Of the Federal Reserve and Taking from Savers

Ben Bernanke has a blog. You can find it here, courtesy of the Brookings Institution. Of course, what would the former Chairman of the Federal Reserve Board write about, other than decisions he made as Chairman, and why people who take issue with them are wrong? One would expect no less, and reading the light he sheds on previous decisions—offered in Fedspspeak at the time that they were made—is surely the chief lure of Ben Bernanke’s blog. Allowed to communicate in regular English, not worried about how Fed Watchers might construe or misconstrue everything he says and does not say, Ben is more able to speak his mind clearly.

The former Fed Head chose for his first blog post a vigorous defense of price controls on interest rates. In the process Bernanke demonstrates the assumption that we are safe letting government economists control the economy—an assumption continually disproven by real-world experience.

In fact, as a result of entrusting much of our economic freedom in the United States to government economists, we do not have a free market for interest rates, at least not short term rates, and we pay for that every day. The Federal Reserve sets short term rates in this country, and so far the market has had zero success in moving rates from the near zero interest rate range that the Federal Reserve has decreed and maintained for some years. Keep that in mind the next time you wonder why you earned $1.73 in interest on your savings account last year.

If you borrow money—when you can get a loan—then you might consider yourself lucky. The biggest borrower of all, in the whole world, is the United States Government. Uncle Sam must be feeling very lucky, because he is paying comparatively little on the $18 trillion of U.S. Government debt, increased by another half trillion dollars last year.

If you save money, though, especially for your retirement—and if you have to live off of those savings in retirement—you might not feel so fortunate. By keeping interest rates lower than the market would set them, the Federal Reserve is daily transferring many billions of dollars from savers to the Federal Government. And you thought that only the IRS takes your money.

Let me illustrate with an example. For the last three months of 2014, all of the banks in the United States, all of them together, paid no more than $11 billion to people who had their money in banks. Is that a lot of money? It depends. When that is the interest paid on nearly $12 trillion in deposits, the answer is, no, that is not very much money at all.

Do not blame the banks, though. They are in the saving and lending business, too. Try as they might, with the Federal Reserve controlling interest rates, banks could not pay any more interest to depositors. If a bank did, it would have more money than it could lend as people shifted their deposits where they could get a better return. To pay interest on deposits, banks cannot get much more interest from the loans they make than the Federal Reserve price controls allow, and many relatively good loans present more repayment risk (banks do need to be paid back) than those low interest rates would cover. Low interest earned means low interest paid.

All the banks in the nation have a little over $15 trillion in loans and other assets, on which they earned last year about the same amount as they did five years ago, when they had $2 trillion less in loans and other assets. In an environment of low interest rates, banks have to concentrate their lending on the safest borrowers.

That is how the low interest rates controlled by the Federal Reserve are oppressing the economy. When savers and lenders can only get a few cents on a hundred dollars lent, they place their money with the very safest of borrowers, since they cannot afford to take any losses. Someone who has a really good idea—which like all good ideas may or may not succeed the first time—has trouble getting the money to give his idea a go and hire people to help him try.

Ben Bernanke claims that the Federal Reserve’s near zero interest rate policy—called ZIRP—has been stimulating the economy. If so, where is the stimulation? Why has the recovery been so weak? There has been stimulus, but it has gone primarily to support Federal Government spending and to pay down the debt of the largest and healthiest businesses that can trade in their higher cost loans for the Federal Reserve’s lending bargains. The biggest increases in bank loans have been in Treasury debt and deposits at the Federal Reserve.

Ben Bernanke, in his blog, reminds me of the story of the lawyer representing a client charged with stealing a car and returning it damaged. The lawyer says, first, that his client never had the car; second, that he returned it in perfect condition; and, third, that it was already irreparably damaged when his client took it.

