How “mortgage” became just another word for trouble

Nearly 80 years ago Stewart McDonald, the Federal Housing Administration’s first administrator, observed: “To many people, ‘Mortgage’ became just another word for trouble—an epitaph on the tombstone of their aspirations for home ownership.” Over the last 7 years, the same epitaph has been written for many millions of aspiring homeowners.

When established in 1934 by Congress, FHA implemented strong, commonsense underwriting standards—increasing down payments to a minimum of 20%, establishing reliable and speedy loan pay downs with a 15-20 year loan term, using a residual income test to assure a borrower’s reasonable ability to pay, and requiring demonstration of a good credit history. From 1934 to 1960, these standards helped millions upon millions of Americans safely and confidently achieve the American dream of eventually owning their home free and clear of a mortgage and helped increase the homeownership rate to new heights. Over its first 20 years, the FHA paid only 5,712 claims out of 2.9 million insured mortgages for a cumulative claims rate of 0.2%.

Yet by 1962 Time Magazine would observe: “Homeowners of a new and unattractive breed are plaguing the Federal Housing Administration these days. Known as ‘the walkaways,’ they are people who find themselves unable to meet their mortgage payments—and to solve the problem simply move out their belongings at night, drop their house key in the mailbox and disappear.” What had caused an FHA mortgage to become just another word for trouble?

Powerful interest groups such as the National Association of Realtors convinced politicians to replace FHA’s sound underwriting practices with increasingly risky ones.  From 1957 to 1961 Congress raised FHA’s maximum loan to value ratio (LTV) four times so that by 1961 the maximum LTV was 97%.

In 1963 the FHA commissioner issued a report analyzing why is was suffering from mounting foreclosures:

The Congress expects, many home buyers require, and the housing industry needs the high volume of home construction and the active market for existing homes that can be soundly achieved and sustained through the liberality of the terms on which FHA is authorized to insure mortgages….The Federal Housing Administration is deeply committed to a program of accurate underwriting based on adequate analysis, accurate information, and sound judgment. This report will help us to keep our risk-rating processes in line with the changing times.

However, the very next year, FHA abandoned the very risk-rating process it had been relying on.

As a result the increasingly lax standards for FHA insurance once again made foreclosures commonplace. From 1975 to 2011, over 3 million FHA borrowers would lose their homes to foreclosure. Over time, powerful lobbies, politicians, and HUD pushed to replicate FHA’s abandonment of commonsense underwriting at Fannie Mae, Freddie Mac, and other parts of the mortgage market. For 8 million families experiencing foreclosure from 2007 to the present, “mortgage” once again became just another word for trouble.

The only way to bring stability to our housing market is to once again assure that the preponderance of mortgages are safe—ones that have a low risk of turning into trouble under economic stress. This requires a return to common sense underwriting. Today this safety standard is being  met with respect to 0% of FHA insured mortgages and only 38% of all new home purchase mortgages nationwide.

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

How a Parent Chooses a School by Benjamin Scafidi, Ph.D. and James P. Kelly, III, J.D

What do parents really consider when trying to choose their child’s school from a list of options? Based on the findings from our latest study, we created a graphic simulation of a parent’s likely experience choosing a school. Take a look and share your thoughts in the comments!

The idea that impoverished parents shouldn’t be trusted to choose a good educational option for their children is one repeated often by school choice critics.

For instance, Michael Walker Jones of the Louisiana Association of Educators was quoted by the New Orleans Times-Picayune saying, “If I’m a parent in poverty, I have no clue because I’m trying to struggle and live day to day.”

More-Than-Scores

Click on the cover to download a PDF version of the study.

Friedman Foundation study proves that idea isn’t just offensive to parents, it’s factually flawed. The study found 93 percent of parents from a large choice program, including those in poverty, are willing to take three or more time-consuming steps to obtain the information they need to make an informed decision about their child’s education.

Notably, low-income parents are most likely to rank graduation rates and college acceptance rates as the two most-important pieces of information they desire from private schools. Other important pieces for all parents include student-teacher ratios, a safe environment, and curriculum and course descriptions.

Considering the hot debate also going on around standardized test scores, this study surprisingly showed no parents listed them as the most important factor for choosing a school.

Based on what we know about parent priorities, check out this simulation of how a hypothetical parent might go about choosing a school.

Click on the info-graphic for a larger view.

As we can see, the school the parent chose did not have any available standardized test scores, yet he or she still determined it was the best fit. Many school choice opponents claim that test scores aren’t always a fair measure of the quality of education a school might offer. This is especially common in schools with large populations of kids who start off behind grade-level. School administrators and teachers in such a position worry test scores set the odds against their schools from the start. But, as the new study and our simulation show, test scores just aren’t that important to parents.

Looking with a wider lens, we see this parent actually wanted to stay in her ZIP Code yet did not choose her ZIP Code-assigned public school. Why? It didn’t outperform the other schools based on criteria she and many other parents find most relevant.

That’s not to say private schools don’t have room to improve. The parent in our simulation might have chosen a different private school had desired information been readily available. The new Friedman Foundation survey showed the failure of a private school to provide information would (79 percent) or might (20 percent) negatively impact a parent’s decision on whether to send his or her children there. So, if a school wants to attract more students, it would be in its leaders’ best interest to be transparent and accessible.

To read the full study by Benjamin Scafidi, Ph.D. and James P. Kelly, III, J.D. visit edchoice.org/MoreThanScores

Poll: GOP Voters Want Politicians to Support Natural Marriage

gop marriag

Click on image for downloadable copy of the survey.

WASHINGTON, PRNewswire-USNewswire/ — The Family Research Council (FRC) and American Values released the results of a commissioned national survey conducted by Wilson Research Strategies showing that 82 percent of Republican and Republican-leaning independents believe marriage “should be defined only as a union between one man and one woman.” 74 percent strongly agreed with this statement.

The same survey found that the voters want their elected leaders to promote this view in public policy: 75 percent of Republican and Republican-leaning independent voters disagree that “politicians should support the redefinition of marriage to include same-sex couples.” 67 percent strongly disagreed with this statement.

FRC President Tony Perkins made the following comments in response to the survey:

“Republican voters continue to resist the demands of cultural elites who want to see the party abandon the very core values that gave rise to American exceptionalism. The vast majority of the GOP base continues to believe that marriage is a non-negotiable plank of the national platform and want to see their elected officials uphold natural marriage as the national standard, a goal to stand for, encourage and promote in law.

“The results of this survey are no surprise especially considering what has taken place in recent months. Republican voters, like everyone else, have seen that redefining marriage is really about fundamentally altering all of society. Redefining marriage undermines our fundamental freedoms of speech and religion and in the case of the Mozilla CEO, even the ability to engage in the democratic process without the fear of losing one’s livelihood.”

American Values President Gary Bauer made the following comments:

“Public policy makers are doing a great disservice to themselves and future generations by continuing to misread the convictions of the American people, who overwhelmingly support the institution of marriage as a unique union of one man and one woman. The misinformation campaign waged by media elites muddies the debate and attempts to isolate those who support the time-honored traditions and values shared by every major world religion throughout human history.

