Republican Amnesty: “In Lies We Trust”

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Something is terribly wrong with the ability of the Republican leadership in the House to think clearly or speak honestly.  The Speaker authorized what will be a $1.43 trillion 12 month out of control omnibus spending bill. It is a 1600 page bill that had a massive amounts of pork in it, and is another bill that no one read before they voted for it.  Pelosi never authorized such a large out of control spending bill when she was Speaker. This bill will contribute to the bankruptcy of the Republic.

That spending bill funded the the hiring of 1000 new federal employees, for 9 months.  Those new employees will not have had the experience in immigration matters to interview each applicant, or the years of experience in national security to weed out criminals, terrorists, and fraudulent applicants.  Yet those new employees will be issuing work permits and social security numbers to 5 million illegal immigrants.  They will lack the experience to determine if the issuance of those work permits and social security numbers, to millions of illegal immigrant that apply have been residents in the US for 5 years, or if issuance of those permits will be in the best interest of the National Security of the Republic.

The American Chamber of Commerce and the Speaker know that issuing work permits and social security numbers to 5 million illegal immigration will depress wages for the 43 million unemplyed Americans seeking employment.  The issuance of work permits and social security numbers to 5 million illegal immigrants was recently determined to be Unconstitutional by a US Federal Judge in Pennsylvania.

The American voters will hold the Speaker of the House responsible for ignoring the will of the American voters; he said he was opposed to Obama’s illegal Execitive Order on immigration, and for his outright support for the occupant in the Oval Office’s out of control spending.  The omnibus spending bill was not what the voters were promised by the Republican leadership before the mid-term election.  The American voters feel they were betrayed by the Speaker, and that he never intended to honor his pledges to the American people.

Please read the below listed article that is much more specific in details and includes quotes by the Speaker.

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Lawrence Sellin, Ph.D.

Republican Amnesty: In Lies We Trust

by LAWRENCE SELLIN, PHD December 16, 2014

It was a Republican electoral head fake.

They always favored amnesty, but prior to the mid-term elections, in order to mobilize their voter base, the Republican leadership pretended to oppose Barack Obama’s threat of executive amnesty.

On February 24, 2014, the US Chamber of Commerce, the heart and soul of the Republican establishment, laid the groundwork for Republican amnesty for illegal aliens:

“There will never be a perfect time for reform. The political landscape isn’t going to be any more conducive to reform in two years or four years,” wrote Chamber President Tom Donohue. “The case for immigration reform is clear. The need is undeniable. The time is now.”

Donohue had previously stated that they would “pull out all the stops” to get immigration reform in 2014. The group planned to spend $50 million to blunt the influence of the Tea Party, largely because it opposed amnesty, and millions more to push for immigration reform legislation that the Congressional Budget Office had said would lower the wages of American workers

Having received his marching orders, on March 4, 2014, House Speaker John Boehner (R-OH) said that he wanted to get amnesty legislation done before the end of the year, even as he insisted that the immigration reform he and President Barack Obama had discussed in their White House meeting was not “amnesty:”

“He wants to get it done. I want to get it done,” Boehner said. “But he’s going to have to help us in this process.”

Then came the head fake.

Knowing support for amnesty was a losing issue, the Republican establishment focused their opposition on executive amnesty hoping that, if it was presented forcefully, voters might also think that it included any form of amnesty.

During the run-up to the mid-term elections, Reince Priebus, the chairman of the Republican National Committee (RNC), called executive amnesty “un-American” and “unconstitutional, illegal, and we don’t support it.”

Priebus promised that, if the Republican Party takes the Senate, they will do everything in their power to stop Obama from proceeding on the executive amnesty.

Even after the election, while simultaneously criticizing executive amnesty and oozing hypocrisy, Boehner said:

“That is not how American democracy works,” he said. “By ignoring the will of the American people, President Obama has cemented his legacy of lawlessness and squandered what little credibility he had left.”

“Republicans are left with the serious responsibility of upholding our oath of office. We will not shrink from this duty, because our allegiance lies with the American people,” he said. “We will listen to them, work with our members, and protect the Constitution.”

Among voters, strong “majorities of men (75%), women (74%), whites (79%), blacks (59%), and Hispanics (54%),” in addition to tri-partisan majorities of “self-identified Republicans (92%), Independents (80%), and Democrats (51%)” did not want Obama to enact executive amnesty.

Yet, according to Reps. Michele Bachmann (R-MN) and Steve King (R-IA), the political establishment, both Republican and Democrats, made a decision months ago that they were going to approve amnesty.

HR 83, a bill literally crafted behind closed doors in cigar smoke-filled rooms by a handful of legislators and staffers, endorses and fully funds Barack Obama’s unconstitutional executive actions granting amnesty to illegal aliens, including Social Security benefits to support them.

Despite the fact that the Republicans sailed to victory in one of the biggest election routs of the past century and grew to historic levels in the U.S. House, they never intended to honor their pledges to American voters.

They did so not out of weakness.

In order to preserve their fragment of the political landscape as junior partners in a corrupt status quo, it is a more defensible position for the Republican establishment to be deemed eunuchs and cowards rather than what they are; bold-faced liars who care little about the Constitution and represent only themselves and the interests of their wealthy financiers.

You see; that too is a head fake.

Lawrence Sellin, Ph.D. is a retired colonel with 29 years of service in the US Army Reserve and a veteran of Afghanistan and Iraq. Colonel Sellin is the author of “Restoring the Republic: Arguments for a Second American Revolution “. He receives email at lawrence.sellin@gmail.com.

Does Government Spending Boost the Economy?

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Stimulus boosters assume their conclusions – by Robert P. Murphy

A recent article in Business Insider by Jim Edwards offers putative “Proof That Government Spending Cuts Hurt Economic Growth.” He even goes so far as to claim that “war is good (economically).” In this article, I’ll explain what’s wrong with this popular and age-old fallacy.

First, I want to point out something quite amusing. Edwards relies on a Financial Times story that presents a series of charts produced with data from the Bureau of Economic Analysis (BEA). Here is one of the charts, along with Edwards’s description:

This chart, from the FT’s Matthew Klein based on data from the BEA, seems to show that government has a pretty straightforward effect on GDP. When spending goes up, it adds to economic growth. When it goes down, it subtracts from it and hobbles the economy:

Edwards seems to think that the above chart shows at least a correlation between government spending and economic growth. After all, he wrote that the BEA chart “seems to show that government has a pretty straightforward effect on GDP.” But as Scott Sumner pointed out in amusement when he saw the article, the chart does nothing of the kind.

Look carefully at the legend. The various colored rectangles are different components of government spending. Specifically, the rectangles indicate how the change in each component — positive or negative — relates to the change in overall GDP. The black line is not GDP growth, but is instead the sum of the various components of government spending. In short, Matt Klein at the FT is telling us that if we take the BEA’s word for how much each component of government spending contributed to GDP growth in each quarter, then we can stack those numbers on top of each other and even add them up! Contrary to Edwards, the FT chart doesn’t “show” anything at all, except that the BEA each quarter announces how much various components of government spending contributed to, or subtracted from, GDP growth.

But let’s move past Edwards’s hilarious misinterpretation of the chart and get to the more fundamental issue. The problem with these ostensibly scientific and empirical measurements is that GDP itself is definedto include government spending. As they teach in any introductory macro class, the expenditure-based formula for GDP is

GDP = C + I + G + NX,

where C and I are private consumption and investment, G is government spending, and NX is net exports (gross exports minus gross imports).

Now we see the problem. Even if we set aside the serious theoretical and practical difficulties with the aggregation necessary to estimate these figures, we are still stuck with the fact that the above formula is an accounting tautology, not an economic theory. Yes, other things equal, an increase in government spendingG on the right-hand side will make GDP on the left-hand side increase dollar for dollar. The whole argument, however, centers on whether other things will remain equal.

