Of Obama and Ethelred the Unready

March 22, 2014 1 Comment

As the troubled year of 2009 was approaching its final weeks I wrote a commentary, reprinted below, reflecting on how President Obama’s unreadiness for the job of President was endangering our soldiers abroad and weakening the economy at home. As we have witnessed a recovery that month after month remains so anemic that many Americans are not experiencing much of a recovery at all, as our retreat from world affairs encourages aggression by adventurers in Russia and elsewhere, and as the Obama Administration plans to return our Army to levels not seen since before World War II, it seemed to me appropriate to reprise my musings of November 2009. I also have to wonder whether the Nobel committee, which was so excited to award the peace prize to Barack Obama for promises to reduce American influence in world affairs, still considers its decision and the policy that it celebrated to have been wise and fortunate for the world.

Arguably the worst king of England was Ethelred the Unready. He was unready to rule his kingdom, he was unready to promote its prosperity, he was unready to repel the invader. The chief manifestation of his unreadiness was his inability or unwillingness to recognize reality. Reality eventually caught up with him—as it always does—and with his kingdom—as it always does for those subject to unready rulers.

The current President of the United States, Barack Obama, may be working hard to earn himself the title of Obama the Unready. The evidence is accumulating.

For months, the novice commander-in-chief has been at a loss to know how to respond to the urgent recommendations of the field commanders in Afghanistan. They have been pleading to increase the troop levels. The added troops are needed to respond to increased enemy activity. Unwilling to say yes or no, the President vacillates while American soldiers die because they are stretched too thin. He seems to have forgotten that American soldiers under President Clinton were similarly sacrificed in another poor corner of the world—Somalia—only because Clinton did not provide enough troops to do the job. Rather than decrease casualties, insufficient troop strength increases casualties, soldiers who would not die if given enough support to overwhelm the enemy. This week the White House announced that President Obama is still unready to decide on troop strengths for the mission in Afghanistan. Unfortunately, the Taliban is not waiting for him to make up his mind.

Also this week, President Obama gave a little speech about the economy. It was hard to miss the sense of frustration and perplexity in his remarks, made quickly as the Nobel laureate left town to seek more praise from his adoring foreign fans. He admitted that unemployment remains high, despite his economic program. He admitted that employers are reluctant to hire new people. He just does not seem to know why. His solution is to call a conference of economic talkers in December to talk about it. He remains unready to do something about his economic plans and government policies that are making it riskier for employers to take on more employees. Faced with half a trillion dollars in new taxes (many focused on small businesses), higher health care expenses from the trillion dollar “reform” program, new environmental plans to cool off the globe by cooling off economic growth, and dozens of other new plans to make it harder for businessmen to succeed, businessmen are reluctant to hire new people that they will later have to let go. All the while, the natural tendency for the economy to recover is weakened.

Consumer spending remains suppressed, while the Obama Administration and its friends in Congress pursue policies that make consumer credit more expensive and harder to get. Congress this year, with the Obama Administration cheering on, passed new credit card laws that make it difficult for lenders to have riskier borrowers pay higher rates. The result is that everyone gets to pay higher rates. Predictably, consumer credit declined by 15% in September and shows little sign of getting better. As we approach the holiday season, so important for the success of retailers, the Obama Administration and its Congressional allies are busily making it tougher for banks to run their debit card programs. Expect more debit cards denied at the checkout lines. Also expect the pace of store closures, already growing faster than swine flu, to continue to grow. Seen any empty storefronts at shopping centers lately? Be ready to see more, even as President Obama convenes his economic talk show in December.

Not to forget swine flu, the Obama Administration was eager all year to pump up the worry about a swine flu epidemic, in hopes that it might frighten people into supporting healthcare legislation. In the meantime, the Obama Administration’s health officials, who are heavily involved in development and distribution of vaccines (lawsuits that plague the medical industry have driven most vaccine manufacturers out of the business), were ready to promise but unready to deliver swine flu vaccine. Expect more of the same, of promises that do not meet actual needs as government becomes even more involved in regulating healthcare. Service and speed are what most people look for when they are sick, but service and speed are not what government programs are known to provide—any government program.

It should be no surprise that President Obama is not ready for the growing challenges of being President. Like Ethelred, Barack Obama had little training for the job. Governing has not gotten easier in the thousand years since Ethelred disgraced the throne of England. It is not getting any easier for Barack Obama. Fortunately for America, we do not invest all power in a king.

(First published on November 13, 2009)

Filed under banking, Barack Obama, Constitution, economic growth, environmentalism, global warming, government, healthcare, interest rates, jobs, markets, national defense, national security, personal finance, statism, taxes, Uncategorized

Of Demagogues and Big Problems

January 25, 2014 Leave a comment

One of the common tricks of demagogues, as cheap as it is common, is to denounce in high dander something for being “Big,”—“bad” because it is “Big.” Some of the recent targets have been Big Banks, Big Pharma (the drug companies), Big Oil, Big Insurance, and Big Business in general. The target is apparently chosen for its relation to the prescription that the demagogue already has in mind. Invariably the prescription involves granting more power to the demagogue, sometimes ceded from the freedoms of the targeted Big, but not infrequently taken from the liberty of the people who are somehow harmed by the Big, who are to be somehow made better by being less free.

