At What Price Jobs?

Don’t know much about history

Don’t know much biology

Don’t know much about a science book

Don’t know much about the French I took

But I do know that I love you

And I know that if you love me, too

What a wonderful world this would be.

—Sam Cooke, Wonderful World

Obama’s Rainbow Tour rolls on. 

We’ve now got the gist of Obama’s new “jobs plan,” and as I predicted it’s being offered as a take-it-or-leave-it package.  $447 billion in additional “stimulus” spending consisting of the following basic elements: 

·         Extending the payroll tax reductions enacted in December of last year,

·         Extending unemployment benefits,

·         Giving federal subsidies to state programs for training unemployed workers,

·         Giving federal subsidies to local governments to keep from laying off teachers,

·         Giving federal subsidies to renovate schools and roads. 

But what bang are we really getting for our buck? 

First, it’s worth considering the absurdity of the government “stimulus” spending concept.  The idea is that the government will jump start things, thus “creating” jobs, by injecting capital—money—into the economy.  But where does that money come from?  There is no stash of Obama-money.  The only money the government has to inject into the economy is money it takes from we, the citizenry, who are the economy.  So what “stimulus” spending is really doing is putting back into the economy money that the government took out of the economy in the first place.  The only thing that has changed is in which citizen’s hands the money is (and, one suspects, there lies the key for Obama). 

Imagine taking $10 from your daughter’s piggy bank to give to her as her allowance.  You’d get the same “What kind of an a-hole are you?” stare you see from the cheated kids in the Ally Bank pony ads.  

Second, it’s clear that Obama has no idea what a job is or where it comes from.  Most of Obama’s proposal doesn’t even have anything to do with jobs at all.  Cutting taxes is almost always a good thing, but the payroll tax reduction—I think it amounts to about $1000 per household—is likely not enough to make much difference in the economy.  Unemployment benefits and training don’t create jobs that aren’t there.  Subsidies to prevent teacher layoffs may prop up a few jobs, but how many can that really be?  And renovating schools and roads—if done right—only takes so long, at which point the job is over.  And for all his sudden bluster about the need to get this done “right now”—where was this urgency when he was spending all of last month on the golf course, or for that matter, during the last year and a half or so?—even if his plan were to pass Congress tomorrow it is virtually certain that the school and infrastructure projects he envisions would not even begin until the middle of next year, and the vast majority wouldn’t begin for years. 

He can talk all he wants, but this plan isn’t going to create a bunch of jobs, and the few it might aren’t coming any time soon.   

Past experience with Stimulus I suggests that Obama is overestimating his plan’s potential impact, probably by a substantial amount.  If the CBO is to be believed, the $862 billion Stimulus I “created or saved” between 1.1 million and 3.3 million jobs, yet still leaves 14.3 million unemployed today.  Query how they measure this sort of thing; the 200% +/- spread alone should call the estimate into question.  But taking the CBO’s estimate at face value, Stimulus I ran between $261,000 and $783,000 per job, for an average estimate of about $522,000 per.  Obama is estimating his new $447 billion Stimulus II will create 2 million jobs (who knows where he’s actually getting his numbers, but I’ll bet it’s no coincidence that just happens to be exactly the number that would bring unemployment under the magic 8% he predicted back in Stimulus I).  That works out to $223,000 per job, or about 15% better than even the best numbers that can be derived from the CBO’s estimates on Stimulus I’s job results, and nearly 60% better than the median.   

Even if we assume Obama is right that his plan will create jobs, that it is all net job creation and not jobs “saved,” and that it will create them all right now—none of which is true, but let’s indulge him for the moment—extrapolating from the CBO’s estimate of Stimulus I’s performance indicates the plan would result in approximately 856,000 jobs, reducing unemployment a whopping 5.9%, or from its current 9.1% to about 8.6%. 

Hoo-rah.  Tell it to the 13.5 million who would still be unemployed. 

And what about the cost of this thing?  Using Obama’s own best-case estimate, he wants to spend $223,000 apiece to create 2 million jobs.  This means that combined, Stimulus I and II will have spent $1.3 trillion to create (“or save”) between 3.1 and 5.3 million jobs, and there will still be 12.3 million unemployed.  Even if we accept the dubious proposition that this shows that stimulus “works,” at some point don’t we have to say we’re spending too much for too little return?  For $715 billion—or a little over half the total if Obama gets his way—we could have just given each of the 14.3 million unemployed $50,000, roughly one year at the average household income level, which for most of them would represent a raise over their last job. 

Meanwhile, to pay for this nonsense, Obama plans to raise income taxes on those making over $200,000 a year, a group that includes most small business owners—but, conveniently, still excludes reluctant tax-evader Warren Buffett (remember, he only makes $100,000 in salary subject to income tax; most of his earnings are in the form of capital gains, which so far Obama has not proposed to tap).  So what we have is a proposal that:

·         Has little to do with jobs

·         Won’t make a significant dent in unemployment even under Obama’s own estimates, and

·         Imposes additional financial burdens on the very people who actually create most of the jobs in this country. 

