Tsunami/Economy


27 Jul 2011

Treasury Secretary Tim Geithner recently revealed that the government sends out 80 million checks a month. That’s a lotta dependency. Add in spouses and others who are also dependent on those checks, and you have a lot of slaves on the government’s plantation. Could a citizen 100 years ago have imagined such a monster?

This is why there aren’t going to be meaningful cuts to the government until there is some form of collapse. Mess with the checks going out and you’ll have a problem on your hands. Thus your conservative Congressman talks about a meaningless balanced budget amendment, as if Congress is going to pay any more attention to that than they do the rest of the Constitution. He proposes a 1% cut in year one (the only year that matters in the budget) when a 60% cut is needed (for starters). He supports a gimmicky non-solution. This is the path that wins elections in conservative districts. If you think most conservative voters support a small government in practice, just try to cut off their government checks.

As this article puts it:

The intellectual purpose of the entitlement state – conditioning people over generations toward dependency with vows to loot future taxpayers to maintain the system – has worked perfectly… The welfare state has won over all of society. It has succeeded in making the entire culture dependent on it. Middle class conservatives condemn welfarism even as they clamor for better public schools, apply for student loans for their kids, hold jealously onto their Medicare and Social Security benefits, accept unemployment checks when they’re expedient, and resist any talk about cutting back the government’s support for its police and soldiers. Liberals today say they are realists on welfare but never cease to agitate for more ways to put us all on the dole. As we find ourselves in the wake of fiscal catastrophe, we must recognize that only a tiny portion of government expenditures go to the easy targets – the earmarks, the welfare mothers, the roads to nowhere, the Woodstock museums, the funding to study bird migrations, even the salaries of bailed out CEOs. America is, despite the conservative and liberal propaganda to the contrary, essentially as much a welfare state as most other nations of the West, and the hugest chunk of the entitlement expenditures are going not to the easily scapegoated classes, but rather to the respectable masses.

09 Apr 2011

We have just witnessed the budget charade.

Not long ago, the Ryan plan was introduced with some fanfare. It promises lots of cuts… over decades. Few cuts of significance in the first year. When you hear someone say that they want to cut trillions over 10+ years, remember that budgets are redone every year. The shelf life is one year. The only part of the budget that matters is the first year. No one is basing the 2012 budget on what the 10-year outlook was in the 2003 budget.

One of the invariable parts of these plans is to oversee the slow privatization of retirement money by cutting benefits to those under a certain age. This is a good thing in that social security needs to be phased out.

The problem is how these things are sold. People are told that by privatizing they will get better returns at lower costs. True in the past. The problem is that the economy is headed down the tubes due to all the debt, and this promise will be empty (plus, 401K offerings usually provide little protection against inflationary forces since those are deemed “unsafe” investments by advisers living in the bubble past). So what’s going to happen when people see their “safe” bond funds getting killed and their money market funds losing purchasing power due to inflation? If it’s anything like I remember 2008, we’re going to hear a loud outcry. People believe that Wall Street is ripping them off (somewhat true, although the Fed is the far bigger culprit). People are going to want this corrected. It will be another outburst of what I call “stupid populism,” which asks good questions and proposes bad answers.

The gimmicks will fall apart from voter anger. Politicians will empathize but their inability to deliver the goodies will be more transparent. (If it were earlier in the Ponzi scheme, big government could ride to the rescue, but alas, the hour is late.)

I just finished Tom Wood’s book Rollback. Woods hammers away at historically false assumptions such as how the government saved us from sweatshops, or how the financial meltdown was caused by “deregulation.”

This questioning is what is needed with the Medicare and Social Security debate, too. The greatest assumption of all is that the government owes you a retirement. Instead of promising people increased returns through private/public gimmicks like subsidized 401Ks, the government should get out of the promise-making business altogether. The assumption that the government can protect our retirement “security” needs to be exploded. People need to be told that they are responsible for their own retirement. The entitlement mentality needs to be shamed. People need to buy their own insurance, work cooperatively with their churches or civic organizations, plan ahead, etc. There’s no free lunch.

It would help if the government would get out of the game of encouraging debt through low interest rates and backstopping loans, and spending massive amounts of money, but that is a topic for another post.

07 Mar 2011

Some random thoughts as we watch the battles play out between public unions and government officials…

  • Why do so many people look upon policemen, firemen, and public school teachers as sacrosanct? To use the latter example, public schools are an incredibly inefficient use of resources. If someone says “we can’t put a price on a good eduction,” to that I say yes, we can. We have to. We do it with everything in our lives because scarcity is a fact of life.
  • Teachers sometimes tell us that they have a masters degree, as if that’s a reason why they should be paid at above-market rates. From an economic standpoint, you are worth what someone is willing to pay you. In a free market, most teachers would be making less money. Why? Because there is always the option to learn at home, to form cooperative education groups with other parents, to use digital learning methods, etc. Teachers would have to compete like everyone else. That’s a world teachers want to avoid, thus the desire to maintain coercive collective bargaining laws.
  • In the end, the unions are going to lose (and it can’t come soon enough). Maybe not this year, but the fact is that state deficits are out of control. The pensions that past politicians agreed to (because promises of future payouts were easy to make way back when) are unaffordable. Unions can recall hard-headed governors, but states are still going to default on much of these debts. That’s economic reality.
  • Does anyone else find it annoying that public workers think that private workers owe them an above-average living? Many of us in the private sector have seen declining living standards over the past 10 years.
29 Jan 2011

What we really ought to ask the liberal, before we even begin addressing his agenda, is this: In what kind of society would he be a conservative? -Joseph Sobran

A perceptive quote. For most, the answer is “in whatever society I can keep getting whatever I’m currently getting, and I don’t care or I don’t think about how it is extracted from others with threats.” For the true believers in the social gospel, it will occur when we reach an earthly Utopia. We have eternity in our hearts, but we want that eternity in the now. The spending cannot stop until every mouth is fed and everyone is cared for. Which, in reality, means that the spending can never stop, because it ain’t gonna happen.

And so the social security checks and the Medicare reimbursements and the wars will go on until we ram head-on into the wall at the end of the road. Then it’s going to get interesting.

