Beware of the Republican Statists

This Cato article reveals Republican hypocrisy when it comes to lining their state's pockets with stimulus money. If you throw billions in a feeding trough, both blue and red pigs will come slobbering after the slop. It's not just reluctantly taking the money because if you don't, someone else will, it's the statements to trough managers that the stimulus will create jobs after calling it a failure in public.

This is why tea partiers need to remain independent and keep the pressure on limited government -- forget partisanship -- make the individual candidates earn trust. It's the only way to start the difficult process of climbing out from under the huge pile of debt and regulations dumped on us..

So, you want an unprincipled party? Welcome to the New Majority!

Some days it's almost impossible to respond to the political mish-mash in the news and in the blogosphere. All the politically clever moves, the brilliant spins, the simple evasions, the smears, the specious justifications and rationalizations, it all gets to be a bit much, and for anyone who has a hunger for straightforward analysis which addresses the underlying structure of the ideas floated around, or the overarcing principles involved in political disagreements, well, they will starve in this current environment.

 

Today, David Frum finds clarity in these ideas:

What is clear to me is this:

* The world financial system nearly collapsed in September-October. It had to be saved. TARP was messy, TARP rescued a lot of people who didn’t deserve rescuing, but TARP was indispensable. We’ve lived through a 1929-31 type experience, but without TARP we might have rediscovered the horrible difference between a 1929-31 style severe recession, and a 1932-33 style economic collapse.

* Monetary policy had done all it could do for the US economy by January 2009. Fiscal stimulus was needed. I’d have preferred a payroll tax holiday to the spending measures put in place by the Obama administration, but I prefer those spending measures to doing nothing. Those spending measures, including cash for clunkers, cushioned the fall of the US economy in the second quarter of 2009, and they reduced the rate of decline to almost zero in the third quarter. They offered real (if expensive and inefficient) help when help was needed.

* The indications are that employment recovery will be slow and painful. (See the ominous words of San Francisco Federal Reserve board president Janet Yellen here: “The strength and durability of the expansion is in question. … The danger is that demand may grow at too anemic a pace to support vigorous expansion.” Republicans must – MUST – offer answers to this predicament, and our usual inventory of policies will not suffice. A capital gains tax cut will do little at a time when almost all investors are looking at huge accumulated capital losses.

* The Obama administration’s most serious economic policy failure has been its inability to devise a policy to remove the bad debts from the books of financial institutions and get them lending again. Let’s criticize them for that! But our criticism will only have bite if we have an alternative remedy to offer. How can we do that if any attempt to address the problem elicits only angry cries of “No bail outs!”

* There’s a big difference between addressing a systemic financial crisis and rescuing individual non-financial companies struggling with chronic economic failure of their own making. Condemnation of the GM and Chrysler bailout is a valid and useful bright line to separate Republicans from Democrats.

* No responsible governor could have refused the federal money on offer in 2009. States must balance their budgets. In the span of 12 months, tax revenues collapsed for most states: by 11.5% for example in Florida. What was Gov. Crist supposed to do about that? Chop state spending by 11.5% on six weeks’ notice? And what effect would it have on the nation’s economy if big states were laying off teachers, halting all road maintenance, and closing hospitals? If we make refusal of stimulus funds a litmus test of political acceptability, no sitting governor who cared about his or her job would be eligible for a Republican nomination for anything. We’d be left only with the governors who had physically or mentally checked out of their jobs: the Sarah Palins and the Mark Sanfords

 Sorry, but I don't find clarity in TARP -- the money wasn't used as it was proposed to be used, and if the big banks had failed, other lending institutions would have taken up the slack. You either believe in the free market or you don't -- you don't get to pick and choose. It's obvious that TARP was corporate welfare doled out to government cronies in the financial industry.

I don't find clarity in the idea that the stimulus was good in any way you can look it. Only someone who doesn't support capitalism, but does support pragmatic statism, can see any necessity in the stimulus. The stimulus is misdirected money which will not help the economy -- it will only delay recovery and reward Democratic special interests.

 I don't find clarity in minimizing the benefit of lowering capital gains taxes, especially when the administration and congress is proposing a 69% increase in capital gains taxes. Small businesses are the backbone of our economy -- TARP, the stimulus and high capital gains taxes, all hurt small businesses, yet Frum cannot acknowledge this.

 I don't find clarity in the idea that Republicans should come up with more clever, statist, financial gimmicks than the Democrats in order to be viable. Frum has no center. Moderates like Frum simply want to out-statism the Democrats while posturing as free market proponents, which brings us to principles. Frum, to be sure, would say that principles don't win elections -- principles don't get legislation passed -- principles don't build a political majority -- principles don't bring home the bacon to states.

 If Mr. Frum and the other moderates are saying -- "Join the Republican Party -- we can be even more unprincipled than the Democrats!" -- then I say -- "To hell with both parties." 

 

http://www.frumforum.com/can-conservatives-govern

Keeping our asses out of ditches

The advice to not worry about how the mule got into the ditch, just get it out has always appeared pragmatic and straightforward advice, but if the mule continues to get in the ditch, over and over, you might want to find out why this is happening.