Accepting that this isn’t just a political ploy to set up his re-election spin and he actually intended this to be something Congress would pass—I know, just go with me here—this isn’t a jobs plan.  It’s a plan to take money from the productive and give it to the unproductive and to his political cronies in the AFL-CIO and NEA.  Nothing more. 

Somewhere, John Galt is warming up his plane.  I just hope he takes me with him.

Yes, Mr. Gleckman, Social Security Is A “Ponzi” Scheme

"A rose by any other name would smell just as sweet."

—William Shakespeare, Romeo and Juliet

The sheer stupidity and/or nefarious semantic games of the Left never ceases to amaze.

In a September 8 piece at Forbes.com, contributor Howard Gleckman purports to take Governor Perry to task for what Gleckman calls Perry’s “loony” labeling of Social Security as a “Ponzi” scheme and a “monstrous lie.”  Although Gleckman acknowledges that the program is underfunded, he says Perry is wrong on both counts because according to the Social Security Trustees’  2007 Report it will still be able to pay young people 70-75% of their promised benefits.  To him, that’s “pretty close” to meeting 100% of the program’s promise, and therefore Perry’s rhetoric is simply an idiotic impediment to fixing the system’s obvious fiscal problems. 

Thanks for clearing that up, Howard.  That’ll make my kids feel soooo much better. 

At a certain level it doesn't matter, but Governor Perry is correct.  Social Security is a Ponzi scheme, and it is a lie, not just to our kids, but to everybody.  And I have no idea why he's now backing off the point just because some have criticized his use of the term. 

Let’s review a little history. 

The term “Ponzi scheme” refers to a con game—read:  fraud—made famous in 1920 by swindler Charles Ponzi, and later perfected by Bernie Madoff.  The details and window dressing can be customized—in Ponzi’s case it was selling investments in a company that was supposedly engaging in a kind of international postal arbitrage—but the guts are always the same.  As the Securities and Exchange Commission defines it: 

“A Ponzi scheme is an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors.”   

So a Ponzi scheme has three defining elements:

(1)        Payment of purported returns

(2)        To existing investors (that is, people who have already paid in)

(3)        Out of money paid in by new investors. 

Now, Social Security was born in 1935, and the idea was that people would pay into the system and the government would (snicker) hold the money in a trust fund where it would earn interest, and then return the money and the earned interest to the contributors over time upon their retirement.  

No, really (snicker).   

In practice, however, early recipients received benefit payments well in excess of their contributions (in itself a classic symptom of a Ponzi scheme).  By 1937 the Supreme Court held in Helvering v. Davis that the program was constitutional because both employees’ and employers’ contributions were in fact just taxes that flowed into general revenue, thus destroying the “trust fund” myth.  Ida Ludlow, the first recipient of monthly benefits, paid a total of $24.75 into the system, but her first check in 1940 was for $22.54, and she ultimately received over $22,000 from the system.  What this means is the program has necessarily always funded benefits (i.e., paid “returns”) to current recipients (i.e., existing investors) out of the contributions of current workers (i.e., new investors), a fact confirmed by the very 2007 trustee report upon which Gleckman relies: 

Even if a trust fund’s assets are exhausted, however, tax income will continue to flow into the fund.  Present tax rates would be sufficient to pay 75 percent of scheduled benefits after trust fund exhaustion in 2041 and 70 percent of scheduled benefits in 2081. 

Mr. Gleckman, that’s what a Ponzi scheme is. 

Well, yes, it “looks like” a Ponzi scheme, but it really isn’t, and if you just understood risk and insurance you’d see that.  Um, no.  The recent debt ceiling and deficit discussions should have made abundantly clear that the federal government’s capacity to take and borrow is not infinite.  Sooner or later, the program has the same risk of collapse that Ponzi’s stamp operation did.  Nor is Social Security like insurance where risk of some negative event is spread over a number of people most of whom will never need to collect.  Insurance is a wager; it’s a hedge against the happening of an event.  Social Security is a retirement program—well, technically, it's a tax, see Helvering--it was supposed to be an investment upon which the contributors planned to reap a return in their old age, not a hedge in case they lived past retirement age. 

The fact of the matter is Social Security is, and almost from its inception has been, structured to pay current recipients out of the current contributions, not out of profits generated from investing current recipients’ past contributions.  That’s what a Ponzi scheme is.  That by 2041 the program will be able to pay 75% of promised benefits doesn’t change its fundamental structure as a Ponzi scheme, nor does it make it OK.  The system is going to take people’s money with a promise of X, then deliver 75% or less of X out of money it takes from someone else.  And 25% of a lie is still a lie.  