Bernanke begins by explaining that the Federal Reserve does not set interest rates, or that at most its ability to do so is only “transitory and limited.” He pleads that the Fed can only affect short term rates “in the short run.” He does not explain how seven years of ZIRP can be considered the short run. Then he progresses in his blog to describe how the Federal Reserve “influences” interest rates and then how the “Fed’s actions determine” interest rates. His argument, after denying that the Fed can set rates, is that the economy has been so weak that the Fed has had to lower interest rates for the nation’s own good. Bernanke next argues that the economy has remained so troubled (he does not say, despite ZIRP) that the Federal Reserve has had no choice but to continue with ZIRP, concluding that it is the economy after all the forces the Fed to do what it does. Do not blame the Fed Governors, they had no choice but to continue doing what they cannot do because it has not done any good so far. I think you need to have a Ph.D. in economics to make such an argument.

We cannot do it, we did what we had to do, and since it has not helped we cannot stop. I wonder how he reacted to those kind of explanations from his teenagers. Any responsible parent would reply, no, you cannot have the car, give me back the keys.

Of Unbanked and “Underbanked”

Speaking of banks, as I did on this page a short time ago, there are those who are concerned that too many people in the United States are “unbanked” or “underbanked.” By the former they seem to mean those who do not use any banking services, particularly who do not have any bank accounts. By the former, they mean those who obtain some banking services from businesses that are not banks. The very existence of the terms, and the way that they are used by those who use them, implies that being “unbanked” or “underbanked” is a bad thing.

I will here disclose that I have worked for banks for nearly 10 years and for all I know may continue to do so for some time into the future. Whatever bias or color to my views that this condition provides I will nevertheless try to comment from a fair and factual point of view.

My first point, therefore, is that I am not prepared to assert that absolutely everyone should have a bank account. I can easily envision the value of a bank account for most if not all people, but I concede that they should be allowed to choose for themselves and that it would be terribly wrong to force people into banks. I acknowledge that there are some alternative providers of financial services who seem to please their customers, and I do not deny that banks can benefit from good competition. Banks have a long history of drawing upon the ideas and innovations of non-banks, just as non-banks have been eager to try their hand at successful new products and services that banks have pioneered. Bank customers have benefited the most from that process, as the variety and value of financial products have expanded, and the United States has led the world in the discovery of new and useful financial services.

Having said that, the nation cannot do well without a strong, vibrant, and prosperous banking industry. Our nation and people grow as we save financial resources and invest them in improvements for the future, whether new homes, new factories, or new ideas of how to do and make things better, faster, and cheaper. That is a major part of what banks do and are all about.

Moreover, there are a lot of things we do and a lot of places we go because we know that our ability to pay and get paid—to exchange things we value less for things that we value more (the reason we buy and sell things and use money to do it)—is secure, reliable, accurate, and relatively quick. That is our payments system, and banks created it and are at the center of it.

Americans also like the idea of becoming wealthier and expect to do so. If that seems a commonplace to you, recognize that it is not so in all parts of the world, where getting by from day to day is about the most to which people can aspire, for whom poverty is a way of life that they expect to bequeath to their children. To the extent that this miserable condition is becoming less the case in much of the world, that more people are beginning to believe that they can build and improve their wellbeing for themselves and their posterity, this new-found hope for accumulating wealth is attributable to the dispersion of principles of freedom and prosperity that Americans take for granted but which are new to much of the world. The global adoption of many American principles of prosperity has been a major contribution of the New World to the Old World and to all mankind.

Now get ready for the bold but true statement: you cannot get there and stay there without banks and the services that banks provide. Banks gather wealth, safeguard wealth, allow it to be used efficiently, and apply it to building the future. That is why governments pay so much attention to banks, and also why it is so harmful when governments try to capture banks and channel their services to the personal gain of themselves and their cronies. That is also why misguided bank regulations are harmful—even if in subtle but powerful ways—to the nation and its people.