For example, in a depressed economy with excess capacity, the typical Keynesian will say that an increase inG will cause private consumption and investment to increase also, so that a dollar of extra government spending will cause GDP to rise by more than a dollar — the famous Keynesian multiplier.

In contrast, the typical Austrian- or Chicago-school economist will say that an increase in G will tend to make private-sector spending fall by a greater amount, so that a dollar of extra government spending will cause GDP to fall. (We could get the confident support of free-market economists for this conclusion if we stipulate that the extra government spending is financed through higher taxes, which destroy more private after-tax income than they raise in extra revenue.)

Moreover, even if “total GDP” rises somewhat because of an increase in government spending, that wouldn’t be a good thing, because $10 million spent by politicians is not nearly as likely to channel resources to valuable uses as $10 million spent by private investors.

After this discussion, we can see why pretty charts from the FT showcasing government spending’s “contribution to GDP growth” quarter by quarter don’t really mean anything. It’s the same for the ex post “empirical” analyses that concluded that the Obama stimulus package “saved or created” such-and-such million jobs. The underlying models that generate these estimates assume a Keynesian world, and thus cannot test whether the Keynesian model is correct.

The critical yet missing piece of information in these analyses is the counterfactual, to know what the size of the economy and level of employment would have been in the alternate universe where government spending had taken a different course. From a naïve, “let the facts speak for themselves” perspective, the Obama stimulus package clearly hurt the economy. Remember that unemployment shot up higher with the stimulus than the Obama team warned people would occur without the stimulus.

The exact opposite happened with the so-called sequester. For example, the firm Macroeconomic Advisers, using a Keynesian model, predicted that the spending cuts would knock 1.3 percentage points off of second quarter 2013 growth, and 0.6 percentage points off of third quarter 2013 growth. Here’s what really happened:

It’s the mirror image of the Keynesians’ stimulus blunder. The economy grew faster with the sequester than the Keynesians said would occur without the “drag” of the spending cuts. In the case of the Obama stimulus, their excuse was, “Wow, the economy was worse than we realized, good thing we got that deficit spending in there, inadequate though it was.” In the case of the sequester, their response would have to be, “How about that, the economy was stronger than any of us realized. We dodged a bullet, since the sequester dragged down growth so much.”

In summary, we shouldn’t trust empirical “proof” that government spending boosts the economy, when the alleged evidence so often rests on a model that assumes as true the very issue under dispute. It is particularly absurd to argue that government spending on war makes us richer, because war doesn’t merely deploy scarce resources into unproductive lines — it actually destroys both equipment and workers.

ABOUT ROBERT P. MURPHY

Robert P. Murphy has a PhD in economics from NYU. He is the author of The Politically Incorrect Guide to Capitalism and The Politically Incorrect Guide to The Great Depression and the New Deal. He is also the Senior Economist with the Institute for Energy Research and a Research Fellow at the Independent Institute. You can find him at http://consultingbyrpm.com/

Kickstarting It Old School: Crowdfunding may seem new, but it has a long history by Iain Murray

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If you’ve been to crowdfunding sites like Kickstarter and Indiegogo, you might think that they are new phenomena, made possible only by the wonder of the Internet. That’s true in part, but crowdfunding actually has a long and proud tradition dating back well before the web was a twinkle in Tim Berners-Lee’s eye.

As my colleague John Berlau details in his new paper, “Declaration of Crowdfunding Independence: Finance of the People, by the People, and for the People,” entrepreneurs and inventors had a long track record in the early part of the last century in seeking funds directly from large groups of interested supporters. Henry Ford, for example, sought funding for his first car from friends, colleagues, and even his lawyer, whose investment of $5,000 in 1903 turned into $12.5 million by 1919.

Indeed, mass solicitations for funding were common among colonial-era entrepreneurs seeking to develop ideas into new ventures. Ben Franklin created a fire department and insurance company using the model in 1752. The insurance giant MetLife was founded by solicitation of policyholders in the 1860s. Railroads — the high-tech start-ups of the early 19th century — routinely raised money from citizens who could expect to use the service.

As the example of Henry Ford’s lawyer shows us, there was a crucial difference between earlier crowdfunding campaigns and today’s web-based equivalents: those who put up money got an investment share in the company rather than simple perks such as T-shirts or downloadable movies.

What happened? To put it simply, the Progressive Era happened. Beginning in the late 1910s, states began to pass laws restricting investment solicitations, based on the idea that people were being lured into turning over their savings for promises of pie in the sky. Progressive reformers wanted to protect vulnerable investors from losing their shirts; some even declared such investment sinful.

As is so often the case, these “Baptists” were accompanied by bootleggers in the form of local banks, who feared they were losing savings accounts to these investments. As Berlau points out, for example,

Kansas Bank Commissioner J.N. Dolley, who pushed through that state legislature the nation’s first “blue sky” law, was a former bank executive who worried openly about deposits being withdrawn for stock offerings. He complained, “The banks hear of such cases because usually the victim draws money out of a bank to buy his wildcat mining shares or his stock in a lunar oil company, or whatever it may be.”

Eventually, the federal government got into the act. It created the Securities and Exchange Commission (SEC) in 1934, which imposed more and more restrictions on how companies could raise money.

SEC rules prevented entrepreneurs from soliciting investment from the public and eventually created the class of the approved “accredited investor,” which turned general investment into a rich man’s pastime. And the reason there are so few peer-to-peer lending operations like Prosper or Lending Club is because the SEC requires that every loan made on peer-to-peer websites submit a separate prospectus or securities filing.

These restrictions on investment, dating from early in the 20th century, are a perfect example of what Competitive Enterprise Institute founder Fred Smith calls the Progressive Era’s derailment of classical liberal evolution.

The good news is the tide can be turned back. And the development of new technologies like peer-to-peer lending and crowdfunding platforms represents the first steps in restoring American finance’s innovative spirit.

Debt and equity crowdfunding afford much greater potential for boosting companies, jobs, and the economy than the current versions of fundraising. Debt-based crowdfunding offers a specific rate of return, while the equity version offers an ownership stake similar to a share of stock and a claim on future profits.

These forms of funding allow a firm to expand quickly. According to a study by Crowdfund Capital Advisers, “While pledge or donation crowdfunding lead[s] to an increase of 24 percent in revenues, equity-based crowdfunding resulted in a quarterly increase of 351 percent[,] not including funds raised via the equity round.” In addition, “87 percent of firms either had [hired] or intended to hire new employees as a direct result of having raised equity or debt financing via crowdfunding.”

Thankfully, some in Washington have noticed these possibilities. The Jumpstart our Business Startups (JOBS) Act, which became law in 2012, has allowed limited investment crowdfunding. The SEC, however, has dragged its feet in issuing regulations pertaining to the liberalization and has taken a more restrictive view than seems to have been Congress’s intent.

The new Congress could go further. It could create a new, high upper limit for crowdfunding offerings and other exemptions from securities laws at $10 million, up from $1 million. The Startup Capital Modernization Act of 2014 (HR 4565), which contains just such a measure, has already been passed out of committee in the House. Congress could also significantly decrease, or abolish, the qualifications necessary to be an “accredited investor.”

The United Kingdom abolished its version of the accredited investor rule in the mid-1980s. That allowed ordinary people to share in the success of the Thatcher-era privatizations, which involved crowdfunding solicitations such as the “Tell Sid” campaign.

If equity crowdfunding worked for Henry Ford, it can work for people today.

ABOUT IAIN MURRAY

Iain Murray is vice president at the Competitive Enterprise Institute.

We’re Number Two

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The U.S. was the world’s number one economy prior to World War II, but it took off big-time after the war and there has not been a day of my long life in which we were not number one—until now.

The International Monetary Fund recently released its calculations regarding the world’s economy and concluded that China is the number one economy, producing $17.6 trillion in terms of goods and services, as compared with the U.S. producing $17.4 trillion. It’s not an overwhelming gap, but it is a warning that our economy is going in the wrong direction and has been before and since the financial crisis of 2008.