Obamacare is one example, Big Insurance, Big Pharma, and Big Medicine all denounced to some degree in the effort to generate popular support to pass the legislation. In the end, as more and more people are recognizing, it is individual choice that has been lost, personal freedoms to choose doctors, medical plans, and available treatments (along with substantial sums of money) that have been taken, passed on to big bureaucracies identified by the demagogues.

Demagogues on left and right and even in the middle resort to this device of denouncing Big Bad, because it resonates with many people who do not consider themselves “Big” anything. We all can feel intimidated by something in our lives and experiences bigger than ourselves, making us all potentially susceptible to the demagogue’s pandering. It is also a favorite device of demagogues, because it does not require much thought or creativity to make the anti-Big speech. It seems almost required that the demagogue at some point refer to the Big Target as “Goliath” and modestly identify himself or herself with “David.” That tired jape is now getting to be about 3,000 years old, but demagogues think that their audiences just cannot get enough of it.

To be sure, there are some cases where being big is a good thing and some things that can be too big to be good. It all has to do with why they are big and perhaps how they got that way. Big savings are usually good. The Grand Canyon is big and magnificent, and I would say that the Empire StateBuilding is, too, at least as I behold it. On the other hand, big debts are to be avoided, big pits can be dangerous, and the L Tower in Toronto is an eyesore in my estimation (though I will acknowledge that others could be fond of it).

Government can be too big or too small, depending on what it does with our rights and freedoms. There are governments too small to promote and protect freedom, while there are many—most—that are too big, and ever increasing at the expense of individual rights, freedoms, and opportunities. That includes governments that are big enough to help their cronies become bigger by robbing the competition and the public. Businesses that are big because of government favor would be better for everyone if they lost the government favor and let competition, efficiency, and customer choices determine how big they should be.

Some are just big because they grew that way. Is Microsoft or Apple too big? I do not know, and neither do you. Exposed to the full discipline of the free market they will be the right size, and so will their competitors. What is the right size for banks in the United States? I do not know, and again neither do you nor does anyone else. The more that they are exposed to market forces, the sooner we will get the best answer, which I expect will be along the lines of “many sizes and shapes” in order to match the many sizes and shapes and needs of businesses, families, and individuals who rely on banks for financial services. Free competition in open markets has the power to right size commercial enterprises.

A word of caution. Part of the success of the war on Big consists in making the listeners feel small and helpless—unless rescued and led by the fearless demagogue. Besides belittling most people, the demagogue’s device diverts attention from the fact that just about everyone is part of something Big, a Big that may eventually be the demagogue’s next target. Maybe your church will one day be considered too “Big.” Or maybe the industry in which you happen to work will become a “Big” target, the town or region where you live, your race or your ethnic group, your savings and investments, the cars or trucks that you drive, your appetite, your use of water, the size of the lot of your house, the wealth of your nation. All of these, and many others, have already been used by demagogues in their Big harangues. The demagogue’s insatiable appetite for power never has enough targets. He or she is always looking for more.

Sometimes there is a kernel of something genuinely amiss in the demagogue’s Big complaint. Often, when you boil down the genuine substance of any of the complaints to the hard facts, it is hard to discover what is the Big Deal—at least in the problem. The Big Deal is to be found in the solution, which is what the demagogue is really after. Were the Popes in Rome really controlling the lives and governments of England in the time of Henry VIII? No, but the solution of confiscating Catholic Church properties and awarding them to the King’s cronies was a very Big Deal. The Nazi demagogues in Germany played the same game with their own people, the German Jews, and with their property and possessions.

The demagogue’s solutions, resting upon emotion and panic, seldom solve anything and often lead to more problems. The Climate Wars—one year the coming ice age, the next year global warming, today just climate “change”—is an example we have all seen unfold, inflicting untold billions of dollars of costs while enriching favored cronies, but which in even the most enthusiastic promises of the demagogues will do little to affect the climate in reality in our lifetimes.

The next time you hear a public figure fume about something being Big, carefully inquire into and focus upon what he or she is after. You may be a target just Big enough.

Filed under anarchy, banking, Catholicism, demagoguery, environmentalism, freedom, global warming, government, healthcare, markets, private property, rights, statism, too-big-to-fail, wealth Tagged with

Of Minorities and Society

December 21, 2013 2 Comments

The saddest chapters of history chronicle the breakdown of human society. Rights are abused, the innocent—if innocence is allowed to exist—are trampled. Poverty, hatred, violence, and uncontrolled human passion prevail. Destruction and degradation, physical and moral, replace human progress.

All society, except that of master to slave, relies upon an element of free association. Societies may have more or less elements of coercion as well, but it is the element of free association that allows the society to continue, that motivates its members to acquiesce in or even encourage the society’s continuation. Free, voluntary association is what gives a society its legitimacy. Without it, there is no society, just a group of people ruled by one coterie of thugs or another.

Cooperation in society cannot be taken for granted. When it is, when free cooperation, instead of being nurtured and encouraged, is replaced by coercive rules and compulsion, particularly rules and compulsion designed to benefit some at the expense of others, society declines, people interact more by will of others than by their own volition. With time either the situation is redressed or the society disintegrates, often to be conquered from the outside when its internal strength has turned to weakness.

