The inevitable battle between the runaway public sector and the private sector that funds it has begun.  What started recently in Wisconsin will continue to spread across the country as the unworkable fiscal mathematics that are so many state budgets finally degenerate into social unrest between the payers and the payees. More specifically, the instigators of this mess, the public sector union managements and their progressive political operatives, will struggle against their most existential threat to date.  It will not be pretty.

Continue reading at Forbes Opinions…

Like old-growth timber succumbing to a band of lumberjacks, incumbent Democrats in Congress crashed to Earth in record numbers Tuesday night.   Where there’s been a steady call for politicians to “do something” about the economy, about jobs, about Wall Street, about the environment, about everything, at least one Congressional district showed that they want “something else” to be done instead.   I’m referring to my own Congressional District 19 in New York, where a newcomer to politics, Dr. Nan Hayworth, ran against the Democratic incumbent, John Hall.   It is a tale worth telling, and emulating.

Continue reading at Forbes Opinions…

Eleven months ago, in the face of a gauntlet of headwinds that the Obama administration was creating in front of the American job creation engine, I came to the following conclusion:

“If you were an entrepreneur, or a business owner or manager with the ability to start large new initiatives, perhaps ones requiring large numbers of new employees, in the face of the above legislative uncertainty, would you dare proceed?”

The resulting economic lockup, and the trillions of private capital sitting in fear on the sidelines, has become the story of the day.

Predicting this story was not difficult, due to the nature of The Machine itself.  Driven by a lust for power, fueled by environmental extremism, economic illiteracy, and class warfare, and financed by a self-serving cycle of union cronyism, there can only be one conclusion:  The Machine is antithetical to the founding principles that made this country great, and can only produce seizure.   Here’s how it breaks down: Continue reading »

Photo by Ira Block

[This essay was originally entitled “Lessons from Grand Central Station”, until several readers pointed out that the correct name is Grand Central Terminal.  It was an error that I could not let stand.  The permalink (URL) reflects the original title so as to not break existing references. — Author/Admin]

Every weekday morning, trainloads of people are dumped into New York’s Grand Central Terminal and sent on their way.  Thousands per hour traverse the huge main room as they make their way to their desired subway stations, taxi stands and exits in all directions.  Arteries of traffic spontaneously form and disperse — you can join one that’s going in your general direction, get swept along its path and then step out at your stop.   The human pathways will intersect each other with the precision of a champion marching band.   Collisions between any two people amongst the throngs are rare, even amongst those who clearly don’t know where they’re going.

Photo by Ira Block

What’s most remarkable about the above is that no one manages this process.   There are no human traffic cops in white gloves waving some people on and telling others to stop.  There are no ropes herding commuters one way or another.    There are no rules dictating which path you must take to get from point A to point B.   The room manages itself, based on essentially one unwritten rule:  common courtesy. That is to say, you can’t charge through the crowd like a running back, stiff arming people as you go.   What might initially appear as chaos is instead a model of simplicity and efficiency.

Continue reading »

As I’ve written before, “Nothing is more dangerous than the combination of bad ideas and great communication”.    I want to add to that, by including voter apathy.

Witness the birth of ObamaCare, and the justifiable rage that has ensued as a result of the state taking one sixth of our private economy into its control.   In the days before the historic vote, note that not even the New York Times could produce a poll saying that a majority of Americans wanted this bill to become law.  Most remarkably, as of March 29th, a stunning 54% of likely voters would see it repealed.   In morphing their supposed mandate for “change” as pertaining to healthcare and health insurance policy into a supposed mandate for this bill, Obama’s operatives reached their peak (thus far) in disingenuousness.

The rage exists simply because our representatives did not represent.   Instead, they blatantly misrepresented.   Continue reading »

The irony should be lost on no one:  While the country waits to see exactly how brazenly its Congress can behave with regards to health care, the government waits to see how compliant the citizenry will be in revealing various statistics via its once-every-ten-year census.   A massive advertising campaign, kicking off during the Super Bowl no less at $2.5 million dollars for a 30-second spot, implores people to participate:

“The census helps us know exactly what we need, so everyone can get their fair share of funding.”

– 2010 Census TV Ad

A river runs through it? Nope.

I don’t recall reading in the Constitution about the government needing to know what we need.  I do recall reading that a census must be taken to ensure the proper distribution of congressional members.   However, even that has gone beyond the ridiculous, with state-sponsored gerrymandering that produces districts with geographical footprints that look like some kind of meandering wetlands mapping.

Continue reading »

I’ve completed your assignment, Professor Reich.   I’m not a “Republican running for office next November” and regarding “thinking hard about things”, well, unless I’m missing something, I just don’t see where this is so hard.   Perhaps I need some after-class help.

