Liberty always has a way of dying when no one is watching. It could not have died during the administration of George Bush or when there was a Republican Senate, not because there was no one in office who wanted power, but because there was vigilance on the part of civil libertarians who feared encroachment on their freedoms. In the last two months, it has begun to whither not due to late night back room deal cutting, but because there was a public outcry for it to be put down. Liberty was given two crippling wounds recently to the delight of a populace who did not recognize what they were applauding.
When the life choices of the “Octo-mom” came to light the tabloids and the public went through a brief period of confusion followed by outrage. A woman with no job or visible means of support and who was mother to six infants and toddlers born from artificial insemination and then delivered eight more babies which had been fertilized in a lab and implanted in her uterus. During the midst of the greatest destruction of personal wealth in a generation, a populous which feared for its jobs and was sweating monthly payments suddenly realized it was going to be footing the bill for fourteen children who were brought into the world only to boost one woman’s feeling of worth. The calls came in: she has an addiction to being pregnant, she suffers from mental illness, she is trying to make up for a lonely and empty childhood by crippling the egos of fourteen babies.
Suddenly it was acceptable to state that she had no right to do what she had done. Everyone, both liberal and conservative, seemed to feel very safe agreeing that she was wrong, that the doctor who performed the procedure had failed in his oath to “do no harm”, and that government had the right and the duty to take the children away from her.
Imagine if, just a few short months ago, someone had spoken up and suggested that the government had a right to limit the number of children a person on public support could have? It was a rock solid part of liberal belief that society had no right to limit the life choices of individuals who continually made bad choices. Once a person goes on public support, their life choices are severely limited but we, the belief has always gone, should not regulate behavior. This has often been extended to not make suggestions about how best to get themselves into a more self reliant. This party explains how an underclass has developed which goes from generation to generation, each having less of a clue of how to raise themselves up than the last one had.
Our response to “Octo-mom” suggests that times have changed. Now, when we the society know better, we have a right to at least criticize. But “Octo-mom is not the only focus of our new involvement. Now, our politicians have given themselves the right to manage the behavior of bankers. Even if a banker uses his own money to remodel his office, we have seen that he can be criticized if his bank later takes a government loan. Even when a bank’s managers are taken into a back office and forced to take bailout money they do not want so others will be more inclined to follow along are subject to the Senate’s rage when they entertain clients and attempt to grow their business. Congressmen who have never taken a business course have assigned themselves the power to know who to run multi-billion dollar corporations.
As a conservative, I would like to say that this new trend is the doing of Democrats, but the back room arm twisting of bankers started under George Bush’s tenure and illustrates why George Bush was never a conservative. The trend has been ramped up incrementally by such figures as Harry Reid, Nancy Pelosi, Barney Frank, Christopher Todd and John Kerry.
There is a form of socialism found in the history and economic textbooks which allows for private ownership with government management. It was the guiding economic policy in Spain, Italy and German for several decades of the twentieth century. It is called Fascism. Each time it was tried, it led to a suppression of the poorest citizens while a ruling elite rose under the hand of a dictator. It does not matter if the county’s top leader is George Bush, Barack Obama or Susan Sarandon, we do not need a dictator; we do not need a ruling elite and we do not need the micro managing of a strong central government.
Friday, March 20, 2009
Wednesday, March 18, 2009
20090301 Lining the Road to Hell
How do things that are well intentioned turn so terribly wrong? Well it happens all of the time. Sometimes the things which start out the most benignly end up doing the most damage.
Case in point: in the mid-1970’s America was coming to grips with the fact that it had not always treated minority groups very fairly. The practice of “red lining” was particularly on peoples’ minds. “Red lining” was an unwritten policy of making such minorities could not get a loan to buy a home in a “decent” neighborhood. That is, of course, blatant discrimination. Legislation was passed in 1977 to make sure that banks treated everyone equally when evaluating home loan applications.
Flash forward twenty years. While some banks behaved honorably, others feared offending some of their larger customers and had a track record that was questionable at best. The office of Housing and Urban Development announced that it would use a new interpretation of the law and begin enforcing a system of quotas based on census data. If any lending institution was found to not meet the quota level for any minority, it would be subject to legal proceedings.
Move ahead a few more years and the public interest group ACORN began hiring lawyers to sue banks rather than merely reporting the banks to HUD. Banks begin very closely monitoring percentages of minorities living in regions, percentages of minority groups applying for loans and percentages of each minority group approved for loans. In some cases, banks needed to find minorities who were not necessarily looking for a loan. It increasingly became more and more important to bankers that they make loans to every minority group even if some of those loans might fail, after all the banks insured all of their loans. Once the standards for receiving a loan began to fail, it suddenly became easier for anyone to qualify.