“Incredibly, the debate is no longer about privacy and tolerance. Religious liberty, free speech and rights of conscience are now at stake. This survey should remind political and cultural leaders that this debate is far from over. If anything, it is taking on a new sense of urgency for millions of men and women of faith.”

To view the results of the survey, click herehttp://downloads.frc.org/EF/EF14D62.pdf

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Relearning The Cold War’s Harsh Lessons

Some very interesting realignments are taking place in the world, often between nations one would think have little in common. The threat of fanatical Islam in the form of the Muslim Brotherhood and al Qaeda related groups has produced unexpected outcomes.

Russia, China and Iran are supporting Syria which is under attack from Islamist forces while the Saudis are eager to see the regime overthrown, apparently for the same reason. The United States is likely to use its military assets to demonstrate it is no paper tiger, having largely been in retreat in the Middle East since Obama took office.

At age 75 I lived much of my life during the Cold War from 1946 until 1989, some 43 years which culminated two years later in 1991 with the collapse of the former Soviet Union. Throughout that era it was, in the words of Ronald Reagan, the “evil empire.” Presidents from Harry Truman to George H.W. Bush had to base their decisions on what the Soviets and their satellite states were doing. At times it turned hot as in Korea and Vietnam.

It was the U.S. development of the atomic bomb and later the hydrogen bomb that dictated what occurred because neither nation wanted to engage in a nuclear war. Having stolen our nuclear secrets, the Soviets were able to develop their own and, later, Red China had the bomb as well. Other nations, too, would acquire their own. What emerged was the fear of “mutually assured destruction.”

This fear worked, but now the world is facing the prospect of an Islamic nation, Iran, having nuclear weapons (as does Pakistan) and, at that point, all bets are off. Islam embraces death as martyrdom and the gateway to paradise. In Iran, its leaders believe that massive human death and destruction is necessary to secure the return of the Twelfth Imam, a mythical figure, but one that is real to them.

In an excellent history, “The Cold War”, by John Lewis Gaddis, published originally in 2005, the reader is taken on a journey back to that era, but a goodly portion of the present U.S. population has little or no recall of it. Anyone age 24 or younger has no experience with the Cold War and likely no knowledge of it. The Korean War was fought in the 1950s and the Vietnam War in the 1970s.

The single lesson of the Cold War was that Communism could only exist if the governments that embraced it were led by despots and the full power of the state was used to maintain it. In the case of Russia and China, literally hundreds of millions died as a result. The closest example of Communism is Cuba, just ninety miles off the shore of Florida.

Other nations such as Venezuela and Nicaragua are essentially Communist, but the good news is that, during the course of the Cold War and in the wake of the demise of the Soviet Union, many new democracies have emerged. What occurred was the “globalization of democratization.” Gaddis notes that “By one count, the number of democracies quintupled during the last half of the 20th century, something that would never have been expected at the end of the first half.”

What Americans are witnessing, however, is the effort of the Obama administration to “transform” America into a close approximation of a Communist nation as more and more of its structure has come under the control of the federal government. It has been a long process that began at the beginning of the last century, ushered in with the Bolshevik revolution in Russia in 1917 and manifested here with a vastly expanded federal government and the creation of various “entitlement” programs that comprise some 60% of our annual budget.

Americans have become accustomed to a government that has extensive control over many sectors of its economy and other aspects of our lives. The educational system has been transformed into a form of politically correct indoctrination and one that consistently fails to teach the most fundamental skills, least of all the ability to think independently. The emphasis has gone from self-reliance to self-esteem.

These days, one in five households in America is on food stamps. Despite four years of failure to reverse the impact of the 2008 financial crisis, the nation remains mired in the longest non-recovery in its history since the Great Depression.

At the end of World War Two in 1945, in response to the Soviet Union’s takeover of Eastern Europe and the need to put Western Europe on a firm economic footing, the United States had to remain on a virtual wartime footing. Our troops would remain in Europe where the Marshall Plan was implemented to aid the recovery of our allies as well as West Germany. This was followed by the creation of NATO to provide military support against a possible Soviet invasion.

The U.S. had to lead the effort to force the North Koreans back across the 38th parallel. Later it would attempt to do the same thing to maintain South Vietnam. The former was a stalemate that exists to this day and the latter was a defeat.

During this period, the Soviet Union remained the focus of U.S. attention. The CIA was created by Truman to monitor and respond to Soviet efforts to extend its influence such as the Communist takeover of Cuba in 1959. The expansionist efforts led to a fearful confrontation in 1962 when the U.S. demanded the removal of nuclear missiles that the Russians had placed in Cuba. The Russians backed down.

All during this time, from Stalin to Khrushchev, the real story of the Soviet Union was the continuing failure of Communism. Gaddis noted that “By 1971, the Soviet Union’s economy and those of its East European satellites were stagnating. By 1981, living standards inside the U.S.S.R. had deteriorated to such an extent that life expectancy was declining—an unprecedented phenomenon in an advance industrialized society. By the end of 1991, the Soviet Union itself, a model for Communism everywhere else, had ceased to exist.”

After the death of Stalin in 1953, the Soviet Union would be led by a succession of aging dictators until events required that a far younger leader, Mikhial Gorbachev, was installed in 1985, but it was too late and he came on the scene when powerful leaders, Ronald Reagan, Margaret Thatcher, and Pope John-Paul were positioned to resist.

Today, we have a President who told his Russian counterpart that he would have more “flexibility” after his reelection and, having imposed the takeover of the nation’s healthcare system, the expansion of federal power over the economy, and the vast expansion of its surveillance system, every American is learning what it was like to live under Communist domination.

Historically, the Cold War is over, but if the chill relationship between Putin’s Russia and Obama’s America is any indication, it still endures.

It doesn’t look to end anytime soon and the destruction of the U.S. dollar and our economy, a communist goal for decades, is well underway.

© Alan Caruba, 2013

Mandated by the State: Smart Meters and Obamacare

I a Florida homeowner and careful about my usage of electricity. My electric bill last month was $41.56. People buying health insurance choose their plans carefully as well to fulfill their health needs and economic situation. If I am forced to pay a fine of $13 for not doing anything it would result in a 31% monthly increase in my electric cost for no logical reason.

Florida Power & Light (FP&L) has spent hundreds of millions of dollars to install what they refer to as “smart meters” on the properties they service. They require all of their customers to allow installation or face a monthly fine for what they refer to as opting to a “non-standard” meter. The Federal Government put together Obamacare and now forces all who have their standard health insurance plans the government describes as non-standard to scrap them and comply with what the government wants or face a fine.

The meter on my home was here when I bought it ten years ago so did I buy a home with a non-standard meter? My meter is no more non-standard than millions of the people who are being forced off their insurance plans because the government says they know what is best for consumers. Where the Supreme Court says it is all right to tax people for not having government mandated insurance the PSC says it is fine for FPL to tax conscientious homeowners who choose to keep their standard meter.

Just as there are all kinds of bad things being unveiled about Obamacare and the havoc it has caused the new meters from FP&L are like what Pelosi said about Obamacare… you have to install it to find out what it is all about and I and many thousands of others are not interested.