In its latter years imperial China was prey to numerous foreign incursions because its society was a mighty empty shell, old traditions surrounding an empire of competing warlords. Ancient Greece, which twice when united proved too much for the Persian empire, became relatively easy prey to the Romans after the ties of Greek society had become tired and weak. Rome, in its turn, after a thousand years, was enormously wealthy but mightily weak in the internal strength to repel the roaming barbarians, vibrant societies powerful in their own internal cohesion. Much of Africa, Asia, and Latin America today remains mired in poverty from the inability of relatively young countries to develop cooperative societies that encourage the generation of wealth and its application to promote prosperity for the present and for the future.

With cooperation at the core of successful society, one would think that democracies must be the most successful. History records otherwise. There are no historical examples of a successful democracy, at least not one that lasted for long enough to matter. Like a match set to paper, democracies flare up brightly into power and glory but all too soon die away to ashes.

The problem with democracies has been that all too quickly the majority in the democracy learns that it can become wealthy by robbing the minority, under camouflage of statutes and government. That only lasts until either the minority successfully rebels, becomes a majority in its turn, or the wealth of the minority is exhausted. In reaction, the majority may seek to preserve its advantages by yielding to a dictator—a “mouth” for the majority—to govern in the name of the majority to discern and express its will. Few of these dictators have resisted the temptation to wear the mask of the majority to govern for the benefit of themselves and their cronies. That has been the case for every communist government, without exception.

But, is it not right and just for the majority to prevail? Perhaps, but to prevail over what? Everything? Consider: if majority rule is applied to deprive the minority of life, liberty, and the pursuit of happiness, why should the minority cooperate? All that such society offers them is slavery, unrequited labor and service to fill another’s belly and pockets. In a pure democracy, there is no check on majority avarice, no refuge for the minority. The majority must always have its way.

Republics, however, are built upon a foundation of minority rights. Republican governments are granted only limited powers, exercised by representatives of the people, within boundaries beyond which the government may not go. A written constitution serves to enshrine and strengthen those rights against violation by the majority. The system gives a stake to all—not just the current rulers—in the continuation and strengthening of the society. No democracy, hereditary monarchy, or dictatorship can provide that.

In a nation as great and diverse as the United States everyone is part of a minority. Whether we consider age, ethnic background, religion, geography, culture, profession, or a multitude of other distinctions, we are a host of minorities. We can only come together and remain as a nation, strong and vibrant, if we are confident of protection in our minority rights, for protecting minority rights in America means protecting everyone’s rights. That is why the Founders proposed and the nation embraced a Republic formed on a federal structure of divided and limited government.

In that context, what are we to make of the current direction of American society? Are we preserving the Republic? Does our society feel like it is coming together? Recent public opinion polls find that more than 60% of Americans believe the nation to be going in the wrong direction. In another poll, a mere 22% believe that the current government rules with the consent of the governed.

What is the national political leadership doing about this? We have a President who aggressively pursues a variety of programs that have in common the taking of wealth from one minority segment of the nation to reward others. These wealth transfers are lionized for the undenied purpose of political and electoral advantage for the President and his supporters.

You will recognize the pattern. A crisis is discovered by the President, and an industry or group is demonized in public speeches and echoed in the establishment media as causing the problem and/or standing in the way of its solution. A plan is announced that involves confiscations from the demonized industry or group to fund benefices bestowed on Administration favorites.

Consider a few examples of many. Global warming is hailed as an imminent crisis with disastrous consequences; the coal, oil, and gas industries are identified as the foes of progress; and a variety of taxes and other restrictive policies are proposed, together with planned subsidies for businesses and companies favored by the White House. Banks are declared to be the nefarious forces behind the recent recession, new laws and regulations are applied that confiscate billions of dollars from the industry, much of which is then channeled to hedge funds and other political allies of the administration. Some millions of people are discovered to be without health insurance, doctors and the health insurance industry—among others—are fingered as being at the root of the problem, so a major overhaul of the entire structure of the health system is enacted that favors some at the expense of others. Administration cronies receive lucrative contracts to develop and administer the new system. There are many other examples, large and small, in education, welfare, housing, transportation, law enforcement, and many other government programs.

Is there any wonder that there is gridlock in the national government, when policy after policy is aimed at transferring wealth from some to reward others? Where is the room for cooperation and compromise, when the issue is how much of your family’s wealth is to be taken and given to someone else? The Roman Republic fell into gridlock after decades of appeals to mass acclaim for schemes of popular distribution of public plunder. It ended in the triumph of the Caesars, and later their eventual fall to the barbarians. It is perilous to abuse social comity.

President Obama has announced the transfer of wealth to be the chief focus for the remaining three years of his administration. Can our society weather that?

Filed under America, banking, Barack Obama, benevolence, China, communism, Constitution, demagoguery, democracy, federalism, freedom, global warming, government, healthcare, politics, republics, rights, Rome, slavery, tyranny, wealth

Of Washington and the Life of the Nation

November 22, 2013 1 Comment

Washington, D.C., is a strange place. I speak from experience. My whole working career has been in Washington. In many meetings with people visiting Washington I have explained to them that Washington is not America. Few have been surprised by the remark. In many visits away from Washington (and in connection with my work I accept nearly every invitation to leave town and be among those whose lives too many in Washington try to run) I am ever and powerfully reminded how different the rest of America is from Washington. I have not been surprised. Kansas City is much closer to America than Washington ever was or will be.