Robert Reich

I read and re-read this part of the assignment:  “You don’t have to be an orthodox Keynesian to understand that as long as the private sector is deleveraging the public sector has to borrow and spend in order to keep the economy moving forward.”

You seem to share Paul Krugman’s never-ending chorus that government must step in and make up the difference when private sector spending undergoes a contraction.   Here’s a good example of that.

I also caught your appearance on CNBC with Larry Kudlow and the Cato Institute’s Dan Mitchell on January 26th as well, where you said:

“At a time when the private sector, consumers and businesses, are massively deleveraging, government has got to come in there to fill the gap.  I mean, I don’t care whether you are a Keynesian, or a Neo-Keynesian, or a Neo-Conservative, or a Neo-Classical economist you’ve got to understand that there is not enough demand in the economy to keep the economy going when the private sector is deleveraging and pulling back.  And therefore, there’s got to be a government spending, regardless of your ideology.”

I admire your consistency.   And you said that on live TV, to boot!

I suspect that you have fond memories of your time on the playground, creating wonderful towers of sand with a sand digger,  standing back and announcing “Look, everyone, at what I’ve made!   Isn’t it grand?”   But I also suspect that you ignored all of the cries of the other kids in the sandbox:  “Hey, Bobby’s taking all the sand again!  Jimmy just broke his ankle in a hole that Bobby made!  Bobby’s hitting dirt and wrecking all the sand!”    How did you get all this past the playgound aides?

I’ll stay after class for extra help if you can provide an explanation of how increasing government spending, massive deficit spending no-less, which must be funded with the resources taken from the private sector, ultimately helps the private sector.   I mean, on one hand, there seems to be nearly uniform agreement that we want the private sector to create jobs.  But on the other hand, aren’t you advocating taking the resources with which, at the margin, the private sector will create those jobs?

I’ve heard something about a “Keynesian Multiplier”, but what about what I’ll call a “Government Subtractor”?   (and can I get extra credit for that term?)  It seems to me that if the federal government decides to spend a bunch of money, it needs to first spend some of that money deciding how it’s going to be spent, and then if it passes it on to the states, the state governments are going to do the same.  Maybe even a local government will get involved, too.   So how much of each original dollar, taken from the private sector in the first place, actually returns to some recipient in the private sector?   In addition to that, how do you feel about everyone arguing via politics on how to spend all that money?    Are the playground aides still involved here somewhere?

For another twist on that theme, you must be familiar with organizations like Charity Navigator that rate various charities at their efficiency.   No one likes to give to a charity that wastes tons of money on administrative overhead.   I suspect the government would not rate very highly if judged this way.

Again, I’m no Keynesian, but if we just did an across the board tax cut, one that could be largely achieved just by changing a few variables in some software here and there (I learned that in my programming class), wouldn’t that basically pin the charity evaluator’s efficiency meter?   It would put more money in everyone’s pockets overnight, where they could do whatever they thought was best with it.   Yes, admittedly, it might not make for many great photo ops, like you sitting on the digger next to your nifty sand castle.

But what really has me stumped is how you are smart enough to decide that the private sector is not spending enough, and can decide (even approximately) how much the government should spend instead.   In other words, you not only feel confident in identifying a gap between the actual and the ideal, you’re prepared to use the force of government to do something about it.  It must be the leverage of that sand digger you that remember.  The power in those two handles really is pretty cool, I confess.

Also after class, perhaps you can explain this chart to me:

I know that a lot of people used to bemoan the United States’ very low saving rate.   But it sure seems to me that they got the message recently!  Looks like they’re saving again!   Have you decided that this huge collective behavior of our society is actually wrong? Are you pitting your singular professorial prowess against the collective brainpower of all of these new-found savers?  It seems to me that the only way you’d feel comfortable saying that the government should spend more is if you believe that the government will spend the money more effectively.  I thought we were in Econ 101 here… is this some preview of a graduate-level course or something?   Do you teach that course, too?

I will hand it to you though, all these different spending programs over the years have certainly created a very impressive tower of laws and regulations, along with an army of individuals trying to figure them all out.   It seems a lot of politicians loved their sand diggers, too.   But they must have mixed mortar into the sand they used for those towers, because no matter how hard people jump up and down on them, they never seem to collapse.

There’s no telling what legislative debacles await our country over the next year, until the new class of 2010 is sworn in and Obama’s ability to implement his remake of America comes to a screeching halt.   In the meantime, we can suggest a few resolutions for Congress and our President, or at least aspiring candidates, to consider:

We will not give away that which we do not own. As we come out of the Christmas season, we must realize that while Congress loves its adopted role of Santa Claus, it is not a role that is found in the Constitution.    Adopting this resolution would nearly single-handedly restore the government to its original limited purposes, as prior to “giving” something to anyone, Congress must first take it from someone else.   And in one fell swoop, government would become dramatically cheaper as well.