See the similarity in how citizens are being mandated to do what the government or monopoly demands. Is that right?

If there are any sane people in the state government would you please intercede with the PSC and eliminate the mandatory sign up for the FP&L meter or face monthly fines?

The Progressive Income Tax: Backed by the envious, used by the greedy by DOUG BANDOW

Most Americans dislike the income tax, now more than a century old. The rates are too high. The provisions are unfair. The recordkeeping is onerous. The revenues are wasted.

Other than that, Mrs. Lincoln, how was the play?

But there are fans. The politicians, certainly, of both parties. What good would it do to serve in Congress if you didn’t have any money to spend? There are other sources of public money, to be sure, but none so effective at plucking the geese while minimizing the hissing. Withholding means many Americans look forward to receiving a refund even though that means they have provided an interest-free loan to the very officials conscripting people’s money for dubious purposes.

The beneficiaries of the politicians’ largesse also share in the income-tax lovefest. Uncle Sam needs money to write checks. He can borrow, but there’s a limit to investors’ credulity. Borrow too much and they might doubt Washington’s ability to repay. Moreover, robust tax collections are necessary to repay debts. So creditors, too, benefit from the income tax, even if they don’t enjoy paying on the other end.

Don’t forget about the armies of tax preparers and IRS agents who, at the end of the day, end up with much of the deadweight loss.

Then there are the fans of expensive and expansive government. Jonathan Cohn of the New Republic argued that the money collected has gone for building infrastructure, cleaning the environment, and keeping us safe from foreign threats. Alas, a lot of federal building is politically driven, conservation measures spend huge amounts inefficiently to control minimal problems, and military outlays go to defend scores of foreign societies rather than our own. In all these cases, less would be more.

More dangerous may be the social engineers. For instance, Yale economics professor Robert J. Shiller suggested using the income tax to mitigate “some of the worst consequences of income inequality.” He proposed indexing taxes to income inequality.

It’s a genuinely nutty idea: Inequality measures are sensitive to data distortion based on dates chosen, units measured, and more. Moreover, they incorporate no judgments about how the inequality arose. Were opportunities obstructed, systems manipulated, wealth extracted, people defrauded? Or did a generally free society operate naturally and deliver ever-changing income and wealth patterns? If the latter, what is the government trying to “correct”? And if the former, is the government correcting the right things?

Worse, though, is the weird presumption that seizing private wealth from mostly productive taxpayers and giving it to political operators noted for their electoral skills rather than economic judgment would somehow remedy financial disparities. There is no evidence that increasing Washington’s resources would yield greater social or economic justice, improve economic efficiency or growth, or make people wealthier or freer.

To the contrary, experience demonstrates that the majority—most people outside of those who make their living from the federal trough—are likely to end up worse off. Extensive bureaucracies soak up a lot of money before it leaves government hands. Cash gets tossed at influential interest groups, such as businesses, non-profits, contractors, and unions. Benefits for the poor are dwarfed by middle class welfare, such as Social Security and Medicare. Federal largesse gets bestowed on foreigners through misnamed foreign aid, which long meant taking money from poor people in rich countries and giving it to rich people in poor countries. America’s defense budget is another form of foreign aid, subsidizing some of the wealthiest countries on the planet.

Providing more money to expand these and other programs is supposed to close the income and wealth gaps? The social engineers just assume that the benevolent dictator model, in which angels enact direct transfers that make people healthier and happier, can actually exist.

Unfortunately, the income tax creates additional harms. By taxing work, the levy discourages work. The higher the rate, the greater the incentive to choose leisure and invest in consumption and tax shelters. Moreover, credits and deductions give legislators the opportunity to play social engineers, providing subsidies and manipulating behavior sub rosa.

The greater the resulting complexity, the more wealth is wasted in compliance activities rather than invested in productive endeavors. Indeed, the system most benefits tax professionals who profit from the system’s failings. Today the tax code and IRS rules run nearly 75,000 pages. And there never is any certainty; my Cato Institute colleague Chris Edwards noted nearly 5,000 tax changes over the last decade. Ever-confused taxpayers are a captive audience for tax preparers and litigators.

Income taxes impose a number of other burdens. There is no financial privacy, since Uncle Sam is empowered to rummage through everyone’s personal affairs. And taxpayers are expected to maintain potentially extensive records for possible inspection for years. For instance, use a home office and you’d better keep your utility bills, home repair charges, and gasoline receipts!

Moreover, as Edwards pointed out, the entire enforcement process is built around a denial of due process. From start to finish the burden of proof falls on the taxpayer, not the government. The Fifth Amendment right against self-incrimination is out the window. Fourth Amendment protections against unreasonable searches and seizures don’t apply. Sixth and Seventh Amendment guarantees of a jury trial don’t cover the U.S. Tax Court.

Contrast this with the sales tax. You pay it when you purchase something and you are done with it. You don’t have to keep personal records. You don’t have to file a return. There is no government rummaging around through your bank records for enforcement.

Even social engineering usually is at a minimum. Consumption levies typically include little variations of rates among goods, with at most occasional exemptions of “necessities” and surcharges for “luxuries.” There seldom is much attempt to manipulate rates to achieve objectives other than raising revenue. Even politicians don’t claim that they can use the sales tax to solve the “problem” of income inequality.

The first income tax in U.S. history was proposed in 1814 to fund the ill-fated War of 1812. Happily, the conflict ended before Congress could demonstrate the dire consequences even of taxation with representation. In 1861, a desperate national government turned to the income tax to fund its war to conquer the Southern states seeking to separate. Americans sacrificed both independence and liberty in that conflict.

A search for revenue to replace declining tariff collections led to another income tax in 1894, but the Supreme Court declared the levy unconstitutional. Legislators probably could have met the jurists’ objections by scaling back the tax. Instead, 15 years later Congress proposed a constitutional amendment, which was approved on February 2, 1913, during the heyday of the Progressive Era. From modest beginnings it has grown into a monster.

There is a necessary role for government, but it is far more limited than today’s Leviathan in Washington. Government must be funded, but it should be by something other than today’s income tax, which has made it far too easy for politicians to mulct the public. There are many reasons for Americans’ steady and serious loss of liberty, but the income tax ranks high among them.

doug bandowABOUT DOUG BANDOW

Doug Bandow is a senior fellow at the Cato Institute and the author of a number of books on economics and politics. He writes regularly on military non-interventionism.

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

CLICHES OF PROGRESSIVISM #2 — Because We’re Running Out of Resources, Government Must Manage Them

The Foundation for Economic Education (FEE) is proud to partner with Young America’s Foundation (YAF) to produce “Clichés of Progressivism,” a series of insightful commentaries covering topics of free enterprise, income inequality, and limited government.

Our society is inundated with half-truths and misconceptions about the economy in general and free enterprise in particular. The “Clichés of Progressivism” series is meant to equip students with the arguments necessary to inform debate and correct the record where bias and errors abound.

Leaders and experts who support free enterprise and who understand the importance of fiscal responsibility and entrepreneurship will author the pieces. A book will be released in 2015 featuring the best editorials in the series. The opinion editorials and columns will be published weekly on the websites of both YAF and FEE: www.yaf.org and www.FEE.org.