Furthermore, the 2007 trustee report upon which Gleckman relies predates last year’s payroll tax reduction (which cut contributions into the program by an estimated $120 billion) and the current recession.  The 2010 Report Gleckman says “isn’t much different”—query, if that’s so, why he didn’t just use it; maybe because the 2010 report has the program exhausting its assets in 2037, four years earlier than the 2007 report projected?—likewise doesn’t account for the payroll tax cut.  For political reasons, however, I suspect congressional Republicans will have to go along with Obama’s proposal to extend the payroll tax reduction, despite it being opposite of the Social Security Trustees’ obvious recommendation (both in 2007 and in 2010) to try to restore the program’s fiscal sustainability.  So the real long term picture for the program is considerably worse than even what is reflected in the current trustee report.   

Call it what you want.  The bottom line is that the idea that Social Security is some kind of retirement "insurance" is and always has been a lie.  It doesn’t pay you “benefits” earned from investing your contributions to the program.  What Social Security does is take your money by force and give it to your parents, then take your kids’ and your grandkids' money--again, by force--and give it to you.  As I posted here, even Genius Joe Biden recognizes that a system like this depends on there being enough children to contribute in the future for it to survive.  With lower birthrates in the post-boomer era meaning there are fewer and fewer to pay in, the program sooner or later faces collapse under its own weight. 

Smells like a Ponzi scheme to me, but the real question is this: 

How much better off would we all be if instead of taking our money from us the government let us keep our money and invest in our own retirement, and let our employers keep their money and invest in their businesses (or, God forbid, increase wages)?

The President Needs A Course In Civility, Civics

“The only rules that really matter are these: what a man can do and what a man can't do.  For instance, you can accept that your father was a pirate and a good man or you can't.  But pirate is in your blood, boy, so you'll have to square with that some day.  And me, for example, I can let you drown, but I can't bring this ship into Tortuga all by me onesies, savvy?  So, can you sail under the command of a pirate, or can you not?”

—Johnny Depp as Captain Jack Sparrow in Pirates of the Carribbean: The Curse of the Black Pearl

Boy, I’m sure glad we finally got to hear from the President, although coming out of Thursday’s address to a joint session of Congress I’m left wondering when he’s going to make the speech on job creation we’ve been told was coming.

There will be ample discussion from all the usual corners about the substance of Obama’s plan, such as it is; how it’s yet another half-trillion dollars in still-failing stimulus, how no matter how many times the President says “it’s paid for” he has yet to explain how that’s so, how it’s unlikely to result in any significant job creation any time soon if at all, yadda yadda yadda.  What I want to do is take a look at a couple of aspects of the President’s speech as they relate to our constitutional republic.

To begin with, the tenor of the address and even the juvenile and transparent scheduling debacle reflects a fundamental misunderstanding of, and disrespect for, how our federal government is supposed to be structured.  Last time I looked, we had three separate and co-equal branches of government, each with its own Article creating it and establishing its scope; the office of President isn’t even the first branch listed (that’d be Congress in Article I).  Yet as I have discussed here, here, and here this President routinely behaves as though he is a CEO—read:  dictator—with the members of the other branches serving as his subordinates like so many corporate vice presidents.

The President didn’t need a joint session of Congress to present his plan.  Assuming he actually has a plan with any substance to it, he could have submitted a draft bill at any time over the last 900-some-odd days he’s been in office.  And he didn’t need a joint session of Congress to get a national TV audience to convey his message; Presidents have been making TV addresses from the Oval Office for 40 years.  No, by purporting to unilaterally schedule a joint session for him to speak, doing it on basically no notice—does everything with this administration have to be an immediate emergency, and given the apparent urgency of the matter could he really not at least have started the scheduling discussion before he left to spend a month on Martha’s Vineyard?—then using that platform to give Congress a public dressing-down, Obama deliberately set out to embarrass them like an abusive schoolteacher.

It isn’t the first time he’s done this.  Recall Obama’s 2010 State of the Union Address, during which he chastised the Supreme Court for its campaign finance ruling in Citizens United v. Federal Election Commission.  It is becoming all-too routine for this President to publicly demean and belittle the other branches of government by convening formal governmental occasions that demand a certain respect and decorum and then use them to bully and embarrass guests (in the case of the Supreme Court) or his hosts (in the case of Congress).  It’s at best uncivil, and it’s at worst faux-imperial.

Furthermore, the President’s tone and message in scolding Congress ignore what Congress’ job is.  To hear Obama tell it, because there is an economic crisis and the American people are frustrated, Congress should do what he wants.  But Congress doesn’t work for Obama, nor does any one congressman work for the “American People.”  Each member of Congress works for the 700,000-something people in his or her district.  And as I've posted before, some of us disagree with Obama’s approach to the economy, and we’ve sent our representatives to the District with all-but-express instructions to stop him.  So when they don’t go along with him, they’re not “playing politics,” and they’re not “putting party before the American people”; they’re doing their job.

