Laffer Curve is Dead

This chart which was stolen from my favorite economic blog, Carpe Diem, shows that the laffer curve is likely not as dead as some (Paul Krugman) would want you to believe. The marginal tax rate goes down and the government just gets a smaller piece of a bigger pie.

Economics and Jesus

In my spare time, I enjoy few debates more than what Jesus' view on the economy would be. So, this morning and after every one left (about an hour ago) I treated myself, this Christmas, to reading a few articles debating the issue.

I love this topic because both side has excellent points and, due to the topic, is impassioned. Some people will adamantly swear that Jesus was a socialist. They use quotes like "Give up all your possessions and follow me." They also use some of the parables, mainly the parable of the good samaritan, which is in Luke 10: 25. They argue that Jesus was a radical who cared nothing for the ways and means of the world but only sought to follow God. He flipped over tables in church because he was so incredibly anti-materialistic. He freely gave up himself for the good of others. How can one not see how clearly socialist he is?

The other side says that Jesus is an anarcho-capitalist. He did not believe in the hierarchy and believed in direct aid to the poor. Notice that Jesus did not dictate someone else to die on the cross for the sins of mankind. Jesus came to this earth to set us free. Governments can do nothing but inhibit freedom, so therefore, Jesus must be an anarcho-capitalist. They then point to the parable of the sower which is in Matthew Mark and Luke. He told us to use our talents wisely. There is no wiser use than what the free markets will determine.

The benefit of this argument is that both sides have a great deal of evidence. I will not tell you where I stand on this argument tonight, because I want to clearly state my views on this topic and that will simply take more time than I am willing to commit this close to midnight.

I hope all of you had an incredibly Merry Christmas and I hope that God blesses you in the upcoming new year.

Why the last post matters

Thanks to Angry Bear Blog for creating this fantastic chart. The author is a liberal economist who I read every day and encourage you to do the same.

If companies and people save their money, they can't spend their money on improving and growing their business... meaning they can't hire.

Tax Cuts

There are two real questions when dealing with tax cuts. The first, and the one this entry will not address, is whether it is moral for a government to take money from individuals based on the threat of force to give to programs the individual does not agree with. The second, and the reason for this entry, is whether it can get an economy rolling again. Will the people spend enough money to stimulate the economy.

We will first deal with why these tax cuts will not be as effective as possible, if at all. Milton Friedman, likely the best economist to ever live, spent a great deal studying the effect of tax cuts on the population. He developed the Permanent Income Hypothesis which states that people's consumption patterns are not determined exclusively, or even primarily, with current income levels. Instead, people base their consumption patterns on long term income expectations. People consume based on a constant proportion of their long term income.

He also found that short term increases do little to nothing to increase consumer spending. In fact, in one situation, a government gave the people a one term tax refund before hiking the tax rates. Friedman predicted consumer spending would go down even though the people received the refund and he was correct.

The tax bill passed is not an effective way of spurring consumer spending because it is a temporary increase. These increases are not effective. If Congress truly wanted to increase spending and spur economic growth they would pass permanent tax cuts. Unfortunately, this is politically impossible.

Census Shows People Respond to Incentives

The Census is out. This has major implications in politics, with the GOP netting 6 seats but the more interesting point is that it shows how people respond to incentives. Michigan is the only state to have a decrease in population. They lost enough people where we are reasonably certain people moved away, rather than a stagnant population dying off. Why is this important?

The Michigan economy is terrible. While other states are certainly suffering, they pale in comparison to Michigan. People moved to find jobs and a better life, not in a differnet country, but in a different part of the same country.

Further proof of this is Texas, which saw the greatest population gain. Certainly some percentage of this is from immigration, both legal and illegal. Even subtracting that percentage, however, is becomes abundantly clear that people were moving into Texas. They did this because there were jobs and low taxes. People respond to incentives, but I guess I am just a fool who happens to believe in the laffer curve.

Rothbardian Anarchism vs. Friedman Minarchism

Murray N. Rothbard is probably the most famous modern anarchist of the Austrian school of thought. Rothbard became an anarchist from a minarchist because he believed that the free market would be more efficient in all aspects, including militarily. If the free market is truly superior, why would this cease to be the case when it comes to personal security, and collectively, national security. National security has always been the achilies heel of anarchy. If the anarchist country is attached, how do we, as a nation respond without a central government.

Milton Friedman came up with a semi-solution of this by ceding national security to the government. He said there were two types of goods and services: divisible and indivisible. Divisible goods could be easily separated by individual. I can decide which type of tie I prefer and purchase accordingly. If you have a different preference, you can purchase differently. That is a divisible good. National security is an indivisible good. I cannot purchase one level of national security, while you purchase another. We must purchase equal amounts, even if this does create the free rider problem.

Why is this important today? The TSA has recently been accused of unnecessary procedures to keep us safe. The TSA has claimed that this is necessary, in part because it is an indivisible good (without using that language). The problem is that this is inaccurate. Security could be, and in my opinion, should be provided by the individual airline companies. These different airlines could then provide varying levels of security, if they chose. The “traveling public,” as the TSA calls us, would then get to choose whichever level of security we are comfortable with.

Note that the real financial losers here are also the “traveling public.” Not only do they have to go through time consuming and humiliating procedures, but they are forced to pay for it… literally. The taxpayers fund the TSA who then executes the safety procedures. They also provide partial immunity to the airline industry, meaning that if another disaster occurred the government would be forced to bail out the airline industry again. The airlines get what they want: less liability. The government gets what it wants: more control. The people get to pay for it all.

New Years Resolution

Hello all,

I have ignored you. Every year I make a new years resolution and am usually pretty good about keeping it up. This year, the resolution will be this blog. I will post a minimum of 7 posts per week starting now.

Enjoy,

George

Happy Meals Banned in San Francisco

San Francisco just banned the toys in happy meals unless McD's changes what is included in the meal. They did this because the McDonald's happy meals did not meet the nutritional standards that local government has set.

Due to time restrictions, I will keep it short. The practical reality is that it it is a parent's job to make sure their child eats right. A parent should have the right to feed their kid food they want. A parent no longer has the right to reward their child for doing good on a test, doing well at camp, etc. by taking them to McD's for their favorite meal.

This is the fundamental question. Who should have control over what your child eats, watches and does?

Government pushes low fat cheesy diets...

I was reading the huffpo and came along this article. The huffington post editors were stunned to find that a government that promotes and incentivizes healthy eating would also give millions of dollars to promote cheese, a substance that although is delicious, has been known to add on a few pounds.

They go through this process. The government thinks Americans should eat better and work out more. A noble goal. The problem is that farmers make up and enormous voting block and are not beholden to any one party. To remedy this, the politicians use a percentage of the tax revenues they take from the farmers through taxes they use it to promote consumption of cheese. How did this happen? The government has been promoting low percentage milk (1 or 2% instead of whole). This milk fat has to go somewhere so it goes into cheese, which lowers in price. In order to handle the overflow of cheese the government basically helps firms by paying for advertising promoting the cheese.

So the government takes some of your tax dollars to promote people to live a health lifestyle. Taxes the farmers, raising the price of your milk and then spends a percenage of those tax dollars to promote a substance full of saturated fat. The government at work....

BTW HuffPo readers, this is not limited to dairy. There is no more egregious example than subsidizing tobacco farmers and paying for non-smoking campaigns.

Good intentions causing more poverty

Close to 70% of students with a 4-year degree have student debt. The average student of a 4-year degree is 25,000 dollars. Imagine on top of that going to a graduate or professional degree which a record number of people are doing. Personally, I will have well into six-figures of debt by the time I graduate. Thank God the government is there to support us with access to cheap cash. They really make college affordable for the middle and lower class people.