Writing in Market Watch, Brett Arends, put it succinctly. “As recently as 2000, we produced nearly three times as much as the Chinese.”

As discomforting as the IMF news is, the worst news has been significantly under-reported in the nation’s media. The U.S. is now $18 TRILLION in debt.

In February of 2014, CNS News reported that “The debt of the U.S. government has increased $6,666 trillion since President Barack Obama took office on January 20, 2009, according to the latest numbers released by the Treasury Department.”

President Obama has been responsible for more debt over the course of his two terms to date than all previous U.S. Presidents in the first 227 years combined.

Writing in the Daily Caller, Tracy Miller, an associate professor at Grove City College, noted that “Over the first five years of Obama’s presidency, the U.S. economy grew more slowly than during any five-year period since just after the end of World War II, averaging less than 1.3 percent per year. If we leave out the sharp recession of 1945-46 following World War II, Obama looks even worse, ranking dead last among all Presidents since 1932.”

Why was this man reelected in 2012? One is inclined to find common ground with ObamaCare “architect”, Jonathan Gruber, who called voters “stupid.”

I prefer to believe, however, that the voters have been subjected to a non-stop campaign in the national media to get the first black American elected President and then to ignore some truly horrible facts about his two terms in office thus far.

The voters are not stupid, but they have been deliberately misled by the careful exclusion of news about the actual state of the economy.

Reality caught up with Obama in the two midterm elections of 2012 and 2014. The voters shifted power in Congress to the Republican Party. In the most recent midterms thirteen of the Senators who had voted for ObamaCare were defeated.

As December began, CNS News reported that “The labor force participation rate remained at a 36-year low of 62.8 percent in November, according to the Bureau of Labor Statistics.”

The BLS measures the percentage of “non-institutional population” in the labor force, those 16 years or older who were not in the military or working in a governmental job, i.e. the private sector. In September, the rate was the lowest since February 1978!

To put this in perspective, by November, the number of beneficiaries on the Supplemental Nutrition Assistance Program—food stamps—had topped 46,000,000 for 36 straight months according to data released by the Department of Agriculture. The Census Bureau reports that there are 115,048,000 households in the nation as of August 2014. That means the number of households on food stamps equaled 19.75% of all the households in the nation; one out of five. Those on this program outnumber the entire populations of nations such as Poland or Argentina.

It doesn’t stop there. On December 3 CNS News reported “The total number of people in the United States now receiving federal disability benefits hit a record 10,982,920 in November, up from the previous record set in May, according to newly released data from the Social Security Administration.”

How bad is the U.S. economy? In August, CNS News’ Terence P. Jeffrey reported that “109,631,000 Americans lived in households that received benefits from one or more federally funded ‘means-tested programs’—also known as welfare—as of the fourth quarter of 2012.” The data came from the Census Bureau. That was the same year Obama was reelected and it represented 35.4% of the entire U.S. population at the time. By the end of 2012, it had increased to 49.5%!

Means-tested government programs include Social Security, Medicare, railroad retirement, unemployed compensation, worker’s compensation, Veteran’s compensation and Veteran’s educational assistance. The largest of these programs are Social Security and Medicare.

Why does the U.S. have an $18 TRILLION dollar debt?

Consider that, in fiscal year 2013, the federal government paid out more than $2 TRILLION in benefits and entitlements according to data from the Bureau of the Fiscal Services’ Monthly Treasury Statement. You don’t have to be a mathematician to conclude that, if more Americans were working, there would be less need for many of the benefits programs and the largest among them would be more financially sound.

News of new jobs is always welcome, but it hides the deeper problem of too many unemployed and while Congress continues to debate what to do about Obama’s effort to give work permits to illegal aliens and protect them from deportation, the Center for Immigration Studies announced in June that “Since the year 2000 all of the net increase in the number of working-age (16 to 65) people holding a job has gone to immigrants (legal and illegal).” Should the U.S. make five million or more illegal aliens eligible to compete for jobs with its native-born and naturalized population?

The U.S. must pay billions in interest on its debt. The failure of Congress to address the need to reform the tax code, reduce the deluge of regulations negatively affecting the business and industrial sector, and get control over spending has dug the nation a very deep and dangerous hole.

Statistics can be daunting, but we all can feel that something is terribly wrong with the economy despite the news about a vigorous Wall Street. The fact remains that Main Street is in trouble. The nation requires an economy in which new businesses are created and existing ones can afford to expand. That is not happening.

That is why we are Number Two.

© Alan Caruba, 2014

Rep. Vern Buchanan (R-FL 16) Busts the Budget — Votes for Amnesty and Obamacare

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The Republican co-Chair of the Florida delegation is Congressman Vern Buchanan representing District 16. Buchanan’s campaign website states, “Washington’s irresponsible pattern of borrowing and spending has put our country on a road to bankruptcy.  Unbelievably, America borrows $188 million every hour.  This is simply unacceptable.”

In a December 6th email to constituents Buchanan wrote, “The national debt this week surpassed $18 trillion for the first time in our nation’s history. Since President Obama took office six years ago, the debt has ballooned by nearly $7.5 trillion. Washington’s addiction to spending is putting our nation on the path to bankruptcy.”

In a December 7th InstaPoll Buchanan asked constituents: What action do you think Congress should take to reduce the federal debt, which surpassed $18 trillion this week? Sixty-nine percent of those responding answered “reduce spending.“

Buchanan wants a balanced budget amendment to reign in Congress, but in October 2013 Buchanan voted to raise the debt ceiling and now has given President Obama a victory. The victory is passing a bill that busts the budget, continues to fund pork projects, Obamnesty, Obamacare and will increase the national debt.

The Conservative Review reports:

“This 1700+ page, $1.1 trillion Omnibus spending bill granted President Obama full funding for 11 of 12 federal departments for the remainder of the fiscal year – without any congressional restrictions on his unilateral action on amnesty, Obamacare, and environmental regulations. Worse, this bill actually provided Obama with an additional $2.5 billion in funds to facilitate his executive amnesty. Most egregiously, this 1700-page bill was crafted as a backroom deal by lame duck senators who were rejected by the American public in the November election. Speaker Boehner placed the bill on the floor with only 48 hours to read all 1700 pages.” [Emphasis added]

The Conservative Review gives Buchanan an “F” rating on fiscal responsibility with a score of 53%.”

Did Congressman Buchanan read the bill or did he vote for it first to see what was in it?

Buchanan sits on the House Ways and Means Committee. Does he not understand what he did by voting for this omnibus spending bill? Is Buchanan exhibiting the very “irresponsible pattern of borrowing and spending” that he campaigned against?

Buchanan’s campaign website states, “As a businessman for 30 years, and past Chairman of the Florida Chamber of Commerce, I know what it means to balance a budget, meet a payroll, and exercise the fiscal discipline necessary to keep a business moving forward.” But Buchanan is no longer a businessman. He is a member of Congress. The only payroll he is now meeting is that of the federal bureaucrats in Washington, D.C., at the taxpayers expense.

Buchanan has not exercised “fiscal discipline”. The only thing he is moving forward is President Obama’s agenda. Is that why those in his district re-elected him? Is Buchanan “grubering” those who elected him?

Buchanan’s campaign website rightly states, “Government does not create jobs, small businesses like the thousands located in Southwest Florida create the jobs.” Buchanan has a jobs plan, but it does not help small businesses. Rather it is to provide jobs to even more Washington bureaucrats and Congressional staffers while his constituents pay higher taxes. Small businesses are harmed by Obamacare’s healthcare mandate, which kicks in in 2015. Florida continues to suffer because of omnibus spending bills like the one Buchanan and many of his fellow Republicans helped passed.

Perhaps it is time to hold the Vern Buchanan’s responsible for their irresponsibility! Buchanan ends emails to constituents with “tell me what you think.” Perhaps those who voted for him should?