The refusal to confront economic reality is evident in this discussion about raising the debt limit. Why, if we do this, there will be a default! Exactly. These people prefer the delusion (or deception) that there’s a way around this, when in reality adding more debt is just setting up a greater default, and more pain, down the road. Why not just get it over with? There is no way the government can legitimately “stimulate” the economy out of this problem. A bank makes a loan to a company with the idea that the company will be able to expand or grow production, and from that production pay back the loan. The government couldn’t produce its way out of a paper bag.

One more thing: I heard a guy say the other day that the government has a “fiduciary responsibility” to pay the pensions of public workers. Nonsense. If I contractually agree to pay someone $10 an hour, then I have an obligation to pay it. If politicians from 20 years ago passed a law saying that government workers get a massive pension, the law should be changed without scruple because politicians have no right to borrow and steal money from others to pay for it.

If you live by the government, you will die by the government.

23 Sep 2010

People are upset about the economy. They’re grasping for alternatives to the current political class. Someone recently noted that the great danger of the Tea Party is that it feels like a revolution to its members, but it doesn’t address any of the issues that really matter.

This is true. It is fun to watch incumbents squirm and then lose, but if the “new people” are just going to repeal Obamacare, maintain tax rates, and cut discretionary spending to the level of a few years ago, well, then they’re using a teaspoon to shovel snow during a blizzard. It’s nothing but a start. Drastic problems need drastic solutions. The public isn’t there yet, no matter how much we hear the word “revolution” this fall.

I now call myself a libertarian for lack of a better word. I’m not wholly comfortable with that term. Like other terms (“conservative”), it has its baggage. There are a lot of competing understandings of the word. But that’s true in the conservative world, too.

However, let’s summarize the solutions to the massive spending that threatens a complete economic collapse in this country. First, entitlement spending (Medicare, Medicaid, welfare, etc.) must be phased out. The money has already been squandered and we have seen the devastation welfare has caused. Second, government control of the money supply that enables overspending and boom/bust cycles needs to end (eliminate the Fed, repeal legal tender laws, end the moral hazards such as the FDIC). Third, the U.S. needs to end its military presence in over 100 countries. Don’t we all know the course of empire? Fourth, the Federal Register needs to be thrown into a bonfire. An economist noted that federal regulations alone cost $1.2T a year. That’s over 30% more than the government collected in income tax revenues last year. Fifth, public education needs to end. Why do people to see something sinister in countries with their red-scarved children, and yet they imagine that our government schools do not advance the state’s agenda? Public schools– and I include universities, of course– are government indoctrination centers.

Reread that last paragraph. Do conservative Republicans advance that kind of agenda? No. Libertarians like Ron Paul do.

15 Jul 2010

The economy hasn’t recovered, but there is currently no 2008 feeling about it right now, that feeling of imminent doom. I think it’s a mistake to see “this is the worst it will get” in this lull, though. Now is the time to be preparing yourself for the next downturn.

There are good books out there telling you how to protect your existing assets: Charles Goyette’s Dollar Meltdown, Peter Schiff’s books, etc. There are neo-survivalist books telling you how to survive. If you want it raw (warning: occasional profanity), this book by an Argentine who lived through his country’s currency crisis is insightful.

Few books, however, talk about the importance of growing your ability to earn income. In a world with fewer “good” jobs (thanks to the government’s ongoing spending and resulting destruction of capital), you may have to outwork others to get those jobs. Or keep your job.

I started a new job a few months ago. Let me give you a few examples that I’ve stumbled into re: protecting my ability to earn income.

First, I work extra hours but I don’t charge for them. There’s nothing wrong with working more than 40 hours a week, even if you’re only paid 40. Obviously one has to balance family and life, but I’m finding that those additional hours learning software, learning ways to streamline your job, etc., make a difference.

Second, I no longer waste any of my work day surfing the web or reading email. I spend my work day working. I’m a lot more productive at work because of it. I don’t have to hurriedly close a web page because someone busted me reading Drudge Report instead of working (I think we all know that feeling).

Third, I invested a little money. I was fretting a little because I couldn’t find a certain technical manual at the library, and I didn’t want to pay for it. Finally, I just broke down and bought the thing. I should have done it two months before I did. I’m not talking about motivational books; I find them a gimmicky waste of money. I mean professional or training materials.

Fourth, better than books are simply spending time hacking around in a piece of software, or talking to someone who is an expert at a professional discipline. I find many people like this at my workplace. Three months into my job, I’ve learned enough that people have started asking me questions.

Fifth, I’ve had a few opportunities of late to apply for other jobs. I’ve decided not to because I’m learning a lot at this job. If I’m growing in a role, then that’s a big factor in whether I stay in it. Similarly, I don’t discount a positive or even “half-decent” work environment any longer. I had a job a few years ago where I hated the work environment and the company culture. It was a miserable time.

To be valuable, you have to put in the time. You have to work. You have to learn. It’s your sacrifice to learn and grow that blesses others.

Who knows, it may be that thing that keeps you employed down the road.

29 May 2010

“Animal rights” is one of the great fads of our time. It has bound weak consciences with a false view of creation.

This week, a video hit documenting abuse on an Ohio farm. Farmhands are shown repulsively cursing as they beat cows. The outrage poured in internationally. A domineering, regulatory mindset was on display in spades: Put the farmer out of business! Increase regulation! Stop eating dairy!

It’s good, of course, to expose people who abuse animals. I doubt these people show compassion to people, either. People have always loved animals for good reason: they are a fascinating example of God’s creativity and brilliance. Animals bless us in so many ways. Most of us have affection for our pets. Many years ago, a huge moth flew into a room where I was talking with my former pastor. My pastor scooped it up in his hand, opened the window, and let it go, saying something like “we should spare God’s creation when possible.” Most of us don’t wantonly kill creatures.

Many have made the excellent point that the people protesting the beating of cows often support the slaughter of infants in abortuaries. One’s moral priorities do reveal the heart’s darkness. However, Christians should also consider the intent of the groups who exposed these cruel farmhands. The goal of vegan-friendly groups like Mercy for Animals and the Humane Society of the United States isn’t to prosecute a few wrongdoers, but to introduce more farming regulations. They’d love to end animal farming altogether, but if they can’t do that at least they can make it so expensive that people can’t afford it. This is an unbiblical, evil intent which flows from rebellion against the Creator.

