No more ag subsidies! Sign a petition to Vilsack!

They’re bad for the economy, the world, and farming. Sign our bipartisan petition to send them to the Dustbowl of history!

Agricrap

My grandfather was a farmer; believe me when I say I’m all in favor of family farming as a lifestyle. But massive subsidies are wrecking markets, doing substantial humanitarian damage, and promoting environmental destruction. Stay tuned in the next few weeks for an opportunity to fight farming subsidies.

Bush is a regulate and spend liberal!

Michael Tanner over at Cato is very, very right. Obama can blame Bush or he can blame the free market for America’s recent problems, but blaming both is just ridiculous. The massive trends towards privatization and deregulation in the past eight years that Obama went all Kucinich on during the campaign are not a part of observable reality. If anything, they stopped when Clinton left office.

http://www.cato-at-liberty.org/2009/01/13/of-course-that-implies-he-had-principles/

“President Bush says that he ‘chucked aside my free-market principles’ when faced with the current financial crisis. Well, duh!

The president said that he had no choice because he was “concerned that the credit freeze would cause us to be headed toward a depression greater than the Great Depression.” Even if one accepts that rather contestable premise, one is tempted to ask what caused him to chuck aside conservative and free market principles when he:

* Increased federal domestic discretionary spending (even before the bailout) faster than any president since Lyndon Johnson.
* Enacted the largest new entitlement program since the creation of Medicare and Medicaid, an unfunded Medicare prescription drug benefit that could add as much as $11.2 trillion to the program’s unfunded liabilities;
* Dramatically increased federal control over local schools while increasing federal education spending by nearly 61 percent;
* Signed a campaign finance bill that greatly restricts freedom of speech, despite saying he believed it was unconstitutional;
* Authorized warrantless wiretapping and given vast new powers to law enforcement;
* Federalized airport security and created a new cabinet-level Department of Homeland Security;
* Added roughly 7,000 pages of new federal regulations, bringing the cost of federal regulations to the economy to more than $1.1 trillion;
* Enacted a $1.5 billion program to promote marriage;
* Proposed a $1.7 billion initiative to develop a hydrogen-powered car;
* Abandoned traditional conservative support for free trade by imposing tariffs and other import restrictions on steel and lumber;
* Expanded President Clinton’s national service program;
* Increased farm subsidies;
* Launched an array of new regulations on corporate governance and accounting; and
* Generally did more to centralize government power in the executive branch than any administration since Richard Nixon.”

The Credit Crunch that didn’t happen

Looks like a massive contraction of credit isn’t what started this mess:

http://www.lewrockwell.com/higgs/higgs102.html

How about record inflation that gave us negative interest rates and worthless government bonds, meaning the housing market suddenly looked like the sexiest investment on the planet? Especially when you factor in laws like the Community Reinvestment Act, which actually mandates that banks give loans to high-risk mortgage seekers, and government charters for two cutely-named companies to control 70% of American mortgages without getting the same scrutiny as private banks, it is even more clear that “unrestrained free market capitalism” isn’t to blame for this. Neither is the more Robin Hood-esque “corporate greed.”

USA: Forged in Freedom

(An argument between me, Robert Burack, and Bob Bowen at http://www.weeklyfilibuster.com)

BURACK: Continuing war. Economic collapse. Global threats. Dilution of values. Natural disasters leading to poverty and suffering.

It can all get pretty heavy. Earlier this year, Bill Maher remorsed about the country’s seeming lack of ability to do “great things”. I agreed wholeheartedly. Then we elected Barack Obama.

It’s a new year – a new possibility. The first one hundred days of a presidency are usually the most productive, and I’m excited to see what is going to get accomplished. It’s just going to be nice to finally have a President that asks us to sacrifice something – to be better as a collective whole. Because, if we learned anything in 2008, it was that we’re all in this together.

CAVEDON: We do great things as persons, not as a nation. America was founded on the premise that persons ought to be free, not that nations ought to accomplish “great things.” The greatest things we’ve ever done, like putting railroads across the country, reaping wealth that put Europe to shame, creating a unique literary tradition, making films that are the best in the world, putting man into the sky to fly, and creating not one but two machines that let us communicate globally in an instant (telephones and computers) was all done by personal initiative and effort.