Alas, there are not nearly enough elves in Washington or anywhere else to create all of the “toys” that society has lobbied for.  But even if somehow there were, why have we tolerated a bunch of politicians and bureaucrats determining who is naughty and nice, delivering stimuli, redistribution and favors to the latter, and coal (not even “clean coal” at that) into the stockings of the former?

We will not “triangulate” our national security. Ah, imagine the calculus that screamed in the backroom meetings about Afghanistan…. How many votes do we lose if we stay? Who do we gain if we appear tough?   How blatantly can I ignore my field generals?  Osama bin Laden is on record that 10 million dead infidels, which includes both conservatives and liberals — the enemy does not care — would be an acceptable goal for their cause.  Meanwhile, we offer full Constitutional courtroom rights to self-admitted wartime terrorists.   Just what are we thinking?

We will make the “death tax” permanent. Could there be a more blatant act of class warfare and demonstration of the Politics Of Envy?   Wealth accumulated through a lifetime of work and saving, wealth on which taxes have already been paid, is taxed again because supposedly the government can redistribute the wealth more efficiently that those that created it.   How is it that we tolerate the transfer of wealth from those with the best track record of creating it, to the entity with the best track record of squandering it?

We will repeal Obamacare. Or whatever it’s ultimately called.    In a spectacularly stupid tactical maneuver, the Democrats have both a) followed a path of ramming through legislation that no poll can describe as being wanted by the American people, and b) structured the financial pain of the plan to come before the supposed gain.   This sets up a massive opportunity for those running in the 2010 elections (and probably 2012 as well) to run on a campaign cleanly targeted against the Democrats and tapping into the public’s disgust for government waste and overspending by selling the repeal of Obamacare as a cost-cutting measure.

Furthermore, if they have the spine not displayed for the last several elections, they’ll aggressively market a health insurance reform plan centered around Health Savings Accounts, true nationwide competition between insurance companies, malpractice reform, and directly addressing the uninsured.  In other words, a plan that will cost a tiny fraction of Obamacare, but more importantly, will actually be successful in driving down the rate of inflation in medical spending.     Why?  Because where HSA’s are being adopted, that’s exactly what’s happening.

The bottom line on Obamacare is that it simply can not work, because there are no elements in the plan that give any incentives to individuals to seek less medical services.  Indeed to the contrary, it will dramatically increase those demanding medical care without correspondingly increasing the supply of service providers.    The existing on-the-road-to-bankruptcy plan that is Medicare is being held up as a model to emulate, which would simply be laughable if it weren’t so outright dangerous.    But hey, this is consistent with the rest of the Obama administration’s thinking:  Identify the cause of a major sociological problem and then do more of it.

We will not sit idly by as a politically active minority transforms the character of our country. In other words, the giant that is a nation that still leans conservative will not stay asleep any longer.   It is obvious what happens when that takes place:  It sets up the stage for a demagogue like Obama to tap into a fawning national press corps and sweet-talk himself into office, promising the world (or “change”) to any and all supporters/worshipers along the way.

Instead, we will vote in record numbers and shut down the attempts to overturn the defining characteristics of our society, namely, limited government centered around freedom in all forms.    We will no longer watch the irony of formerly communist countries like Estonia racing towards freedom while we race away from it.   We will return to our global role as a country that leads by example, one that recognizes God-given liberty as the most effective way to improve the condition of mankind.

Lastly, we will actively encourage and support politicians who support the above. We will donate our time and resources to ensure that they are elected to office and hold them accountable for promoting true change in the form of reducing the size and role of government in our lives.    Likewise, we will have the courage to tell those who promote the opposite, in no uncertain terms:  You are wrong.

Anyone needing proof that at least one U.S. Senator exists who truly “gets it” with regard to the government’s role in creating our recent financial debacle should devote 10 minutes to watching this video.     This was South Carolina Senator Jim DeMint’s allocated time in questioning Federal Reserve chairman Ben Bernanke during the latter’s December 3rd renomination hearings in the Senate Finance Committee.  It’s great theater, Bernanke’s I’d-rather-be-having-a-root-canal demeanor notwithstanding.