Christians in general need to be more concerned about individual liberties, particularly now that our government is spending much of the nation’s economic output and running up unpayable debts. Interest groups and politicians use events like this cow beating to seek unlawful government power over citizens. The government has been increasingly binding us with silly legalisms that the Pharisees would think idiotic and regulations that Joe Stalin would consider overkill. Cities force us to waste money recycling. New York City has banned trans-fats. Government at all levels is now trying to regulate salt content. The federal government wants to regulate carbon, which is like trying to regulate nitrogen. It’s an idiotically corrupt money-making scheme.

Walter Williams has noted that anti-smoking crusades started in the 1960s with advocates pushing merely for a non-smoking area on planes. Today, smoking isn’t only banned on planes, it’s banned in all private businesses in many states (including Ohio). Government works this way. It gets a foothold, then grows like a cancer.

Remember, they don’t need to seek outright bans on anything. Regulation does wonders to making stuff less accessible. Regulation and “higher cost” are synonyms.

15 May 2010

Envy is a constant of human nature. So is a desire to steward other people’s money, whether they like it or not.

We’ve been hearing a lot lately that almost half of all citizens pay no income taxes. This, it is said, leads to a populace that is more open to tax hikes.

Indeed, tax hikes are sometimes palatable when people are told that only the rich will pay. Why should people be living the high life when I’m struggling to get by?

Those who vote to increase the burdens of “the rich” need to realize something: the joke’s on you. Supply side economists are right about one thing: wealth does trickle down. A prosperous society with a large middle class has more wealth to go around. In the material sense, which is all that matters to the world, the poor benefit from nicer schools, deluxe shopping centers, green space, more security, incredible inventions such as computers, and inexpensive food. Meanwhile, the trees have been kept equal by hatchet, axe, and saw in Cuba. What have they given the world lately? How are the poor doing there?

Still, tax hikes are politically unreliable. They can be dangerous to a politician seeking re-election.

Regulations aren’t dangerous. With every new scandal, the solution is always “more regulation.” The voters agree: “Someone needs to keep an eye on xyz.”

The obvious truth is that regulations lead to the same end as a tax hike: the diversion of wealth from productive to unproductive use (namely, enriching the government and its trough-feeders) and the hampering of the creation of new wealth. The business owner who has to comply with minimum wage laws, health care mandates, handicapped parking spots that sit unused 98% of the time, and a hundred other things must pass his costs along to his customers. He can’t eat all of the costs. Moreover, every small businessman regularly calculates the real worth of keeping his business open. If he can make as much money as a grunt for someone else, then maybe he’ll decide that the freedom of owning a business isn’t worth the hassle and the risk. This hassle increases with every increase in regulations.

The Federal Register is now over 75,000 pages long. Can you think of one item in your home that isn’t regulated by the government in some way? I can’t. Consider all the time and money your workplace spends in various forms of regulatory compliance.

One last thing: Leftists always like to tell us how much they hate corporations, but their confiscatory politics ensure a world of big corporations. The large companies have the economies of scale to comply with the high taxes and the mounting pile of regulations. In fact, large companies often like regulations. They have cozy financial relationships with the government. They like the idea of hamstringing their smaller competitors.

I’d rather the Federal Register be two pages long… double-spaced.

21 Mar 2010

Well, that was a nauseating debacle. I hope Bart Stupak enjoys his mess of pottage.

We might call this the day that private insurance died. I doubt that the imperial throne will need to fight like this again to complete the move to single-payer health care. Economics will do the dirty work. That is, private insurers will exit because they can’t cover pre-existing conditions (imagine selling fire insurance and being required to take people whose house has just burned down. It’s not the best business model). The government will enter in its usual role as the “lender of last resort” (aka. savior), using its printing presses of course.

I predict that we’re 5-6 years away from the health care system being on the verge of collapse. The revenues will be spent (in fact, they’re already spent) long before the “benefits” of this disaster are implemented in 2014. As Massachusetts discovered, it’s a pretty short trip to insolvency.

The people who are going to lose the most in all of this will be the baby boomers. As Gary North has said, expect a hard retirement. If you’re not in shape, think about getting in shape.

Has there ever been an instance in all of history where government involvement in something led to increased quality and lower costs for all? Think public education. The government provides direct funding, cheap credit for student loans, and other forms of subsidy (by the way, artificially-low interest rate loans are a boon for the seller, not the buyer). These actions increase resources. Demand explodes. Prices rocket upward (prices are a form of rationing). The bureaucracy expands, employees get raises, and empowered unions secure large pensions and are able to provide time and money for the reelection campaigns of their benefactors. Meanwhile, students and their parents go heavily into debt. Taxpayers pay through the nose (for example, the Cato Institute notes that public schools cost $25K/yr per student in some cities). High prices increase calls for more gov’t help to make education “affordable.” And so the government responds with more funding, and prices go even higher. Lather, rinse, repeat. One government intervention begets another.

You have to wonder if people will ever figure it out.

I think the U.S. health care system will be on the verge of collapse by 2017 (several years after the “benefits” kick in), but that optimistically assumes that the U.S. economy avoids collapse under the weight of unsustainable debt it has already accumulated. All the money that will be collected is already spent, unless the U.S. can use the revenues as collateral of sorts to borrow even more money at low rates.

Which leads to death panels. I’m not a huge fan of Sarah Palin, but she’s right that death panels are coming. There’s no getting around it, just as I see no way (short of repeal) around the fact that this bill is pretty much the death of private health care. Care will have to be rationed because the money eventually will not be there. This bill’s astronomical cost makes it worse.

The government isn’t going to ration fairly or humanely, it’s going to ration politically. I’m guessing that working-age taxpayers will eventually get first dibs, while old timers with extended problems are going to see their plug pulled. Economic malaise, the lack of free market competition/incentives, the addition of millions of people to the system, and government subsidies are going to make health care even more expensive. The stifling effect of the government on the economy is going to make things even worse, because it really is true that a prosperous society materially benefits all in that society. A poor society does not. You cannot build a prosperous society by attacking production and savings, and that is exactly what big government attacks through its spending, its debt, and its costly regulations.

You can’t legislate away economic reality.

13 Feb 2010

Conservatives complain heartily about Barack Obama. “Bush wasn’t the best, but this guy is spending us into oblivion.” Obama believes, or so he says, that he has no other choice.