As Lee Corso would say "No so fast!"

While I am thankful government is willing to basically cosign my loans with me up until this point and is now willing to directly lend me the money, I have to take a step back and think that maybe they caused this mess. Notice that cheap and easy access to loans have dramatically increased the cost of an education. The schools, knowing that the average student now has easier access to money than before raises rates in order to get more money... sound familiar? To make matters worse, universities popped up that provided a poor education experience but cost a lot of money because the consumer (the students in this example) had almost no incentive to check out if the school was good or not because the government was guaranteeing them a free (for now) education.

Whenever the government gets involved in influencing our personal decisions, no matter how wonderful their intentions, we end up getting hurt. If the government had not provided free access to guaranteed loans tuition would be far cheaper. Would less people have access to higher education? Maybe, but not definitely. Private charities could have taken over and even with the government support we see schools starting to match student and family means with tuition. That trend could have happened earlier. We will never know because the government got involved...

More Election Thoughts

So, the more I look at exit polls from this election as well as the map, I have become more convinced that this election was a small wave on top of a major realignment to the map of 2000-2006 and before.

I'll deal with the more controversial analysis step first. This was not a tsunami, it was a realignment. The majority of house seats won were in districts that McCain carried, some by large numbers. First, this means that a great deal of very motivated republicans lived in that area as a large number of republicans (this one included) were incredibly unhappy with McCain and either voted third party or stayed home. This means these seats were really just democrats borrowing seats that were obviously going to be returning to republican hands semi-quickly. The circumstances aligned so that this would not be the message or soundbytes coming from Washington insiders.

The small wave likely tilted elections that would have been close in 2006 and before. These are races like Ohio governor, PA senator, and WI senator. I am intentionally not putting on the IL senate seat as that was just a matter of the two worst candidates anyone can conceive of battling to make voters hate the other just a little more. The small wave switched votes in some of these swing states and swing areas from the democrats to the republicans and caused the races to either go republican or give the republicans a larger edge than they would have if there was not a wave underway (mainly seen in WI and FL).

This was still a refutation of some of Obama's policies. The country was realigning to the center-right. Obama's policies have not been center-right or even center, which is where he needs to end up. This is partly the republican's fault as Obama had to look to get the whole democratic party to support his bills because the republican's refused to play ball but President Obama also is a known progressive so had no problem going left on some issues. The biggest areas the President has gone left is health care (and I understand some consider this a compromise bill) and unemployment/welfare.

The real problem in the democrats is not the house seats they lost but the exit polls. The electorate that showed up said overwhelmingly they wanted the government less involved. Despite democrats saying that this is not specific enough, for voters, just chanting small government is currently enough. It will be interesting to see what happens when the new congress does not decrease the size of government (call me a skeptic). Will they give up? Create Third Party? Just keep voting Republican? No one knows. Democrats either need to get on the bandwagon of small government, create the right political situation where people are more amenable to larger government or split that voter block.

The other big issue for democrats is health care. There is no greater shift between 2008 and 2010 than health care. The voters used to trust democrats with health care 2 to 1. Now they trust republicans with health care 2 to 1. Some believe this is because Obama care is a disaster and some on the left believe that Obama just did a terrible job of selling the bill. The answer is likely both. The bill has some major flaws but Obama also did a terrible job of making the bill about some of the more popular parts of the bill. The democrats need to fix that trust gap in health care before 2012 or we will wake up to a republican president.

Conversely, the republicans need to fix their west problems. In NV, CO, and CA they lost.... bad. Losing in CO could be acceptable as the dems ran a strong candidate. Losing in NV against an unpopular senator with everyone knowing that was the big prize of the night is completely 100% unacceptable. The republicans need to figure out what went wrong, and it is far more than having a weak candidate, and fix it. CA also should have been closer. Boxer was beatable this election. Fiorina was a decent candidate but didn't come close (and lost classlessly by not conceding in a reasonable time frame btw). Even thought the republicans look good in the midwest, they should not desire to put all their marbles out there and need to fix their western problems.

Feingold

So, the more I read today, the more Russ Feingold is being discussed and for good reason. I think that I will spend some time (be prepared for another long entry) about my thoughts on him, and why I think he lost.

So, the last few hours I have been reading a lot of Feingold's statements and watching his ads. From this, I believe I have viewed Feingold with far too rosy a picture the last few years. I remember hearing he cast the vote against the PATRIOT Act. I was stunned then but have come to respect that vote more than any other cast by a senator in my lifetime. Every single American was terrified and we were told this law would make us safer. Only Feingold understood that this was not true, but even more importantly, the PATRIOT Act would get rid of some of the major reasons for fighting in the first place.

From this vote he got called a civil liberties champion. I used to believe this rhetoric but now believe that it was completely untrue. A civil libertarian stands up for the first amendment and Feingold was certainly an enemy of it. McCain-Feingold made it illegal to spend your money campaigning for issues you thought were important. Luckily, the Supreme Court understood how unconstitutional it was, and quickly killed it. Just because a liberty can be abused, does not make it a liberty.

Someone who respects civil liberties would support a limited commerce clause. The commerce clause is where government gets nearly all of it's power and it limits a great deal of freedoms. Feingold not only did not limit the commerce clause but extended it far beyond anything people considered just a few years ago. Through Obamacare, he said that Congress has the right to force individual citizens to purchase a service through a small group of government-approved corporation. This struck him as fine. This law destroys a great deal of basic liberties and Feingold not only didn't seem to mind but went to bat for the law.

While we can all reminisce for the Feingold of the PATRIOT Act, that person faded not long after that vote. He was replaced by a sterotypic liberal who was not concerned with liberties or rights of the people he was sworn to protect.

Feingold lost for three major reasons. More than 60% of voters in the exit polls said government needed to do less, a supermajority were unhappy with Obamacare and a supermajority also said they were worse off than they were two years ago. This matches what we saw across the nation. Feingold constantly stood on the side of big government over small businesses and over individual rights and liberties. I do not care if he is a hero to most or all, after really considering his time in the senate he is no longer a hero of mine.

He talked like a libertarian but acted like the opposite. Eventually, the reality of what he was caught up to him. The average Wisconsin voter saw a stream of votes from their senator that they felt hurt them. This election, more than any other in the nation, was not electing one candidate, it was rejecting the other. No one really knows who Johnson is or what he will do, but they do know that Johnson would not support Obamacare and will attempt to limit the size of government that is currently scaring the daylights out of them.

For that I say kudos Wisconsin.

Elections

What do these elections mean?

This election can only mean one thing. It means that everyone is libertarian like me again and I am sure that republicans will become more libertarian and create a permanent majority. Not really.

This election points to the simple fact that America in 2010 is a lot like America in 2007 and before. In 2008 President Obama and a number of democrats convinced themselves that the days of America being a center-right country are over. Hundreds, if not thousands (counting local races) rode President Obama's coattails to victory. Through this belief they passed bills that were center-left or left altogether. This includes, but is not limited to, bills like the bailout, Obamacare and pouring cash into the economy with no coherent direction. The latter continued today. These are all positions outside of what the America people think are appropriate and because of this President Obama in his own words got "shellacked."

This was a rebuke of Obama's current plans but it was far from an adoption of the republican plans. In a poll taken the day after the election the majority of voters said they expect the republican congress to disappoint them. I infer from this that the voters want the gridlock they voted for. They don't trust President Obama to pass laws that will move this country forward, through employment. Voters don't trust the republicans because they are blamed (in my opinion incorrectly) for creating the financial crisis. This opens the door for someone to step up and lead the nation. The leading candidates are Boehner, Obama, and Reid. The leader who steps up will create middle of the road solution, which none of them currently hold.