Here’s a Couple Of Charts That Might Explain Why Congressmen Voted For The ‘CRomnibus’ Spending Bill from IJReview’s Kevin Boyd:

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Illegal aliens get Social Security Benefits thanks to Boehner and his RINOs

The New Congress Must Save the USA from the EPA

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When the Republican Party takes over majority control of Congress in January, it will face a number of battles that must be fought with the Obama administration ranging from its amnesty intentions to the repeal of ObamaCare, but high among the battles is the need to rein in the metastasizing power of the Environmental Protection Agency.

In many ways, it is the most essential battle because it involves the provision of sufficient electrical energy to the nation to keep its lights on. EPA “interpretations” of the Clean Air and Clean Water Acts have become an outrageous usurpation of power that the Constitution says belongs exclusively to the Congress.

As a policy advisor to The Heartland Institute, a free market think tank, I recall how in 2012 its president, Joe Bast, submitted 16,000 signed petitions to Congress calling on it to “rein in the EPA.” At the time he noted that “Today’s EPA spends billions of dollars (approximately $9 billion in 2012) imposing senseless regulations. Compliance with its unnecessary rules costs hundreds of billions of dollars more.”

Heartland’s Science Director, Dr. Jay Lehr, said “EPA’s budget could safely be cut by 80 percent or more without endangering the environment or human health. Most of what EPA does today could be done better by state government agencies, many of which didn’t exist or had much less expertise back in 1970 when EPA was created.”

The EPA has declared virtually everything a pollutant including the carbon dioxide (CO2) that 320 million Americans exhale with every breath. It has pursued President Obama’s “war on coal” for six years with a disastrous effect on coal miners, those who work for coal-fired plants that produce electricity, and on consumers who are seeing their energy bills soar.

AA - EPA the EnemyAs Edwin D. Hill, the president of the International Brotherhood of Electrical Workers, noted in August, “The EPA’s plan, according to its own estimates, will require closing coal-fired plants over the next five years that generate between 41 and 49 gigawatts (49,000 megawatts) of electricity” and its plan would “result in the loss of some 52,000 permanent direct jobs in utilities, mining and rail, and at least another 100,000 jobs in related industries. High skill, middle-class jobs would be lost, falling heavily in rural communities that have few comparable employment opportunities.”

“The United States cannot lose more than 100 gigawatts of power in five years without severely compromising the reliability and safety of the electrical grid,” warned Hill.

In October the Institute for Energy Research criticized the EPA’s war on coal based on its Mercury and Air Toxics Rule and its Cross State Air Pollution Rule, noting that 72.7 gigawatts of electrical generating capacity have already, or are scheduled to retire. “That’s enough to reliably power 44.7 million homes, or every home in every state west of the Mississippi river, excluding Texas.” How widespread are the closures? There are now 37 states with projected power plant closures, up from 30 in 2011. The five hardest hit states are Ohio, Pennsylvania, Indiana, Kentucky, and Georgia.

If a foreign nation had attacked the U.S. in this fashion, we would be at war with it.

The EPA is engaged in a full-scale war on the U.S. economy as it ruthlessly forces coal-fired plants out of operation. This form of electricity production has been around since the industry began to serve the public in 1882 when Edison installed the world’s first generating plants on Pearl Street in New York City’s financial district. Moreover, the U.S. has huge reserves of coal making it an extremely affordable source of energy, available for centuries to come.

The EPA’s actions have been criticized by one of the nation’s leading liberal attorneys, Harvard law professor Laurence Tribe, who has joined with Peabody Energy, the world’s largest private coal company, to criticize the “executive overreach” of the EPA’s proposed rule to regulate carbon emissions from existing power plants. He accused the agency of abusing statutory law, violating the Constitution’s Article I, Article II, the separations of powers, the Tenth and Fifth Amendments, and the agency’s general contempt for the law.

It is this contempt that can be found in virtually all of its efforts to exert power over every aspect of life in America from the air we breathe, the water we use, property rights, all forms of manufacturing, and, in general, everything that contributes to the economic security and strength of the nation.

That contempt is also revealed in the way the EPA spends its taxpayer funding. Senator Jeff Flake (R-AZ) released a report, “The Science of Splurging”, on December 2 in which he pointed to the $1,100,000 spent to pay the salaries of eight employees who were not working due to being placed on administrative leave, the $3,500,000 spent to fund “Planning for Economic and Fiscal Health” workshops around the nation, $1,500,000 annually to store out-of-date and unwanted publicans at an Ohio warehouse, and $700,000 to attempt to reduce methane emitted from pig flatulence in Thailand! “After years of handing out blank checks in the form of omnibus appropriations bills and continuing resolutions,” said Sen. Flake, “it’s time for Congress to return to regular order and restore accountability at the EPA.”

Whether it is its alleged protection of the air or water, the only limits that have been placed on the EPA have been by the courts. Time and again the EPA has been admonished for over-stating or deliberately falsifying its justification to control every aspect of life in the nation, often in league with the Army Corps of Engineers.

If the Republican controlled Congress does not launch legislative action to control the EPA the consequences for Americans will continue to mount, putting them at risk of losing electricity, being deprived of implicit property rights, and driving up the cost of transportation by demanding auto manufacturers increase miles-per-gallon requirements at a time when there is now a worldwide glut of oil and the price of gasoline is dropping.

The United States has plenty of enemies in the world that want it to fail. It is insane that we harbor one as a federal agency.

© Alan Caruba, 2014

RELATED ARTICLE: How Obama and His Environmental Base Are Planning to Eradicate the Oil and Gas Industry

With Cromnibus passed, Boehner surrenders all leverage through 2015

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Well, the “cromnibus” monster spending bill passed last night, and President Obama and Vice President Biden worked hard to get Democrat support — which they did not receive.

The funding measure passed and in doing so, the new incoming GOP majority will have little to no say in funding measures through the entire year — basically half of the new GOP majority Congress. A better approach would have been to execute a continuing resolution (CR) that went into February and then do appropriations by agency, funding what is essential by priority. Instead Obamacare is funded through October next year and funding to President Obama’s illegal immigration executive action — $2.5 billion. However, Speaker Boehner has declared that next February Congress will take up the illegal immigration fight, since the DHS is only funded through February. Whoopee.

In effect Speaker Boehner essentially surrendered the majority which the American people gave the House GOP and with it, the greatest leverage — the power of the purse. Some 1,800 pages, no doubt including pork, has passed which most did not read.

And what if the gambit Speaker Boehner has doesn’t work out next February? That’s the question The Hill asks, writing, “Even if Republicans shut down the Department of Homeland Security (DHS) next year, President Obama could still carry out his executive actions giving legal status to up to 5 million undocumented immigrants. Speaker John Boehner (R-Ohio) and other GOP leaders have punted the funding fight over Obama’s immigration action to February, arguing their new majority will have more leverage to stop the plan dead in its tracks.”

RELATED ARTICLE: ‘Boehner and White House win’: Omnibus bill passes 219-206 – here are the 67 Republicans who voted NO

EDITORS NOTE: This column originally appeared on AllenBWest.com.

CLICHÉS OF PROGRESSIVISM #31 – “Labor Unions Raise Wages and the Standard of Living” by Hans F. Sennholz

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To believe that labor unions actually improve the lot of working people is to suggest that the capitalist economy fails to provide fair wages and decent working conditions. It is to imply that a free economy does not work satisfactorily unless it is “fortified” by union activity and government intervention.

The truth is that the unhampered market society allocates to every member the undiminished fruits of his labor. It does so in all ages and societies where individual freedom and private property are safeguarded. (The process works faster and more efficiently in our high-tech, information age with a labor force more mobile than ever before but it worked in previous times too, so long as individuals were free to accept or reject the offers of employers, or to leave one employer and work either for another or for himself–Editor.)

The reason your great-grandfather earned $5 a week for 60 hours of labor must be sought in his low productivity, not in the absence of labor unions. The $5 he earned constituted full and fair payment for his productive efforts—a voluntary contract he likely entered into because it represented his best opportunity. The economic principles of the free market, the competition among employers, a man’s mobility and freedom of choice, assured him full wages under the given production conditions.