As loans were made that were less and less secure, being able to insure tem became more and more important. A.I.G. became the world’s largest insurer by daring to venture into areas that others feared to attempt. As long as the troubled loans remained a small percentage and the rest of the market remained stable then there would be a few write offs but profits would still be made. But nothing exists in a vacuum.
When loans became easier to get, more people were able to buy houses. When more people were able to buy houses, the price of houses went up. The size of the loans that were approved began to increase. This cycle repeated for a little while before speculators fresh from the internet bubble took notice. They needed a place to put money and house prices were having a boom and they poured their money into the market driving prices up further. More and more people were making money in the housing market and it started getting fashionable. TV programs that showed people buying and flipping houses abounded on TLC, DIY and HGTV. Buying houses for no money down was preached as the way to get rich.
A person with a modest mortgage who had a fifty percent equity stake based on his or her purchase price saw the value of their home double or triple. Suddenly they had a seventy-five or eighty percent equity stake and they felt wealthy. Lenders, who knew they were sitting on riskier loans than they historically had, saw the increased equity in their customers’ homes and encouraged home owners to borrow off of this equity. Unfortunately, the act of issuing shaky loans is what inflated those home equity values so the home equity loans did not help prop up the lending structure, it magnified the underlying problem.
I wish I could say that this is the only arena that a situation like this has arisen but I check out the news everyday and I see the exalted leaders of this great nation crafting well meaning ideas into law with no foresight into what changes they are creating. It seems like no corner of our lives is safe from this kind of interference.
Case in point: in the mid-1970’s America was coming to grips with the fact that it had not always treated minority groups very fairly. The practice of “red lining” was particularly on peoples’ minds. “Red lining” was an unwritten policy of making such minorities could not get a loan to buy a home in a “decent” neighborhood. That is, of course, blatant discrimination. Legislation was passed in 1977 to make sure that banks treated everyone equally when evaluating home loan applications.
Flash forward twenty years. While some banks behaved honorably, others feared offending some of their larger customers and had a track record that was questionable at best. The office of Housing and Urban Development announced that it would use a new interpretation of the law and begin enforcing a system of quotas based on census data. If any lending institution was found to not meet the quota level for any minority, it would be subject to legal proceedings.
Move ahead a few more years and the public interest group ACORN began hiring lawyers to sue banks rather than merely reporting the banks to HUD. Banks begin very closely monitoring percentages of minorities living in regions, percentages of minority groups applying for loans and percentages of each minority group approved for loans. In some cases, banks needed to find minorities who were not necessarily looking for a loan. It increasingly became more and more important to bankers that they make loans to every minority group even if some of those loans might fail, after all the banks insured all of their loans. Once the standards for receiving a loan began to fail, it suddenly became easier for anyone to qualify.
As loans were made that were less and less secure, being able to insure tem became more and more important. A.I.G. became the world’s largest insurer by daring to venture into areas that others feared to attempt. As long as the troubled loans remained a small percentage and the rest of the market remained stable then there would be a few write offs but profits would still be made. But nothing exists in a vacuum.
When loans became easier to get, more people were able to buy houses. When more people were able to buy houses, the price of houses went up. The size of the loans that were approved began to increase. This cycle repeated for a little while before speculators fresh from the internet bubble took notice. They needed a place to put money and house prices were having a boom and they poured their money into the market driving prices up further. More and more people were making money in the housing market and it started getting fashionable. TV programs that showed people buying and flipping houses abounded on TLC, DIY and HGTV. Buying houses for no money down was preached as the way to get rich.
A person with a modest mortgage who had a fifty percent equity stake based on his or her purchase price saw the value of their home double or triple. Suddenly they had a seventy-five or eighty percent equity stake and they felt wealthy. Lenders, who knew they were sitting on riskier loans than they historically had, saw the increased equity in their customers’ homes and encouraged home owners to borrow off of this equity. Unfortunately, the act of issuing shaky loans is what inflated those home equity values so the home equity loans did not help prop up the lending structure, it magnified the underlying problem.
I wish I could say that this is the only arena that a situation like this has arisen but I check out the news everyday and I see the exalted leaders of this great nation crafting well meaning ideas into law with no foresight into what changes they are creating. It seems like no corner of our lives is safe from this kind of interference.
Monday, March 16, 2009
20090215 Stimulating Talk
The outlook for the American economy has just gotten worse. I struggled with an opening line this week and then decided just to blurt it out. Congress has passed something they refer to as an economic stimulus bill which provides next to no stimulus. It does provide a lot of spending but very little of it will stimulate the economy. It will have the effect of tying up nearly a trillion dollars worth of capital so that the private sector will not have it available to grow the economy.