It’s necessary to see the larger picture before putting Obama on a special pedestal of infamy on the specific topic of government spending. I believe that we’re seeing a historical crescendo. Since 1971 the dollar has been unhinged completely from gold, and this, along with other factors such as the dollar’s currency reserve status, has led to an explosion of spending and debt. Politicians became addicted to cheap money and huge deficit spending (even the “balanced budgets” of the 90s were frauds because they were raiding the misnamed “Social Security Trust Fund” the whole time, and thus massively growing unfunded liabilities). As the heroin addict needs ever greater hits to get the same high, a debt-laden economy requires ever greater infusions of government spending to postpone collapse. The federal debt has more than doubled since 2000, and the debt ceiling has been raised with increasing regularity. The scope of government bailouts continues to widen. Problems are hitting the shore in waves, with the largest wave hitting in late 2008. Ensuing waves have been increasing the destruction, and the government response (propping up large and insolvent banks, guaranteeing nearly all mortgages, and so on) is ensuring that larger waves are in store. In short, the crescendo is building.

Eventually, just as a junkie will crash, so will the economy. The government will be forced to stop spending and make life-altering changes when it can’t find enough borrowers, or if it sees prospect of monetary collapse, or some other crisis. Perhaps it will lose control and we’ll see a hyperinflation. You will definitely be seeing broken promises. They were never sustainable promises.

If the crash doesn’t happen in the next few years, expect the next president, regardless of party, to be a larger spender than Obama. Both parties share a devotion to Keynesian economics and both parties realize that, politically, they don’t have any other choice but to keep spending. Economically, they do. Morally, they do. Politically, they don’t.

Politics always wins out with political parties. They are not going to do the right thing and let the economy (that is, all of us) freely restructure through a lot of pain. The voters won’t stand for it, and politicians know it.

02 Feb 2010

Recently I heard an author on a talk show. The author correctly explained in great detail why the economy was in its current situation. He even implicated the Fed. Then the host asked what to do. The author proceeded to explain that the government needs to spend a trillion dollars (!) rebuilding our infrastructure, with massive “investments” in stuff like solar energy.

Yes, solar energy.

The author commits the same error as politicians: he thinks he knows how everyone else’s money should be spent. Since the wealthy pay an indiscriminate share of taxes (the top 10% of earners pay over 70% of the taxes), he’s replacing the wisdom and knowledge of all the entrepreneurs and businessmen out there. He thinks he has the knowledge and intricacy to spend the confiscated assets of tens of millions of people more wisely than those people would’ve done it.

Think about how arrogant that is. It’s what politicians and bureaucrats do every day.

Politicians have the advantage of trafficking in what is seen. People see $50 million spent on some boondoggle and the jobs it produces despite massive inefficiencies. They don’t see what businesses and products and employment will never come into play because that $50 million has been spent.

The ruling party comes up with a spending plan, they blow hundreds of billions of dollars, and then six months later the opposition says “ha, it didn’t work!” … as if politicians ever spend money on anything that does. The opposition party’s stimulus plan wouldn’t have worked either.

A better idea is to stop all “recovery” and “stimulus” plans, but that’s seen as inaction. Egged on by the voters who want them to “fix” problems and end the suffering, the politicians will never let it be. They have to “do something.” They’re like alchemists in a lab, squandering wealth day after day to find that elusive golden formula.

29 Jan 2010

I caught parts of the State of the Union (SOTU) last night. That’s better than I did the past 10 years. SOTU speeches are basically lists of proposed handouts delivered in a torrent of high-toned cliches (“We must answer history’s call”), accompanied by the Swiftian spectacle of Congresspersons (ahem) ostentatiously barking their approval in the bright lights.

Anyway, the guy who played Obama was spot-on. There were many fine moments, such as when he promised to freeze government spending for three years… except for Medicare, Social Security, and Medicaid. Then he told us that the “worst of the storm has passed.”

However, best of all:

Talk to the window manufacturer in Philadelphia who said he used to be skeptical about the Recovery Act, until he had to add two more work shifts just because of the business it created.

Yes, it’s the Broken Window Fallacy in action, and Obama’s hero in the example is a glazier! Nice!

It has to be the most unintentionally funny line ever delivered in a SOTU.

20 Jan 2010

There are those who still think they are holding the pass against a revolution that may be coming up the road. But they are gazing in the wrong direction. The revolution is behind them. It went by in the Night of Depression, singing songs to freedom. -Garet Garrett, 1954

I was at a children’s function a month or two ago at a Lutheran church (ELCA). During it, they did the Pledge of Allegiance. I didn’t join in.

Have you ever thought about the pledge? Joe Sobran once noted that the phrase many want to remove– “under God”– is the only good part of it. The Pledge was written by a 19th-century socialist. It speaks against secession (“indivisible”), which is something that the Founders saw as a necessary bulwark against Federal tyranny. Unlike the National Anthem, the pledge calls on us to… make a pledge. It’s not a binding oath in the sense that I will be prosecuted for disobeying it, but why would I want to say something I do not necessarily believe? Christians believe that kingdom of Christ supersedes the state. Why would a man leave a wayward denomination (where he may have once given membership vows) and yet pledge unqualified allegiance to his country?

I admire the soldiers who risk their lives overseas. However, the U.S. is broke. We need these kids here in America. We need them producing stuff instead of consuming resources. All government employees, soldiers included, are consuming resources. Peter Schiff once created an illustration to explain America’s interaction with foreigners since the end of World War II. Consider an island, he said, where a couple of foreigners and an American are stranded. One foreigner’s job is to gather the wood. Another creates the fire. Another obtains the food. They come to the American and ask what his job will be. His answer: He’ll eat the food.

Government employees are eating the food.

Military spending is a key contributor to what is likely to be more calamitous for this country: a currency crisis caused by overspending. Conservatives rail about government spending, and yet unflinchingly support massive military spending. This defeats the purpose. If even 20% of the populace denied legitimacy to 99% of federal spending (and that includes Medicare, social security, and war spending), I’m guessing that would be a huge problem for the legitimacy of the federal government. Things would change. Among those who should know better (including me a few years ago), the military is the best possible propaganda for federal legitimacy and overreach. People believe dubious claims that soldiers in, say, Iraq, are “fighting for our freedoms.” I don’t question our soldiers’ motives. I do question the government’s motives and the real effect of interventions like this.