We can do great things. Let’s not politicize everything and look to the government to crusade and dream for us. That’s dictionary “totalitarianism” – the idea that the state should have total ambition, total reach, and total resources ready to address any issue that “the people” want it to.

BOWEN: Let’s look at what we have done together. We put a man on the moon. We saved Europe and became rich at the same time with the Marshall plan. We ended racism in our legal systems with the Voting Rights Act and the Civil Rights Act. We used Social Security to save our senior citizens from abject poverty. We faced down Stalin and Khruschev. We ensured people’s life savings with the FDIC. We proved to the world that democracy could work and now event the most brutal totalitarian regimes pretend to be democratic.

If that were all, then we would meerly be a wonderful nation. Democracy is not all about individuals. Some of it is about what we choose to do together. The tasks that we recognize are simply too great to do alone. It is those tasks on which a national spirit thrives. We face great challenges in the next several decades, but with a track-record like the one we have, we have reason to be confident.

Every day, people suffer and die of terrible diseases. How is it acceptable that we are doing less than everything that we can to cure cancer, MS, AIDS, huntingtons, alzheimers, and dozens more? This is the work of a great nation. In the richest country in the world, middle and working class people are bankrupted by medical bills because we are the only nation in the world without universal health insurance. We owe it to the uninsured and the under-insured to fix our system.

By the way, something I had to get out: to lay railroads across this country we exploited Chinese immigrants to pay them low wages in jobs with high fatality rates because of racism. Let’s not tout that as one of our greatest achievements.

CAVEDON: We put a man on the moon; I’ll chalk that one up for the Feds. Saving Europe? Please. We didn’t enter the war until we were directly hit, at which point doing anything less would have been cowardly. The Marshall Plan helped make inefficient bureaucratic welfare states throughout Europe possible by breaking prosperity away from economic sanity. We ended racism in our legal systems, sure, but never forget that it was legal systems that made institutional racism possible. We used Social Security to force every American, no matter how well-off or far-sighted, to buy into socialized pensions that will either bankrupt themselves in a few decades or face privatization (not to mention that our seniors were NOT living in abject poverty before Social Security and the market has grown by a third in the past forty years! Show me any Social Security account with that kind of growth, even after factoring in recession!). We faced down Stalin? Where? We faced down Khrushchev by taking American missiles out of Turkey quietly – hoorah humility. We proved to the world democracy and free markets could work by being rich and free without central control of our lives and money.

America is doing more research than any other nation on the planet to research cures for everything from cancer to HIV/AIDS to genetic diseases to heart disease. Our private system of health research and insurance means that people can choose to pay for more experimental treatments than they are elsewhere. In the UK, every treatment must be certified by a central government body. One of the criteria they use for certification is cost effectiveness. If a treatment does not extend average life expectancies by a certain amount per pound spent, it is not approved. A recent kidney treatment extended average life spans by six months in patients; unfortunately, the government cost ratios mandated at least a year of improvement before the drug could be used. In America, you are free to make your own choices about the kind of treatment you need with your doctor. Unfortunately, new HHS Secretary Daschle’s plan could change that: http://www.reason.com/news/show/130726.html

Universal health insurance will not come without dramatic new government control of the health care system. 130,000 pages of Medicare regulations already set the standards for what is cost-appropriate. Believe me, I’ve purchased more than one wheelchair and other pieces of medically necessary equipment through private insurance and still had to have my needs meet state standards. As long as the government is footing the bill for health care, it and not competition, my freedom to pick insurers, and my doctors will have the power to ultimately say what I can consider. If we want to truly help the poor, let’s limit tort and liability so that doctors can take patients as Good Samaritans and make house visits without fearing the lawyer. Let’s give more tax deductions for research of new drugs and cut back on restrictions that prevent people from freely choosing alternative and experimental treatments. Let’s shrink down Medicare and Medicaid so that more private insurers can be innovative with their coverage plans.

Finally, as for railroads, the labor standards sucked and were abusive, fine. In the end, though, it is perhaps more of a testament to the dedication of Chinese immigrants that the system came out as well as it did, just as Southern agriculture is a credit to the slaves who built it from nothing. In so much as the overlords and task masters get credit, you are right, it is wrong because so many were forced to work without contracts they freely entered. Perhaps, though, the end result is a source of pride for the people whose ancestors still worked through it all and made something impressive. But then, I’m just another white guy from the middle class who cannot really speak of such things.

