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.