I seem to recall someone bearing a striking resemblance to the President telling us that “elections have consequences.”

At least some of the President’s proposals, even in broad outline, also demonstrate a misunderstanding of the scope of Congress’ charge under the Constitution.  Consider, for example, Obama’s proposals to spend federal money renovating schools and providing financial aid to local governments to avoid teacher layoffs.  Now, I am all for education.  I agree that teaching our kids is among our greatest responsibilities and that as a society we don’t place as high a priority on it as we should.  I will even concede for purposes of this discussion that these two proposals will “create” jobs.

But no matter how good an idea it might be, no matter how necessary it might be, no matter how badly you might want it, none of that means the United States Congress is authorized to do it under our Constitution.

Contrary to popular belief, Congress does not have unlimited power to do anything it deems a good idea, or anything the President demands it do.  As I posted last week, Article I, Section 8 lists the specific powers Congress has, and none of them come anywhere close to permitting Congress to provide federal funding for school infrastructure or teacher salaries.  It’s just not there.

Certainly, I’m aware that Congress in fact does spend money on these kinds of programs, and has for a long time.  But it is a dangerous, dangerous road for us to continue to ignore the very clear limitations the Constitution was intended to place on the scope of federal power.

Professor Obama might do well to dust off his copy and maybe crack the binding.  Maybe review a little Emily Post while he's at it.

Ruling Striking Texas’ Informed Consent Law Is No Victory For Women

  

And when I get excited

My little China Girl says

‘Oh, Baby, just you shut your mouth.’

—David Bowie, China Girl

Last week U.S. District Judge Sam Sparks blocked key portions of a recent amendment to Texas’ Woman’s Right To Know law that provided for mandatory sonograms prior to doctors performing abortions.  By way of background, the amendment, known as C.S.H.B. 15, passed the Texas Legislature this Spring by an overwhelming—and bipartisan—2/3 majority in both houses, and was signed into law by Governor Perry.  Judge Sparks’ decision was issued in the context of a pre-emptive lawsuit filed by a New York entity called The Center for Reproductive Rights, purportedly as a class action on behalf of Texas providers of abortion services (query how such a class could possibly ever be certified, but that’s another discussion). 

Would that people in New York were as respectful of our rights as Texans to govern ourselves as our Governor is of their rights as New Yorkers to govern themselves.  So much for having the decency and respect for our political processes to rely on the legislative process to change policy, eh, Mr. Krugman? 

Judge Sparks struck provisions requiring doctors to display a sonogram image of the unborn child, make the heartbeat audible, and to describe the fetus’ dimensions, development, and activity, saying such provisions violated the First Amendment.  The CRR’s Nancy Northup hailed the decision as a “huge victory for women[.]” 

How do you figure? 

First, let’s be clear:  C.S.H.B. 15 contains absolutely nothing preventing a woman from getting an abortion in Texas if she chooses.  Contrary to the obviously political complaints contained in Judge Sparks’ order, the Act is not “onerous”—sonograms are routinely performed anyway—it isn’t going to make procedures significantly more expensive—the Act provides for making information about free sonograms available—and it is difficult to see how there is going to be a mass exodus of doctors leaving the Texas abortion market such that access to abortions is going to be materially impaired.  So C.S.H.B. 15 isn’t really about women’s “reproductive rights,” whatever those are. 

Nor does C.S.H.B. 15 impact women’s First Amendment free speech rights.  Often skipped in media coverage of the statute is the fact that the bill expressly allows women to opt out—they don’t have to see the sonogram or hear the audible heartbeat if they choose not to.  All the bill was designed to do was to ensure that the information was available to women who might not know to ask for it, and after all isn’t that what “informed consent” is all about?  

Let’s remember a point that’s often lost in this debate.  Leaving aside the fact—yes, fact—that abortion terminates an innocent human life, abortions very often take a terrible and permanent toll on the very women whose “reproductive rights” the pro-abortion movement so vociferously purports to protect.  The emotional scars left as the realization of what they’ve done sets in don’t go away.  What possible purpose is served by not ensuring that a woman at least has access to all the available relevant information before she makes a decision that either way she goes will impact her for the rest of her life? 

I repeat:  How do you figure this is a huge victory for women? 

But what about the doctors?  Doesn’t the First Amendment protect them against the government requiring them to provide certain dictated information?  You mean like requiring healthcare professionals to provide certain specific end-of-life “option” information, as was required in a version of Obamacare supported by many on the Left?  Or requiring attorneys to include certain disclaimer language in advertisements as do Texas and most other States?  Or requiring cigarette manufacturers to include certain warnings on their labels?  Or requiring restaurants—ahem, New York—to post dietary information on their menus?  Or requiring certain commercial property owners—ahem, California—to post statements that their property contains substances “known to the State of California” to cause cancer?  Government requirements that providers of goods or services give certain information or make certain statements to their customers are nothing new.      