Which brings us back to the agenda of the “unbanked” and the “underbanked.” In the United States, chief causes for people remaining “unbanked” are regulations that make banking more difficult and services more expensive; cultural barriers for people who come from societies where personal banking is either unknown or where the experience has been one of banks used by local governments to harvest wealth from people to enrich the governing elites and their cronies (much of Latin America, for example); and people who for whatever reason just do not prefer to use banks. The first cause regulators can solve but have largely been resistant to solving; the second can be overcome by time and experience and is showing signs of that; and the third cause is no more of a problem than people who prefer to rent rather than own their home, to eat eggs without grits, or who do not like the New York Yankees. I do not have to understand the personal preference to acknowledge it.

The concept of “underbanked” (that government needs to help banks figure out how to serve people who may get some banking services outside of banks) I fear may be a political device to harness American banks to serve the cronies of the “underbanked” advocates. We have already seen this game with the Community Reinvestment Act (CRA) regulations, adopted ostensibly to ensure that banks lend to their local communities (as if bankers, unlike other businessmen, need government regulation to notice business opportunities right under their own nose). In practice, CRA has been used to coerce banks into providing loans and even grants to and through poverty advocacy agencies that tend to prosper more than the people whom they claim to be helping. The folks who fret about the “underbanked” have marvelous formulas and plans for other people’s money to solve problems about which the people to be helped seem little concerned. I have never heard of any truly “underbanked” people themselves calling for the firm hand of government to get them into the banking system; if they want banking services, they just go and get them.

I have the haunting suspicion that the “underbanked” advocates would if they could use banks the same way found in the abandoned societies of the “unbanked,” where banking services came through the hands of people who knew better than others and always made sure to get their cut for their benevolence. That is not really banking, and that is symptomatic of why people flee those lands. The wealth creation of such captive banks seems to be for someone else. If it happens in America, where will the people go?

Of Obama and Ethelred the Unready

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)

Of Marriage and Happiness

Last week I completed teaching another “Strengthening Marriages” course at church. The principles I taught were my own. By that I do not mean that I thought them up. They are mine because I embrace them. The course was designed under the direction of living Apostles and prophets. The concepts are divinely inspired. Their purpose is not to “fix” troubled marriages but rather to help husband and wife in any marriage increase the joy of this most important of all human relationships.

Here is a summary of some of the key principles taught.

The first and foundational principle is that the family is not only the most important institution in the Church but is in fact the most important institution in all time and all eternity. The marriage relationship is our most important relationship and can be the source of our greatest joy, beginning now and lasting forever. The key to that joy is building our marriages and our homes on the rock of our Redeemer, Jesus Christ. So built, we can withstand all that this life of trial throws at us, allowing us to begin living in heaven already while here in mortality.

Another central principle of happiness is unity in marriage. Husband and wife are intended to be one. Man and woman were created to be united and become a greater one. No man or woman is complete or whole without wife or husband. To enjoy the most of that unity husband and wife should allow their differences in gifts to complement one another. God intended man and woman to be much alike but also significantly different in physical, mental, and even spiritual gifts. Embrace that, do not fight it. Unity in marriage also requires complete loyalty to each other, placing commitment to each other above any relationship with anyone else on earth. This unlocks an unending wealth of happiness in marriage.

Important in the day-to-day life of marriage is nurturing love and friendship with each other. Frequent expressions of love and kindness—in ways large and small— play no small part in that nurturing. The proper expression of intimacy in marriage is a gift that God has extended to His children that, kept in proper channels, unlocks enormous eternal power. Complete faithfulness to each other strengthens that intimacy and enfolds it in an ever increasing love.

Both husband and wife should expect and acknowledge that there will be challenges. The purpose of mortal life is to be immersed in a world of challenges and grow from those challenges, our reactions to them shaping us into who we choose to be for the eternities. In marriage we find help to face those challenges, a help meet that we can find in no other way or relationship. Husbands and wives, with the aid and inspiration of the Lord, can work through any challenge. This is part of the marriage covenant. Marriage, to be what the Lord intended, to manifest all of its power for joy, must be a covenant, not a contract, a covenant through which we give all to each other without consideration of an “exchange.” The concept of “prenuptial” agreements, of counting the contributions of each in marriage, are foreign to the eternal union of souls that marriage can be as intended by God.