Many times in emergency situations, there's no time to figure out the whys, you just act with the knowledge you have at the moment, then figure it out later, but this is only in emergencies. Government is making a virtue out of pragmatism when what's needed is analysis and systemic thinking. We were told the bailouts and stimulus were pragmatic reactions to an emergency situation -- and even if that's true, we can now analyze and think systemically -- was it necessary? Do adjustments need to be made? Could we have done something different? What needs to be done to avoid this happening again? What caused it?

Rather than look at fundamental problems and fundamental solutions, government continues to look at symptomatic problems and symptomatic solutions. Because banks made bad loans, politicians see only the banks and decide that more regulation is needed, rather than ask why banks made these bad loans to begin with. Others have looked at the fundamental problem which led to bad loans and it leads to government pressure to expand home ownership, and guarantees that Fannie and Freddie would buy these loans.

The reason government refuses to look at fundamental problems and fundamental solutions is because government actions are a large part of the problem and limiting government power is the solution. Systems thinking shows us that cause and effect are often far removed from one another by time, so it's difficult to link a chain of events from the original cause to the effect. Peter Senge did a lot of great work on systems thinking and learning organizations years ago in his book The Fifth Discipline. This book should be required reading for all politicians.

Until we can drill down to fundamentals we'll be stuck with symptomatic tinkering, stuck in a cycle creating the same poor results. As an example, how often have you talked with a friend who's had serial relationship problems who comes to you for advice looking for a way to deal with the current problem, searching for some pragmatic way to make the current relationship better? After awhile you begin to see a pattern that suggests a fundamental problem with the way your friend approaches relationships in general -- if you are brave, you reveal to your friend what you see, but this can be risky -- no one wants to acknowledge that their way of thinking and acting is problematic and that deep fundamental changes are needed at the level of personality, value-judgements and mindset.

However, there can be no lasting fundamental change and improvement until the fundamental problem is discovered and acknowledged. With government the fundamental problem is the idea that technocrats can manage our complex economy, or that they should. As long as government is blind to the unintended consequences of its social engineering efforts and unable to see the chain of events leading from cause to effect over long periods of time, then our nation will continue to suffer from this tinkering with symptoms, giving aspirins for a fever which will return until the fundamental cause of the fever is discovered and a fundamental treatment is implemented. The fundamental treatment is to allow the free market to work.

The hubris of modern technocrats prevents the insight and humility necessary to understand economic principles which can't be violated, or to fathom the moral questions involved when individual right are violated because some greater good is divined by a handful of manipulators. It's not their right to make these decisions -- much larger, over-arcing principles take precedence. Not only is it immoral to deny human beings free choice with their lives and property, as long as they are not violating the rights of others, it's economic suicide to centrally plan when the variables of economic activity are unfathomable.

It's also myopic, pretentious and cynically assumptive for a relative handful of patronizing social engineers to think that the welfare state is the only way to deal with poverty or to provide a safety net or to deliver healthcare. This fundamental idea that the public is self-centered and dispassionate, while the State is generous and compassionate, is the main cause of our most fundamental problems leading to de-humanizing effects -- inner city dependents locked out of economic opportunity, and public schools failing to address the educational needs for the 21st century. These problems require innovation only the private sphere can offer within communities where the fundamental problems are understood and fundamental solutions can be found.

It's time to find out why asses keep getting in ditches.

Progressive claims of stimulus working are bogus

http://online.wsj.com/article/SB10001424052970204731804574385233867030644.html

This article shows that the stimulus had little or now effect on consumer spending, and vindicates Freidman's position that short-term increase in income does not stimulate the economy in any meaningful way.

This is reasonable since people know that if they spend it all, there will not any more coming in later. People trust consistent income, and consistent income comes from stable jobs -- stable jobs come from allowing the capitalist system to work, which means getting government out of the way.

The progressive policies are failing as they praise their efforts to create and save jobs. Plus, unemployment has risen in 42 of the 50 states. How come we allow government to lie, accept it as business as usual, when we teach our kids to tell the truth? I'm preparing a post addressing this and our screwed up ideas of "democracy".

Creating instability by efforts to stabilize

One of the most pernicious effects of government intervention, especially the type of hyper-active intervention going on now, is that it destabilizes business, causing investors to wait until the manic activity subsides and they know the new rules of the game.

Ostensibly, the stimulus efforts and new regulations were meant to stabilize an economy in free-fall, but all these efforts have a de-stabilizing effect. If the rules of the game are not stable, then people with money to invest will not risk that money if they think changes are on the way in a minute or two which might negatively affect their investments.

A better course, even if government was bound and determined to do something, would have been to do something and then say, this is the new set-up -- now, go for it. But, then, investors would've had to trust that was all of the intervention -- and that might be asking too much of people preparing to risk billions (the new millions).

On a smaller investment level, I talk with home-buyers all the time who are waiting to "see what happens". Government has set up an expectation that if things get worse, they, politicians, will likely create more incentives to spur activity -- the rational buyer is going to wait, if they don't have to buy now, to see if the deals are sweetened.

So all the incentives so far only create the possibility of further incentives, or changes that will affect their decision if they make one now. When people know that things are what they are and government is not going to change anything, then they will act, but there is no end in sight to the interventions. Both the stimulus efforts and regulations are engineering efforts from a central command with no idea how to manipulate people as intended. All these efforts are creating instability and they work counter to creating economic activity. The stimulus might create some short-term jobs, as many observers have pointed out, but people aren't stupid and they aren't going to buy high-dollar items, or make investments, based on a temporary paycheck.