Wages were low and working conditions primitive because labor productivity was low, machines and tools were relatively primitive, technology and production methods were crude when compared with today’s. If, for any reason, our productivity were to sink back to that of our forebears, our wages, too, would decline to their levels and our work week would lengthen again no matter what the activities of labor unions or the decrees of government.

In a free market economy, labor productivity determines wage rates. As it is the undeniable policy of labor unions to reduce this productivity (as measured per man-hour) by forcing compensation up or spreading out the work with restrictive work rules, they have in fact reduced the wages of the masses of people although some privileged members have benefited temporarily at the expense of others. This is true especially today when the unions enjoy many legal immunities and considerable political powers. And it also was true during the nineteenth century when our ancestors labored from dawn to dusk for low wages.

Through a variety of coercive measures, labor unions merely impose higher labor costs on employers. The higher costs reduce the returns on capital and curtail production, which curbs the opportunities for employment. This is why our centers of unionism are also our centers of highest unemployment; they are also the industries that have seen the most dramatic declines in numbers of existing jobs, because like anything else, the higher the price, the less will be purchased. (It’s also why compulsory unionism states for years have shown lower rates of both employment growth and wage rates than so-called “right-to-work” states. See http://www.mackinac.org/4290  – Editor.)

True enough, the senior union members who happen to keep their jobs do enjoy higher wages. But those who can no longer find jobs in unionized industries then seek employment in nonunionized activity. This influx and absorption of excess labor tends to reduce their wages. The resulting difference between union and nonunion wages rates gives rise to the notion that labor unions must indeed benefit workers. In reality, the presence of the nonunionized sectors of the labor market hides the disastrous consequences of union policy by preventing mass unemployment. (Nonetheless, with 94% of today’s private sector workers being completely non-union, and many of them enjoying very high wage rates, it’s increasingly difficult for unions to argue that workers without unions are exploited and unprotected. – Editor.)

Summary

  • Wages can only be paid out of what is produced (no production, no wages), therefore greater productivity is the key to higher wages.
  • Unions typically hamper production. Union activity may result in some people getting more but without an increase in productivity, that simply means that some other people must get less. Either you bake a bigger pie for everybody or you just slice the pie up differently.
  • It looks sometimes like unions have actually forced wages higher because of the lower wages in non-unionized businesses. But the latter are caused in part by the outflow of labor from unionized sectors to non-unionized ones. Unionized auto-workers today, for example, may make a little more per hour than their nonunionized counterparts but there are a lot fewer of them too!

For further information, see:

“Why Wages Rise—Part I” by F. A. Harper

“Why Wages Rise—Part II” by F. A. Harper

“Can Labor Unions Really Raise Wages?” by Henry Hazlitt

ABOUT HANS F. SENNHOLZ

Editor’s Note: This essay, with minor updates, was first published in the 1962 book, “Cliches of Socialism.” Prior to serving as president of the Foundation for Economic Education from 1992 to 1997, the late Hans F. Sennholz was chairman of the department of economics at Grove City College in Pennsylvania from 1956 to 1992. A noted economist and teacher of the “Austrian” school, he earned his PhD under the tutelage of Ludwig von Mises. Read more about him here. The featured image is courtesy of FEE and Shutterstock. 

The Case Against Rent Control: Bad housing policy harms lower-income people most by Robert P. Murphy

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To someone ignorant of economic reasoning, rent control seems like a great policy. It appears instantly to provide “affordable housing” to poor tenants, while the only apparent downside is a reduction in the income flowing to the fat-cat landlords, people who literally own buildings in major cities and who thus aren’t going to miss that money much. Who could object to such a policy?

First, we should define our terms. When a city government imposes rent control, it means the city makes it illegal for landlords to charge tenants rent above a ceiling price. Sometimes that price can vary, but only on specified factors. For the law to have any teeth — and for the politicians who passed it to curry favor with the public — the maximum rent-controlled price will be significantly lower than the free-market price.

The most obvious problem is that rent control immediately leads to a shortage of apartments, meaning that there are potential tenants who would love to move into a new place at the going (rent-controlled) rate, but they can’t find any vacancies. At a lower rental price, more tenants will try to rent apartment units, and at a higher rental price, landlords will try to rent out more apartment units. These two claims are specific instances of the law of demand and law of supply, respectively.

In an unhampered market, the equilibrium rental price occurs where supply equals demand, and the market rate for an apartment perfectly matches tenants with available units. If the government disrupts this equilibrium by setting a ceiling far below the market-clearing price, then it creates a shortage; that is, more people want to rent apartment units than landlords want to provide. If you’ve lived in a big city, you may have experienced firsthand how difficult it is to move into a new apartment; guides advise people to pay the high fee to a broker or even join a church because you have to “know somebody” to get a good deal. Rent control is why this pattern occurs. The difficulty isn’t due to apartments being a “big-ticket” item; new cars are expensive, too, but finding one doesn’t carry the stress of finding an apartment in Brooklyn. The difference is rent control.

Rent control reduces the supply of rental units through two different mechanisms. In the short run, where the physical number of apartment units is fixed, the imposition of rent control will reduce the quantity of units offered on the market. The owners will hold back some of the potential units, using them for storage or keeping them available for (say) out of town guests or kids returning from college for the summer. (If this sounds implausible, consider just how many people in a major city consider renting out spare bedrooms in their homes, as long as the price is right.)

In the long run, a permanent policy of rent control restricts the construction of new apartment buildings, because potential investors realize that their revenues on such projects will be artificially capped. Building a movie theater or shopping center is more attractive on the margin.

There are further, more insidious problems with rent control. With a long line of potential tenants eager to move in at the official ceiling price, landlords do not have much incentive to maintain the building. They don’t need to put on new coats of paint, change the light bulbs in the hallways, keep the elevator in working order, or get out of bed at 5:00 a.m. when a tenant complains that the water heater is busted. If there is a rash of robberies in and around the building, the owner won’t feel a financial motivation to install lights, cameras, buzz-in gates, a guard, or other (costly) measures to protect his customers. Furthermore, if a tenant falls behind on the rent, there is less incentive for the landlord to cut her some slack, because he knows he can replace her right away after eviction. In other words, all of the behavior we associate with the term “slumlord” is due to the government’s policy of rent control; it is not the “free market in action.”

In summary, if the goal is to provide affordable housing to lower-income tenants, rent control is a horrible policy. Rent control makes apartments cheaper for some tenants while making them infinitely expensive for others, because some people can no longer find a unit, period, even though they would have been able to at the higher, free-market rate. Furthermore, the people who remain in apartments — enjoying the lower rent —receive a much lower-quality product. Especially when left in place for decades, rent control leads to abusive landlords and can quite literally destroy large portions of a city’s housing.

20141014_RobertMurphyABOUT ROBERT P. MURPHY

Robert P. Murphy has a PhD in economics from NYU. He is the author of The Politically Incorrect Guide to Capitalism and The Politically Incorrect Guide to The Great Depression and the New Deal. He is also the Senior Economist with the Institute for Energy Research and a Research Fellow at the Independent Institute. You can find him at http://consultingbyrpm.com/

EDITORS NOTE: The featured image is courtesy of FEE and Shutterstock.

Should Google Run a City? by Mark Lutter

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Let the search powerhouse experiment with governance.

Would you want to live in a private city?

No? What if Google were running the city?  Would that change your mind?  Google building and running cities is less crazy than you think.

Google has expressed interest in constructing cities, and Larry Page wants to create autonomous zones that can experiment with social rules. Combined, these two ideas have the potential to transform the world. Institutional change can jumpstart economic growth while competent, efficient administration can ensure those gains are not lost to corruption.

The idea of private cities typically invokes fears of a dystopian future, where malevolent corporations ruthlessly exploit the population for profits. Government is seen as a last defense against private tyranny. However, by replacing a nameless corporation with Google, the thinking changes. Rather than fear predation, we appreciate the benefits of efficient administration.