See the index of the published chapters here.

#2 — Because We’re Running Out of Resources, Government Must Manage Them

Milton Friedman once said “If you put the federal government in charge of the Sahara Desert, in five years there’d be a shortage of sand.” The great economist wasn’t just being cute. He’s pointing to a very serious problem with government management of resources. And in this chapter, we’ll talk about why it’s a problem. But first we should ask: Why are people so concerned that we will run out of resources? And how can we find a reasonable balance between using resources and conserving them?

When most people think about resources, they think about the possibility they might be used up. And running out of resources means there will be nothing left for future generations. This scares people. So the notion goes something like: If parents let kids get into the groceries on the first night of the camping trip, there won’t be any sandwiches left for the picnic. The parents wisely ration the resources and restrict the kids’ access so that there is something to left for later. People who think government should manage resources are thinking that government will behave like wise parents. But does it?

What you may not have realized is that people in the market—under certain conditions—find a balance between consumption and conservation, which one might call “sustainable.” But first there has to be a complete market mechanism. This may be hard for some people to get their heads around, because most people think markets cause over consumption. And certain kinds of markets can.

Healthy markets only exist under certain rules. The main rules are what we might call the Three Ps: Private property, price signals and profit. These are the basic conditions of exchange. Without them there can be no healthy market.

Private property means that an individual has full ownership of a resource. We know who the owner is, how much they own and that right cannot be taken away arbitrarily. The owner may also have the authority to divest himself of the resource. That means we know the difference between mine and thine and in so knowing, we have the one of the conditions under which to conserve, trade, or consume.

Prices are what economist Steven Horwitz calls “information wrapped in an incentive.” When the price of some resource goes high enough, owners have the incentive to do any number of things. They might use less of the resource (i.e. conserve it), they might find new creative ways to increase the supply of the resource, or they might find a substitute, which ends up conserving the resource. Of course, we make any such choice because we expect of future returns, otherwise known as profit. And in this equilibrium created by prices, property and profit markets balance use with conservation.

Consider a resource that was once highly sought after: whale blubber. Whale blubber was used as an energy resource in the 19th century. But in the case of whales, there were only two of the three Ps. Whalers had prices and profit, but no private property. The whales belonged to what is known as the Commons—which meant anyone could hunt them. Unsurprisingly they were nearly hunted to extinction. Because no one owned them, whalers had a perverse incentive to hunt them quickly. The whales rapidly became scarce. Indeed, as the number of whales went down, the price of each individual whale went up and the incentives to hunt increased. But this can’t happen if there is a robust private property regime in place. If people could own whales, their incentive is not destroy them unsustainably, but to raise them. (Ironically, fossil fuels saved the whales thanks to substitution.)

In the 19th Century American West, wild bison (buffalo) roamed the unfenced, commonly-held Plains by the millions. They were hunted nearly to extinction. By contrast, people could own and raise cattle and the use of barbed wire on private property made it feasible to do so. Today, there are far more cattle in the Plains than bison and even where bison are privately-owned, their long-term survival is now better assured than it ever was on “public” property.

Consider trees. In North America, there are more trees than there have been in over a hundred years. Not only do foresters have incentives to regrow trees they harvest, they have incentives to cut them at a sustainable rate. Of course, in certain parts of the world—like Amazonia and Africa—concerns about forest clearing are justified. The big difference between forests in North America and South America? In one case, forests are largely government managed and in the other they largely privately managed.

Since 1900, U.S. forestland acreage has remained stable for more than a century. Unlike some regions in the world where deforestation is happening at a rapid pace, the US has actually maintained its forestland for the past 100 years. When one includes the heavily forested Northern Forests of Canada, forestland in North America since 1900 has grown—by a lot, according to the UN State of the World’s Forests reports.

By contrast, forests in many parts of the world are losing ground, even losses in these areas are slowing. Still, that leaves the question: why are North America’s forests growing while forests in other areas being lost? Certainly the biggest factor is whether the country has the Three Ps. The absence of property rights is known as the Tragedy of the Commons. If we look at the facts around the world, places that have stable private property rights have stable forestland. Places that don’t have tragedies of the commons—with its attendant rush to exploit.

Political leaders in areas without private property rights have tried to solve the problem of over-exploitation of forestland through the application of government management—that is: simply forbid people from using the resource or have the government allocate it “sustainably.” Contrary to Progressive conservation clichés, neither policy works particularly well.

In the case of bans, black markets form and there is a race to exploit the resource. Poachers and illegal exploiters emerge as the problems persist. For example, black rhinos are under threat in Africa despite bans. Because the profit motive is even stronger under bans, risk takers come out of the woodwork. In the case of government allocation of resources, the process can easily be corrupted. In other words, anyone who is able to capture the regulators will be able to manipulate the process in his favor. What follows is not only corruption, but in most cases considerations of “sustainability” go by the wayside, along with all the market mechanisms that constitute the true tests of sustainability.

 

Max Borders
Editor & Director of Content
The Freeman

Summary

  • It is simplistic to assume that people will blindly use up what sustains them without regard to the incentive structures they face; if they have incentives to conserve, they will do so.
  • Private property is a powerful incentive to conserve resources. You lose if you squander what’s yours.
  • When property is held “in common,” you have a license to use and abuse resources with little incentive to nurture and improve them.
  • For more information, see http://tinyurl.com/pn3qlfbhttp://tinyurl.com/ot533p3 and http://tinyurl.com/ngchvyo
Max Borders

Max Borders

ABOUT MAX BORDERS

Max Borders is the editor of The Freeman and director of content for FEE. He is also co-founder of the event experience Voice & Exit and author of Superwealth: Why we should stop worrying about the gap between rich and poor.

RELATED STORY: CLICHES OF PROGRESSIVISM #1: Income Inequality Arises From Market Forces and Requires Government Intervention

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

In Us We Trust? by GARY CHARTIER

David Rose argues that trust is a prerequisite of economic growth. David C. Rose. The Moral Foundation of Economic Behavior. Oxford University Press. 2011. 269 pages. $40.16.

Economists find it easy to model human actors as rational utility maximizers, evaluating possible decisions in light of their likely outcomes and choosing those options with the most utility-maximizing consequences.

But in The Moral Foundations of Economic Behavior, David Rose argues that economic development depends on trust, and that trust can only be expected to feature prominently in a particular society when those who live in it understand key moral requirements—in particular, duties that preclude negative conduct.

As Rose notes, people who reason this way may not be particularly good trading partners. If someone assesses her options in each situation and alters her plans as her judgments about the best way to maximize her utility change, she’s unlikely to prove very reliable; she may steal from others or defraud them. And this kind of behavior will tend to dispose others not to want to trade with her. The more widespread a tendency to maximize individual utility is in a given society, the more wary people will be about trading with each other, and the more resources they will likely spend detecting and preventing opportunistic behavior.

In such a society, the benefits of widespread trade won’t be available. The society will be poor.