The government isn’t “protecting our freedoms” overseas. They are ticking off people who do not want foreign troops in their country. Foreigners may strike back repulsively, but in the same way that you don’t flash jewels in a bad neighborhood and expect to come out unscathed, you shouldn’t blow things up in pagan lands.

Joe Sobran once quipped that the Constitution poses no threat to our current form of government. Other than setting terms of office, the Constitution has been a dead letter for generations. It isn’t even a small speed bump for Congress. The massive entitlements that are far and away the greatest financial threat to the country are all unconstitutional. Every war since World War II has been undeclared. The federal bureaucracy has over 14 million (the figure is probably much larger by now) employees and/or contractors. The Constitution hasn’t changed in the past 50 years, but federal spending has risen steeply. So much for “limited, constitutional government.” Were they still celebrating the republic in imperial Rome?

The older I get, the more I’m questioning “first things” when it comes to politics. Pundits debate who should run the Fed. Better to debate why the Fed should exist in the first place. People debate what the president is or is not doing. It’d be better if people were questioning whether the presidency itself is really a good idea.

The government wants us to believe that it protects our freedoms and rights. It’s easier to prove that government works to restrict our God-given rights. By spending our money and issuing regulations, they take our fields and redistribute them (c.f. 1 Sam 8:14). I think it was Milton Friedman who correctly noted that all government spending is taxation. Politicians are simply connected people who administer goodies to others for political and financial benefit. Congressmen parlay their connections into quite lucrative careers after leaving office, in areas like banking and lobbying that benefit lavishly from political connections.

One way to consider fighting back against the government is to stop, as much as legally possible, feeding it. Stop buying its bonds, use Fedex instead of the post office, don’t join the military, avoid funding public schools as much as possible, etc. Stop feeding into the legitimacy of the current American state as if it is run by anything other than corrupt power-mongers. Don’t buy the lie that a Republican takeover is the answer.

Yes, I know, we live in a fallen world. However, the Bible doesn’t get sentimental about Rome. Paul used his prerogatives as a Roman citizen, but his letters are bereft of state worship. Jesus steered clear of Judean politics. He and John the Baptist knew who Herod was.

Maybe Christians should take a hint from this.

12 Dec 2009

Conservatives would love to scrap the income tax. Question: How do you do this and still support all the wars and defense?

Look at the math. The government is slated to take in about $2 trillion in tax revenue this year. Around $866 billion of that is from the income tax, while another $842 billion comes from FICA (which is supposed to be earmarked for various entitlements like social security). Meanwhile, the U.S. government is spending over $1 trillion a year on wars, overseas bases, and missiles (note: the US debt clock shows less, but that figure does not include supplemental appropriations).

Let us reason together, conservatives: How do we scrap the income tax and yet spend $1 trillion a year on defense? The government isn’t bringing in enough from the income tax to even fund current defense/war spending. Surely you don’t want to raise taxes. Surely you don’t want to continue the ruinous borrowing. Surely you don’t want the Fed to further debase the money supply.

Limited government and foreign interventionism are simply incompatible. The current level of defense spending is unsustainable.

Here is the argument I always hear: “Yes, but defense is a constitutional function. If the government didn’t spend so much on unconstitutional things like social entitlements, it could afford to fund Iraq and Afghanistan and our overseas bases!” While it is imperative that all social entitlement spending be phased out, the argument is simply wrong. Again, look at the figures. The current budget for wars and defense ALONE is enough to ensure “big government.”

Financially, these wars are a real danger to freedom, especially if a dollar collapse results in social chaos. I’m with Ron Paul that our presence in foreign countries does more harm than good anyway, but we’ve hit a point where the U.S. either brings the troops home and closes its bases now in orderly fashion, or it scoots home later with its tail between its legs.

23 Nov 2009

This is my favorite snippet of his. It’s the funniest way you can spend three minutes learning how politicians think. Republican ones, too.

20 Nov 2009

That’s Peter Schiff on how the health care bill will destroy the private insurance market. The proposed bill doesn’t take effect until after 2012, conveniently bypassing the next presidential election. In 2016, when the scope of the disaster is dawning on people, they probably won’t tie it back to the 2009 bill. Instead, greedy insurance companies and speculators will be blamed, just as oil greedy oil companies are blamed for high gas prices instead of the devalued dollar.

Regardless of whether the health care monstrosity passes, the size of unfunded liabilities (most of which are health-care related) ensures that rationing will ratchet up in the next decade. It’s going to take longer to see the doctor, especially specialists. Fewer treatments will be available. The process will be even more bureaucratic. The wages of big government is poverty.

Start thinking in general about how to deal with your health situations when your doctor’s office is less available. If you rely currently on, say, monitoring your blood pressure regularly and you do this at your doctor, think about getting your own home unit. These are the kind of things where one could expect to see shortages.

Email arose to get around the postal service mail monopoly. Cell phones have circumvented heavily taxed and regulated local phone services. How will the free market circumvent the government health care monopoly?

I think you’ll see more trips to Mexico and other countries for medical care. Walk-in pay clinics? Great idea, although those will be threats to the gov’t system and likely there will be pressure to outlaw them. There is already a huge amount of medical data online, professional and homespun. Maybe we’ll see more businesses arise allowing people to ask questions of specialists on the internet. These will have to be careful with all the personal injury attornies out there. Another way would be to let people buy prescription drugs with cash, without seeing a doctor, but that will never be allowed for various reasons (almost none of them good). Maybe some enterprising people will come up with ways to do various medical tests and solutions at home. More of these would undoubtedly exist if it weren’t for government regulatory oversight that adds huge cost barriers to innovation.

By the way, if any of you make any of these ideas fly, I fully expect to be reimbursed.

30 Oct 2009

But we urge you, brethren, that you increase more and more; that you also aspire to lead a quiet life, to mind your own business… 1 Thess 4:10-11

Those who are busy-bodies, meddling in other men’s matters, generally have but little quiet in their own minds and cause great disturbances among their neighbours. -Matthew Henry

A thought has been occurring to me lately: Why do people think they can steward my money better than I can?