In all of recorded history, the number of times that a government spending program helped stimulate the economy is precisely zero. “But Jim, what about the ‘New Deal’; Didn’t that end the Great Depression?” Examination of history tells a different story. Every time the government poured money in to fight the depression, the nation’s wealth dropped, stocks faltered and unemployment increased. In hind sight, the efforts to end the Great Depression actually prolonged it. Only when twelve million men were pulled out of the workforce to fight World War Two was the economy crippled by government interference able to support those remaining.
I could go into a long diatribe about what Congress’ real agenda is in this stimulus package but let’s focus today on something a little more positive. I am going to share with you, my dear readers, what a government stimulus package that would work would look like. It has three components.
First, if the government wants to keep unemployment from growing and keep industry investing, it should allow companies to take an immediate 100% tax deduction on all equipment purchased in 2009 without having to depreciate the equipment for seven, ten or fifteen years. Get the companies retooling for the future now knowing that it is more cost effective to do it now rather than waiting for a recovery.
Second, if the goal is to stabilize falling home values which has caused so many to own more for their house than it is worth, tell anyone who buys a foreclosed property in 2009 and holds that property for a minimum of five years that they will not have to pay capital gains tax. Give people an incentive to get these houses off of the market today. Home prices can bottom out now and begin going back up modestly. Money can be spent renovating the properties and flow more money into the economy.
Lastly, if the government feels a need to spend money and they are serious about ending our dependence on oil and saving the auto industry, they should begin a program of retrofitting all civilian government fleet of car, trucks and buses at all levels, local, state and federal over to natural gas which retails at 99 cents a gallon. It’s a cheaper fuel, that is produced locally gives better mileage than gasoline and greatly reduces emissions. Once the government creates the marketplace, a distribution network for fuel grade natural gas will spring up on the foundation of the current gasoline network. The auto industry can then manufacture smoother running, better mileage cars for the general public.
Rather than soak up capital which it can then be distributed in an inefficient manner by people with no idea how, the government needs to give free enterprise the elbow room to go out and do the job. Please point out to me one thing that the government does efficiently and effectively. Don’t say “Take our money.” Have you seen the tax forms? The government takes our money in the most inefficient way.
I know that you all think I must be brilliant to come up with these ideas, but I have to tell you these ideas are actually based on what has worked every time a government has successfully tackled severe economic problems.
In all of recorded history, the number of times that a government spending program helped stimulate the economy is precisely zero. “But Jim, what about the ‘New Deal’; Didn’t that end the Great Depression?” Examination of history tells a different story. Every time the government poured money in to fight the depression, the nation’s wealth dropped, stocks faltered and unemployment increased. In hind sight, the efforts to end the Great Depression actually prolonged it. Only when twelve million men were pulled out of the workforce to fight World War Two was the economy crippled by government interference able to support those remaining.
I could go into a long diatribe about what Congress’ real agenda is in this stimulus package but let’s focus today on something a little more positive. I am going to share with you, my dear readers, what a government stimulus package that would work would look like. It has three components.
First, if the government wants to keep unemployment from growing and keep industry investing, it should allow companies to take an immediate 100% tax deduction on all equipment purchased in 2009 without having to depreciate the equipment for seven, ten or fifteen years. Get the companies retooling for the future now knowing that it is more cost effective to do it now rather than waiting for a recovery.
Second, if the goal is to stabilize falling home values which has caused so many to own more for their house than it is worth, tell anyone who buys a foreclosed property in 2009 and holds that property for a minimum of five years that they will not have to pay capital gains tax. Give people an incentive to get these houses off of the market today. Home prices can bottom out now and begin going back up modestly. Money can be spent renovating the properties and flow more money into the economy.
Lastly, if the government feels a need to spend money and they are serious about ending our dependence on oil and saving the auto industry, they should begin a program of retrofitting all civilian government fleet of car, trucks and buses at all levels, local, state and federal over to natural gas which retails at 99 cents a gallon. It’s a cheaper fuel, that is produced locally gives better mileage than gasoline and greatly reduces emissions. Once the government creates the marketplace, a distribution network for fuel grade natural gas will spring up on the foundation of the current gasoline network. The auto industry can then manufacture smoother running, better mileage cars for the general public.
Rather than soak up capital which it can then be distributed in an inefficient manner by people with no idea how, the government needs to give free enterprise the elbow room to go out and do the job. Please point out to me one thing that the government does efficiently and effectively. Don’t say “Take our money.” Have you seen the tax forms? The government takes our money in the most inefficient way.
I know that you all think I must be brilliant to come up with these ideas, but I have to tell you these ideas are actually based on what has worked every time a government has successfully tackled severe economic problems.
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