Those who are, in the economists’ sense, “rational” won’t be likely to behave as case-by-case maximizers. They may not be concerned about the societal consequences of fostering distrust, but they almost certainly want others to deal with them. And anyone with the reputation of being willing to cheat others is someone with whom others won’t want to trade. The discipline imposed by continuous dealing will thus dispose rational actors, even ones who might be inclined to cheat, to behave reliably.

However, the discipline of continuous dealing can’t make everyone reliable all the time. Frequently, people engaged in trading relationships are strangers, and it’s not always possible for either to be aware of the other’s reputation. And institutional mechanisms designed to require accountability from those who steal and defraud are anything but uniformly effective.

Rose focuses on a further, even more serious problem: Reputational and similar mechanisms for ensuring good behavior only work when theft and fraud can be effectively detected, but they frequently cannot. People often enjoy what Robert Frank has termed “golden opportunities”—opportunities to take advantage of others with essentially no possibility of detection. These opportunities are particularly likely to arise in connection with open-ended contracts that leave the parties with lots of discretion. One party to such a contract may be able to cheat the other with no realistic possibility of detection: While it may appear to an observer that she’s fulfilling her obligations, she may in fact be taking unfair advantage of her trading partner.

While no one may be able to detect this kind of cheating, the expectation that it might occur is enough to put a damper on people’s expectations. Trust will be inhibited, and thus so will trade—and therefore prosperity. A society can achieve the kind of wealth that widespread trust makes possible only if everyone is committed to being trustworthy even when no one’s watching and even when behaving in an untrustworthy manner won’t lead to perceptible harm to any individual.

To foster prosperity, people need to be moral, not in order to avoid bad consequences, or even in order to achieve good ones on a case-by-case basis. They need to have internalized preferences for trustworthiness—most effectively fostered by culture—that can’t be overridden by the desire to benefit themselves or others in particular situations. They need to think of the duty to be trustworthy as, effectively, absolute. A society in which people reason this way will be able to sustain widespread, persistent trust. Economic relationships among strangers will be possible, social cooperation will flourish, and prosperity will ensue.

Rose is clear that the economist qua economist can’t show that people ought to be moral, or what form moral principles ought to take. But he argues that economists can show that societies in which particular moral principles are widespread will prosper. And I’m inclined to agree: Cooperation among strangers is the foundation of prosperity, widespread trust makes cooperation possible, and a moral—and not merely instrumental—commitment to reliability is a foundation for widespread trust.

There are interesting questions to ask about Rose’s arguments: When does background injustice reduce the duty to be trustworthy? What determines when a putative moral requirement really is a moral requirement? How shall we determine just what open-ended, relational contracts actually require? But, however we resolve these questions, Rose has made a convincing case that a society full of trustworthy people will be effectively positioned to experience the miracle of economic growth.

ABOUT GARY CHARTIER

Gary Chartier is a professor of law and business ethics and associate dean of the Tom and Vi Zapara School of Business at La Sierra University in Riverside, California. He is the author of Anarchy and Legal Order: Law and Politics for a Stateless Society, published by Cambridge University Press.

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

Free the Poor: Does economic freedom alleviate poverty? by Julian Adorney

2014 marks the 50th anniversary of the War on Poverty, and many claim that President Johnson’s program has lifted millions out of poverty.  But if we really want to help the poor, research suggests that economic freedom does more than government aid.

Economic Freedom Within the United States

In “A Dynamic Analysis of Economic Freedom and Income Inequality in the 50 States: Empirical Evidence of a Parabolic Relationship,” Daniel L. Bennett and Richard K. Vedder argue that, past a certain point, economic freedom decreases inequality. Increasing economic freedom benefits the poor and middle class more than it helps the wealthy.

Bennett and Vedder analyze the 50 states in terms of their economic freedom and their income inequality over 25 years (from 1979 to 2004). Bennett and Vedder define economic freedom as more or less the degree to which government is limited. They measured and ranked states according to the size of government, the level of taxation, and the level of labor market regulation. They define income inequality using the Gini coefficient. Because different states have radically different levels of economic freedom (compare New York and North Dakota, for instance), the authors were able to draw on a wealth of data about relative economic freedom in 50 distinct economies.

The authors find a parabolic relationship between a state’s economic freedom and its income inequality. As states initially become more economically free, most of the gains go to the wealthy. But at a certain inflection point X, which 21 states had already hit by 2004, the relationship shifts: past this point, as states become more free, income inequality declines.

But does income inequality decline because the rich lose wealth (perhaps through fewer opportunities for crony capitalism), or because the gains from increasing economic freedom go primarily to the poor?  In “Income Inequality and Economic Freedom in the U.S. States,” Nathan J. Ashby and Russell S. Sobel find that it’s the latter.

Ashby and Sobel analyze the 48 states of the continental United States in terms of their economic freedom and the incomes of their poor, middle-class, and wealthy residents over 20 years (from the early 1980s to the early 2000s). They use the same measure of economic freedom as Bennett and Vedder.

The authors find a strong positive correlation between a state’s economic freedom and the income level of the poorest 20 percent of residents. Freer states did better by their poor than less free ones. In particular, Ashby and Sobel found that increasing the economic freedom of a state by one unit (equivalent to moving from 40th-freest state to 7th freest-state) increased the incomes of its poorest residents by 11 percent. By contrast, the same change increased the incomes of the richest quintile by just over a third of that (4.3 percent). The middle class also saw increases, greater than the rich but less than the poor. Increasing a state’s economic freedom by reducing taxation and regulation creates broadly shared prosperity across all quintiles. Their research helps explain why, as states become more economically free, their income inequality declines: The poor and the middle class see more gains than the wealthy.

But couldn’t this be a case of mistaken causality? Maybe some states have less poverty because they have more natural resources. With less poverty, they need less government to help the poor, meaning they’re economically freer. But Ashby and Sobel anticipated this claim. They control for about a dozen variables, including education, geography, and median income. The last controlled variable is especially important; it places richer and poorer states on a level playing field, so to speak, for the study. It combats the idea that perhaps wealthier states need less government because they have less poverty, and firmly points the arrow of causality toward economic freedom reducing poverty.

Ashby and Sobel’s research is a compelling argument against government poverty programs. Other research, for instance the Mercatus Center’s Freedom in the 50 States annual report, notes the positive effects of economic freedom on aggregate economic growth. But because their data is left in the aggregate, it’s difficult to determine to whom exactly the economic gains go. But by breaking down their research by quintile, Ashby and Sobel make a case that economic growth especially helps the poor.

Economic Freedom Worldwide

Nor is the connection between economic freedom and bottom-rung prosperity unique to the United States. Recent research in the Economic Freedom of the World (EFW) 2013 Annual Report finds the same trend internationally.

The Economic Freedom of the World (EFW) Annual Report, published by the Fraser Institute, analyzes around 150 countries in terms of factors like their economic freedom, closeness to a laissez-faire state, poverty levels, and per capita income. The results are a striking indictment of the idea that more government intervention in the economy can help the poor.