In support of the point I offer a few painful examples. I see one each day that I drive into the city. Looking at the cars around me I note that very few are more than a few years old. At the same time I am impressed by how many of the cars are foreign luxury models. It is typical, when paused at a stop light, to notice that many of the surrounding cars are BMWs, Mercedes, Lexus, Acuras, Audis, and not an insignificant number of Jaguars, high end Range Rovers, and Porsches. I also see a lot more Prius cars and other hybrids. This is not to say that there is anything inherently wrong with driving any of these or any other late model high-priced cars. I merely note it as very different from what I see when paused at a typical traffic light in other cities and towns in America.

As an aside, I am grateful to the people who buy and drive a Prius or other model of hybrid, because they subsidize my purchase of gasoline. Their cars do use less gasoline (though not enough less to compensate their owners for paying so much more for their cars), leaving more for people like me who drive regular gasoline-consuming vehicles. That reduction in gasoline demand helps reduce the price.

The Prius drivers might be offended were I to tell them, however, that I am entirely unimpressed by their conspicuous token of environmental sensitivity. Their purchase and operation of a Prius, after all, is very likely more harmful to the environment than is my more conventional automobile. First of all, they pay $10,000 or more extra to buy their hybrid, and if the price system works at all efficiently that means that making a Prius or other hybrid consumes far more in resources than making a conventional car. Second, the hybrid car fans and their coteries in the D.C. area have convinced the masters of the highway networks to create special less-traveled commuter lanes that the hybrid drivers are permitted to use, meaning that they reduce the efficiency of the highway infrastructure. So, to the Prius drivers of the world I say, thanks for the subsidy, but save your enviro lectures for when you are looking in the mirror.

The automobiles of the nation’s capital region are a sign of an even more painful reality of how Washington is different from the rest of America. It is also the wealthiest part of the nation, by far. On April 25, 2013, Forbes magazine published an article about the richest counties in the United States in terms of average income (Tom Van Riper, “America’s Richest Counties”). Six of the ten richest counties are in the Washington, D.C. region, including the top two and one more out of the top five. While recession lingers in the rest of the nation, Washington and its suburbs are doing rather well, with unemployment down to 5.5%, well below the national average.

I will also say that I am not opposed to wealth and wealthy people. I wish all of the world to be wealthier and rejoice that it is far wealthier today than people of just a few generations ago could have dreamed. But we could all live so much better still. I ache that the policies of governments around the world stifle economic growth and development and hold so many of their people down in poverty. The poor nations of the world are not poor because their people are less talented and intelligent than others, but because their governments are so oppressive and have been for generations.

Therein lies my beef with the wealth of Washington and its environs and the key to its estrangement from America. That wealth is hard to explain from the perspective of value added to the rest of the nation. Washington is basically a one-company town. Unlike other one-company towns, however, it produces little that adds enough value to the lives of others that would allow it to prosper in open competition in free markets. The product of Washington instead is forced upon the rest of the nation, whose productive income is confiscated to keep the Washington wealth-eating machine going.

Try to name an economic product or activity that is not somehow subject to special handling by or permission from someone in Washington or controlled from Washington. After the Dodd-Frank Act, for example, all financial activities have become more subject to direction by Washington bureaucrats than ever before. Today, a bank has to pay more attention to its regulators than it does to its customers. Who gets the best attention out of that arrangement? The same is true for energy producers, communications firms, health care providers, and you can continue the list. All that special handling comes with a toll, payable in taxes, or borrowed from the financial markets, or layered upon private incentive and individual initiative. Today in Washington the most convincing argument for new rules and laws is to announce that something is “unregulated.” When you regulate liberty, how much liberty survives? How much of America survives?

Next year, 2014, will mark the 200th anniversary of the burning of Washington by the British in the War of 1812. The curious thing about the burning of Washington was that it did not make a lick of difference. The rest of the nation went on about its business, little harmed or even affected. The same was true during the Revolutionary War when the British occupied Philadelphia. Rather than end the war it did nothing to bring the British victory. In America the nation was not run by its government, and in fact government was mostly irrelevant to the daily life of the people. That was very different from European experience, where nations were so dominated by their rulers that capturing the capital was tantamount to beheading the country.

Washington is strange to America. That can be tolerable, but only if it is smaller and less significant. Let the real nation draw its life from the people and live where they live their lives without direction from their rulers. Let us have a Washington whose disappearance would not mean much to the rest of the nation.

(First published May 18, 2013)

Filed under America, banking, Dodd-Frank Act, economic growth, environmentalism, exceptionalism, federalism, freedom, government, poverty, productivity, rule of law, socialism, statism, taxes, tyranny, Washington, wealth

Of Limited Freedom and Limited Government

November 17, 2013 1 Comment

I live and work near the belly of the beast, and I can report that these days he is not happy. His belly is rumbling. He has eaten more than he can digest. Watch out, he may throw up. He is already belching.

The federal government is not working, we know and see. Not only is it not working as was intended when it was created by the States, it is not working as designed and over designed in subsequent years. The federal government cannot manage the national parks, the welfare system is breaking down, the national transportation infrastructure takes in more money and yet the signs of dysfunction and decay on roads, rails, and bridges are increasingly apparent. Banks are regulated with thousands of rules while the banking industry continues to shrink: we have fewer banks today than we did in 1891, and their share of the financial markets has been dwindling for decades. So much of what the federal government touches turns to rust and ruin.