Let's discuss some specifics for both parties:

OVERRATED NEWS

The losses in the house hurt the democrats but these seats were basically borrowed seats anyway. Political expert Cook said that these seats were in areas where God didn't to have democrats (or something to that effect). While he is obviously using hyperbole, his point is right on. Democrats understood they couldn't hold onto seats in conservative districts very long, much as republicans lost a couple seats in liberal areas (like New Orleans). This is just the way it goes. The raw number of seats can only point to a wave of people against Obama's plans that has already been dissected and discussed ever since health care passed. This tells us little new information.

REPUBLICAN'S WEST PROBLEM:

The republicans are facing a major issue right now. They are losing the west and don't know what to do about it. Despite spending a great deal of money they lost Colorado and Nevada. Nevada should have been an incredibly easy pick up and republicans couldn't seal the deal. Latinos voted about 66% for democrats in this area (despite a group of new republican latinos winning Tuesday).

If republicans want to get ready for 2012, they need to spend some real time in the west. It will be tough for them to routinely win without having Colorado and Nevada in their pockets.

OBAMA'S PROBLEMS:

The midwest is the upset of the election and the most shocking result. It is the first time since reconstruction the midwest has gone republican in a time of recession. The republicans swept the midwest despite very strong democrats running in Wisconsin and Ohio. If Obama has any shot of being elected in 2012, he HAS to win the midwest. This set has to include 2 out of Pennsylvania, Ohio and Wisconsin.

The midwest is livid to a point I thought I would never see. In just a few years Feingold went from a dark horse to run for President in 2008 to losing his senate seat to a person with absolutely no name recognition in 2010. I was asked by someone in WI in 2009 what I thought the republican chances of toppling Feingold were and I told them that Tommy Thompson could possibly do it, but less than 50/50 chance and anyone else would have roughly 0% odds.

Feingold likely could have won this seat back if he had changed his views on everything and ran from everything he ever said (like John McCain did this election). For Feingold, that was a price he was unwilling to pay. While I disagree with quite a few of Mr. Feingold's views, that is something I can respect and know, for certain, the senate is a worse and less truthful place without him in it.

Getting back to the original point, Obama needs to figure out how to win back the midwest. Obviously Obama will likely not win Indiana again but he needs to win 2 of the big three to carry this election especially as Florida seems to be turning a darker red. This needs to be his first priority.

TEA PARTY:

The conservatives are interpreting one piece of data correctly this election. The tea party 100% saved the republican party. It took them from the Party of Bush to the Party of Libertarianism (kind of). The republican party was leaderless, and worse, directionless after 2008. They had no idea where they were going. Now they at least have an identifiable message. They have an increasingly identifiable leader (Boehner) and are getting their groove back.

The interesting part for me was watching the smear pieces of MSNBC on the rise of the new right. These documentaries painted the tea party as a group of racists who had no idea what they were talking about. These documentaries tried to scare people into not hearing what the tea party said, but the people responded as I hoped they would. The tea party is going to be around until, at least, 2012 and maybe beyond that.

The tea party lost a lot of races for the republicans as well, though. Delaware and Nevada instantaneously come to mind. It should be noted that even in liberal Delaware the Tea partier got 40% of the vote. This is a pretty big percentage for someone so far outside the general mainstream of the state. The tea party needs to exist to keep the republican party honest. They should have been louder during Bush. The tea party will become to republicans what the green party is to democrats. The tea party will continue to cost the republicans seats but that is a price the republican party should pay until they earn the people's trust again by cutting spending, etc.

WHERE DO WE GO FROM HERE?

The biggest takeaway from last night, other than gridlock is headed to DC, is that 2012 will look a lot like 2004 or 2000. The race will be tight and there will be the normal battle grounds. The midwest, florida and possibly, the west if republicans can't get a handle on the colorado or nevada.

Obama has two models he can follow: Clinton or Bush. They are both viable paths to follow to reelection. Under the Clinton plan he goes towards the middle and starts to compromise with the republicans. His approval ratings go up and so do republicans. This could be a particularly good approach as none of the real contenders in 2012 for the republicans are in the house or senate. The big problem for Obama is that if he does this a democrat could run to his left in the primary. While this is currently being talked about in the political circuits, I find this unlikely. If Obama runs to the middle, his numbers go up and no one dares run against the incumbent President with strong favorability.

The other scenario is that Obama can run left and start to drive down the independent voters.In this method, he just has to stop anything from happening and attack the republicans at every point. This could happen but seems unlikely given where the President currently is mentally.

I will write a little more about the elections a little later but hope this gives you a good idea of what I think this election means and doesn't mean

Feingold misses the point.

Russ Feingold was my senator in undergrad and I have had the pleasure to talk to him personally on a couple of occasions. He is one of the great senators of our time even if I disagree with him on a number of issues. Feingold is easily one of the smartest senators and understands policy implications better than most. That being said, the following quote comes from this politico article. I think it shows where the democratic senators are misunderstanding the tea party/conservative movement as a whole.

Feingold, at every stop, quotes Johnson’s having called health care reform “the greatest affront to personal freedom in my lifetime.”

“He must have led a charmed life,” Feingold jokes. “How does it hurt him that our youngsters can stay on their parents' insurance? And how does it hurt him that our seniors are finally going to get some help on that doughnut hole.”

He misses the point entirely. The criticism that his opponent put forth was about the freedom-killing aspects. Johnson is critical of a law that forces the consumer to purchase a certain good that they do not feel they need. To make it worse, the government decides which hand-selected firms are able to sell this service. I would suspect Johnson disagrees with any law that artificially raises the price of a good or service and then the government forces people to purchase it.

The response from Senator Feingold is telling. He does not say that this law does not limit personal freedoms. He doesn't even speak to that. Feingold says that the law will help people. The problem is that, at best, it helps people by taking away their freedoms. If people thought health care was a good value, they would already purchase it and Obamacare would have been unnecessary. It is precisely because the government limits competition raising the health care costs that people do not purchase it.

This is the disconnect that is happening all across the country. The people are yelling for more freedom and the government keeps acting as if we are too stupid to know what we are asking for. It is time for Feingold and anyone who voted for bailouts, TARP, or Obamacare to get the message. I demand my freedom and I don't particularly care if you think I am too stupid to know how to use it.

How is your wife?

Compared to what. That old joke is often forgotten by people who argue against capitalism and freedom. They believe, maybe honestly, maybe not, that the state can dictate a better life for all without any costs to anyone. This fantasy is recently shown in this video:

For fairness, I am against child labor in almost all settings but certainly not 100% which will be discussed later. What the person in the video fails to understand that life is not a game of ideals, it is a game of comparisons. First he paints child labor as a 12 year old chained to her dangerous and deadly sewing machine, it might not be. For example, I bagged groceries at 15 or 16 (don't quite remember). That, technically is child labor.

That being said, let's look at the scenario this person is likely talking about. An impoverished child working long hours for little pay. This is terrible and quite said, but might be preferable to other choices. For example, some children in Africa choose to work instead of becoming children soldiers. Some children in Latin America choose work over starving.

Would I want my child to work compared to get a wonderful education, going to an Ivy league school, get a Rhodes scholarship and win the nobel peace prize? Of course not. That is likely not the choice facing most of these parents. It is the hard choices that this person willfully chooses to ignore. It is work or be sold into slavery. It is work or starve and watch your family starve as well. Lastly, it is work or be a soldier. Would I prefer my child to work in those situations? Likely yes.

Listen, I wish these tough choices didn't exist. The fact is that corrupt and ineffective governments create bad situations for a lot of people. These bad choices result in bad outcomes which are all-too-often blamed on capitalism as a whole. Also note that his solution would be for an increased role of the state. The state will take the choices away from the parents and the child. Instead of my child choosing to work so he can eat, he is unable to do so. He must start because the state has declared it so. He must become a child soldier or he must be enslaved. These people's terrible positions already leave them with few choices, and unfortunately, the person in the video wants to take away even more.