An important principle of happiness that needs to be applied whenever a challenge arises within the marriage itself, be the challenge large or small, is that we can choose to react in patience and love rather than in frustration and anger. That may take practice, but it is a rewarding practice. As children of God, we can increase our power and freedom to make that choice each time that we choose well. Strong lines of communication between spouses will enable us to respond to challenges most effectively. When looking at each other, seeing the admirable qualities rather than the temporary weaknesses facilitates that communication and builds the confidence that underlies it.

A successful eternal marriage involves the Lord as a constant Partner, Help, and Guarantor of the covenant. He wants us to succeed. We draw upon His help and strength through faith and prayer. Modern prophets for a hundred years or more have counseled that great power comes to husband and wife and then to their family from such inspired practices as regular, daily family prayer and scripture study and weekly family home evening. From long experience I can tell you that this is true.

We know that we each will come up short from time to time. The atonement of Christ gives us the best tool for dealing with our shortcomings and not letting them harm our marriage: forgiveness. We discussed how we need to seek forgiveness from each other and be ever ready to extend forgiveness. The result is peace, trust, and security.

Do not neglect to follow, jointly, principles of sound family finances. Managing family finances together can be a powerful way of uniting marriage in real life. As we manage the material elements of our life we build eternal spiritual ties with each other. In a material way we see our complete union growing closer. A few of the key principles of successful financial management include paying an honest tithe (as a constant reminder of the spiritual nature of all things material), spending less than we earn, and the freedom that comes from living within a budget.

These are just highlights of the marvelous truths that God has revealed to us through His prophets to make our marriages what He intends them to be, the greatest source of happiness and joy in this life and happiness and fulfillment beyond anything that we can imagine in the eternal worlds.

As you consider them, think on the words of the modern prophet Brigham Young about the marriage relationship:

But the whole subject of the marriage relation is not in my reach, nor in any other man’s reach on this earth. It is without beginning of days or end of years; it is a hard matter to reach. We can tell some things with regard to it; it lays the foundation for worlds, for angels, and for the Gods; for intelligent beings to be crowned with glory, immortality, and eternal lives. In fact, it is the thread which runs from the beginning to the end of the holy Gospel of salvation—of the Gospel of the Son of God; it is from eternity to eternity.
(Brigham Young, October 6, 1854, Journal of Discourses, 2:90)

(First published June 8, 2013)

Of Borrowing and Saving

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)

Of Dysfunction and Governing the Nation

It seems that no more evidence is needed.  The establishment press, normally loathe to criticize the federal government, has at last become even fond of proclaiming that “Washington is dysfunctional,” although they do so as if announcing something worthy of being “news.”  The Senate has not passed a budget in some four years.  The House of Representatives regularly passes budgets that the Senate will not even consider.  The President—who has no budget-proposing role under the Constitution—proposes budgets that are routinely disregarded while declaring his intent to govern without the Congress.  At the same time, people feel more alienated from their government than ever before, in ever increasing numbers considering the nation headed in the wrong direction, regardless of the party in control of national policy.

In the most recent demonstration of the Washington breakdown, the Congress this year failed to pass the annual appropriations bills before the current ones expired.  Or, better said, the House passed appropriations bills, the Senate demurred, and the President announced that he would veto any appropriations legislation that offered either more or less than what he wanted.

The establishment press, amplifying executive branch efforts to promote panic and stampede the public, announced that “the government would shut down,” and yet 83% stayed open.  Some prominent public operations (that do not require any appropriations to operate) were closed at the President’s bidding, like the Lincoln Memorial and the various veterans and war memorials, but the President seemed to have enough money to travel to various campaign-style rallies to complain about the government shut down.  There was national confusion and consternation.

Perhaps what is news is that there is, at last, general agreement, and the President has helped demonstrate, that the federal government has become dysfunctional, by which we may mean, not doing what it needs to do.  I also notice that this condition has not been getting any better.  In addition to the recent, visible indicators, I would offer some longer-term measures.

