thing we can say with high confidence about this is that at least several Nobel laureates in economics are wrong.

The truth is that nobody knows if it will work or not. It would be as if, on the night before the Apollo launch, half of the world’s Nobel laureates in physics were asserting that rockets can’t get as far as the moon, and the other half were saying they can get there in theory, but we need much more fuel. This is a question about which expert opinion isn’t worth much. We are making decisions in a sea of ignorance, and shouldn’t kid ourselves about this.

The strongest argument for the stimulus (and the one that I think, in their heart-of-hearts, most supporters actually hold) is what could be called the Costanza-Hoover Principle: Do the opposite of whatever Herbert Hoover did. In a world of limited knowledge, this isn’t as crazy as it might seem, at least as a starting point. It sure seems like Hoover screwed up; and hopefully we can avoid his mistakes. This pretty much boils down to: Avoid a tariff war; don’t try to balance the budget right now; don’t restrict the money supply (that gold standard thing is right out); and, most importantly, prevent a collapse of the banking system.

This principle would lead to deficits (and as a practical matter, we are going to have large deficits for some time), but would also lead to us trying to feel our way into it, rather than making a huge commitment all at once. So-called boldness in the face of ignorance is simply lack of judgment. What would it mean to “feel our way into it”? That’s the subject of an upcoming post.

02/10 03:01 PM

Stimulus Healthcare

http://www.bloomberg.com/apps/news?pid=20601039&refer=columnist_mccaughey&sid=aLzfDxfbwhzs

Anyone who thinks "universal healthcare" will actually be universal needs to read this article. This bill is a power grab, nothing more. It puts the government in charge of the most intimate aspects of your life, substituting government rationing for market pricing. It is not about healthcare, it's about control. Where's the debate? Oh, I forget, it's unpatriotic to debate.

Be Afraid

http://www.reason.com/blog/show/131587.html

Read this, and then remember that the same types of folks who like leaking juicy tidbits to the press can't wait to have a federal health records database. This "stimulus" bill is lots more than spending.

This administration, and it's aiders and abettors in Congress are hell bent on taking away our individual liberties.

QOTD

The more I see, the more convinced I am that the Democrats have finally found their Nixon.

From the Adventures of Roberta X. Hey, I can't write/post longish rants all the time.

Bailout! Bailout!

Because there is no disaster which immediate, decisive, wrong action cannot make worse.

From whatyououghttoknow.com

QOTD

The recognition of the insuperable limits to his knowledge ought indeed to teach the student of society a lesson of humility which should guard him against becoming an accomplice in men's fatal striving to control society - a striving which makes him not only a tyrant over his fellows, but which may well make him the destroyer of a civilization which no brain has designed but which has grown from the free efforts of millions of individuals. -- F. A. Hayek

Of course, expecting humility from the Messiah might be asking a bit much.

I Told You So

From Instapundit today:

OH, GOODY: Treasury in plans for record debt sale. “The US Treasury on Wednesday opened the floodgates of government bond issuance, revealing plans for a record debt sale in February and more frequent auctions in the months to come. The announcement came amid growing fears about US government deficits and sent the yield on the benchmark 10-year Treasury note rising to 2.95 per cent, up from just over 2 per cent at the end of December. The rise in Treasury yields has been pushing mortgage rates higher, complicating efforts to revive the economy.” So the “stimulus” is now a drag on the housing market. . . .

Posted at by Glenn Reynolds at 10:56 pm

I hate to say it, but I told you so.

If there is a private sector credit crisis, how will government borrowing money to pay for the planned increases in spending do anything to make private capital more generally available? Doesn't the government actually compete for private capital? It seems to me that if I, as an investor, choose to put my money into treasury notes or government bonds, that money is no longer available for investment in corporate stock or a bank where it could be used to finance job growth or expansion. If that's the case, just how will private loans become easier to obtain?

If government is not the answer, then why does government act in a Keynesian manner? Simply put, power. The government loves Keynes, because Keynes puts the government in charge. Economics though, at its heart, is about the purchasing decisions that you make. You, and only you, know what's best for you. That is what it means to be free. When you give those choices to someone else, you lose.

Another International Post

More on the international scene. The last three posts make for depressing reading, don't they?

One of these days I'll get around to posting on our own little demographic time-bomb. Here's a hint: I no longer think it likely that I'll be able to retire.

H/T Instapundit

Sold Down the River

This is not good news.

It's going to be a long four years.

EU unrest

Wildcat oil strikes: Europeans are finally waking up to the demise of democracy

This may be the most important article of the day. Forget the middle east. Widespread unrest in Europe would not be a good thing.


As an aside, it is also worth remembering that under Article VI, treaties take precedence over the Constitution itself. I bring this up because of this little gem of a treaty. If gun control resurfaces, this is likely to be the means.

To the Barricades

Arm Against the Keynsian Counter-Revolution

And for those thinking I've really gone off the deep end, rest easy. My reading list also includes Marx and Keynes in the near future. I just happen to agree with a free market approach. I did not say laissez-faire approach. Some regulation is a good thing, encouraging transparency and accountability. What I strongly disapprove of is the government picking winners and losers. That's inherent in the approaches now being discussed.

1938

This article from the Wall Street Journal explains why the circumstances surrounding the 1938 recession within the Depression is a little bit more complicated than might appear from reading this piece from the HuffPo. A much fuller explanation may be found in The Forgotten Man by Amity Shlaes. (Well worth reading.)