For anyone interested Peter Leeson from George Mason and University of Chicago has done some great work on this. While I disagree with some of his conclusions (I am a minarchist not an anarchist) his work is interesting and should be read. He deals with the fact that strawman arguments are put forth to defend the state.

Hayek Inspiration: Retake

I was woefully unhappy with the last entry so I will try to explain my sentiments again.

We are currently in a dark age of capitalism. People are overwhelmingly blaming the free market for an economic collapse. Government intervention is bordering an all-time high, if it is not already there. The government now owns the means of production of some of America's largest industries and is attempting to take over even more. Some politicians are even getting ready to take some of the final steps towards a completely planned economy. Let there be no doubt that we are on the road to serfdom.

Serfdom is not defined, exclusively, by poverty. It is defined as a person in unfree poverty. Our rights and choices are slowly being taken away from us either to protect us from others, protect the economy, and even to protect us from ourselves. This road ends with us losing our freedom and all serving the state.

From all this negativity, however, I see some hope. Capitalism and free markets have never died. In Communist Russia, people would use the black market to complete tasks, both large and small. The same is true in Communist Cuba. The top jobs in Cuba is not doctor, lawyer or any skilled profession. The top jobs are all defined by access to foreign cash because it is worth so much more due to the state of their dreadful economy. No matter how much the government tries to kill the market it thrives. The government can certainly make it smaller, slower, less efficient and more tedious. They have and will but that is the extent of their power. They cannot kill it and this infuriates them.

In fact, the last time capitalism was under this much pressure to "throw in the towel" was likely during the writing of "The Road to Serfdom." People viewed two societies, fascism and socialism and decided that fascism represented the last throes of capitalism. Hayek pointed out that fascism is far more aligned with socialism than capitalism. The state takes away your rights, starts nationalizing your corporations and ends with state control of means of production. Hayek turned back this trend, almost single-handedly and that is where my hope comes from. My generation has not yet found our Hayek. He is out there noticing that things aren't going well. Whenever the government steps in to "fix" a problem it always gets worse. My generation will find it's Hayek. Frankly, it must.

"Collectivism is slavery." -FA Hayek

Road to Serfdom: A slight history lesson

I have been rererereading Road to Serfdom from Hayek, easily one of the top 5 books ever written. This book has become a sensation again because many feel that we are, once again, on the road to serfdom. I want to give you just a short explanation of why people feel we are on this road, why it is bad and why I believe there is great reason for hope. This might be a little longer than usual but hopefully you will think it is worth it.

People generally think that serfdom is poverty. This is certainly true but to Hayek and myself it is something far worse. It means someone who is not free and in poverty. Poverty is a necessary but insufficient condition of serfdom for you lawyers/philosophers out there. Hayek believed that they were on the road to serfdom meaning that the people would be impoverished and lack the freedoms that generations had taken for granted.

People believe that we are on this road right now because the opposite of absence of freedom is random order. Random order is when I operate in my best interest free of any governmental coercion and you do the same. The result is an extremely limited government and people responding to work together in a Smithian sense. A good, and commonly used example, is that of a pencil. If I am a pencil manufacturer I need to buy graphite for the middle of the pencil, wood for the outside, rubber for the eraser, metal to hold the eraser, yellow paint, etc. The pencil manufacturer buys goods to fill these needs from around the world. The rubber manufacturer might hate the paint manufacturer but they will both sell to me because I am offering them the highest prices. From this comes my pencil. We have all operated in our own self interest by all working together. There is no order from above to make a pencil, to buy goods from any one person but it just happens that we work together because the incentives tell us to.

The road to serfdom is "walked down" when random order is replaced with directions and coercions. If I have to buy my eraser from certain government approved manufacturers, that will certainly increase my costs. If the government tells me I can only sell my pencils at certain locations the customer will have a tougher time buying my pencil, and will likely be forced to spend more. The consumer is going to become more comparatively impoverished and will suffer from a lack of freedom.

We are currently on this road. The financial bailouts have forced us to become shareholders in poorly run companies; financial reform has limited what types of securities we may purchase; taxes have limited our income; health care reform has forced us to spend our money on a certain good and pay higher rates, etc. There is no doubt our freedoms are being taken away and we are becoming increasingly impoverished.

The hope that is hidden lies in the book itself. The road to serfdom was never meant to be a top selling book. It started to as a small letter to a friend arguing that fascism was capitalism in it's last throes. Capitalism was all but proclaimed dead in a way that my generation can never understand. The two choices were socialism with it's freedom-killing and soul-crushing central planning or fascism which offered the same but with a different title. From all of this came Hayek storming on to the scene as one of the last to defend freedom and capitalism. My generation has not yet seen it's Hayek. We are losing the battle right now. Socialism and central planning are on the rise but there is hope. Someone will stand up and fight. The free market can never truly be killed becuase we will always desire goods and the government will never be able to provide all of them, no matter the orders.

Russia fell because central planning cannot succeed. Mises talked about why when he said there was a calculation problem. I think that Mises shortchanged his own thoughts. Socialism and central planning must fail not only because of the calculation problem but because people desire to be free. Capitalism is under attack again. This generation will have a Hayek. It must.

"Collectivism is slavery." - Hayek

Obamacare strikes again

Let me start by saying that I have been studying a topic I do not care for for the last 3 days so if this is ranty, I apologize.

During my break I read this article. Boeing states that they will have to charge their employees more just to meet the requirements in the new health care law. This is what drives me up a wall. Washington acts as if they are trying to help the poor, when they are the exact class that is being punished with these foolish laws passed by a congress too incompetent to know what is doing and signed by a President who has lost touch with reality. Boeing had to cut the health care because it would be subject to the "cadillac tax" provision in Obamacare. Basically, this means that Boeing's health insurance was too good so it would be taxes at a higher rate. Think about this. Obamacare was passed as trying to give more people access to better health care but it is having an opposite effect.

Why is this happening? Follow the incentives. There are no incentives other than an unfunded mandate to each individual to purchase a health care plan to get health care. The reverse, however is the far more troubling analysis. Under Obamacare companies are disincentivized from providing health care to children and employers are disincentivized from providing good health insurance to their employees because of the cadillac tax. So what do we see? We see the goal of the law failing because the incentives of the law operate in the opposite direction. We see people paying more for worse health insurance because that is what the government has incentivized.

The practical reality is that congress needs to understand that incentives matter. While almost all congresses have ignored incentives, this congress seems more ignorant than others. They start off by paying businesses to take risks and then acting surprised when those risks are taken. They then disincentivize children's insurance only to be stunned when children are refused coverage. Then, they disincentivize good health care plans for employees only to be flabbergasted when that occurs as well. The truth is that they know what they are doing. Obamacare is a step towards getting to the real goal, single payer health care. Time will tell if this works or not but in the mean time the poor and middle class will suffer.

The rich can still afford the better insurance it is only the little guy who this plan hurts. It is only the ones that they claim to help. I think the little guy can do just fine on their own without this kind of "help" from Washington.

Here we go again...

In this video the new chairman of the White House's Council of Economic Advisor's discusses tax cuts. There are too many flaws to go over all of them so I will just state the major criticisms I have.

First, the graph is incredibly misleading, and shows how much contempt this administration truly has for the wealthy. The dots represent tax savings, but not by percent, but by raw dollars. This means that even the a smaller decrease in the tax rate for the wealthy will be represented by a scarily huge dot meant to do nothing more than terrify middle class and lower class voters into soaking the rich with tax hikes.