The First Amendment was intended to ensure that people could speak out against the government.  It was never intended as a magic talisman affording absolute protection of, and shield against, all speech at all times and in all contexts.  Where the government has a legitimate interest—and in the area of abortion and informed consent the Supreme Court has said it does, see Gonzales v. Carhart and Planned Parenthood v. Casey—narrowly-tailored intrusions upon speech do not violate the First Amendment.  And it is appropriate that the burden in this instance be borne by the doctors who can be expected to know what information is available, rather than a woman who might not necessarily know that with a sonogram she could see her baby, or that it is possible for her to hear the baby’s heartbeat.  One imagines that for at least some women, that might be information relevant to her decision.  For those to whom it is not, they can easily decline the information or ignore it; but there is no recourse for those to whom it would matter but who never receive it or even know it exists. 

Bear in mind that Texas has had informed consent laws on the books—in the abortion context as well as generally—since 2003.  It’s only the addition of physical evidence and description pertaining to the condition of the unborn child that is now raising concern.  This has nothing to do with the First Amendment. 

The pro-abortion movement is absolutely terrified of anything that would illustrate the undeniable fact that what they call “the fetus” is actually a human life.  They don’t want you to see that she has a human face, and fingers and toes.  They don’t want you to hear her working heartbeat, fully separate from her mother’s.  Or maybe it’s that they themselves don’t want to have to confront the truth of what it is they advocate.  As Jodie Foster as Clarice Starling observed in Silence of the Lambs, “[i]f he sees Catherine as a person and not just an object, it’s harder to tear her up.”  So they concoct a lawsuit to prevent that information from being made available.  Translated: groups like the CRR want women to be making the decision whether to have an abortion in as ignorant a state as possible as to the actual condition and attributes of the life they carry, regardless of the possible emotional and psychological consequences that decision may have for that woman down the road.

There is no "victory" for women here.

Listening to Obama On Jobs and Market Fiction

“‘Your mother can’t produce food out of thin air,’ said Hermione.  ‘No one can.  Food is the first of the five Principal Exceptions to Gamp’s Law . . . It’s impossible to make good food out of nothing!  You can Summon it if you know where it is, you can transform it, you can increase the quantity if you’ve already got some . . . ’”

—J.K. Rowling, Harry Potter and the Deathly Hallows

Somehow, I’d rather be watching football.

I covered this idea a couple of weeks ago, but as we wait with bated breath for the President to unveil his “new” proposals for creating jobs—betcha none of them involve him getting government the hell out of the way—I thought we should review some history so we can have it freshly in mind as we listen. 

Recall that our current economic troubles began with the collapse of the mortgage and housing markets.  Unscrupulous lenders in the subprime market, so the groupthink goes, made unfair loans to prey upon the weak and economically disadvantaged.  After all, money is the root of all evil, so it must be that greedy bankers caused the mess.  Yes, I’m sure of it. 

Not so fast. 

Stan Liebowitz actually detailed the history of the housing/mortgage collapse in an article titled “Anatomy of a Train Wreck” that ran in the October 20, 2008 edition of National Review (don’t ask why I still have that issue hanging around).  The immediate problem was a sudden ramp up in mortgage defaults, resulting in the crashing of the securities into which these debt instruments had been bundled and sold (the so-called “mortgage-backed derivatives”).  But how did we get there?   

As Liebowitz explains, as far back as the 1970s, concern—real or otherwise—over housing discrimination led to policies out of the Federal Housing Administration and the Federal Reserve that encouraged, if not compelled, banks to make loans to people who would not have otherwise qualified under traditional underwriting standards.  The 1977 Community Reinvestment Act forced banks to do business uniformly across the geography in which they operate, meaning they had to make loans not only in affluent suburbs, but in economically-challenged inner cities.  Reporting requirements built into the Home Mortgage Disclosure Act left banks open to scrutiny and public scorn from the press if the data showed racial discrepancies in loan acceptances.  By 1993, Liebowitz reports, the Boston Fed had issued new underwriting directives: 

“‘Management should be directed to review existing underwriting standards and practices to ensure that they are valid predictors of risk.  Special care should be taken to ensure that standards are appropriate to the economic culture of urban, lower-income, and nontraditional consumers.’” 

So, in the name of increasing the number of mortgages given to “non-traditional” customers—read: those who ordinarily couldn’t qualify for them—traditional underwriting standards aimed at ensuring the loans got paid back were to be altered or even ignored. 

Thus was born the subprime mortgage market.  And it had the desired effect of increasing the number of mortgages.  It also led to a sharp increase in real estate speculation, as mortgages were not only easy to get, but could be had for little or no down payment.  And the predictable byproduct of this increased demand was a sharp rise in home prices to levels well above their actual value in an unadulterated market.  Everyone’s net worth—at least on paper—shot up, and all was good with the world.  