Imagine if I were granted the right to steward your money for you. Perhaps I’d make you buy cloth diapers. You can forget about that SUV; a used Cavalier will do. Don’t give me that nonsense about an easier way to ferry the kids home from school! You can cram three in the back of that Cavalier if you try. Your kids should be riding the school bus anyway (oh, I forgot, they will be going to public school because the private one costs too much). You can plan to start eating soy instead of steak, chubby. Also, your clothing will be furnished off the Old Navy clearance rack, and Old Shep will be dining on the cheapest 50lb bag of dog food that I can find.

Can you imagine being such an arrogant busybody, nannying the lives of other adults? Well, when we vote for a bond issue, or we support a new tax or a new government entitlement, that’s what we are doing. We are putting a claim on other people’s money. We’re reducing the money that they have available to steward for themselves. In effect, we are telling the government to spend other people’s money for them in accordance with our wishes.

How about we let people steward their own money instead, and let them be answerable to God for it?

I often do not steward my money wisely, but I can guarantee you one thing: I steward it more wisely than the government stewards its money. I’m not $100 trillion in debt, for example.

Granted, it’s not a very high bar to jump over.

15 Oct 2009

As my wife will tell you, one of my favorite statements now is: “Nothing will change until the collapse.” In other words, the irresponsible spending will continue until the government cannot do it any more. The voters are deluded and/or economically ignorant, and won’t believe that the merry-go-round is going to stop until it actually stops. Politicians aren’t going to risk losing re-election by doing the right thing.

Perhaps I should define “collapse” (or “tsunami,” as I sometimes call it). I do not mean Mad Max or Omega Man. I do not necessarily mean that the economy will disappear and we’ll be back to barter, or that we’ll be pointing rifles at dudes throwing Molotov cocktails. What I do mean is a watershed time of huge economic downturn. The Argentine Fernando “Ferfal” Aquirre put it this way about his country’s 2001 economic crisis (allow for the fact that English is Ferfal’s second language):

Most man kind divides the world’s history according to the birth of Christ. So do we, but Argentineans also refer to “before and after 2001” or “before and after the crisis or 1:1″ (when 1 peso = 1 dollar). I kid you not, this kind of reference is used several times a day on ordinary conversations.

Example;
“Nice car! How did you afford it?”
“No, I bought it before the 2001 crisis”

“Have you ever been to Paris?”
“Yes, beautiful place”
“Really, man I wish I could go there”
”Yea, but I went before 1:1”

This is just an example, of how such an event transformed everything for us, in such a terrific scale.

When I say collapse or tsunami, that’s what I mean. I believe that a currency crisis and severe inflation will be involved, because (and you’ve heard this all before) the U.S. government has massive debts it cannot possibly pay back. It has made promises to entitlement recipients that it cannot keep. It has creditors who have been moving away from the dollar to cut their losses. The government is doing all the wrong things.

The end result of the collapse will be a more hardscrabble existence for all of us. Historically, people may look back and say that the collapse began in earnest last year, but I think it’s going to get much worse.

The U.S. Debt Clock has updated its figures and now lists unfunded liabilities of over $100 trillion. Note that the unfunded liabilities of the infamous Bush “prescription drug program,” which was rammed through by the Republican party leadership (whose hacks are often in the media complaining about irresponsible spending), now exceeds that of Social Security. Both programs are pikers, though, compared to Medicare.

01 Oct 2009

Michael Moore has been on various shows flogging his new movie. He criticizes capitalism as “evil.” However, when he describes “capitalism,” it turns out that he’s really criticizing fascism.

The health care and banking systems are examples of economic fascism, which is the whorish entanglement of government and big business (with government playing the role of Daddy). Let’s take the banks for example. U.S. banks are a cartel under the thumb of the price-fixing Federal Reserve. The banks are “private,” but they operate under heavy regulation (which they embrace). Government agencies like the FDIC “guarantee” bank deposits with money they do not have, which means instead of one bank being at risk, the entire system is at risk of broad collapse. The big banks benefit from government guarantees that ensure privatized gains and socialized losses. Politicians benefit by getting large campaign contributions from financial interests, and they get their big government programs funded by the Fed’s counterfeiting. There is also a swell revolving door between lobbying and banking interests and government agencies. Look at the fantastic wealth accumulated by the Rubins and Hank Paulsons of the world.

The current banking system wouldn’t exist in a free market. To call the banking system “capitalist” is a horrid misuse of the word. Capitalism is simply private ownership of the means of production. It involves the voluntary interaction of buyers and sellers. I grow corn on my property and offer it for sale. You (or a middleman) decide whether to buy it. We must agree on a price. The capitalist system is simply millions upon millions of these transactions.

In other words, the capitalist system means freedom. That’s why I prefer the term “free market” to “capitalism” because it speaks to peaceful, voluntary exchange. The alternative is that Michael Moore and others decide how to spend much of our money for us (since they arrogantly assume that they know how to allocate resources more efficiently and “fairly” than us uncaring dolts).

Michael Moore is an authoritarian socialist dressed in populist garb, so he has an interest in confusing his terms. He is another reminder of this observation by Paul Elmer More:

There is something at once comical and vicious in the spectacle of those men of property who take advantage of their leisure to dream out vast benevolent schemes which would render their own self-satisfied career impossible.

24 Sep 2009

Government is good at one thing: It knows how to break your legs, hand you a crutch, and say, “See, if it weren’t for the government, you wouldn’t be able to walk.” -Harry Browne

There was a town hall event a few weeks ago where it transpired that one of the people who was there calling for (if I remember correctly) the abolition of Medicare had to be treated by Medicare for an injury. Haha, what a hypocrite!

Really? The government takes over half of our incomes, perhaps 3/4 of it once you trace the taxes everywhere. The government creates the inflation that slowly robs people of their savings and taxes false gains (e.g. If you buy a stock for $50/share and sell it 10 years later for $75/share, you have to pay capital gains on $25/share even though much of that gain is due to currency debasement i.e. inflation). All of these factors have created hardships if both spouses are not working. The government’s massive subsidies and other interventions in the health care, education, and financial markets have jacked up costs to the point where it’s difficult to survive outside of the system. The government created a massive bubble with its monetary policies that are wreaking havoc on family wealth.