The problem with punishing the rich with higher taxes is that it is not only immoral but nonsensical for job creation. The government taking money out of the hands of the hiring class will further deteriorate job creation. This group has a great deal of small businesses and small business owners in it. Mr. Gooslbee's graph makes sure not to mention that the rate hikes are not just on those evil millionaires but rather on any couple making over 250,000 dollars if Obama were to get his way. So, the small business might be forced to shift their hiring budget over to pay the increase in taxes. This does not even include the group of people who might not start a new business because of the increase in tax rates. This analysis also does not include two income homes who might have one person stay at home to get into that lower tax bracket. This will lower tax revenues, not increase them as Mr. Goolsbee insists.

The tax raises are also immoral. The administration's policy punishes people they don't care for. Nothing more; nothing less. They seem to have a deep dislike for the wealthy. The evidence for this is clear. They talk about "spreading the wealth around"; constantly bash wall street, despite them being the engine that drives this nation's economy; and refuse to blame people for taking out loans they knew they could not afford, instead choosing to blame banks. The practical reality is that this administration will have to choose between increasing employment and punishing the rich. They can't get both. It saddens me that they are continuing down this path as it means a slower recovery, a less complete recovery and many more years of suffering for the middle and lower classes.

To make matters worse, no one in the White House seems to understand that this is NOT the government's money. This is an individual's money who worked darn hard for it. The person who worked hard for it should have the right to spend it as they see fit. The more the government takes, the more immoral it is. Taxes are nothing more than the government stealing your money under threat of violence and imprisonment. They should be as low as practicable because the average citizen can spend his money better than the government can.

Not only does the administration distort the truth about what the effects of the tax increase he is proposing will do to the government, but the evidence he cites that every objective economist and analyst agrees with Mr. Goolsbee's analysis. The reality, is far different. The administration tried this trick before stating similar evidence for the bailout before more than five hundred economists signed their name onto an advertisement saying that the bailouts would do more harm than good. Who was right, there?

I am not sure who Mr. Goolsbee thinks of as an "objective" economist. His friends at the Progressive Policy institute likely agree with his redistribution plan but the majority of economists do not and likely will not. Professor Sowell from Stanford has been particularly effective. Professor Perry from University of Michigan has as well. The fact is that the majority of economists from Mr. Gooslbee's old university likely disagree with this tax hike. Professor Fama certainly is critical of it as are Professor Rajan. The administration needs to explain how tax revenues increased the first years of the tax cuts before making wild claims that every economist agrees.

The practical reality is that President Obama needs to rethink his economic team. He has been in office for two years and things have not been going well for him, or more importantly, for the country he is supposed to lead. It doesn't take a genius to figure out that these problems started with the economy. His policies have led to a marketplace where people are terrified to act. Risks that created this country and made it great are now considered taboo. We need to go back to embracing the free market. We need to return to the times when we encouraged that young entrepreneur to risk it all and create the next ipod, starbucks coffee or tablet pc. The more we punish them by discouraging risks and taking more of their money through taxes, the less likely we are to see them pop up. Mr. Gooslbee is obviously very gifted on television but it will take a fundamental turnaround in President Obama's economic policies, not better sound bytes, to quickly turn around this country's economic problems.

The rich want to pay more in taxes: Let them but don't force me.

In this video Ms. McGibney, a television producer, responds to Ben Stein's comments over the weekend that forcing him to pay higher taxes is a form of punishment for reasons he does not understand.

Ms. McGibney says that paying higher taxes is "patriotic" and the right thing to do. Nothing could be further from the truth. First, this country was founded, in some part, over a tax rebellion. We were fed up with paying high taxes. To argue that it is patriotic is rather silly. Even if we were to agree that paying higher taxes was "patriotic" or somehow morally superior, we must then take the inexplicable leap to saying that forcing (by threat), someone else to pay higher taxes is also patriotic or moral. This is what the wealthy left fail to understand.

If people like Ms. McGibney, Bill Gates or Warren Buffett want to pay higher taxes, let them. If they think the government can use their money better than they can, or a charity they would give money to can, give them that option. What we should not do, is let the few wealthy liberals dictate that we all have to pay higher taxes.

The practical reality is that these people don't really believe that paying taxes is patriotic or even better than donating. If they did, they would give more to taxes and keep less. They want to pay the least amount of taxes as possible, just like the rest of us but feel the need to morally condemn us. It is not about what is best for the country, but what is best for their egos.

Shocking: While told to eat healthy, American's continue to eat foods they like

This article was linked to by HuffPo using the headline American's eat shockingly few vegetables, despite Healthy Food Campaigns. And in further news, the sky is blue today.

Every time the government tried to interfere in people's actions in inevitably fails. They say not to do drugs, and the drug rate climbs. They put DARE in our kids' schools and it still has no effect. Now they say to eat healthy, but we refuse.

Since it's Sunday I'll keep this short.

Here's the practical reality, people will act in their own perceived self interest. The only thing that stopped people from smoking was an increase in prices. The surgeons general warning did absolutely nothing. If you really want people to change their behavior you have to change the incentives.

Please note that I am not encouraging a so-called fat tax. That would basically be a poor tax, as most fast food restaurants are in lower class areas. I have four within walking distance, btw. People should feel free to eat what they want. You do not need an ad campaign to tell people vegetables are healthy for you and fries are not. People already know that. They are choosing to eat foods then enjoy despite its consequences. I would fight for that right as we all should. Now, I'm off to order a big mac.

Raising Taxes doesn't raise tax revenues

This is a myth the fiscal liberals and haters of freedom have spread. Imagine if the government took 100% of your salary. Would you work? Of course not. Why would you? This is just an illustration of how absurd it is to say that always raising the tax rate raises tax revenues.

There are certain situations when raising tax rates raises tax revenues. If taxes were at 1%, raising to 2% might not affect the number of people choosing to work very much but could dramatically increase the tax revenues. This is not the situation we find ourselves in today.

Mother Jones magazine, of course, does not understand this fact as shown in this article. They claim that the Republicans want to keep the tax rate at the low low rate of the federal government stealing more than 1/3rd of people's salary to an even higher rate. That sounds fine if you believe in redistribution, but even if you believe in redistribution you should not want to increase the tax rate. As this chart shows, tax revenues are higher when tax rates on people are lower than they would be under the proposed Obama plan. Notice what this means. There will be more money for public works and services if we let the rich keep more of their money. It is the very definition of a win/win. How is this possible? First, people will choose to take higher paying jobs. Second, people will invest more creating increased employment, something we desperately need to commence. Lastly, people will feel more comfortable spending their money, further increasing employment if they have lower tax rates. This was the very premise of Milton Friedman's marquee book The Monetary Policy of the United States.

The practical reality is that the left and haters of freedom, like Mother Jones, knows these facts. They do not want to tax the rich because they love the poor. They want to tax the rich because they hate the rich. They believe in punishing those who have more than me or you. You cannot tax the rich enough to make the poor wealthy. It just isn't possible. People need to be responsible for their own actions. They need to work towards the American dream not collect this week's dream at the welfare office. No one ever said the American dream was easy, but you will never get to fulfill it standing in the welfare line waiting for someone else's money. It is time every take a little more responsibility for their actions.

For what it's worth, from my current economic standing I cannot even see the rich, let alone the super rich. I am in debt up to my eyeballs, but I did it to chase the American dream.

CNN is shocked by Harvard. I am shocked by them.

http://www.cnn.com/2010/OPINION/09/22/syed.harvard.peretz/index.html?hpt=C2

The part of this article I wish to highlight is:

The Harvard platform for Peretz gives racism an intellectual cast and authority and that is a very dangerous thing. When groups like the Tea Parties espouse bigoted views, they are more easily dismissed. But when Harvard chooses to distinguish a man who cloaks his prejudice in intellectual jargon, and then gives him additional credibility by choosing to recognize him out of thousands of its distinguished alumni, it makes scholarship a haven for prejudice.