The problem is it was all a fiction based on unsound economic fundamentals.  There was no market for subprime lending because the people at whom such mortgages were directed couldn’t afford them.  Their individual economic circumstances made them bad credit risks.  And zero-down loans meant borrowers had effectively no skin in the game, and thus no incentive not simply to walk away from the mortgage if the price of the home asset securing that loan fell.    Contrary to popular belief, banks don’t want you to default on your mortgage, and they’re not in the business of foreclosing—foreclosures cost money and eat into profits.  Only when the government pushed them into loan markets they otherwise weren’t in did banks began making these higher-risk loans and offering the more “innovative” mortgage products.  It was only a matter of time before the defaults started tumbling in, and the glut of foreclosures left more houses on the market than there was demand to absorb them, revealing the run-up in housing prices for the artificial bubble that it was. 

What does this have to do with Obama’s speech on jobs, you ask? 

The housing/mortgage crisis is a vivid illustration of what happens when government attempts to create a market by edict where no market exists organically.  Such creations are artificial, and inherently inefficient.  If they were good ideas, the market would have already come into existence naturally.  It’s a funny thing about free-market capitalism:  with millions of people, each acting in their own best interest, engaging in billions of transaction decisions good ideas—the efficient and desirable—survive and thrive, and bad ideas fail and are discarded.     

Interesting how the same people who shriek that evolution—the development of species by billions of trial and error mutations, the best of which survive and the lesser of which die out—is more than just a theory can’t manage to get their minds around this. 

We’ve seen the cost of such government efforts to engineer new markets with the disastrous campaign to create “green jobs.”  One need look no further than last week’s bankruptcy of Solyndra, the solar panel firm that cashed in some $520+ million in federal jack and still couldn’t make a go of it.  The fundamental problem for Solyndra was that in the end there simply wasn’t enough demand to keep prices at levels that would allow Solyndra to compete with government-subsidized Chinese firms and still make a profit; in other words, there is no market for their product. 

Ditto electric cars, as witnessed by the Chevy Volt, which has sold a grand total of about 2,000 units since its launch in 2010, despite a $7,500 tax credit for those who purchase one (oh, yeah, and the $50 billion in federal subsidies—er, bailout loans—given to the manufacturer, General Motors, some of which has still not been repaid).  The fact is there simply is no market for these products, and if no one wants the widget, the widget-maker has no need to hire anyone.  No market, no job. 

So keep this in mind as we listen to the President tomorrow, as he almost certain to continue his Sisyphean quest to create jobs simply by spending money we do not have to “invest” in markets that do not exist.

SIDEBAR:  I see that a number of Congressional Republicans are planning to skip tomorrow's joint session address.  This is a colossal mistake, and it's going to backfire.  For one, giving Obama a joint chamber filled with nothing but folks who will give him standing ovations at the end of every sentence is going to make him and his ideas look better than they are.  Further, it's petty and childish on the same level as Obama, particularly after he changed the schedule to accommodate Republican complaints.  Moreover, I know it's Obama, but he's still the President, and deliberately skipping disrespects the office and is rude to the man.  We need to be above this kind of thing, and I fear it's going to waste precious capital with Independents.  --RDW

The Politics of Wishful Thinking

Teacher, don’t ya fill me up with your rules,

‘Cause everybody knows that

Smoking ain’t allowed in school.

—Motley Crue/Brownsville Station, Smoking in the Boys’ Room

 
I’d probably be a much happier person if I just quit reading Paul Krugman.  I know I’d live longer.

In a column last week, Krugman accuses congressional Republicans, in particular House majority leader Eric Cantor, of abandoning all sense of fair play and decency in seeking to have federal aid for hurricane Irene victims be financed through offsetting cuts in other spending.  In so doing, Krugman charges—twice in five paragraphs—Cantor with “threatening to take Irene’s victims hostage” for political gain.  He goes on to complain that House conservatives are ignoring the legislative process in favor of achieving their policy goals by unilateral dictation:

Not long ago, a political party seeking to change U.S. policy would try to achieve that goal by building popular support for its ideas, then implementing those ideas through legislation.  That, after all, is how our political system was designed to work.

But today’s GOP has decided to bypass all that and go for a quicker route.  Never mind getting enough votes to pass legislation; it gets what it wants by threatening to hurt America if its demands aren’t met.

Um, Mr. Krugman, have you seen the federal bench?  Or the President?

Never mind that the debt/spending-for-offset-cut deal is one that was already made a month ago.  Never mind that Cantor and House conservatives are doing exactly what their constituents elected them as their representatives to do.  Never mind that what Cantor is doing is the legislative process, and if he can’t get the votes it doesn’t matter what threats he makes or who he attempts to hold hostage.  Anything that gets between Krugman and limitless federal spending is anathema.