Equality through Capitalist Mobility

Contrary to popular media headlines, the average American is now making approximately 20% more than his father. Much of the change has been in non-monetary compensation, meaning that workers are now getting more health care, 401 (k)s, vacation days, and optional training than ever before. That, coupled with more productivity, means the average American can buy things today that were impossible even two decades ago: personal computers and music players, four phone lines, flat screen TVs, central air, imported cars, digital cameras, video cameras…

That growth has not been limited to the rich. Now, even most poor households have TVs, computers, cell phones, freezers, climate control, and other amenities that were limited to at least the middle class a few decades ago.

America is more unequal in terms of short-run wealth, maybe, but what about social mobility, another crucial factor in equality (in the long run)? France’s presidents have been culled from elites at the top civic universities for years, and business leaders in the UK are often descended from old lines of prestige (Sir Richard Branson, anyone?). Meanwhile, in the US, Warren Buffett has lived in the same modest house that he first bought fifty years ago when it was all he could afford and the president-elect grew up in a broken urban household.

Our willingness to have less short-term equality by lowering tax rates and reducing regulations in fact makes the field more open for nouveaux riche to get a foothold. Fewer tariffs, subsidies, corporate taxes, labor regulations, and nationalized industries means less of a skewed field towards established corporations and more room for the kind of innovation and creativity that means the powerful stay on their toes and the young guns just might have a shot at glory.

The exception to this rule, of course, is government action. America has joined Britain in subsidizing its banks, meaning fresh lenders with new business strategies will be unlikely to take the place of disastrously bad management. America has joined France in subsidizing its automakers, meaning new companies and even foreign-owned companies better set to meet the market’s demands are shoved back.

The kind of inequality that we need to worry about more than any other is the kind that puts trenches in the playing field of the market and that combines the power of politicians and corporate elites. It is the abandoning of the free market for corporatism. It is the rise of those too big to fail backed up by those to important to lose.

It is, in a phrase, government intervention.

Maybe We’ll Get a Free Market Out of the Deal!

Compare.

Exhibit A: “…Third, institutions that are too big to fail have turned to be too big to manage. It is vital to get Freddy Mac, Fannie Mae and AIG away from the Washington politicians, lobbyists and bureaucrats. A method of orderly receivership and sound return to market disciplines is essential. A policy of capitalism for the successful and socialism for the failures is unsustainable. A policy of welfare for the Wall Street rich will sicken the entire political system and cripple the economy. Fannie Mae and Freddie Mac clearly should be broken up into smaller companies because they are clearly far too big to manage and far too dangerous and over time they should be weaned from their government endorsements and they should cease to be government sponsored enterprises with future loans made only with market security.

Fourth, the institutions in receivership should be barred from hiring lobbyists or encouraging political contributions. It is intolerable to have those who are soaking the taxpayers use the taxpayers own money to manipulate the system to get even more money out of the taxpayers. .

Fifth, we should insist on new transparency for financial systems so people in the future will know when cunning and clever people are manipulating reality in the pursuit of ill-gotten wealth.”

Exhibit B: “The plan also calls for: participating firms to disclose the value of the mortgage assets on their books, ending Fannie Mae and Freddie Mac’s securitization of “unsound mortgages,” reviewing the performance of the credit rating agencies and having the Securities and Exchange Commission audit failed companies to ensure their financial standing was accurately portrayed.” Look familiar?

Exhibit B is CNN’s description of the Republican plan to get the economy back on the right track, announced this evening. Exhibit A is from Newt Gingrich’s 18-point plan to solve the financial crisis, which was written… last Sunday. Hmm. Regardless of your feelings on the fiscal crisis, it looks like the old Georgian is pulling quite a few strings lately. After all, he coined a nifty little campaign theme a few months ago. In its latest incarnation, it became the catchy “Drill, baby, drill!” Anyone else seeing him on a McCain Cabinet come next year?

As for the crisis itself, it is high time to let Wall Street go ahead and lose some weight. Many talking heads have been quick to point to corporate irresponsibility and a lack of transparency as major reasons for the financial market meltdown. I am inclined to agree, but these critiques do not get to the real meat of the problem, nor do they offer any reasonable free market policies for reform. Indeed, the greatest problem is one that can be solved by looking back at the government: inflation.