Companies like Google think long term. They are unlikely to sacrifice their hard-earned reputations for short-term gains. Further, Google is pragmatic. It will think outside the status quo, adopting the best policies to attract residents. Finally, Google is sufficiently big; it will not be intimidated by rent-seekers trying to live off others’ work.

Despite these benefits, many will be skeptical. People living in the United States and Europe tend to have good lives and fairly well-run cities. The recent battles between Uber and taxi cartels show the potential for improvement, but to a Westerner, the benefits of allowing Google to run cities are marginal.

The real potential for Google and others creating private cities is in the developing world. Poor countries are poor because they have predatory governments. These governments prevent their citizens from engaging in entrepreneurship. They also give monopoly privileges to their friends and family, enriching them at the expense of everyone else in society.

These restrictions typically benefit the elite of those societies, condemning the masses to poverty. Without secure property rights and the rule of law, economic development is a pipe dream. Google could offer hope.

Because Google is worldwide and sufficiently well known, it could negotiate with developing nations’ governments for institutional autonomy to run private cities. Governments would merely need to get out of the way. This may seem like a tall order: abdicating power is rare. Luckily, it is already happening.

Honduras passed a law allowing for ZEDEs (zonas de empleo y desarollo económico), or autonomous regions. ZEDEs allow Honduran regions to opt out of civil and commercial law and import a legal system of their choosing. Further, ZEDEs are able to create their own administrative systems, allowing reprieve from corruption.

Honduras is just the start. El Salvador and Costa Rica are considering creating their own autonomous regions. Whether the decision makers at Google choose to get involved is up to them. But Honduras offers a great opportunity to follow the company’s stated goals.

ABOUT MARK LUTTER

Mark Lutter is finishing his dissertation on proprietary cities at George Mason University. He is also helping to plan a ZEDE in Honduras.

EDITORS NOTE: The featured image is courtesy of FEE and Shutterstock.

Washington Called — Literally!

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“When in the course of human events it becomes necessary for one people to dissolve the political bands which have connected them…”  – The Declaration of Independence

One of the great things about the people of this country is that they will send a message to Washington, D.C. when they believe that a change in direction is needed. FairTax is a non-partisan movement but our supporters agree that the exit polls are correct – people are demanding something be done to improve the economy and allow it to create more and better jobs.

And we have the answer – the FairTax®.

Nowhere was the people’s demand for real change heard louder than in the state of Georgia. And who led the charge? The GA FairTax team who spent hundreds of hours and many months preparing in-depth candidate scorecards and FairTax briefing books for both the primary and general elections.

Dedicated volunteers went to candidates’ events and monitored speeches and social media to capture their positions on tax reform and the FairTax. Invitations were also extended to all candidates, regardless of party, for briefings on the FairTax Plan.

One U.S. Senate candidate, David Perdue, was unfamiliar with the FairTax Plan. He accepted Phil Hinson and the Georgia FairTax team’s briefings, and once he understood how the FairTax is the only tax replacement plan that creates jobs, improves America’s economic growth and eliminates the IRS, he eagerly endorsed it.

And when Perdue’s opponent launched FairTax attack ads, the Georgia FairTax team sprung into action issuing press releases and other communications refuting the misstatements and distortions that were being made against the FairTax.

On January 3, 2015, Senator-elect David Perdue will be sworn in as the Junior Senator from the great state of Georgia. And in case you missed it, on election night Perdue declared in his acceptance speech that when the 114th Congress convenes in January, he would be the new sponsor of the FairTax legislation in the U.S. Senate!

Our hearty congratulations to the Georgia FairTax team for an outstanding election year education effort. They proved once again that determination, initiative, diligent preparation, teamwork and tenacity are the key to advancing the FairTax.

And congratulations to all of you who educated your state’s candidates on tax reform and the FairTax Plan, who held candidates accountable during town hall meetings and who made your voice heard at the ballot box.

This seismic shift in power has already begun to reignite the discussions in Washington on tax reform. The day after the election I received a call from the senior Congressional aide of a major HR 25 co-sponsor who said the Member wanted to know if the grassroots were actively supporting the FairTax campaign now that they were in charge of governance.

And at an event with high wealth individuals, I was asked the same question by several attendees.

If you have not yet signed up for your AFFT paid membership, please do so today. 

We have paid memberships for as little as $5. We must be able to proudly say YES and give solid evidence to back up our claim. One way to convey that support is to share how many Americans have become paid members of AFFT. So talk to your friends, your family and your neighbors.

Instead of buying one $10 membership for yourself, buy one $5 membership for yourself and a $5 membership for your friend or neighbor. That way we have two paid memberships towards our ultimate goal. But please, make sure they support the FairTax and are willing to receive more communication from AFFT.

And if you are a recurring donor, thank you, thank you, and thank you! Your gift is more critical today than it has ever been. Please make sure you read the Chairman’s Report each week to see how your gift is helping to advance the FairTax legislation.

Michelangelo, whose breathtaking paintings adorn the Sistine Chapel, is unmistakably one of the greatest artists to have ever lived. He said, “The greatest danger to most of us lies not in setting our aim too high and falling short, but in setting our aim too low, and achieving our mark.”

The 114th Congress promises to address tax reform. However, is it going to be the Washington, D.C. and lobbyist version of tax reform – really not reform at all – or is it going to be real tax reform with the FairTax? The people’s mandate for action gives us a unique window of opportunity to let Congress know that they are demanding a growing economy and better jobs, and the only tax reform that assures this is the FairTax.

And make no mistake. FairTax supporters in Congress are watching to see if we have the broad support we claim we have.

That’s why I am challenging you to recruit five new paid members between now and January 3, when the new Congress convenes. When we are then asked to demonstrate how the grassroots has embraced the FairTax Plan, we can proudly show that just since Election Day, over 100,000 new patriotic Americans have signed on to support the FairTax.

Here’s to aiming high and to achieving victory.

Obama’s Revenge

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The Democratic Party that supported President Obama’s agenda for the past six years was dramatically rejected in the midterm elections and the message for the new Republican-controlled Senate and House is to aggressively take action on stalled legislation to improve the economy and address other issues that have suffered neglect.

The GOP is going to be up against the revenge Obama will take on America in the remaining two years. The midterms will not generate any humility in Obama; only anger and resentment.

Republicans were not elected to “work with” Obama. They were elected to stop his agenda and actions that have been harmful to the nation. The big question coming out of this electoral mandate is whether the inside-the-beltway Republicans in Washington will do what the voters want.

Obama promised a “transformation” of America, a nation dedicated to individual freedom and liberty, and it has taken this long for many to realize that his definition of transformation was an ever-increasing Big Government to control every aspect of our lives:

  • the education of our youth who lack knowledge of civics, math, and science,
  • the deprivation and reduction of access to vital sources of energy,
  • the refusal to protect U.S. sovereignty by ignoring our immigration laws and border security,
  • the reduction of our military power to levels rivaling pre-World War Two,
  • the failure to resist the growth of Islamic fanaticism,
  • the historic and dangerous increase of our national debt,
  • the failure to take fundamental steps to revive the economy by cutting taxes and reducing regulations,
  • the destruction of our market-based healthcare system.

Obama will take the electoral rejection very personally and, as we have seen in his contempt for working with Congress and his smears of the Republican Party, no one should doubt he will use the remainder of his term in office to wreak as much damage as possible; to prove he is right and the rest of the nation is wrong.

Much of what he will do was put off until after the midterm elections because he knew the level of rejection would be even greater. Now he is free to misuse “executive orders” unless the new Congress takes steps to defund and legislatively stop them. Investigations into the scandals that have become synonymous with his administration must be vigorously pursued.

What can we anticipate?

Obama will do everything he can to leave American vulnerable to increased illegal immigration including a rumored amnesty that would provide work permits and green cards to millions who would compete with jobless natural born and naturalized Americans. He has already refused to spend funds that have been allocated to secure our borders.