Krugman goes on to argue that disaster relief is precisely the situation that is tailor-made for “temporary” deficit spending.  The U.S., he says, is having “no trouble borrowing to pay for current expenses”—query how borrowing actually pays for anything—and that longer term deficit issues can be corrected by “borrowing now and repaying gradually via a combination of lower spending and higher taxes.”  Of course, the problem is in Krugman’s world deficit spending isn’t temporary, and neither the longer term lower spending to repay current debt nor the reduction in ongoing borrowing ever comes. 

But Krugman’s argument highlights a larger point.  Conservatives believe that fair play and decency begin by recognizing we all are governed by the same rulebook, i.e., the Constitution.  It’s not a question of what the government should do, but what it’s permitted to do.  For the Left, the issue is reversed, and is really one of pursuing their subjective perception of decency, rules be damned.  While I sympathize with our friends in the Northeast, the fact is the Constitution only gave Congress and the federal government certain limited powers, and giving away billions in disaster relief isn’t among them.

We’ve been over this before—and yes, I’m aware of the Supreme Court’s history on this issue in the context of disaster aid—but by any fair and unpoliticized reading of the Constitution this isn’t a close call.  Article I, Section 8 lists the specific powers Congress has (plus the ability to enact such legislation as may be necessary and proper to exercise those powers):

·         To borrow money, coin money, and punish counterfeiters;

·         To regulate commerce with foreign nations and among the States;

·         To establish uniform rules on immigration and bankruptcy;

·         To establish a Post Office and post roads;

·         To provide for patents and trademarks;

·         To establish lower courts of law;

·         To define and punish piracy and felonies on the high seas;

·         To declare war;

·         To provide and regulate the armed forces, and to call forth and train militia; and

·         To legislate for the District of Columbia.

That’s it.  Under the Ninth and Tenth Amendments, anything not listed above is reserved to the States or to the People; in other words, if it ain’t spelled out, Congress doesn’t have the authority.  No matter how right it is, or how badly you want it.

The Framers were clear on what they meant by this.  Again, as James Madison wrote in Federalist Paper No. 45:

The powers delegated by the proposed Constitution to the federal government are few and defined.  Those which are to remain in the State governments are numerous and indefinite.  The former will be exercised principally on external objects, as war, peace, negotiation, and foreign commerce; with which last the power of taxation will, for the most part, be connected.  The powers reserved to the several States will extend to all the objects which, in the ordinary course of affairs, concern the lives, liberties, and properties of the people, and the internal order, improvement, and prosperity of the State.

Those “few and defined” powers delegated to the federal government were to be focused on external matters such as war and dealing with foreign governments.  It was left to the "numerous and indefinite" powers reserved to the States to deal with people’s lives, property, and prosperity.

As my Contracts professor used to say, “Wars happen.  Insurance is available.”

Don't come to me with the "general welfare" clause in the preamble.  Both Madison and Thomas Jefferson—men in a much better position to know what the Constitution meant than anyone—rejected the idea that it trumps the Article I limitations.  Madison wrote in objecting to a federal aid package, “I cannot undertake to lay my finger on that article of the Constitution which granted a right to Congress of expending, on objects of benevolence, the money of their constituents.”  Jefferson wrote, “Congress has not unlimited powers to provide for the general welfare, but only those specifically enumerated.”

If the “general welfare” clause is not limited by the powers specifically enumerated in Article I, Section 8, then that enumeration and the reservations in the Ninth and Tenth Amendments become meaningless.  Congress may do anything for which it can assemble a majority to agree it is in the general national interest.  And therein is the danger in Krugman’s position.  Rather than being moored to the objective rules set forth by the Constitution, Congress’ only limitation is a majority’s subjective view of what seems like a good idea at the time. 

We can all agree that Irene has been a major calamity for those in its path, and helping them clean up and rebuild is a nice and even decent thing to do.  This allows Krugman to claim the moral high ground and accuse those who oppose federal aid spending of callousness and political thuggery.  But basing government on a subjective sense of right and wrong as opposed to the limitations of the rule of law leaves it unpredictable, and subject to the very tyranny of factions against which Madison, Jay, and Hamilton warned.  What if a majority in Congress concludes that it is in the interest of the country’s general welfare to, say, remove Jews from positions in the media, or from commerce?  

That'd be 1933 Germany for $100, Alex. 

Fair play and decency, with no grounding in the rule of law, are fickle friends indeed. 

“Tea Party” Racism . . . Not!

How long has this been goin’ on?

How long has this been goin’ on?

Well your friends with their fancy persuasion

Don’t admit that it’s part of the scheme.

But I can’t help but have my suspicion,

‘Cause I ain’t quite as dumb as I seem.

—Ace, How Long

Following up on Monday’s piece about John Lewis and voter I.D. laws, apparently racism allegations are going to have to be a theme this week.