I disagree with a lot of what Peretz allegedly said. His views are abhorrent and should not be honored. Please note I am not saying whether Harvard should honor him, or not, frankly I know very little about him.

The part I find intriguing is that the CNN author says: "When groups like the Tea Parties espouse bigoted views, they are more easily dismissed." He claims that Peretz should not be honored for his views because Peretz extrapolated a bad trait from a small part of a group to the entire group. (Muslims abusing first amendments.) He then does the exact same thing by talking about a bigoted tea party.

Why is it ok for this man to fight bigotry with bigotry? Why is it ok for CNN to "honor" the author's bigotry by giving him prominent placement on their website while Harvard should be forbidden from doing the same? This is the new left. Their bigotry is fine and if you disagree with them you are a racist, or a bigot and will be "called out" on their news cites.

The practical reality is that the elite universities already have a form of bigotry built into them. The students and professors alike are known to condemn conservatives. The elite, liberal, ivy-league schools need to open their doors not only to people of other races and religions but also to people with more diverse opinions. Harvard has done a comparatively good job of this, especially the law school when Kagan was Dean. I do not know enough about Peretz to say if he should be honored; I do know that Harvard is on the right track by accepting students and hiring professors of differing opinions. We should honor Harvard, not the bigoted views of Mr. Syed.

*Full Disclosure: I am currently a student at Harvard University but am by no means opposed to criticizing it if I think it is proper.

Shocking: Incentives matter even in health insurance

http://www.latimes.com/health/la-fi-kids-health-insurance-20100921,0,799167.story

Even the LA times might be starting to understand the downside of Obamacare. Of course, the tone of the article is against the health insurance companies for simply responding to market incentives.

The insurance companies are going to stop selling child-only insurance policies because there is no profit in it anymore. The new health care bill mandated that insurance companies must cover all kids, no matter how risky, but caps the rate they can charge. This creates a situation where insurance companies are forced to lose money. Instead of doing this, they of course, stopped selling the policies that will lose money.

This is not the fault of greedy health insurance companies. They would be more than happy to sell policies if the market could set the rates. Health insurance companies must be able to compete across state lines so the market rate will prevail. When the government confuses signals, these are the kinds of adverse results we can see. Obamacare will slowly but surely kill private sector insurance. This is just the beginning.

The practical reality is that we are losing more than just a type of insurance that can be purchased. We are restricting people's freedom. Anthem Blue Cross is being coerced to provide a service they do not want to provide to people they do not think they can adequately treat. To make it worse, they are dictated the prices they are forced to charge. The consumer is no better off. The consumer now has less choices, less freedoms than before. The consumer who might have been willing to pay a rate that would have allowed their child to be insured is no longer permitted to do so. This is not just a loss of a service, but rather, a loss of one of the core freedoms this country once cherished.

What would we do to fix the economy?

Yesterday and today President Obama challenged the Tea Party to write what would we do about the economy. It is important to note that this is only a small fraction of what needs to be done, but it is only a start. Here is my letter:

President Obama,

Today you challenged the Tea Party to answer what specifically we would do to fix the economy. While I would never speak on behalf of the tea party, I can write what I believe could have done to solve this crisis, then and now. I will answer this question in two parts. The first will discuss what we should have done as the economy collapsed. The second is what can be done now, after trillions spent on bailouts and stimulus packages.

As the economy collapsed President Bush left everything he ran on. He ran on promoting free markets both here and abroad. President Bush, like President Clinton before him, understood that free markets not only lead to increased efficiency (especially for the poorest amongst us) but also leads to a free people. The greatest economists to ever live have been nearly universal on this point, that free markets are a necessary but not sufficient clause for having a free people. When the markets started to sour, President Bush left all of that economic understanding behind and quickly scrambled to approve a bailout of banks and other large financial institutions. This action, along with the unnecessarily dramatic rhetoric from his administration caused nothing short of a panic. When you tell the market everything is going to be terrible for the next few months/years, they will listen.

We should have handled the entire situation differently. The major problem was not the collapsing housing market; rather it was the contagion effect that that had on the rest of the financial structure. We should have immediately tried to remove all government interference from the housing and banking structure. Unlike some of my more radical economists, I would disagree with ending the fed. We should have immediately moved to wind down Fannie Mae, Freddie Mac, and end the Community Reinvestment Act. This would have hurt the housing market, to be sure, but also would have instilled confidence in the rest of the markets that they would not be nearly as effected because of the seemingly random actions of the government.

The next step should have been to tread more cautiously with the so-called stress-tests. When the government first announced they were conducting stress tests on individual banks, the market did not take it seriously. It was only after the government refused to release the results of these stress-tests that people began to panic. First, the government likely should not have done theses tests. There is already a stress test for the banks, everyday, and it is called the market. If the market does not believe any bank will not survive the downturn, they will soon be out of business as their stock plummets. Using taxpayer dollars for a stress test was unnecessary at best, but was likely far worse creating a wave of panic in the industry, further spreading the contagion.

Both President Bush and yourself also should not have passed any stimulus package. The stimulus packages served to cause further panic (contagion) and confused the signals of the market. Companies should succeed by successfully serving their customers or creating a good that people want to purchase. When the government interferes and states that no matter how inferior the product is, the government will esnsure the corporation not only stay in business, but even turn a profit, it disincentivizes corporations from creating profitable goods or completing profitable services.

In short, President Obama, the government should have responded with a calm rationality and removed the causes of the economic collapse, mainly government intervention in allowing people who are unable to own a home to get a loan everyone knew they could not afford while guaranteeing banks would not lose in the process. Conversely, the government further incentivized bad lending by giving the banks taxpayer money, and even worse, created widespread panic, by doing the equivalent of shouting fire in the crowded room.

What we should do now:

We need to take a few immediate actions to improve the economy, and this country as a whole. The first is to put aside all of the uncertainty that comes from the government selecting winners in the market. This can be accomplished through putting a hold on all undelivered stimulus and bailout money. This money should not be granted and should just be used to pay down America’s sizeable debt.

The next step is to restore the culture of work. We need to take the tough step of limiting the number of weeks someone is on unemployment. Before I go any further, let me first state that my mother, father step mother, aunt, uncle, and two cousins have all been unemployed during this recession or currently are, partly as a result of this recession. I do not say that we need to limit the weeks of unemployment lightly or without understanding the impact of that statement. Studies have now shown, however, that a great deal of people find jobs the week after their unemployment runs out. This would only shock some inside the beltway. Economists understand that unemployment disincentivizes work because they are essentially getting paid to not work. If we force people back to work by either increasing their incentive to work, through tax cuts or disincentivizing not working, by limiting unemployment, or both.

We should also pass real financial reform. The reform bill congress passed and you, unfortunately, signed into law is nothing short of just punishing the successful because they are successful. I, frankly, demand more from my government than pitting us against one another. I demanded more from President Bush and I demand more from you. The following are likely major causes of the financial collapse: Fannie Mae, Freddie Mac, CRA, loose monetary policies and the government propping up banks and encouraging them to make risky bets by, basically insuring against losses with taxpayer dollars. The financial reform bill does not alleviate any of those problems, with the possible exception of the last. The government needs to understand that printing money will not solve any recession, but just postpone it. If the government had passed meaningful reform, it would include changes to the entire list of causes above.