When Attorney General Eric Holder exits the Department of Justice expect Obama to nominate someone even more radical and divisive.

In the next two years you can expect the Environmental Protection Agency, already producing more regulations than any other element of the government, to go into overdrive to shut down as many power plants as possible, reducing the production of electricity on which the nation depends.

Obama has done little to respond to the growing global Islamist movement, showing favor to terrorist groups such as Hamas, but his greatest effort has been to provide Iran with the approval to advance its nuclear weapons capability by opening negotiations that, if agreed to, would put it within mere months of being able to put nuclear warheads on missiles and in bombs. It would change the balance of power in the Middle East and threaten the rest of the world.

Expect Obama to try to close Guantanamo despite legislation forbidding this action. In keeping with his tilt toward Islam, he has already released five Taliban leaders in exchange for an alleged U.S. Army deserter. Others who were released rejoined the Islamic holy war.

He will, of course, do everything he can to protect his namesake legislation, the Affordable Patient Care Act otherwise known as ObamaCare. It must be dismantled before it does even more harm to the nation’s healthcare system. He has waited until after the midterms for Americans to learn that their ACA premiums will rise dramatically. Ultimately, it must be repealed.

In these and many other ways, he can continue to harm our national interests. The one prediction that can be made with certainty is that he will spend even more time playing golf and indulging the many perks of the office.

© Alan Caruba, 2014

Making It Easy to Predict the Next Financial Crisis

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It is a cliché, but true, that history repeats itself. This is largely due to the failure of each new generation to learn anything from the past as well as the human tendency toward the bad habits of greed and power-seeking. Only the names and faces change.

That is why the next financial crisis is entirely predictable.

On October 23, The Wall Street Journal had an article, “Relaxed Mortgage-Lending Rules Clear Final Hurdle.” The financial crisis in 2008 was the direct result of relaxed mortgage-lending rules. Indeed, it was the result of government pressure on banks to make “sub-prime” loans to people who any bank might sensibly conclude could not replay them. Those loans, in turn, were sold to Fannie Mae and Freddie Mac, two government-sponsored enterprises, who then bundled and sold them as mortgage-backed assets.

As Wikipedia notes, the Federal National Mortgage Association, commonly known as Fannie Mae, was founded in 1938 during the Great Depression to expand the secondary mortgage market by securitizing mortgages by issuing mortgage-backed securities, allowing lenders to reinvest their assets into more lending. In 1970 the Federal Home Loan Mortgage Corporation, whose nickname is Freddie Mac, was created for the same reason. Both are overseen by the Federal Housing Finance Authority. Neither issues mortgages. As noted, they buy them from banks, bundle them as securities, and resell them.

Getting the government involved in the housing market has been a supremely bad idea, much as getting the government involved in education and, as we are learning, involved in the nation’s healthcare insurance sector. There are only a few things the Constitution authorizes the government to do and none of these are mentioned. That has never stopped politicians.

The Wall Street Journal article reported that “Three U.S. agencies signed off on relaxed mortgage-lending rules, helping complete a long-stalled provision of the 2010 Dodd-Frank financial-overhaul law.” Two commissioners of the Securities and Exchange Commission “warned the rules would do little to prevent a return to the kind of lax mortgage underwriting that fueled the financial crisis.”

The Economist also took note, saying “When politicians bashed Wall Street for its reckless mortgage lending in the wake of the subprime crisis, bankers retorted that it was the politicians’ enthusiasm for expanding home ownership, even if it meant small deposits and low credit standards, that had really fomented the disaster.” Suffice to say there is plenty of blame to spread around, but the banks had to play by the rules the government had put in place.

In the wake of the financial crisis “many banks have stopped lending to riskier borrowers” but the new rules simply recreate the conditions that led to it, although “the rules only affect the tiny market for securities issued without federal backing, less than 2% of the $1.58 trillion in mortgage securities issue in 2013…”

The rule changes are being hailed as an example of the how great the “reform” implemented after the financial crisis was in the form of the Financial Stability Oversight Council and Orderly Liquidation Authority, otherwise known as the Dodd-Frank Act.

Suffice to say it is a regulatory nightmare of several thousand pages of rules, often quite vague, that are still being interpreted. That said, its purpose, to prevent predatory mortgage lending, improve the clarity of mortgage paperwork for consumers, and reduce incentives for mortgage brokers to push home buyers into more expensive loans was needed. It also changed the way credit card companies and other consumer lenders had to disclose their terms to consumers.

As The Economist noted, the agreement regarding mortgage-lending rules “would permit banks to securitize and sell mortgages without retaining a 5% stake—leaving them little incentive to maintain high lending standards.”

That needs repeating: little incentive to maintain high lending standards, the very reason we had a financial crisis in 2008.

All this is largely due to the progressive notion that everyone, no matter how little they earn, should be able to purchase a home. In reality, those at the low end of the economic ladder should not be encouraged or seduced into taking on such debt. When they do and the economy goes south, leaving them unemployed, they just walk away from the debt.

Why should the rest of us—taxpayers—bail out the mortgage sector as we did in 2008 with huge loans to the banks and insurance companies that had purchased mortgage-based securities? The government had to step in with the complete government takeover of Freddie Mac and Fannie Mae. We got stuck with the bill.

It also drove up our national debt, leading to the first reduction in the nation’s credit rating in its history.

There is already talk on Capitol Hill that, should Republicans take control of the Senate and retain it in the House, they are likely, as Reuters reported, “to target the Consumer Financial Protection Bureau and capital requirements on insurance companies.” To put it another way, the Republicans are the adults in Congress while the Democrats, liberal to the core, will never admit we are being set up for another financial crisis.

© Alan Caruba, 2014

Is America in Decline?

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In case you have had the feeling that America is in decline and will make way for a new superpower, you may be right. At least you’re right if you agree with James MacDonald, the author of “When Globalization Fails: The Rise and Fall of Pax Americana” (due in January 2015, Farrar, Straus and Giroux). Given his review of the rise and fall of previous powerful nations, history, and a current analysis, they come together to say our days of global influence are over.

In a way, the election of Barack Obama is the perfect example of failed leadership, both as President and as a nation that others used to rely upon to maintain world peace, protect the sea lanes necessary for trade, and intervene when rogue players threaten their neighbors and the world.

For the first time in most people’s memory, our former allies and those nations looking toward America to see what action it will take or not no longer have any confidence in our willingness to take any action. More specifically, what action President Obama will or will not take. The rise of the Islamic State is a response to Obama’s abandonment of the Middle East.

Obama arrived in office with the belief that America was the problem and has proceeded to diminish Pax Americana (Latin for ensuring peace) in every way possible. He began by apologizing for America for having been too aggressive in the past and not having much good to say about it except in the most perfunctory and obligatory way.

MacDonald’s book is a historical review of previous world powers like Pax Britannia and the rivalries of colonial powers like Spain, Portugal, France and Germany. Bit by bit nations began to regard world trade as a brake on potential wars—they were wrong as in the case of the last century—and as a way to lift all nations toward greater prosperity. International organizations like the League of Nations and the United Nations have demonstrated no ability to ward off combat or the threats posed by rogue nations like North Korea or Iran.

“If the world’s great and rising powers are going to avoid conflict, it will require a determined effort to avoid the pitfalls of history,” says MacDonald.

MacDonald offers eight elements that produced the era of peace that began in post-war 1945 when the U.S. emerged with a thriving, growing economy while those in Europe and Asia were devastated. My generation looks back on those years knowing they were likely the best America will enjoy and hoping our economy will not be devastated by a national debt of $18 trillion and unfunded liabilities of $127 trillion!

It takes a historian to remind us that “One of the main lessons of history is that history lessons are eventually forgotten.” One need only look around the world for proof of that. The U.S. is not the only nation spending itself into a black hole. MacDonald reminds us, too, that it was the Cold War between the U.S. and then-Soviet Union that helped maintain “an unquiet peace” because neither nation would ever use its nuclear weapons. MacDonald fears “an equally intense Sino-American hostility” as China flexes its muscles. Don’t be surprised to see Japan acquire a nuclear shield or other Asian nations in China’s sphere of influence.