It’s hard provide better verbiage on what DeMint describes, both in the setup of the importance of the issue and the implications of not getting our hands around the true causes of our recent crisis.   Any informed voter needs to be aware of this perspective, and of the presence of elected officials who are willing to buck the populism that keeps it from getting the attention it warrants.   So with that disclaimer, I’m quoting large portions of DeMint’s comments:

Sen. Jim DeMint

“When Congress created the Federal Reserve, they created arguably the most powerful institution in the whole world.  Our whole economy, all our prosperity, wealth, rests on the soundness of the dollar, as does much of the economic systems all around the world.  So as we consider your renomination it’s important that we ask some difficult questions, not just of you, but to ourselves, because no one can say that there haven’t been major failures and I think a lot of us have to admit that the Federal Government, the Federal Reserve let down the American people and a lot, a lot of people have been hurt.

I will take exception to one of the arguments that I’ve heard today and I’ve heard often about what we heard last October and what actually happened.    We were told that if we did not appropriate nearly a trillion dollars to buy toxic assets that the whole worldwide economy or economic system was likely to collapse.  We appropriated nearly a trillion dollars and we never bought one toxic asset and the world economic system did not collapse.   Now we can make a case and debate about all we want about whether or not twisting banks’ arms and forcing more money into the banking system actually helped us.  We could talk about that all day.   But the premise that we used, to create this TARP program, was never followed through on, and it’s difficult for me to find credibility in the arguments that we saved our economy.”

The bait-and-switch performed last fall under the financial doomsday scenario scare tactics described above is nothing short of criminal.   Recent reports of TARP’s supposed effectiveness miss DeMint’s crucial point:   The unprecedented program was passed using scare tactics for an implementation plan that was quickly  abandoned following its passage. Yet in “fool-’em-once-fool-’em-again” fashion, President Obama has the audacity to now want to take $200 billion of these TARP funds and throw it at other sectors and politically expedient portions of our economy.   But we won’t call it a “stimulus”…

DeMint continued:

“For me perhaps the biggest failure, in the Federal Reserve, in the political side here in Washington, is that, amid all these failures, the politicians, the folks in the Administration and Federal Reserve, have claimed credit for saving the system, while blaming capitalism and unrestrained free markets for our problems.   That has justified the positions that are now being taken here in the Congress in many ways, to come back and even extend the control, the intrusion of the Federal Government further into the private sector.  I think you’ve been a big part of orchestrating that, and shifting the blame onto the private sector.

Fed Chairman Ben Bernanke

No one’s arguing that there’s not blame to go around everywhere.   But the biggest failure I’ve seen, is the failure for us to recognize the role that we played and the lack of our oversight of Fannie Mae, who created a lot of these toxic assets and sold them around the world, the loose monetary policy that created chronically low unemployment rates and high leverage across the economy.   By not taking some of the blame, and making the public is aware of that, we’ve undermined the system that made this country prosperous, and I think that is an egregious error.”

Although I’ve written about this before, it warrants repeating that the attempts by many to move our economy away from free markets, to any extent, truly risk killing the golden goose.  And with the government’s nearly perfect track record of never repealing any major program or initiative, the stakes for preventing such major legislative endeavors that might permanently weaken our preeminently free-market orientation have never been higher.

More from the Senator:

“To a large degree the oversight that we’re responsible for here in this Congress we did not accomplish because of assurances that we’ve  gotten over the years, from your predecessor and from yourself and by doing that I think we have egregiously failed the American system.

…

I would again, as you and I have talked personally, ask you to consider the need to make the Federal Reserve more transparent.   There’s no need that independence needs to mean secrecy.  The confidence in the Federal Reserve, the mistrust around this country, has reached new heights, and we need to do something to restore faith that the American people have in their monetary system, their financial system, and that responsibility is at the Federal Reserve as well as in the Congress.   I would encourage you again to consider what type of openness, or “audit” as you and I have talked about, would be appropriate in order to reassure the American people that we’re not looking at another Fannie Mae situation, that over years we were told “not to worry, not to worry”, that everything is OK, and now we saw what it did.   We can’t allow that to happen with the Federal Reserve.”

DeMint here is referring to S604, the Senate counterpart the Ron Paul/Alan Grayson Amendment (HR 1207), which recently passed 43-26 in the House Financial Services Committee, much to the fear of Federal Reserve itself.   DeMint’s intentions here call the bluff of many who would call upon even more regulation and oversight of all aspects of our economy:   Evidently there are still plenty of elected officials who are not comfortable with this oversight extending to certain government agencies.

Lastly, it is well worth noting that voters who agree with DeMint’s worldview can thank The Club For Growth for helping him and other liked-minded individuals get to Washington.    The Club’s legal ability to advertise itself is outrageously limited (perhaps this is Washington’s notion of limiting government).   Anyone wanting to see DeMint’s perspective advanced in Washington should encourage and support similar candidates,  and the Club’s track record in getting that done is impressive.   In the never-more-important war of ideas, having candidates who will reliably legislate from the limited-government side is correspondingly crucial.

So does the President support Read The Bill, or not?