Obama's Title of Nobelity

President Obama's recent acceptance of the Nobel Peace Prize is an affront to the United States Constitution. Yes, I know that two prior sitting presidents have received the award. I don't excuse them either. But in this case, since the award is intended to influence our President's future actions, it constitutes direct foreign meddling on the office of the President. Roosevelt and Wilson were still free to place American interests above those of the Nobel committee because their awards were for specific past accomplishments.

The spirit of the Constitution's emolument clause is to prevent undue foreign influence:

Article I Section 9.8: No title of nobility shall be granted by the United States; and no person holding any office of profit or trust under them shall, without the consent of the Congress, accept of any present, emolument, office, or title, of any kind whatever, from any king, prince, or foreign state.

The Nobel Peace Prize is a title. The money is an emolument. And the Nobel committee, though not a foreign state, is a foreign entity. (Some argue that since the committee is elected by the Norwegian Parliament, it is an extension of a foreign state) . It is good that President Obama intends to donate the money to charity. But he is retaining the title and intends to let it guide his future actions. This clearly go against the principles of republican government.

Federalist Papers 2,3,4,5, and 22 all warn of the dangers of foreign influence. George Washington warned in his Farewell Address:

As avenues to foreign influence in innumerable ways, such attachments are particularly alarming to the truly enlightened and independent patriot. How many opportunities do they afford to tamper with domestic factions, to practice the arts of seduction, to mislead public opinion, to influence or awe the public councils. ...

Against the insidious wiles of foreign influence (I conjure you to believe me, fellow-citizens) the jealousy of a free people ought to be constantly awake, since history and experience prove that foreign influence is one of the most baneful foes of republican government.

I understand that the President has tried to make the best of a difficult situation. Part of me believes that he would have rather this never happened. But why didn't he consult the constitution before quickly accepting the prize? He was sworn to protect that document. Whether he is conscious of it or not, he now has another set of puppet strings.

P.S.
A movie was made in 2006 which also considers Nobel winners to be "nobility".
Here is another good writer on the subject.

Oaks on Religious Freedom

Elder Dallin Oaks speaks out on religious freedom.

Religious Freedom at Risk

Right to Health Care: When Freedom is Slavery by Another Name

Health Care a Right?
"Health care should be a right", says Representative John Dingle. I've heard this same impassioned comment from dozens of others. The language of rights is powerful in American history, so the assertion has a compelling feel to it. Isn't the right to "life, liberty and the pursuit of happiness" our most sacred principle of freedom? Without good medicine your life and happiness are in great jeopardy. So obviously,the logic goes, health care should be guaranteed to all freedom loving citizens. In fact, we should also be free from want and...and from fear itself! But not so fast...

Let me show you the sleight of hand. It's quite simple. The triumvirate of rights (life, liberty, and the pursuit of happiness) refers to what in Natural Law is known as inalienable rights. These are rights that, in the rawest state of nature (say if you were alone on a tropical island) you would be guaranteed to have. These are God-given innate qualities of the human condition. They exist without a social contract. We are designed to assert these rights even as Nature challenges them with hunger, disease, and the elements.

Then comes society. With society comes the ability to exchange rights with others. These are "vested" rights. Vested rights occur as the result of exercising inalienable rights. You can use your free will to voluntarily trade your right to property for a right to someone else's property. The key word is voluntary. Successful societies have learned how to create law which promotes the inalienable rights of everyone. Because everyone has different talents, true protections of inalienable rights will always lead to unequal outcomes.

The concept of a right to health care descends directly from the notion of "freedom from want". Franklin Roosevelt first articulated this progressive ideal in his "Four Freedom's Speech". This "freedom" refers to the guarantee of receiving goods and services. In the rawest state of nature, goods and services don't exist. They are created through the application of labor. Nature bestows no absolute right to the fruit of of someone else's labor except through brute force. It is one thing for you to say "I have a right to pick that apple" and quite another to say "I have the right to force you to pick that apple for me". Having the "freedom" to take the produce of another used to be called plunder and slavery.

Photo of Benkos Bioho by who is that with rachel

The guy who says that health care should be a right is saying "I have a right to force people to serve me". 16% of U.S. GDP is devoted to creating the good s and services of medical care. It represents millions of people working hard each day. Should we have a right to their labor (or the labor of the tax payers funding them) for little or no cost? The real kicker is this: that mentality is equivalent to the thinking of southern slave owners two hundred years ago. The slave had no rights to the fruit of his own labor. They belonged to somebody else. He was compelled to provide goods and services to somebody else at no cost. In addition, the slave could not live his life freely. His owners told him how to live his life (being healthy was definitely a requirement). Current health care proposals in Washington contain both these aspects of slavery.

Elements of coercion, to some extent are necessary evils of any society. We have had a military draft. We have had eminent domain seizures. We have had quarantines. But aren't these the exceptions to the rule? The principles of freedom require that we always try to minimize such coercion.

A note about taxes. Taxation is an example of a necessary evil. You can never get unanimous consent from all citizens about whether to be taxed and by how much and for what purpose. Since this subject deserved a full exploration, I wrote about it at length here: Freedom Based Taxation. In short, we can balance the freedom of collective action with that of individual action. The evils of taxation can be minimized by observing the locality principle and by ensuring that the benefits are shared equally by all.