Given all this, it’s hard for people to avoid the government net at some point. It’s hard to avoid an elephant that spends $4 trillion a year, especially if the majority of your income goes to fund its large appetite. Even principled people may have to swim to some extent in the elephant’s cesspool.

As regular readers know, I state often that nothing will change until the collapse brought about by the unavoidable, coming tsunami (this may not necessarily hit at once; it could be a wave that hits over an entire generation and causes the standards of living to fall dramatically). The reason to inform people of the “freedom” position is to hopefully influence what happens “on the other side,” after a currency crisis or some other spark that causes broken government promises. This is when people will be looking for answers.

Things can work out for the better after the tsunami. One reason the founding fathers hated paper money was because they experienced the ravages of it during the Revolutionary war. A similar thing occurred after the demise of the Civil War greenback. The post-Civil War era (up until the Progressive era came along and began dismantling it) was perhaps the most prosperous and soundest economic era in the nation’s history. The government was far less invasive then.

Things can also work out for the worse. Germany and Russia of the early 20th century come to mind. So does the corrupt French monarchy, which fell to the wickedness of revolutionary France, which in turn fell to the warmongering Napoleonic state that ended hundreds of thousands of lives.

Lew Rockwell believes that the best thing “average” people can do is spread the word with friends, family, and others you can influence. Help to create an informed minority (speaking of which, Ron Paul’s book End the Fed is now out).

My pastor reminds me on occasion that this is how it works with the Christian life too. Sprout where you’re planted.

18 Sep 2009

Conservative talk radio is already abuzz about the 2010 mid-term elections. The hope is that Barack Obama is self-destructing, and a massive wave of discontent will lead to a great victory for the Republicans. Hopes are often dashed, but let’s assume the Republicans do sweep into Congress in 2010. Then what?

Here’s what: there will be more borrowing and spending. There will be the requisite complaining about the borrowing and spending to mollify the conservative base, but much of that base doesn’t really want entitlements cut any more than the rest of the electorate. Entitlement spending is the main reason why the tsunami is coming, but politicians don’t get elected by promising to cut such spending. Voters may congratulate politicians for straight talk about the coming insolvency, so long as it stays talk. Politicians know they’ll get safer mileage out of focusing on inconsequential discretionary spending and abstractions such as “We need to get our fiscal house in order!”

I’m all for driving a stake into Obamacare, but politicians who aren’t seeking to drastically cut entitlement spending are part of the problem because entitlement spending is the problem. In other words, all but a handful of Congressmen are part of the problem. That includes the conservative flavor of the week: Congressman Joe “You lie!” Wilson. It’s noteworthy that Rep. Wilson voted for Bush’s prescription drug entitlement, which now has liabilities exceeding $16 trillion. He voted for the September 2008 bank bailout, too.

The Republicans are using Obama’s dissembling about Medicare rationing against him. Do you think Republicans are going to turn around and push their own cuts to a Medicare Ponzi scheme that is $70+ trillion in the hole and well on its way to collapse? Are you kidding me? They aren’t going to touch it with a ten-foot pole. They know that people who hang around for an explosion tend to get blown up. (The idea that the government will move toward fiscal soundness before the collapse is as laughable as Barack Obama’s fondness of using the excuse that he inherited a economic crisis, as if he would’ve acted more fiscally responsible than George W. Bush. Who was that former senator from Illinois pushing for all that big government? It must have been the current president’s evil twin.)

Voters won’t accept that their entitlement programs are hosed until they’re actually hosed in the coming tsunami. Most of them contributed payroll taxes, and as the masterful and reprehensible FDR once said, “no d*** politician can ever scrap” such entitlements, even if they were a fraud from the beginning (which they were) and the money was spent long ago (which it was).

Republicans are often better than Democrats on key issues like gun rights and abortion funding, even if at best they tend to just maintain the status quo. However, unless the tsunami has already hit, the 2010 election won’t propel meaningful economic change, nor will it remove the inevitability of the tsunami… even if the Republicans win every contested seat in Congress.

14 Sep 2009

Perhaps it’s a waste of time to debate the merits of Obamacare, Cap and Trade, or the latest stimulus measures. None may matter due to one overriding reason: they will all be deluged in the tsunami to come. They’re all empty promises.

The tsunami will slam ashore once the crisis occurs over the national debt. This is the key political issue of our time (at least economically) that frames all others, and yet it is largely ignored. People are hoping against hope. Some politicians and citizens are wary, but the borrowing and spending continues unabated. Remember putting three pieces of bubble gum in your mouth and blowing a bubble the size of your head as a kid? It was awesome watching it grow and grow… until it popped all over your face and hair.

There’s no way to know if the tsunami will hit in a month, a year, or ten years. We can only speculate what will initiate it: the end of foreign debt buying, a Fed shell game uncovered, a series of major bank failures, a sudden submarining of confidence in the dollar… who knows. I know one thing: it’s coming, unless our Lord comes first. It’s coming for the same reason that a street drunk ends up in the gutter after a bender and for the same reason that punching a brick wall hurts your hand. It may hit more like a hurricane than a sudden wave, but nothing will be the same after the tsunami. There is no legitimate way to pay off the debt and the deficits are escalating. It is what it is. At this point, I don’t think there’s any way to escape the island. All the escape boats have been set adrift.

I have no idea how much damage the tsunami will do, but I think a few things are inescapable: (a) the standard of living is going to be much lower for years, perhaps a generation, and (b) some government programs may survive, but they’re going to handle fewer people with far less benefits in real purchasing power, and (c) A lot of people are going to be hurting. War, hunger, and anarchy wouldn’t be a surprise, nor would successful secession movements. More likely are the rise of multi-generational families under one roof, mending clothes, an emphasis on local communities, more crime, fewer imports, poorer health care, used cars, back yard garden plots, less travel, oil shortages, people working until they die, and hopefully fewer animal rights supporters and environmentalists (chic causes during prosperity give way to survival during lean times). This is just off the top of my head. You can follow the logic and come up with your own predictions.