Economic growth is depressed and has been declining for decades; employment is also down, with millions leaving the work force.  Government welfare rolls have expanded dramatically, suggesting that a very large portion of the population is either not able to take care of itself or has surrendered its responsibility to do so.  The federal balance sheet approaches ever closer to insolvency.  To avoid being gloomy and doomy, I will not recount dismal education trends, eroding family formation patterns, the precarious condition of national infrastructure, or our worsening international relations (with allies and opponents).

Yet, the federal bureaucracies are far larger, taxes—visible and hidden—are higher, red tape has become ubiquitous, and federal subsidies have fallen behind promises even as they outdistance the ability of the federal government to pay for them.  If government is the solution, then why is more government not making things better?

How could this happen?  Have we as a nation lost our ability to govern ourselves?  Have “partisan politics”—as though something new rather than part of our national intercourse since 1796—frozen the ability to consider, set, and follow national priorities?  Have the problems of modernity exceeded the ability of policymakers to resolve them?

A case could probably be made for each and all of the above explanations.  I think, however, that they are all symptoms of a more fundamental problem, one recognized long ago, at the founding of the nation.

As early as 1787 the Founders recognized that a central government would not work for the United States.  Even with just the original 13 states and 3 million people, the nation was too vast to be governed in detail from one capital.  That is why they created a federal system, under which the few, truly national concerns—such as national defense, trade, international relations, national standards of measures and sanctity of contracts, preservation of freedom and the rule of law, together with the means to fund these activities—would be handled by the national government.  All else was reserved to the States.

Note that I did not say given to the States.  Remember, the States and the people in them created the national government.  The States and the people in them gave to the national government its authority and power.

Today, the United States stretches across a continent and reaches to the isles of the sea, with over 300 million inhabitants.  It is even more impossible than ever to govern from a single capital, by a centralized government.  We all have seen the evidence, in addition to the growing dysfunction of Washington.  Everyday, people all over the nation struggle with rules made by the federal bureaucracies, rules that are often nonsensical where people live and work and play, rules governing the volume of water in our toilets, the content of our children’s food, the gasoline in our cars, the content of our communications, the form of our financial affairs, and many other elements of daily, personal life.  Even worse, they have become too vast and complex to be administered faithfully or complied with loyally. 

We could fault the executive branch bureaucrats who make them or the Congressmen and Senators who write the laws, but these people are no smarter or dumber than the rest of us, and just as well meaning.  They just have an impossible job.  No one can know enough to run so many things from Washington.

Consider the big issues that seem to have Washington all tied up in knots—in turn afflicting all the rest of us.  The new national healthcare systems are breaking down even as they get started.  National rules for farmers have Congress stuck over who should get subsidies and who should not.  National tax plans designed to take from some to give to others divide the people into winners and losers.  Environmental regulations impose costs on some in order to subsidize someone else.  National education programs follow each other in rapid succession, each with a new and high-sounding name, none of which do much to stem the continued decline in education.  And ever present with all of these national rules are unintended consequences that were not and probably could not be foreseen but which crush people’s businesses, destroy jobs, and disrupt lives.

These are all issues that the Founders never intended for the national government, issues that if governments should address at all should be left to State and local governments, where decisions can be made closer to the people who have to live with the results.

We have at hand a better, competent government, or at least its blueprint.  It is found in the structure of our Constitution that created a federal system.  Our Constitution is the recognition that only through a system that keeps governing as local as possible can a great nation exist in union and harmony.

What we are seeing play out before our very eyes is that our nation not only should not be governed by a central authority, but that it cannot be.  The sooner we recognize that and return to the federal plan of the Founders the happier, and the sooner Washington will be able to function as it should for the benefit of all rather than frustration for all.  The task is too big otherwise and doomed to failure.  It will not be a pleasant failure.

Of Guaranties and Reliance

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)