What is it that ultimately made Wall Street lose its mind and make these bullsh loans in the first place? Inflation. The presence of hundreds of billions of dollars in the markets over the years that should not exist hurts. It does not hurt unconditionally, though. For a while, perhaps three or five years, it produces lower-than-expected unemployment and the economy grows. Combine that with some fortunate mishaps in East Asian markets and a rapid expansion of free trade and you have the Clinton years. Now, though, the chickens are coming home to roost.

All that money that the Fed pumped into the economy to “lower interest rates” certainly did lower interest rates: it lowered them so much that anyone and everyone could get loans and mortgages. Poor credit? No credit? Big problem!

Now, we are suffering the consequences. Giving capitalists hundreds of billions of dollars to play with and then failing to demand any semblance of transparency in transactions was like shipping tons of crystal meth to middle-class white teenagers and mandating that they draw their bedroom shades. Oops.

The proposed solutions are as ridiculously stupid as current federal fiscal policy, without even attempting to break the power of vain politicians looking for a poll boost. Treasury Secretary Henry Paulson, former CEO of Goldman Sachs, has proposed a $700 billion buyout of bad mortgages. Basically, since these mortgages were so deadly they killed Wall Street, Paulson and President Bush think it’s high time that the American taxpayers start bearing the burden. Why suck poison out of a wound when you can just drink it down? And drink it down we will if a buyout goes through. As economist Yves Smith reminds us, “(the proposed buyout) gives the Treasury imperial power with respect to a simply huge amount of funds. $700 billion is comparable to the hard cost of the Iraq war, bigger than the annual Pentagon budget. And mind you, $700 billion is not the maximum that the Treasury may spend, it’s the ceiling on the outstandings at any one time. It’s a balance sheet number, not an expenditure limit.” This is not to mention that $700 billion more may well be enough to save the very businesses that need to die most, all at the expense of the American taxpayer. Bush and Paulson are capitalists, all right. Too bad they oppose free markets.

Fortunately, not all Republicans and economists have whored out to the mighty pimp of corporate socialism. Senator Richard Shelby of Alabama, ranking minority member on the Senate Finance Committee, appears to have worked behind the scenes with grassroots activists and possibly even Newt Gingrich himself to engineer the failure of the buyout bill this afternoon in the annals of the White House. Popular opinion seems mobilized against the proposals, with even liberal-leaning sites like CNN showing majorities against the plan in online straw polls.reason Magazine, a mainstay of libertarian thought, ran an article online tonight at http://www.reason.com/news/show/129041.html featuring the perspectives of high-powered and well-credentialed economists, including the above-quoted Yves Smith, who are devoted to the free market, even in the face of corporate power. These guys get it: Fannie Mae and Freddie Mac are mercantile messes created by the government, big business baddies are about to milk the federal budget for all it’s worth, transparency and non-intervention are the kind of spooky adherence to principles we need most right now, and (gasp!) a return to the gold standard seems to be the only reasonable way to save the economy from the politicians and restore some sanity to finance markets.

Before we think about making voters comfortable and looking like we are doing something, and before we elect another corporatist president ready to sign a pact with the devils of Wall Street, and before we throw up our arms and all vote Socialist, let’s give the free market a real shot at it. Rather than letting shocks and fears scare us into giving the government massive new powers, like we did after 9/11 and in the wake of the Great Depression, let’s try a little sanity and principle.

After all, free markets have always been a lovely, all-American alternative to capitalism. And that may be the best offer that Wall Street giants and the Fed have ever unwittingly given the American people.

CNN article: http://money.cnn.com/2008/09/25/news/economy/deal_reached/index.htm?postversion=2008092513
Gingrich’s plan: http://solutionsday2008.com/blog/2008/09/get-the-politicians-out-of-the-economy-recipe-for-sound-economic-growth.html
reason Magazine article with free market economist quotes: http://www.reason.com/news/show/129041.html

What Bob’s Discount Furniture Can Teach Us About Capitalism

While listening to the radio this evening, I heard an ad for Bob’s Discount Furniture. For those of you unlucky enough to not live near Bob’s sphere of influence, the chain sells, well, discounted furniture. Some of their goods are used and perhaps slightly worn. Their prices are, therefore, naturally lower than those of your big box stores like Bedding Barn and Sears. Lately, though, Bob has been making an excellent point in his advertisements: he sells furniture with no gimmicks.