Yet the federal government keeps reaching out for more, undeterred by its failures. The Environmental Protection Agency aggressively imposes restrictions on the air we exhale, the Food and Drug Administration announces plans to control the fat in our foods, the new Bureau of Consumer Financial Protection has decided what kind of mortgages lenders can make and what kind of people can get them (acknowledging that many who qualify today will be outside the boundaries of federal standards in 2014).

You can augment this brief sampling of a longer list from your own experiences. This is nothing new, other than perhaps in frequency and intensity. If there is a virtue in Obamacare it may be that its unworkability and its increasingly universal hurt are demonstrating broadly what many have been feeling individually.

Demonstrating the hurt is not the same as redressing it. The beast, however ill, will not cheerfully surrender its prey. During the debate over ratification of the Constitution, one commenter, writing in the Philadelphia newspaper Independent Gazetteer (October 12, 1787), observed, “People once possessed of power are always loth to part with it”, and then warned that the Feds could not be counted on, by their own volition, to do “any thing which shall derogate from their own authority and importance . . . or give back to the people any part of those privileges which they have once parted with”. If that was predictable in 1787, it is painfully apparent today. Perhaps the clearest example is how the Washington power elites have exempted themselves and their cronies from the application of Obamacare while continuing to inflict it on the rest.

And yet, Obamacare is the hurt that keeps on hurting. People will not get over it or get used to it. Its pain and suffering will be felt again and again with each new illness, every new tax, as its strictures reduce availability, affordability, and quality of wellbeing. Wave after wave of new harm will come, astonishing its supporters and augmenting the ranks of its victims until it is addressed.

Americans, much like other people, will put up with much before they are roused to action. Unlike for many other people, our Constitution gives us avenues for action. The Constitution embodies the concept of continual redress within the rule of law to make appeal to extremities outside of the rule of law unnecessary and unthinkable, so long as the principles of the Constitution retain their vitality.

The core principle of the Constitution is limited government, designed to protect the growth and expansion of human freedom. Increasingly, for about a century, the “progressives” in Washington have turned public affairs on their heads. Human freedom has been the focus of limitation, while government enjoyed constant growth and expansion. The end seems approaching, either of the ability of government to manage what it has taken on, or perhaps (and hopefully) when the holders of power can no longer convince enough people that it is all for their own good. Limitation on government may return in vogue as promises of government solutions to feed the beast ring ever more hollow.

The Philadelphia writer of 1787, whom I cited above, was a critic of the Constitution, because he believed it impossible that the power gathered in by the federal government could be wrested from its hands. I remain hopeful that it still can be. Nothing else will work.

Filed under banking, Constitution, environmentalism, federalism, freedom, government, healthcare, progressives, rule of law, statism, tyranny, Washington Tagged with

Of Borrowing and Saving

November 8, 2013 Leave a comment

The basic rule is, if you are not already saving, then you are not ready to borrow. This may sound paradoxical, but it is the only safe way to approach borrowing.

You may wonder, if I have savings, then why would I borrow? That question may be answered in any number of ways. Asking it suggests some lack of understanding of the proper purpose of borrowing.

The proper purpose of borrowing is to manage your income. You should never borrow to spend beyond your income.

Most people receive income in lumps, like once a month or twice a month. Expenses do not always behave themselves that way. First, there are the every day expenses, such as for food, transportation, and a wide range of miscellaneous minor expenditures that quickly add up. Then there are other expenses that occur monthly and may more or less happen at about the same time as your income. A third category is the big expenditure, that may come once or twice a year, such as tuition, taxes, major purchases, insurance premiums. Since the timing of our income and outgo often do not line up, we use borrowing to help bring the two into line.

For example, the tuition is due in September, but you plan to pay for college by working through the school year. A student loan or other borrowing arrangement with the college can line your income up with the expense.

Another example might involve a big appliance. Your refrigerator breaks down and you need a new one. You may not usually have several hundred dollars of unallocated income available in any one month to pay for the new refrigerator, but you likely will over the course of a year. Borrowing lets you draw that income from the course of the year into your current month and match it against this large purchase needed today.

Here is a bigger example. You need a new car, both for family transportation and perhaps even for travel to work. Very few people have enough ready income to buy the new car with what will be received in any one month. Most people, though, can draw upon funds available from their income over the course of a few years to pay for the car, and borrowing is the tool that they can use to do that.

Of course, this borrowing from the future to pay for something today can be abused. There is a natural temptation common to man to seek gratification today and worry about tomorrow’s problems tomorrow, even while causing them today. Two things can help counter this potential for abuse. One is interest, and the other is saving.

Interest is what we pay for borrowing. While rewarding the lender, it is a penalty against anyone who borrows in order to spend beyond his income. As you spend beyond your income, the interest mounts. In the end, it will bring down the abuser once the abuse has gone too far and gets out of hand.

Saving is a more benign and effective check on the impulse to borrow in order to spend beyond income. If you are regularly saving, you are doing something even more important than preparing for the future and reaping the rewards from lending to other borrowers. By definition, if you are saving, you are living within your income. You are taking part of your income and putting it aside. That discipline is what is needed to prevent you from using borrowing to exceed your income. You have a proven practice of spending less than you earn.