As EFW points out, the shares of a country’s GDP going to the bottom 10 percent are pretty consistent regardless of how free the country is. From communist states to progressive countries to almost laissez-faire societies, the poorest 10 percent of citizens receive about 2.5 percent of the country’s wealth. No amount of progressive policies has changed that number. But for the poor, life is still much better in an economically free country than in one with more government. More economically free countries have more wealth than less free ones, meaning the poorest 10 percent can end up with thousands of dollars more per year. The poorest citizens of the 25 percent most-free countries earn an average of $10,556 per year. The poorest citizens in the middle 50 percent of countries earn less than a third of that.

So why does more economic freedom mean less poverty? The answers are well-known to libertarians, but worth reviewing. In societies with more economic freedom, decreased taxes and regulation make it easier to accumulate savings and to start or expand a business. Today in the United States, getting permits and navigating the legal maze to start a business can cost tens of thousands of dollars. Getting the permit for a food truck, and complying with the various laws, can cost $15,000 at the high end. Regulations in the United States overall cost about 1.5 percent of the country’s income per capita. But in other countries this cost is even higher; in Germany regulations sap 4.7 percent of the nation’s income per capita. In Italy it’s 14.2 percent.

Some of these regulations drain money from existing corporations, leaving them with fewer funds to expand; others impose hefty costs on anyone wishing to start a business. Both ultimately discourage wealth creation. Countries or states with more economic freedom therefore have more jobs, more innovation, and more goods and services—ultimately more wealth—than societies burdened by a heavy government.

As we approach the 50th anniversary of the War on Poverty, legislators would do well to bear these data in mind. The cure for poverty is not more well-meaning government programs to make the United States resemble Europe. The solution, as it has always been, is more economic freedom.

ABOUT JULIAN ADORNEY

Julian Adorney is an entrepreneur and fiction writer. He has written for the Ludwig von Mises Institute and runs a libertarian blog.

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

Amnesty for Illegals Cannot be Defended

I am totally perplexed by Republicans who advocate amnesty for those who entered the U.S. illegally. We Republicans are supposed to be the party of law and order, a party that stands on clearly defined principles. Let’s cut through the pompous rhetoric: The issue of amnesty is only about cheap labor. All the other arguments are merely background noise. With the national unemployment rate just under 8 percent, how can you argue that illegals are doing jobs that Americans refuse to do?

With all the unemployed engineers (partly because of the shutdown of NASA’s Space Shuttle program), how do you justify increasing the number of H-1B visas? The special visa allows companies to temporarily employ foreign workers in specialty occupations for up to six years. How can six years still be considered temporary?

How do you explain to a kid in Virginia that he or she has to pay out-of-state tuition to attend the University of Maryland while but a student in the country illegally is allowed to pay in-state tuition? Why should someone in the country illegally be able to obtain a benefit that even an American citizen can’t have? Aren’t these Republicans supporting discrimination against American citizens in their lust of the Hispanic voter?
Linking amnesty to winning the Hispanic vote is not a winning or sensible strategy. One has nothing to do with the other. There is no unanimity within the Hispanic community on the issue of amnesty, therefore why are some operatives linking this issue to the future of the Republican Party? One can be against amnesty without being mean and nasty. But to equate supporting amnesty as a prerequisite to proving that you are not mean and hateful is an insult to our intelligence. As if this weren’t bad enough, can someone please explain to me the logic of any Black person supporting amnesty when the Black unemployment rate is in double digits?

We can have honest disagreements on the issue of amnesty; but please don’t give me the perverted reasoning supporters of amnesty have been using: “it’s an act of love,” “they are only looking for a better life,” “it’s not their fault.”

But these same proponents who want to justify ignoring the law based on some irrational, emotional tick refuse to apply the same empathy towards “Pookie” and “LaQueesha,” who represent inner city America.

When “Pookie” gets arrested for carrying a recreational amount of crack and get sentenced to a mandatory minimum of 20 years for a first time, non-violent offense, where are these Republican thespians advocating for an empathetic approach to law enforcement? When a Black woman in Florida fires a warning shot in the air to stop an abusive former husband from beating her and gets 20 years mandatory minimum, where are the Republican voices of empathy?

If we are going to claim to be a nation of laws, then we can’t allow emotion to cause the unequal distribution of justice to continue. If your basis for giving amnesty to illegals is “their intent”—they only want to make a better life; then how can you not apply the same logic to “Pookie” and “LaQueesha?” Can you not make the same argument that they only want to make a better life for themselves and their families?

Pro-amnesty Republicans sound like a bunch of liberals when they refuse to advocate for the enforcement of current immigration law because they claim to know the “intent” of the law breaker. These same pro amnesty members of the House and Senate have been relentless in accusing President Obama for not being trustworthy on health care (“you can keep your own doctor”), but are willing to work with and trust him on the enforcement side of the immigration debate.

If you can’t trust Obama on healthcare, how can you trust him on immigration?

RELATED STORY: Illegal Aliens, Non-Citizens Caught Voting In Florida In Vast Numbers

Florida Coalition Calls for Action on Ethics Reform, Open Government

On April 16th, a coalition of groups, including Integrity Florida, the First Amendment Foundation,  Common Cause Florida, the Citizens Awareness Foundation and The Tea Party Network held a press conference to call for the House to take action on ethics reform (SB 846) and open government (SB 1648HB 1151) bills that were stalled in the Florida Legislature.

Since this press conference Ethics Reform Proposal SB 846 was passed by the Florida House State Affairs Committee.

“Integrity Florida applauds our lawmakers for continuing to strengthen our state’s ethics laws,” said Dan Krassner, executive director of the nonpartisan government watchdog group Integrity Florida. “For the second year in a row, the legislature is advancing anti-corruption measures to improve public trust in government. While more work will be needed in the future to take on corruption, lawmakers are moving in the right direction.”

[youtube]http://youtu.be/QZEy1tLV2TU[/youtube]

 

SB 846, as amended by the House State Affairs Committee, would do the following:

  • Allows the Florida Commission on Ethics to independently begin investigations when officials fail to file financial disclosure reports;
  • Requires lobbyist disclosure at the state’s water management districts;
  • Requires ethics training for elected city officials; and
  • Applies some of the state’s ethics code to Enterprise Florida and Citizens Property Insurance.

President Obama’s War on U.S. Energy

A nation without adequate energy production is a nation in decline and that has been the President’s agenda since the day he took office in 2009. He even announced his war on coal during the 2008 campaign even though, at the time, it was providing fifty percent of the electricity being utilized.

It’s useful to know that the U.S. has huge coal reserves, enough to provide energy for hundreds of years and reduce our debt through its export to nations such as Japan. It increased coal-fired power generation by ten percent in 2013 while Germany’s coal use reached the highest level since 1990. Both China and India are increasing the use of coal. So why is coal unwelcome in the U.S.? Because Obama says so.

On April 15, the White House held a “Solar Summit” to continue promoting subsidies for solar panels and the Obama Energy Department has announced another $15 million in “solar market pathways” to fund local government’s use of solar energy. Its “Capital Solar Challenge” is directing federal agencies, military bases, and other federally subsidized buildings to use solar power.