With Bob, you will not get free installation, free shipping, or discounts on internet orders. About all you might get is some free popcorn if you hike out to one of his fine retail locations. This may seem like a simple matter of straight talk and folksy charm, but the lack of financial trimmings makes Bob’s one of the most ethical retailers in the market today.

If you want to learn Economics 101, the first thing you need to understand is that there is no such thing as a free lunch. Ultimately nothing is free save generosity. Businesses do not provide generosity; they provide goods and services in exchange for a fee. Therefore, they will not give you anything free no matter how much they appreciate you as a customer, hold true to “the true meaning of Christmas,” or want to stimulate the economy. Why not? Because they cannot give you something for free. Nothing is free.

Imagine this fairly plausible scenario. Joe’s Subaru decides that they need something to boost sales in the face of increased gas prices, so they throw in a complementary 2-night, 3-day trip to Lulu’s Resort in Tahiti, worth $700, with the purchase of any vehicle over $22,000. There are two ways Joe can pay for this perk: either he can be a total dirtbag and charge you an extra $650 or so in markup prices, or he can do the “ethical” thing and pay for it using company funds. After all, assuming he is running a decent car import business, he can probably scrounge up a couple hundred thousand bucks from profits to cover the costs, especially after factoring in the new sales. Most of the time when we think about gimmicks, that’s where the money trail in our minds end.

But there is a crucial, simple question missing from this brief overview: what would happen to that $700 in profits if it did not find its way to Tahiti? There are countless possibilities: perhaps it would have gone to charity. Or to the savings accounts. Or to new ad campaigns. Or to employee end-of-the-year bonuses. The first case might be worth looking at further, but not here and now. In the second case, more money in the bank means that another person or company can access $700 to help buy a new home, open a new business, or even take out a new car loan. In the final two cases, the money eventually or directly finds its way into the hands of ordinary folks with ten thousand financial decisions and wishlist items in any given year.

The point is this: the final three cases, which are the only ones we are discussing right now, all lead to money furthering the choices available to investors and consumers. In essence, they mean that money fulfills its primal role, which is to give people the freedom to obtain what goods and services they please. That is the very heart of capitalism. That heart is pierced every time some gimmick comes along like Joe’s trip to Tahiti.

Why? Though it may seem innocent enough, the normal person buying a new car would not ordinarily choose to spend $700 taking off to Tahiti. There are more pressing concerns in life for most of us that we would choose to address first if we had any say in the matter. As consumers, we believe that we are receiving a free gift in the trip. But for the entrepreneur or worker who has however much less money because it is now subsidizing trips to Tahiti for happy customers, that loss is a loss of freedom. If we would not expect an entrepreneur with nothing to gain in the matter or a worker with mouths to feed at home to pay for someone else’s Tahitian getaway, why do we expect them to indirectly? If you want a Tahitian getaway, pay for it yourself!

Gimmicks are a very bizarre form of economic tyranny by businesses. There are some cases where the loss of economic freedom might be justified. For example, including batteries with toys or offering free shipping might be tolerable, given that the products being purchased are unusable without them.

The fact remains that most of the other gimmicks out there are little more than freeloading. Sure, giving away a free iPod with every new microwave might seem harmless, but it is nickel-and-diming investors and workers out of their right to do as they please with money. It is only because that money is not predictable or guaranteed that investors and workers are even willing to part with it in the first place. Since it is not yet their money, there is no direct, accountable loss to them.

When the day’s done and you settle into that hammock at Lulu’s, clutching the keys to your new Tribeca, though, know that it was not free. Know that some poor schmuck got gipped out of that inventory upgrade or that ribeye steak tonight because he did not get loaned or paid what he could have been if you were still bored in Connecticut.

Alternatively, go buy a new bed from Bob’s, pay to ship it in yourself since you are the only person who will actually be sleeping in it and that’s only fair, and sleep soundly in it knowing that the money saved from subsidizing meal gift certificates or giving you free toss pillows is now empowering someone to spend money they earned as they please.

I am sure the same principle applies to government, but at that point things just get scary.