That is why I say that if you are saving, then you are prepared to borrow, and if you are not saving, then you are either living right on the edge—spending your income as fast as it is received—or you are going beyond, borrowing to spend beyond what you earn, and that leads to trouble. Then you will be spending to consume something that you did not earn and do not deserve. The eventual price for that is loss of freedom, as you must in the future consume much less than you earn in order to satisfy the debts.

(First published September 8, 2008)

Filed under abundant life, banking, compensation, deficit spending, discipline, freedom, interest rates, money, personal finance, slavery

Of Presidents and Training for the Job

October 22, 2013 Leave a comment

There are some jobs you just cannot safely do without proper training and experience. Flying an airplane is one that comes to mind. Driving a bus is another. I would put being President of the United States in the Twenty-First Century on the list, too.

President of the United States was a tough job in the days of George Washington. It was even a challenge in the days of Millard Fillmore. It has not become any easier in recent years, and next year it will be a very big job. Considering the global responsibilities of the United States, with several irresponsible oil-drunk regimes threatening peace and freedom (ours and other’s) around the world, can we afford to enroll our new President in a foreign policy on-the-job-training program?

Economically as well, there is little room for error. So far we have gone through a year and a half of the housing market bust without falling into a recession. But our economic growth is anemic. A small false step or two can put us into a full-blown economic decline, exploding banking and financial markets that will then take years to recover. It is important that economic policy next year be led by someone who understands economic growth and how to promote it. The formula for growth—low taxes and steady prices—is well known to those who have learned the lesson; we do not need a novice who does not have enough experience to know that you cannot tax and spend your way to prosperity. We cannot afford his experiments with our jobs and livelihood.

That is why it is breathtaking that a major political party is on the verge of nominating for President someone so inexperienced as Barack Obama. I am unable to recall a single nominee for President, by any major party, less prepared for the office than Barack Obama. Really, there is the challenge for you. Name a nominee—Republican, Democrat, Whig, Federalist—less prepared than Obama.

Barack Obama likes to liken himself to Abraham Lincoln. I cannot claim to have known Abraham Lincoln or assert that he was a friend of mine, but I do say, Barack Obama is no Abraham Lincoln. Even liberal exaggerations of Obama’s undistinguished career cannot make it compare favorably with the long and grueling life experiences that schooled Lincoln for the White House.

In short, Obama does not have the training for the job. It may be that the Democrats’ talent pool is so thin that he will be nominated. But the job of President is too important—to all of us—to be extended to someone so unready.

(First published August 25, 2008)

Filed under Abraham Lincoln, banking, Barack Obama, bubbles, deficit spending, economic depression, economic growth, elections, George Washington, inflation, interest rates, jobs, national security, recession, taxes

Of Guaranties and Reliance

October 19, 2013 Leave a comment

All around the world people are seeking guaranties against the various risks of life. Borrowers want guaranties that they can stay in their houses, even if they cannot pay the mortgage; lenders want guaranties that they will not lose money on bad mortgages; investors want guaranties against bad investments; people living at the water’s edge want guaranties against floods; and even people making guaranties are looking for guaranties that they will not lose money on the guaranties that they have made to others. Guaranties of health, guaranties of wealth, guaranties of safety and happiness, all seem to be in ever increasing demand.

Perhaps what is most disturbing is that people are not just seeking guaranties, but they are looking for others to pay for them. Rather than relying upon their own resources and performance to obtain guaranties, too many are substituting pleas and moans and whines to wheedle free guaranties from others, especially from the government.

In practice, many of these guaranties will fail. Even guaranties from government are unreliable. I recall when a Senator for whom I worked was faced by an agitated constituent, complaining that a government agency reneged on a promise. There was not anything that the Senator could do about the situation, other than to remind the constituent of an important truth about government: they lied.

There is a source of reliable, faithfully honored guaranties. The ancient American prophet Mormon taught a congregation of Christians, “the way whereby ye may lay hold on every good thing.” The way is through faith on Jesus Christ, by whom people from the beginning of time obtained all things worth having, “and thus through faith, they did lay hold upon every good thing” (Moroni 7:21,25).

Unlike many of the guaranties of men and governments, these guaranties are sure, and they also require some reliance by the individual upon his own efforts in order to qualify. In modern times the Savior Jesus Christ has said, “I, the Lord, am bound when ye do what I say; but when ye do not what I say, ye have no promise.” (Doctrine and Covenants 82:10)

The qualifying requirements are not onerous. They relate directly to the promises sought. For guaranties of goodness, the Lord asks us to be kind. For guaranties of financial wellbeing, the Lord asks us to follow practices of financial prudence. For guaranties of happy family life, the Lord asks that we love and serve each other. That is to say, to obtain the Lord’s sure guaranties, we are asked to rely jointly upon ourselves and upon the Lord.

The result was summed up by the counsel of another ancient American prophet, Helaman, that he gave to his own sons:

And now, my sons, remember, remember that it is upon the rock of our Redeemer, who is Christ, the Son of God, that ye must build your foundation; that when the devil shall send forth his mighty winds, yea, his shafts in the whirlwind, yea, when all his hail and mighty storm shall beat upon you, it shall have no power over you to drag you down to the gulf of misery and endless wo, because of the rock upon which ye are built, which is a sure foundation, a foundation whereon if men build they cannot fall. (Helaman 5:12)

That is a guaranty worth having, and well within the budget of each one of us.