Lastly, and I know this one is going to hurt, we have to stop the government from picking winners in given markets. This is a comprehensive problem and I am sorry is must start on your watch. We need to stop the government from paying subsidizing corn, because it artificially deflates ethanol prices, which leads to American car companies creating “flex fuel” cars that no one wants, and are unrealistic. We need to get the government out of the health care business, not because I hate people without health insurance, but because I want them to have numerous choices in which company can best serve them. The health care bill you signed into law continues the process of both parties to artificially restrict competition in this profitable sector of the economy. Insurance companies are not allowed to compete against state lines so the companies are charging rates above what they should. Instead of forcing people to buy any single insurance company’s plan, let the company’s compete and let the people choose which plans best suits them.

It is also time to let the market decide which new inventions deserve our money and which ones do not. The more the government invests in businesses the market does not believe have a chance of turning a profit, the greater the likelihood the government will interfere with proper market signals and we will end up with greater wastes of resources, like the cars and trucks powered by ethanol. America will eventually become more “green.” This will occur not because of any action of the government, in fact, it will happen in spite of the government. The nation can only become green when the average citizen thinks he can benefit from the new electric car, or solar panels, or inventions we have not even yet dreamed of. If we let the market work, investments will be directed towards areas where there is the greatest chance of success in market infiltration.

President Obama, I hope you understand that I write this letter not out of disrespect but because I have so much hope for this country and our economy. The economy is best served by letting people act in their own best interest, which was the whole point of Adam Smith’s Wealth of Nations.

I pray that this letter finds you well,

George J. Wendt

Masters in Management Candidate Harvard University

Masters in Dispute Resolution Candidate Pepperdine University School of Law

J.D. Tulane University School of Law.

Taxes don't just destroy wealth...

According to this ESPN article they also destroy some sports. Apparently some golfers are refusing to play in the UK tournament because to do so would expose them to enormous tax liabilities. The tax liability is not only on UK income but includes international income. With such a strong disincentive to compete, golfers are doing the only rational thing, refusing to compete.

This is not dissimilar from Usain Bolt who refused to race because of the same tax burdens.

The practical reality is that government interference has, once again, led to a disservice to every citizen. The tax burden, at best, was intended to punish the wealthy for the benefit of the middle and lower class. Now the upper class are refusing to work, meaning the state will not get any of their revenue from those events. So, the state cannot redistribute that wealth to the lower and middle class as intended.

To make matters worse for the lower and middle class, they do not get to see their favorite athletes compete. I remember when I was a kid looking forward to my heroes, Michael Jordan and Dennis Rodman, play basketball. I would be crushed if I couldn't watch them compete because the state's policies made it unprofitable to do so.

Basically we see what we all knew would occur. The state had good intentions (possibly) and in the end every person got hurt. Now there is less revenue and less enjoyment for all.

Stimulus keeps prices artificially high at cost of consumers

The New York Times, yes that New York Times, recently has a piece about how the retailers are doing the governments job of bailing out the citizens. Huffington Post's headline was private sector goes public, with a link to this article. (You need a free subscription to see the whole thing.) The Huffpo subtitle is: Government stimulus not enough, so retailers create their own. I say this is great and shows how the government interference in the market right after the stock/housing crash was terrible for consumers. Once the government has stopped (albeit temporarily) artificially increasing people's paychecks the stores started to decrease their costs.

A lot of the government programs have come to an end,” said David Bassuk, a managing director in the global retail practice at AlixPartners, a financial consultancy. “So retailers are taking it upon themselves to do everything they can to get the consumer to spend, even opening up their own wallets to give money back to the consumer.”

If a retailer does not believe there is enough demand for his product, either because the product is inferior, the consumer lost his job or any myriad of other reasons, they have the option to lower their prices to increase demand. The government has been so busy trying to redistribute wealth so we all somehow magically get richer they have made it unnecessary for companies to correct their prices during times of economic downturn. Now that they have stopped a small fraction of the programs, the stores are altering their prices downward where the demand is due to unemployment rate and general uneasiness about the economy.

The government's boosting of peoples income, largely through borrowing from China that our grandkids will have to repay, have kept prices artificially high. This means that citizens have spent a larger percentage of their money in buying goods that were overpriced because of the government policy. This means that the government has redistributed money from the consumers (the citizens like me and you) to the producers (stores like Walmart, Target, etc.). This has happened even in a government that claims to be looking our for the "little guy". Give me a break. The government has been and always will be looking out for the big guy, which is why we need less government.

Happy Fourth.

Government Overreaching... Names

Can you say government overreaching? The naming laws in some parts of the world allow the government to approve or not approve of the name you want to give your little bundle of joy. No one should be surprised by this. The governments in some foreign countries, and ours is getting closer to this, believe that it is their job to make sure no one is ever offended. This is how they justify not letting curse words air at certain parts of the day, it has been one of the justifications for the "war on drugs" and many believe that the hate crimes law was partially intended to scare people with ideas society does not approve of.

When you give people and inch, they take a mile. The government is no different.

Anyway, the article was just meant to be fun. Happy Fourth of July. Go Out. Have a BBQ. Thank the Vets and Troops and remember that the founders wanted America to be free. Try to make their dream a reality.

Thank Goodness we have government to tell us how much everyone should be paid

A chicago alderman is calling out a walmart executive for getting paid too much. He certainly should. This terrible CEO is making more than an hour than his employees do in a year, that is if you argue he makes nearly double what he actually makes. The alderman's math was wrong by more than 50%, but that is not even the point. The CEO and the worker are getting paid the same wage. What can I possibly mean by that. One is paid in the millions, and one will make between 8-10 dollars per hour. I simply mean they are paid exactly what the market would bear. The CEO of Walmart would not be the CEO of Walmart if someone else offered him a better package. The same is true of the Walmart bagger, cashier, manager, etc. They are paid exactly what the market thinks they are worth, no more no less.

In the more hilarious/upsetting news of the article, the alderman who is upset that Walmart pays their workers so little is paid in the six figures for his work. The CEO gets his salary from the sales and profits of the company he helps run. He is not taking a single penny out of his worker's pockets to line his own. The alderman who is disparaging that CEO is the exact opposite. His salary exclusively is lined with the money of others. He never has to prove that he has acted efficiently, or that he has increased profits. All he has to do is sit back and collect his paycheck paid from people like you, me and the workers he feels oh so bad for.

Supreme Court Strikes Down Gun Ban

We now have the right to bear arms, according to the Supreme Court. I can already hear some of the sticklers out there proclaiming that we have had that right for quite a while, it is, after all in the Constitution. You forget one thing. Both sides only read the constitution when it helps their case.

Liberals have been trying to do away with guns and their owners for decades. It started with the absurd Brady Bill and continues today to the outright gun bans in some of America's largest cities. Today, however, the court finally did the right thing.

The second amendment is the amendment that guarantees all the other amendments. It was put into the constitution to guarantee a limit on government. The whole point was that I would be able to defend my family on my own, and not have to exclusively rely on the government for that protection. Today is a major win for freedom, breathe it in.

Daley suports gun ban....

because of all the shootings in his city. The problem is, of course, that Chicago has one of the toughest gun laws in the country. This shows how absurd the current thinking is on guns. The gun ban is certainly not saving anyone's life. The "bad guys" are still able to get guns. In fact, the only people who are not willing to get guns (because they certainly are able to drive 20 miles outside the city to get one) are the law-abiding citizens who want to protect themselves and their families.

The real reason for gun control is the same as every other law passed by the elite majority; they want to control how people act, how they think and who they rely on. The government seeks to command that we own certain things and that we do not own other things. The government should not be able to tell us which bundle of goods to consume, and which bundle of goods to not consume. This is especially true when the Constitution and the Supreme Court all have stated that the government cannot have bans like this.