According to the Institute for Energy Research, “solar energy provides two-tenths of one percent of the total energy consumed in the United States. While the amount of solar electricity capacity in the U.S. has increased in recent years…it still only accounts for 0.1% of net electricity generated…the least among the renewable sources of hydroelectric, biomass, wind and solar.”

So, in addition to the millions lost in earlier loans to solar companies like Solyndra that failed not long after pocketing our tax dollars, Obama is using the power of the federal government to waste more money on this unpredictable—the Sun only shines in the daytime and clouds can get in the way—source of energy whose “solar farms” take up many acres just to provide a faction of what a coal-fired or natural gas powered plant does.

This isn’t some loony environmental theory at work although the Greens oppose all manner of energy provision and use whether it is coal, oil or natural gas. They always find an excuse to mine or extract it. This is a direct attack on the provision of energy, fueled by any source, that America needs to function and meeting the needs of its population, manufacturing, and all other uses.

The most recent example of this is the further extension of the delay on the construction of the Keystone XL pipeline from Canada to refineries on the Gulf Coast. That too is part of Obama’s war on energy for the nation, but it may also have something to do with the fact that the Burlington Santa Fe Railroad owns all of the rail lines in the U.S. connecting to western Canada. They haul 80% or more of the crude oil from Canada to the Midwest and Texas, earning a tidy sum in the process. It is owned by Warren Buffett’s Berkshire Hathaway, a major contributor to Democrat causes and candidates. The Keystone XL pipeline could divert more than $2 billion a year and if its delay is not crony capitalism, nothing is.

This is what the Sierra Club is telling its members and supporters as of Monday, April 21: “Keystone XL means cancer. It means wolf blood spilled. And it’s nothing short of a climate disaster.” It is a lie from start to finish.

Keystone has become a political issue and the announcement by the Obama State Department that is giving agencies “additional time” to approve its construction due to ongoing litigation before the Nebraska Supreme Court that could affect its route brought forth protests from red-state Democrats in Congress who even threatened to find ways to go around the President to get the project approved. Eleven Democratic senators have written to the President to urge him to make a final decision by the end of May. Some of them will be up for reelection in the November midterm elections.

Even Congress, though, seems incapable of over-ruling or overcoming Obama’s war on the provision of energy sources. In early April, the Bureau of Land Management (BLM) released new data showing that federal onshore oil and natural gas leases and drilling permits are at the lowest levels in more than a decade. Leases to companies exploring the potential of oil and natural gas reserves were down in 2013 from 1.8 million acres the year before to 1.2 million, the smallest area since records began to be maintained in 1988!

We have a President who gives daily evidence of his contempt both for those who voted for him and those who did not. His anti-energy agenda impacts on the creation of jobs, causes manufacturing to delay expansion or to go off-shore, reduces the revenue the government needs to reduce its debts and deficits, and drives up the cost of energy for everyone.

And he is doing this in one of the most energy-rich nations on the planet.

EDITORS NOTE: For the latest, updated information on energy visit: Energy Depot. The featured photo is courtesy of the Heritage Foundation.

RELATED STORIES:

Obama: Hurting Energy and Economic Growth
Here’s Where the Government Can Get Out of the Way
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Shock Study: As public school funding increased student SAT scores decreased

Long-term trends in academic performance and spending are valuable tools for evaluating past education policies and informing current ones. But such data have been scarce at the state level, where the most important education policy decisions are made. State spending data exist reaching back to the 1960s, but the figures have been scattered across many different publications. State-level academic performance data are either nonexistent prior to 1990 or, as in the case of the SAT, are unrepresentative of statewide student populations.

Using a time-series regression approach described in a separate publication, this CATO Institute paper adjusts state SAT score averages for factors such as participation rate and student demographics, which are known to affect outcomes, then validates the results against recent state-level National Assessment of Educational Progress (NAEP) test scores.

This CATO study produces continuous, state-representative estimated SAT score trends reaching back to 1972.

The CATO Institute presents paper charts of these trends against both inflation-adjusted per pupil spending and the raw, unadjusted SAT results, providing an unprecedented perspective on American education inputs and outcomes over the past 40 years.

The CATO study found:

In general, the findings are not encouraging.

Adjusted state SAT scores have declined by an average of 3 percent. This echoes the picture of stagnating achievement among American 17-year-olds painted by the Long Term Trends portion of the National Assessment of Educational Progress, a series of tests administered to a nationally representative sample of students since 1970. That disappointing record comes despite a more-than-doubling in inflation-adjusted per pupil public-school spending over the same period (the average state spending increase was 120 percent).

Consistent with those patterns, there has been essentially no correlation between what states have spent on education and their measured academic outcomes. In other words, America’s educational productivity appears to have collapsed, at least as measured by the NAEP and the SAT.

That is remarkably unusual. In virtually every other field, productivity has risen over this period thanks to the adoption of countless technological
advances—advances that, in many cases, would seem ideally suited to facilitating learning. And yet, surrounded by this torrent of progress, education has remained anchored to the riverbed, watching the rest of the world rush past it.

Not only have dramatic spending increases been unaccompanied by improvements in performance, the same is true of the occasional spending declines experienced by some states. At one time or another over the past four decades, Alaska, California, Florida, and New York all experienced multi-year periods over which real spending fell substantially (20 percent or more of their 1972 expenditure levels). And yet, none of these states experienced noticeable declines in adjusted SAT scores—either contemporaneously or lagged by a few years. Indeed, their score trends seem entirely disconnected from their rising and falling levels of spending. [Emphasis added]

Following are the state charts for Florida:

florida education trends cato 1

florida sat trends cato

To view the results for your state go to State Education Trends

RELATED STORY: More Bad News from Government-Run Education: The Corrosive Centralization of Common Core

cato school scores

For a larger view click on the chart. Courtesy of CATO Institute.

Radical Islam in Faith, North Carolina

On 12 April 2014, I drove to the small town of Faith, NC.  I was asked to give a presentation about the activities of the mosques in North Carolina.  This is a 53 minute presentation covering many areas within Islam.  I believe you will enjoy it.

[youtube]http://youtu.be/V4hVTIuFKBU[/youtube]

 

RELATED VIDEOS: How I became a terrorist hunter Part I

[youtube]http://youtu.be/v-SC6-zTJ1g[/youtube]

Part II

[youtube]http://youtu.be/aU97JxniS5A[/youtube]

 

RELATED STORY: Five Arab states top the most corrupt list – Al Jazzera

Was stopping Nevada’s fracking rush behind the Bundy Showdown? by Marita Noon

The story of rancher Cliven Bundy has captured an abundance of media attention and attracted supporters from across the West, who relate to the struggle against the federal management of lands. Bundy’s sister, Susan, was asked: “Who’s behind the uproar?” She blamed the Sierra Club, then Senator Harry Reid (D-NV), and then President Obama. She concluded her comments with: “It’s all about control”—a sentiment that is frequently expressed regarding actions taken in response to some endangered-species claim.

An Associated Press report describes Bundy’s battle this way: “The current showdown pits rancher Cliven Bundy’s claims of ancestral rights to graze his cows on open range against federal claims that the cattle are trespassing on arid and fragile habitat of the endangered desert tortoise.”