Congressional Black Caucus Whip Andre Carson, referring to the “Tea Party” told a group in Miami last week: 

“The Tea Party is stopping that change . . . This is the effort that we’re seeing of Jim Crow.   Some of these folks in Congress right now would love to see us [black people] as second-class citizens . . . Some of them in Congress right now with this Tea Party movement would love to see you and me . . . hanging on a tree.”

This is a consistent message now being trumpeted across the country by the Left and particularly members of the Congressional Black Caucus, and it’s obvious it’s going to be the centerpiece of their 2012 campaign:  the Tea Party is a bunch of racists at war with and out to lynch black people.  And we can all go straight to hell for it. 

Racism.  Jim Crow.  Lynching.  War.  You, American Citizen, can go to hell.  From Congressmen.  Where, oh, where, is the Annointed One, the Great Uniter, the Post-Racial President who has repeatedly called for toning down overheated rhetoric?  Maybe this is on his “to-do” list if and when he ever gets off the damn golf course. 

While we wait for President Obama, let’s clear up a couple of things, because Representative Carson and his Black Caucus colleagues are exposing a startling level of ignorance.  First, there is no “Tea Party” as such.  It isn’t an entity, and it has no organization, structure, or official leadership.  The “Tea Party” is a philosophy or world view that in the last couple of years has manifested itself in a true grass roots movement as people of like persuasion have become fed up with the way business is done in the District.   

And what, exactly, is that philosophy or world view, you ask? 

It’s quite simple, really.  What the people who make up the Tea Party movement are about is restoring liberty—for everyone—by reducing the size and influence of the federal government, and reducing taxes and spending.  That’s it.  Indeed, the moniker “Tea Party” had its origins as “T.E.A.” Party, meaning Taxed Enough Already.  The idea is that we all—again, that’s everyone, including black people—prosper when government gets out of the way and allows us the freedom to apply our individual efforts and talents to take responsibility for ourselves and to provide for ourselves.  When Tea Party advocates speak of “restoring” the government to its constitutional moorings, we're not expressing a wistful longing for the glory days of 1950s segregation or 1850s slavery (and lest I be misconstrued and called a racist yet again, I use the phrase “glory days” as a sarcastic caricature of what we’re accused of); we're referring solely to returning government to the size and scope it was originally intended.  It has absolutely nothing to do with race, and it isn’t in any way aimed at black people except insofar as they are included in the “all of us” who would benefit from smaller government and greater liberty.   

Let me repeat:  what Tea Party folks want is to reduce the size of government and let people keep more of what they earn so they can better take responsibility for themselves. 

Second, by so lightly throwing the term “Jim Crow” at the Tea Party movement, 36 year old Representative Carson demonstrates that he’s not old enough to have any idea of what Jim Crow actually was.  “Jim Crow” referred to the separate-but-equal policy of segregation in the South following Reconstruction.  This policy was enforced through things like discriminatory voting restrictions and laws maintaining separate school systems and public facilities (John Lewis was at least using the term in its correct context, even if he was wrong in its application).  These things were outlawed by the Supreme Court in Brown v. Board of Education and by Congress in the Civil Rights Act of 1964 and the Voting Rights Act of 1965.  I’m not so naïve to think that there is isn’t still racism around, but Jim Crow simply doesn’t exist, and it hasn’t since long before Representative Carson was born.

But more importantly, Jim Crow has nothing to do with what the Tea Party movement is about.  Advocating for smaller government and lower taxes is not a call for segregation; there is simply no connection between the two.  It’s a non sequitur.  And by attempting to make that connection where it doesn’t exist, Carson and others trivialize the work and achievement of those who fought the real civil rights battles of the 1950s and 1960s, and mock the suffering of those who—unlike Carson—actually did bear the heinous brunt of Jim Crow.

I understand you may disagree from a policy standpoint, but trying to reduce government spending and debt is the same thing as lynching?  Really?

Listen to what so-called black leaders like Andre Carson, Cedric Richmond, and Maxine Waters are saying: the Tea Party movement is inherently racist.  Well, for that to be so, it must be that the idea the Tea Party movement advocates—reducing government so people can take responsibility for themselves—is in itself inherently racist.  And if that idea is inherently racist, what they’re really telling you is that black people are incapable of taking responsibility for and providing for themselves.  They can’t make their own decisions.  They need government to provide for them and to make decisions for them as though they are a bunch of children. 

Who’s the racist now?

The only ones who benefit by selling black people short and keeping them addicted to the public teat are these very leaders who lead the life of Riley in the District while spewing this victim mentality nonsense.  As long as the black community continues to listen to the Carsons and Richmonds and Waters of the world, all they’ve done is trade the master’s chains and plantation rations for those of their black overseer.

Mindlessly throwing around accusations of racism against a nameless, faceless group is the act of a coward.  Mr. Carson, I double-dog dare you to go to the House floor and name names.  Call them out to their face.  If members of Congress really are racists who want to lynch blacks, then tell us who. 

I’ll wait.