(First published September 21, 2008)

Filed under abundant life, banking, faith, government, government spending, happiness, individual worth, Jesus Christ, personal finance

Of Claiming Good and Doing Bad

October 13, 2013 1 Comment

A very good book was published this month. Ostensibly, it is about our economy and the recession. It is actually about much more. It is the first book about the current American economy written by a philosopher, and it is perhaps the best book I have read yet about all the recent unpleasantness. Some might say that the economic trouble still continues, more like a long, slow convalescence from a serious illness than a healthy recovery. For many whose financial condition stagnates, for those who have replaced a full-time job with one or two part-time jobs, for graduates who have a degree in hand but no work in the field for which they have trained, and especially for the millions who remain out of work, talk of an economic turnaround can seem like a mockery.

For those and others, Infiltrated, by Jay W. Richards, can help make some sense of what hit us. The book does not suggest that there was a massive conspiracy to drive our nation into economic turmoil. It explains how turmoil came nevertheless as national policymakers followed the prescriptions of people who claimed to be doing good but tried to cheat the laws of economics and markets to impose what they might call “benevolence” on the rest of us.

It was their idea that in order to help more people own homes lenders should ignore such things as ability to repay a mortgage, strong history of employment and steady income, and having some equity in the value of the house so there would not be an incentive to walk away if prices dropped. They also agitated for the government to expand its guaranties for mortgages to people with poor credit histories and loans where lenders cut corners. And they badgered builders to keep building more houses.

Their plans horribly miscarried, and yet those people have even more control over us and our economy today and are more able and determined to try again. The recession, rather than educating and deterring them, has made them bolder.

I am reminded of what the late Louis Rukeyser, the very popular host of the PBS program Wall Street Week, wrote in the 1990s:

Washington has been taken over by an impregnable mob of short-sighted, power-hungry megaclowns.

They try their worst to micromanage every detail of the economy, but succeed only in whipping the markets back and forth, up and down in spastic patterns. They despise the gentler forces of a free market, which would moderate swings far more predictably.
(Louis Rukeyser, 1993 advertisement for his financial newsletter)

The people to whom I refer and whom Richards exposes in his book do not like the markets. They trust themselves more and think that you should trust them, too. They seriously do believe themselves smarter than the markets, and that is the problem. No one, other than God, is smarter than the markets. A large part of economic history, the tragic part, is a chronicle of the disasters caused when a small coterie of people are able to enforce their wishes and preferences on the rest of us in contravention of economic reality. It never works.

That was the story of the Great Depression, and it was entirely the story of communism, where whole societies were based upon the now well-proven fallacy that any group of people, no matter how smart or well intentioned, can gather sufficient data and know and understand enough to run a national economy. It is just far too complicated, with billions of economic decisions being made by millions of people all day and all night long. The markets make it all work, because the markets are the sum combined total of all of those economic actions and decisions interacting with each other. No human five-year plan for economic control has escaped failure.

What is worse, as well intentioned as such people may start out, all too often, as Richards’ book exposes, their efforts not only fail to do what they set out to do, they fail to stay virtuous and instead become enlisted in the service of private gain at the expense of the rest of us. The Soviet system might have worked pretty well for the party owners of the dachas along the Black Sea but only by impoverishing the workers their leaders claimed to be serving.

Do not let yourself be put off that Richards is a philosopher. His book is remarkably readable, one that you can take with you to the beach and actually enjoy, and feel that you have learned something—a lot—in the reading. Richards mixes real life narrative with hard facts and good research, unified by sound reasoning to expose a nasty and growing problem in American government today. The problem is a big part of why government is expanding and becoming more intrusive in all aspects of our lives, including our financial affairs, education, healthcare, energy use, the products we buy, the food we eat, and the entertainment we enjoy, and even the breath we exhale.

That is to say that the story told by Jay Richards, in Infiltrated, is actually a longer story, a story that began long before the recession, and continues afterward, a story that is bigger than his book. The recent economic events and their painful aftermath illuminate Richards’ core message, the human wreckage caused when some people are able to harness the coercive force of government to impose their personal notions of “benevolence” on the rest of us.

Roger Kimball, writing in 2011 in The New Criterion, warned that such efforts are “intoxicating, addictive, expensive, and ultimately ruinous.” (Roger Kimball, “Liberty versus benevolence,” The New Criterion, February 2011, p.6) Richards offers several well-described examples, well illustrating the truth of Kimball’s observations.

A valuable lesson for policymakers and for the people they would govern: the more discretion you give to government, the more you create the opportunity for abuse of that discretion for private gain. Europe in the 18th century was lousy with the practice. Our forebears sought to escape it and fought a revolution to get out of its grip. The men who threw the tea into Boston Harbor were acting in protest of the partnership between the British Crown and the British East India Company.

Beware the public-private partnerships. Jay Richards explains how some public-private mortgage partnerships went bad, very bad, for the partners and for all of us caught in the dust and debris of their collapse. I am reminded of the warning by former Congressman Dick Armey, that when you enter into a partnership with the devil, you are always the junior partner.

I conclude with the words of New York City Democrat Congressman Bourke Cockran, delivered 110 years ago:

That Government only is good, that Government only is great, that Government only is just, which has neither favorites nor victims.