Bundy’s story has been percolating for decades—leaving people to question why now. The pundits are, perhaps, missing the real motive. To discover it, you have to dig deep under the surface of the story, below the surface of the earth. I posit: it is all about oil and gas.

On April 10, the Natural News Network posted this: “BLM fracking racket exposed! Armed siege and cattle theft from Bundy ranch really about fracking leases.” It states: “a Natural News investigation has found that BLM is actually in the business of raking in millions of dollars by leasing Nevada lands to energy companies that engage in fracking operations.”

This set off alarms in my head; it didn’t add up. I know that oil-and-gas development and ranching can happily coexist. Caren Cowan, executive director of the New Mexico Cattle Growers Association, told me: “The ranching and oil-and-gas communities are the backbone of America. They are the folks who allow the rest of the nation to pursue their hearts’ desire secure in the knowledge that they will have food and energy available in abundant supply. These natural resource users have worked arm-in-arm for nearly a century on the same land. They are constantly developing and employing technologies for ever better outcomes.”

The Bureau of Land Management (BLM) wouldn’t be enduring the humiliating press it has received, as a result of kicking Bundy off of land his family has ranched for generations and taking away his prior usage rights, just to open up the land for oil-and-gas—the two can both be there.

The Natural News “investigation” includes a map from the Nevada Bureau of Mines and Geology that shows “significant exploratory drilling being conducted in precisely the same area where the Bundy family has been running cattle since the 1870s.” It continues: “What’s also clear is that oil has been found in nearby areas.”

Nevada is not a top-of-mind state when one thinks about oil and gas. Alan Coyner, administrator for the Nevada Division of Minerals, describes his state: “We are not a major oil-producing state. We’re not the Saudi Arabia of the U.S. like we are for gold and geothermal production.”

The Las Vegas Review Journal reports: “When it comes to oil, Nevada is largely undiscovered country…. fewer than 1,000 wells have been drilled in the state, and only about 70 are now in production, churning out modest amounts of low-grade petroleum generally used for tar or asphalt. Since an all-time high of 4 million barrels in 1990, oil production in Nevada has plummeted to fewer than 400,000 barrels a year. More oil is pumped from the ground in one day in North Dakota—where the fracking boom has added more than 2,000 new wells in recent years—than Nevada produced in 2012.”

But Nevada could soon join the ranks of the states that are experiencing an economic boom and job creation due to oil-and-gas development. And, that has got to have the environmental groups, which are hell-bent on stopping it, in panic mode. Until now, their efforts in Nevada have been focused on blocking big solar development.

A year ago, the BLM held an oil-and-gas lease sale in Reno. At the sale, 29 federal land leases, totaling about 56 square miles, were auctioned off, bringing in $1.27 million. One of the winning bidders is Houston-based Noble Energy, which plans to drill as many as 20 exploratory wells and could start drilling by the end of the year. Commenting on its acreage, Susan Cunningham, Noble senior vice president, said: “We’re thrilled with the possibilities of this under-explored petroleum system.”

The parcels made available in April 2013 will be developed using hydraulic fracturing, about which Coyner quipped: “If the Silver State’s first big shale play pays off, it could touch off a fracking rush in Nevada.” Despite the fact that fracking has been done safely and successfully for more than 65 years in America, the Center for Biological Diversity’s (CBD) Nevada-based senior scientist, Ron Mrowka, told the Las Vegas Review Journal: “Fracking is not a good thing. We don’t feel there is a safe way to do it.”

The BLM made the leases available after someone, or some company, nominated the parcels, and the process to get them ready for auction can easily take a year or longer. One year before the April 2013 sale, CBD filed a “60-day notice of intent to sue” the BLM for its failure to protect the desert tortoise in the Gold Butte area—where Bundy cattle have grazed for more than a century.

Because agencies like the BLM are often staffed by environmental sympathizers, it is possible that CBD was alerted to the pending potential oil-and-gas boom when the April 2013 parcels were nominated—triggering the notice of intent to sue in an attempt to lock up as much land as possible before the “fracking rush” could begin.

deserttortoiseA March 25, 2014, CBD press release—which reportedly served as the impetus for the current showdown—states: “Tortoises suffer while BLM allows trespass cattle to eat for free in Nevada desert.” It points out that the Clark County Multiple Species Habitat Conservation Plan purchased and then retired grazing leases to protect the endangered tortoise.

Once Bundy’s cattle are kicked off the land to protect the tortoise, the precedent will be set to use the tortoise to block any oil-and-gas development in the area—after all environmentalists hate cattle only slightly less than they hate oil and gas. Admittedly, the April 13 leases are not in the same area as Bundy’s cattle, however, Gold Butte does have some oil-and-gas exploration that CBD’s actions could nip in the bud.

Intellihub reports: “The BLM claims that they are seizing land to preserve it, for environmental protection. However, it is obvious that environmental protection is not their goal if they are selling large areas of land to fracking companies. Although the land that was sold last year is 300 and some miles away from the Bundy ranch, the aggressive tactics that have been used by federal agents in this situation are raising the suspicion that this is another BLM land grab that is destined for a private auction.”

The Natural News Network also sees that the tortoise is being used as a scapegoat: “Anyone who thinks this siege is about reptiles is kidding themselves.” It adds: “‘Endangered tortoises’ is merely the government cover story for confiscating land to turn it over to fracking companies for millions of dollars in energy leases.” The Network sees that it isn’t really about the critters; after all, hundreds of desert tortoises are being euthanized in Nevada.

Though the Intellihub and Natural News Network point to the “current showdown” as being about allowing oil-and-gas development, I believe that removing the cattle is really a Trojan horse. The tortoise protection will be used to block any more leasing.

On April 5, 2014, CBD sent out a triumphant press release announcing that the “long-awaited” roundup of cattle had begun.

What I am presenting is only a theory; I am just connecting some dots. But over-and-over, an endangered or threated species or habitat is used to block all kinds of economic development. A few weeks ago, I wrote about the lesser prairie chicken and the huge effort ($26 million) a variety of industries cooperatively engaged in to keep its habitat from being listed as threatened. The effort failed and the chicken’s habitat was listed. In my column on the topic, I predicted that these listings were likely to trigger another sage brush rebellion that will challenge federal land ownership. The Bundy showdown has brought the controversy front and center.

propertyrightsFor now, southern Nevada’s last rancher has won the week-long standoff that has been likened to Tienanmen Square. Reports state that “the BLM said it did so because it feared for the safety of employees and members of the public,” not because it has changed its position.

While this chapter may be closing, it may have opened the next chapter in the sagebrush rebellion. The Bundy standoff has pointed out the overreach of federal agencies and the use of threatened or endangered species to block economic activity.

About Marita Noon

Marita Noon

The author of Energy Freedom, Marita Noon serves as the executive director for Energy Makes America Great Inc. and the companion educational organization, the Citizens’ Alliance for Responsible Energy (CARE). Together they work to educate the public and influence policy makers regarding energy, its role in freedom, and the American way of life. Combining energy, news, politics, and, the environment through public events, speaking engagements, and media, the organizations’ combined efforts serve as America’s voice for energy.