Yes, everything will change in the tsunami’s wake, but Christians will do well to remember what C.S. Lewis noted back in 1939 as England fell into a cataclysmic war:

The war creates no absolutely new situation: it simply aggravates the permanent human situation so that we can no longer ignore it. Human life has always been lived on the edge of a precipice. Human culture has always had to exist under the shadow of something infinitely more important than itself. … We are mistaken when we compare war with “normal life”. Life has never been normal. Even those periods which we think most tranquil, like the nineteenth century, turn out, on closer inspection, to be full of cries, alarms, difficulties, emergencies. -C.S. Lewis, “Learning in War-Time”

God is still a very present help in trouble. Eternity is still forever.

Note: I have created a new category for posts on the economy and the coming tsunami.

09 Sep 2009

We’ve heard more than one person tell us that cost is no object when it comes to our basic right to health care. This is like saying that air is no object when it comes to breathing.

Cost always matters because scarcity is a fact of life. Scarcity is there whether the government “provides” health care or not. Now, some say that health care is so important that we must spare no expense in providing it. Looking beyond the obvious objection that this immorally sanctions us to raid our neighbor’s wallet, there simply isn’t enough wealth to continue on our present financial path (and the government is always busy with new regulations that harm future wealth-building). Medicare and Medicaid alone, using conservative estimates, are almost $50 trillion in debt. That’s way more than the U.S. can ever afford. Government revenues for 2009 are projected in the $2 trillion range. Every new dollar spent is a borrowed dollar.

I tell people this, they disregard it, and basically retort that it needs to happen anyway. Well, pigs need to be able to fly, too. These people are like a Party Boy who gets his paycheck and spends it all on a big blowout keg party. Never mind what’ll happen later when the landlord comes calling for the rent.

Despite all this talk about Medicare savings that has the elderly up in arms, Obamacare will on net add trillions to already unsustainable levels of spending. Its supporters aren’t calling for us to forgo anything to fund all this new spending, except for perhaps military expenditures. While I’m all for bringing the troops home, eliminating the entire military budget (not just war spending) saves around $500 billion dollars a year. Now, $500 billion is a lot of money, but the U.S. deficit is $1.5-$2 trillion this year alone. So even eliminating the entire military budget, which of course will never happen, doesn’t resolve the deficit or future liabilities. Financially, the bigger problem is entitlement spending– Social Security, Medicare, Medicaid, prescription drugs. Most Obamacare supporters believe that these things are sacred, and now they want a massive new program added to the list.

Isn’t the denial of reality, the utter foolishness and childishness of this, obvious?

Let’s say there is a church that built a million-dollar sanctuary back during the boom years. The bust occurred, and now the congregation has lost jobs and tithing is half what it once was. The church can’t meet its commitments. What would any sane session do at this church? Would they vote to borrow money to add another wing? Would they tell the congregation that funding xyz ministry’s is so important that “cost is no object?” Of course not. They would instead cut costs to the bone. They would recognize their earlier foolishness and consider moving to a place the congregation can afford. There is no more important work than that done by a faithful church, but that doesn’t mean that every church has a “right” to a large sanctuary or an expensive ministry to the poor. It has a right to what it can afford. The faithful church works with God’s provision (Rev. 2:8-9).

And so it should be with health care. Any system must be sustainable. Otherwise its will eventually fall victim to severe rationing, just like Party Boy will end up eating ramen noodles and fighting eviction. The system may even fall apart completely. Given that scarcity is a fact of life, I would much prefer the efficiencies, quality, innovation, and sustainability that spring from free-market competition instead of the deficits and wastefulness of government. We want the computer industry, not the post office.

Sometimes I just want to shake people and tell them to stop acting like children. If the dollar collapses as a result of the unsustainable spending and debt, then the chickens will really come home to roost for all the people who’ve pushed and pushed to extend the government spending to unsustainable levels. They are contributing to a disaster greater than any problem they wanted to solve.

27 Aug 2009

He doesn’t hit the target 100% of the time (who does?), but few writers land harder punches than Gary North. Here is yet another example.

“Keep your eye on the yellow buses.” Indeed.

25 Aug 2009

Most of you have probably heard that the Congressional Budget Office is predicting $9 trillion in federal deficits over the next 10 years. Politicians are kvetching about this. They won’t do anything serious about it, though. Too unpopular.

Understand something: You could create a comedy using CBO 10-year budget projections. They change constantly and they are almost always inordinately rosy. Some examples: In 2000, the CBO estimated a budget surplus of over $1 trillion for the next decade. In 2008, they projected that deficits would turn into a surplus by 2012. And now, in 2009, they are projecting steadily increasing revenues and economic growth beginning next year. If that sunshine happens, the deficits will only be $9 trillion over the next decade. Yee haw! You can revisit almost 35 years worth of “Budget and Economic Outlooks” here. Vast amounts of comedy.

Central planners always hope for the best. They think they can tinker with the economy and create a winner, but as Hayek explained long ago, central planning fails because bureaucrats do not have the knowledge of tens of millions of people making transactions in their various endeavors.

It’s hard to blame the CBO in the sense that no man can predict 10 years of the U.S. economy. No one can predict the future because no one knows the future. That said, all you have to do is look at what’s happened in the past and the economic trends (monetary policy, unemployment, debt and spending levels) and it’s evident that things aren’t headed in the right direction. When they tell you there will be $9 trillion added to the deficit over 10 years, it’s safe to hazard that the real number will be at least twice that. However, I think a crisis, perhaps even a collapse, is coming before that, which means that all bets are off the table.

When I ran a business, I had a woman ask me once if I paid a living wage. I replied that I paid a competitive wage. I wanted to tell her that if she were willing to pay me twice as much for the job, I could then pay my workers $25/hour. Many people are so clueless that they actually think that there’s a golden egg hidden somewhere– some vast store of wealth– that more regulations and taxes and righteous indignation at “profiteers” will uncover. Instead it just smothers the goose.

Similarly, politicians yearn for economic growth. They love to foster artificial booms using gimmicks like low interest rates. In times of prosperity, the populace isn’t as concerned about the government skimming more cream off the top. This suits the government just fine. The boom proceeds and everyone is rocking and rolling, and the government is expanding like Jabba the Hutt. Then the bust happens and there’s a mad dash to come up with more gimmicks. Politicians don’t understand– perhaps they don’t want to understand– what makes sustainable economic growth occur. They think borrowing and consumer spending and regulations, not production and savings and freedom, are what lead to sustainable economic growth. In their greed is the seed of destruction.

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