(W. Bourke Cockran, speech given before the National Liberal Club of England, London, July 15, 1903, in W. Bourke Cockran, In the Name of Liberty, p.190)

Our government should be that government.

(First published August 18, 2013)

Filed under banking, benevolence, economic depression, economic growth, economics, healthcare, jobs, markets, personal finance, progressives, recession, rule of law, socialism, statism, tyranny

Of the Constitution and the States

October 8, 2013 Leave a comment

It must be the least employed part of the Constitution. In fact, “never used” may be a better description. I am not sure but that it may be the one part of the Constitution not only never used but never really tried.

I draw your attention to Article V, which offers procedures for amending the Constitution. Article V has been successfully invoked 27 times–25 or 26 times if you reconcile the count for the fact that the Twenty-first Amendment repealed the Eighteenth Amendment, the prohibition of intoxicating liquors.

So why do I refer to Article V if it has been used on more than two dozen occasions? I have in mind an important but neglected part of Article V. Article V provides two methods for amending the Constitution. Only one method has been used. We might call that the Washington Method, since it relies upon the Federal Government to propose amendments and send them to the States. The other, unused method I would call the State Method, as it relies upon the State legislatures to initiate the amendment process.

Article V is short. Here is the text in full:

The Congress, whenever two thirds of both Houses shall deem it necessary, shall propose Amendments to this Constitution, or, on the Application of the Legislatures of two thirds of the several States, shall call a Convention for proposing Amendments, which, in either Case, shall be valid to all Intents and Purposes, as Part of this Constitution, when ratified by the Legislatures of three fourths of the several States, or by Conventions in three fourths thereof, as the one or the other Mode of Ratification may be proposed by the Congress; Provided that no Amendment which may be made prior to the Year One thousand eight hundred and eight shall in any Manner affect the first and fourth Clauses in the Ninth Section of the first Article; and that no State, without its Consent, shall be deprived of its equal Suffrage in the Senate. (Emphasis added)

Constitutions are foundational documents and so should not be changed any more often than you would consider changing the foundation of your house. Change the foundation and a lot of other things change, too, and if you are not careful you can weaken the whole structure. But the Founders of the nation knew that they were not omniscient and that the need for adjustments or even corrections to the basic plan of the government would surely become obvious over time.

For example, the original process for counting electoral votes for President and Vice President almost put Aaron Burr in the White House instead of Thomas Jefferson in 1800. Jefferson was the candidate for President, Burr the running mate, and both received the same number of electoral votes, but the electoral college ballot under the Constitution did not distinguish between President and Vice President. The two were tied, and Aaron Burr got the notion that maybe he should be President instead of Jefferson. The House of Representatives had to sort it out. Afterwards, this flaw in the Constitution was corrected by the Twelfth Amendment.

The first ten amendments, the Bill of Rights, were made almost immediately and were demanded by several states as essential conditions for their ratification of the Constitution itself. We could very appropriately consider those ten amendments as part of the original Constitution since it would not likely have been ratified without their promised addition. In that view, the Constitution has subsequently been amended little more than a dozen times in over two centuries.

It is also worth noting that Congress has proposed amendments that the States have subsequently and appropriately turned down. One such proposed amendment that never got past the States was approved by Congress in 1861, denying Congress the power to interfere with slavery. The Constitution does not, however, limit the power of the States to only considering amendments that come out of Washington. It provides to the States the power to initiate amendments of their own.

Mark Levin, in his recent book, The Liberty Amendments, argues that it is important for the States to exercise that authority. He offers some suggestions for amendments that the States might consider, designed to restore the balance between Washington and the States that the Founders envisioned when creating our federal system.

It is a sign of how distorted things have become that using the word “federal” today almost always leads one to think of the government in Washington. Yet our federal system was designed specifically to preserve State authority and limit the power of the national government. Levin argues that those limits have been dangerously eroded, especially over the last century.

Consider the many aspects of our daily lives that are determined one way or another by Washington laws and regulations rather than by the States whose representatives are closer to the people whom they govern. The list would include the fixtures in our bathrooms, the design of our cars, the food offered to children in school lunch rooms, the subjects that they are taught, the products and services offered by banks, and now the healthcare that we can receive.

A major consequence of the problem is that the power appetite of Washington has taken on more than it can handle and is seriously threatening the health of the nation. Regardless of which parties are in power or whether power is divided, Washington is becoming increasingly dysfunctional. But the professional politicians in Washington will not let go of the power that they have taken from the States, even as they sink under the weight.

What has tied Washington up in knots this fall? It is conflict over Obamacare. Would that even be a problem if healthcare were left to the States to regulate? Congress is having trouble passing a farm bill because of apparently unbridgeable differences over food stamps. Would Washington be stuck in the mud—and at the same time affecting all the rest of the nation—if farm and nutrition policies remained in State hands? At the same time, many States are facing major budget problems coming to grips with paying for programs forced on them by the national government.

The State Method for amending the Constitution was put into the Constitution specifically for the time when the national government was the problem and would be incapable of solving its own problems. Surely that time has come. Washington has gotten tied up in a Gordian knot of its own devising. The wise Founders of the nation apparently knew that things could come to this. It is time for the States to exercise their constitutional power to cut the knot.

(First published September 22, 2013)

Filed under America, banking, Congress, Constitution, federalism, government, healthcare, politics, statism, tyranny, Washington

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