The arrogance of power is daunting. People like Mayor Daley, the former Mayor of DC, President Obama and the Justices who came out for the gun ban all believe that they are more understand, more powerful and more compassionate than the constitution. This is how democracy begins to fall; our elected leaders do not listen to the documents that supposedly rule them, they do not listen to the people, they only listen to their own whims.

On this happy note, I wish you all a happy Wednesday.

Grads Moving Back Home

According to this article graduates are moving back home at a pretty large rate. This is not bad news, despite the articles dreary tone. This means that recent grads (myself included) are finding it tough out there. They are largely unemployed, thanks to this terrible unemployment rate and are finding it tough to make ends meet.

The real reason they are moving home, however, is that the banks are no longer giving out essentially free loans to anyone with a pulse any more. This is a positive development. After a false boom created by the government shoveling money into the people's hands by printing it and falsely lowering the interest rates, there comes a necessary bust. People spend too much in the boom and save during the bust. This does not have to happen. This goes into the business cycle which will get its own post in the not too-distant future.

The best news from grads moving home is that this will lower housing prices. How is this a good thing? We all want loan policies to be corrected but not prices. Unfortunately, this is impossible. Loans were bad because the prices were bad. The prices of homes need to return to market rates, not artificially inflated rates caused by a government keeping interest rates artificially low by printing cash. People moving home is a positive step in this harsh recession that will hopefully get the market back on track. The government created this mess and now we will have to suffer for it. The prices of housing will hopefully, eventually return to the market rate, as will the interest rates at some point (hopefully, even though I am not nearly as hopeful about the interest rate returning to the market rate).

Best way to help the poor is to take away their rights

This huffington post/ New York times article makes this case. The article bashes the credit settlement industry for "taking advantage of the most vulnerable in their time of need." Of course, this is not what the majority do. The majority get the debtor (the customer) to settle their debt with the credit agencies and take a portion of that settlement as fees. The vast majority of the people in the industry are honest people trying to help people out when they need it.

The worst part of this article is not the villification of the people working in a customer service industry, it is the fixes they are proposing. In order to protect the poor, we need to interfere with their right to contract in certain cases. This is absurd. The rich and powerful (Arianna Huffington and New York Times editor board) always return to this old cliche that the poor are just too stupid to make contracts for themselves that they feel is beneficial. No rational individual would enter into a contract, which this is, if they did not think it was their best bargain. When we begin to understand that, the NYT opinion becomes appallingly clear. They simply do not believe that poor people (or even middle class people who took on too much debt) are irrational to the extent we should remove some of their rights. I dare disagree.

I disagree not only because I think that these companies can sometimes help people, and they can. I disagree because the government should not ever interfere with my rights to improve myself. As long as I am not hurting anyone, who the heck is the government to tell me that I do not have the right to benfit myself, even if they view the facts differently. Do I wish that certain people acted differently? Sure but nothing gives me the right to force my will upon them and nothing (certainly not the constitution) allows the government to force their will upon me.

I just wait for articles like this to cease and the poor to finally get the respect they deserve.

America's Longest Running War

The HuffPo today is talking about Afghanistan as America's longest running war. Well, she is mistaken. Lyndon Johnson declared war on poverty in 1964. This is America's longest running war, by far. It is longer and more costly than the war in Afghanistan.

The war on poverty has been a failure under any definition. The war on poverty was meant to basically redistribute wealth from the wealthy and give it to the poor. This has not worked for many reasons. The main reason this has failed is the poor simply became dependent on the state for their well-being. The act was meant to improve the livelihood of the inner city poor. This group is now in just as bad, if not worse shape as they were in the 60's. The major difference is that they no longer rely on their own personal skills for their salary, but depend on taxpayers (future taxpayers at that because we borrow money from China to give to them).

The war on poverty will always fail because we pay people to do it. We pay people to fail. If the poor get a job, they lose the benefits currently gives them. This disincentivizes success. I am not saying life is great on welfare. It is undoubtedly a tough life. That being said, life working for a low wage is also not easy. The major difference is that if you never take that first difficult step of working at the bottom, you cannot get the promotions making your life easier.

While Huffpo and other organizations take aim at the Afghanistan war (and this post should be seen as supporting or not supporting the Afghanistan war) they are missing a larger, and more expensive war that we are doomed to fail because we are incentivizing the opposite behavior we are seeking.

Swine Flu was overly exxagerated... Shocking

Swine flu was not nearly the threat the WHO said it was. The WHO ties to big Pharma are now being blamed for helping fuel the fire of this threat. Of course, anyone who is skeptical of big government and big corporations is not shocked by this, but it does give me an excuse to talk about something that I feel is not discussed nearly enough.

A great deal of people who support small government do not do so because they love big corporations. We do so because we don't trust politicians because we understand the lure of the money of big corporations. We fear the government becomes a tool for the rich that can afford the influence people like me and you can only dream of.

The government becomes a weapon the rich wield while carelessly attacking the poor while destroying their freedoms one at a time. Sound like hyperbole? Hardly. Lets take a look at the H1N1 virus as it is our current example. The rich (big pharma) got millions of dollars of additional research dollars from the government, from our tax dollars. What do we get in return? A vaccine that seems like it was less likely than the government (influenced by big pharma) told us it was. People fell ill because of the vaccine that was not nearly as necessary as we were scared into believing.

The green movement is another example of this. Al Gore's company got a loan of more than 500 million dollars from the US taxpayers. He got a benefit from all of us. Why? He has influence that we do not have. He is forcing his will (of getting cheap or free loans) on us (who are taking a great deal of the risk for him). What rights of ours are violated? The right not to lend the money. This might sound trivial but it isn't. We each have the right to control our own proverbial pursestrings, and the government constantly interferes with this.

There are countless other examples of this being true. Obama covers up for BP while Louisiana suffers. No one can seriously argue that BP's influence over the regulators and the regulation process benefited anyone but themselves. Once again, a large government followed incentives. They get tons of gifts and campaign contributions from these corporations while we watch our wetlands disappear because of the careless acts of a government gone corrupt.

Unions Clarification

After my last post, I thought some more about it and realized I was too harsh on the unions. Unions are fine as long as people are freely allowed to opt in or out of unions without any coercion from any source, be it government, union itself or the employer. If a person chooses to join a union, it is his or her right and should be protected.

I think unions that force you to join simply because you work for a particular company are absurd. Public unions are even more ridiculous and is responsible for a large part of the problems the government is currently having balancing the budget.

I am pro freedom of contract and freedom to contract. This includes the freedom to join a union and freedom to leave a union.

Walmart to Offer College Education to Employees

Walmart is going to begin offering discount and free classes to their employees. Walmart will likely be a recurring theme on this website. I love walmart and really dislike it when people disparage it for no \ reason, other than their personal feelings of superiority and blatant classism.

Walmart does right by their employees in a great deal of the circumstances and this shows the real reason any firm provides services for their employees, the corporation's benefit. If the corporation can benefit from improving their staff, they will do it. Adam Smith discusses the invisible hand where we each act in our own best interest but the coordination of our efforts lead to a better result for others, although that was never our intention.

Here, the company is providing a college education for their employees so they can become more effective managers and employees. There will be more in-house promotions so less need for training, saving the company money in the long run. The employees get a highly discounted education in the process so they win as well. It will be interesting to see how those who are bent on making Walmart the villain, no matter the facts of the situation spin this so Walmart somehow has hurt their employees.

Walmart is doing right by their employees in large part because they have the freedom to create interesting solutions to promote, retain and hire employees. Ford., GM and the like are stuck in arrangements with pushy unions that force the union's will on both the employee and employer alike. The company is not allowed to create a unique solution because it would not be in the thousands of page contract the company and employees are forced to sign. When the market place is not affected by third party coercion, both sides generally win. The quicker people can get a handle on that, the better off we will all be.