MacDonald has little faith in the United Nations which “can be effective only on the basis of consensus among the major powers, and it is not clear that any such consensus would prevail in a multi-polar world.”

As for Pax Americana, the rise of China is a major challenge. “Now that capitalism (euphemistically described as ‘socialism with Chinese characteristics’), has been adopted by a rising power that rejects the idea of Pax Americana entirely, its future is uncertain.” China, “the new hegemon has so far shown itself to be far from benign, displaying a tendency to bully its potential clients over such things as offshore oil resources, water supplies, and access to rare earths.”

“If states are not to return to self-destructive competition for resources, free trade remains a sine qua non of peace,” says MacDonald. “Compared to the nineteenth century, free trade has the advantage of being embedded in international organizations and agreements, in particular the World Trade Organization.”

The future, as always, is clouded and there remains the threat of financial meltdowns. The U.S. had one in 2008 that required massive amounts of federal bailouts to avoid a worse outcome. We have been in the Great Recession ever since.

MacDonald notes that decolonization played a major role in the period following World War I and II. “The breakup of the European empires, even though it has often created its own sources of conflict, has contributed to the postwar peace among the Great Powers by breaking up economic blocs and reducing the causes of friction and envy that helped spur wars.” The lessons of U.S. intervention in Afghanistan and Iraq demonstrate that what was easier in the past is no longer.

At the moment when the Obama administration is desperately trying to arrive at an agreement with Iran that will not permit it to make its own nuclear weapons, MacDonald believes that the threat of nuclear weapons may be the chief means to enforce any peace worldwide. The flaw in this is whether a fanatical Islamic power would resist their use.

MacDonald concludes that “The United States will, in all likelihood, remain center stage in world affairs” for some time to come.

Ridding the nation of its current, unpopular President and unlocking the hold that the Democratic Party has imposed on Congress, will be a major step in the right direction for the nation. Finding a leader who will encourage economic growth and resist our enemies will play a major role in restoring the power and influence we have had.

© Alan Caruba

How Far Can the P2P Revolution Go? Will the sharing economy replace the State? by Jeffrey A. Tucker

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How far can the peer-to-peer revolution be pushed? It’s time we start to speculate, because history is moving fast. We need to dislodge from our minds our embedded sense of what’s possible.

Right now, we can experience a form of commercial relationship that was unknown just a decade ago. If you need a ride in a major city, you can pull up the smartphone app for Uber or Lyft and have a car arrive in minutes. It’s amazing to users because they get their first taste of what consumer service in taxis really feels like. It’s luxury at a reasonable price.

If your sink is leaking, you can click TaskRabbit. If you need a place to stay, you can count on Airbnb. In Manhattan, you can depend on WunWun to deliver just about anything to your door, from toothpaste to a new desktop computer. If you have a skill and need a job, or need to hire someone, you can go to oDesk or eLance and post a job you can do or a job you need done. If you grow food or make great local dishes, you can post at a place like credibles.co and find a prepaid customer base.

These are the technologies of the peer-to-peer or sharing economy. You can be a producer, a consumer, or both. It’s a different model — one characterized by the word “equipotency,” meaning that the power to buy and sell is widely distributed throughout the population. It’s made possible through technology.

The emergence of the app economy — an emergent order not created by government or legislation — has enabled these developments, and they are changing the world.

These technologies are not temporary. They cannot and will not be uninvented. On the contrary, they will continue to develop and expand in both sophistication and in geographic relevance. This is what happens when technology is especially useful. Whether it is the horseshoe of the Middle Ages or the distributed networks of our time, when an innovation so dramatically improves our lives, it changes the course of history. This is what is happening in our time.

The applications of these P2P networks are enormously surprising. The biggest surprise in my own lifetime is how they have been employed to make payment systems P2P — no longer based on third-party trust — through what’s called the blockchain. The blockchain can commodify and title any bundle of information and make it transferable, with timestamps, in a way that cannot be forged, all at nearly zero cost.

An offshoot of blockchain-distributed technology has been the invention of a private currency. For half a century, it has been a dream of theorists who saw that taking money out of government hands would do more for prosperity and peace than any single other step.

The theorists dreamed, but they didn’t have the tools. They hadn’t been invented yet. Now that the tools exist, the result is bitcoin, which gives rise to the hope that we have the makings of a new international currency managed entirely by the private sector and the global market system.

These new P2P systems have connected the world like never before. They hold out the prospect of unleashing unprecedented human energy and the creativity that comes with it. They give billions of people a chance to integrate themselves into the worldwide division of labor from which they have thus far been excluded.

With 3-D printing and computer-aided design files distributed on digital networks, more people have access to become their own manufacturers. These same people can be designers and distribute the results to the world. Such a system cuts out every barrier that stands between people and their material aspirations — barriers such as product regulation, patents, and excise taxes.

It’s time that we begin to expect the unexpected. What else is possible?

Entrepreneurs are already experimenting with an Uber model of delivering some form of health care online. In some areas, they will bring a nurse to you to give you a flu shot. Other health services are on the way, causing some to speculate on the return to at-home medical visits paid out of pocket (rather than via insurance).

What does this innovation do for centralist solutions like Obamacare? It changes the entire dynamic of service provision. The medical establishment is already protesting that this consumer-based, one-off service approach runs contrary to primary and preventive care — a critique that fails to consider that there is no reason why P2P technology can’t provide such care.

How much can things change? To what extent will they affect the structure of our political lives? This is where matters get really interesting. A feature of P2P is the gradual elimination of third parties as agents who stand between individuals and their desire to cooperate one to one. We use such third parties because we believe we need them. Credit card companies serve a need. Banks serve a need. Large-scale corporations serve a need.

One theory holds that the State exists to do for us what we can’t do for ourselves. It’s the ultimate third-party provider. We elect people to serve as our representatives, and they bring our voices to the business of government so that we can get the services we want. That’s the idea, anyway.

But once government gets the power to do things, it expands its power in the interest of the ruling elite. The taxicab monopoly was no more necessary than the government postal service, but the growth of P2P technology has increasingly exposed the reality of how unnecessary the State as a third-party mediator really is. The post office is being pushed into obsolescence. It’s hard to see how the municipal taxi monopoly can survive a competitive contest with P2P technology systems.

Policing is an example of a service that people think is absolutely necessary. The old perception is that government needs to provide this service because most people cannot do it for themselves. But what if policing, too, could employ P2P technology?

What if, when there is a threat, whether to you or to others, you could open an app on your phone and call the private police immediately? You can imagine how such a technology could learn to filter out static and discern threat level based on algorithms and immediately supplied video evidence. We already see the first attempts in this direction with the Peacekeeper app.

Rather than a tax-funded system that has become a threat to the innocent as much as the guilty, we would have a system rooted in consumer service. It might be similar to the private security systems used by all businesses today, except it would apply to individuals. It would survive not through taxation but subscription — voluntary and noncoercive.

How much further can we take this? Can courts and laws themselves be ported to the online world, using the blockchain for verifying contracts, managing conflicts, and even issuing securities? The large retailerOverstock.com is experimenting with this idea — not for ideological reasons but simply because such systems work better.

And here we find the most compelling case for optimism for the cause of human liberty. These technologies are emerging from within the private sector, not from government. They work better to serve human needs than the public-sector alternative. Their use and their growth depend not on ideological conversion but on their capacity to serve universal human needs.

The ground really is shifting beneath our feet, despite all odds. It is still an age of leviathan. But based on technology and the incredible creativity of entrepreneurs, that leviathan no longer seems like a permanent feature of the world.

20121129_JeffreyTuckeravatarABOUT JEFFREY A. TUCKER

Jeffrey Tucker is a distinguished fellow at FEE, CLO of the startup Liberty.me, and editor at Laissez Faire Books. Author of five books, he speaks at FEE summer seminars and other events.