Partial Slavery
I probably won't have many people argue with my view that outright human bondage is a bad idea. I think most would agree that we'd rather suffer a reduced quality of life than live directly on slave labor. Examine the condition of a slave. Would it make it better if we gave the slave Saturday off? On Saturday he can keep all his earnings and do as he pleases. Does that make it better? Okay, let's give him 3 days off. Now he's 42% free. Probably not good enough, so how about he only has to work for his master one day of the week and we'll let him pick which day. Now he's a fractional slave only 14% of the time. Lastly, let's let the slave be free to leave the plantation entirely but he must remit 14% off his earnings back to his master. Are we good now? I think it is obvious that nothing short of 100% free will do, don't you agree? But today, some taxpayers are fractional slaves to others. 4 in 10 tax filers pay no federal income tax at all and the top 50% pay 97% of the taxes. Clearly, an unduly large class of Americans receive benefits paid for by others without their consent.

"Freedom from want" entails large scale widespread coercion. No people in history has ever enjoyed freedom from want. It is part of Nature's Law. "Want" is what drives people to action. The current drive to nationalize health care is just one more attempt so solve social problems at the expense of individual freedom. It cannot but increase the level of fractional slavery we already have.

Take a look at some of the popular arguments for slavery and compare them to arguments for nationalized health care. In each case the speaker illustrates a supposed tangible benefit. Does material comfort trump principle?

Argument Type	Slavery	Nationalized Health Care
Because others do it	John Calhoun: "There has never yet existed a wealthy and civilized society in which one portion of the community did not live on the labor of the other"	Paul Krugman: "...every other advanced country offers universal coverage, while spending much less on health care than we do. "
Paternalism	Calhoun: "look at the sick, and the old and infirm slave, on one hand, in the midst of his family and friends, under the kind superintending care of his master and mistress, and compare it with the forlorn and wretched condition of the pauper in the poor house."	Barrack Obama: "I will make sure that no government bureaucrat or insurance company bureaucrat gets between you and the care that you need"
Stability	Calhoun: "I venture nothing in predicting that the experience of the next generation will fully test how vastly more favorable our condition of society is to that of other sections for free and stable institutions"	Obama: "Now, that's what Americans who have health insurance can expect from this plan -- more security and more stability."
Economic	Chancellor Harper: "And what would be the effect of putting an end to the cultivation of these staples [cotton and rice], and thus annihilating, at a blow, two-thirds or three-fourths of our foreign commerce? Can any sane mind contemplate such a result without terror?"	Max Baucus: "We need to pass very strong, comprehensive healthcare reform this year...Otherwise American families are gonna pay half of their family income on health care premiums"

It is ironic that the practice of partial slavery is more advanced today in what are known as "the blue states". These states were once the liberators who sacrificed life and limb to enforce the Emancipation Proclamation. Progressives in these states still see themselves as liberators. These political cartoons were published during the 2004 election in an attempt to link southern conservatives with slavery. Oh the irony:

(Click on image)

Also see this one

Freedom Based Taxation

Taxes are 100% constitutional and fully consistent with the principles of a freedom loving people. However, taxes become a form of slavery when they systematically and purposefully redistribute wealth. Wealth is simply the product of someone's labor. Whether the laborer is Bill Gates, or a cotton picker in the 1800's, when the fruit of the laborer is given to another without consent it is coerced servitude. The principle of freedom in taxation is that the benefits of the taxes must be general and fall evenly upon all citizens. This implies that taxes should be as local as possible. It also means that private alternatives should always take precedence over public programs. The fire department is a good example of the locality principle. Research at the National Institute of Health Sciences is a good example of the general utility principle as it produces knowledge that is available to everyone. I'd even say NASA is of general benefit even if you aren't a space buff. Federal highways are OK too.

However, here is where we depart from the principles of freedom in taxation: 1. overly progressive taxes, especially "negative" taxation, and 2. general fund expenditures on individuals and special interests. When the government reduces the level of tax to zero (or below zero) for a class of people, they are reaping the rewards paid for by another class of people. I'm not arguing for a capitation tax, nor even necessarily a flat tax. I'm just saying that the lowest income tax level should not be zero! And the highest should not be confiscatory! Today, because of so many tax deductions and credits, 4 in 10 Americans pay no federal income tax! How well does that bode for freedom when 40% of Americans have no incentive as voters to control federal spending?

Second, whenever the government writes a check to an individual so they can receive a benefit that is unique to them, unfair wealth redistribution occurs. Welfare payments out of the general fund to select groups of people based on things such as health status or income level are unequal expenditures which benefit a few at the expense of others.

In the U.S. we have at least tried to pay lip service to freedom principles in our welfare state. Social Security was envisioned as a separate fund dedicated to one purpose. It was to be self-funded and it would theoretically (except for the lucky first cohort) pay out about as much as you paid in. Thus, it wasn't supposed to be redistributive. It was a mandatory savings program. Medicare was to be the same. Of course they are both ponzi schemes and we all know it. Today, both of these programs simply represent a massive generational transfer of wealth. Current workers are slaves to current retirees and will not receive back what they paid in.

But what if taxpayers voluntarily vote to extend benefits to select groups? Well, up until the early 1900's, it was understood that payoffs to special interests, even if charitable were unconstitutional. See these examples. We are now flouting the constitution with programs like Medicaid and CHIP. But still, if taxpayers approve of it, isn't that their freedom based prerogative? No, inalienable rights* should not be voted away and the Supreme Court should not allow it. The fact that it has been allowed shows how far we've strayed from the principles of freedom. Additionally, you will never get unanimity among tax payers, so somebody is going to be forced to pay for something that they don't benefit from.

^{*The right to property is an inalienable right. Before Jefferson, the three liberties were "life, liberty, and property".}

I agree that there is a gray area. The welfare state proponent will no doubt say things like:

1. The benefit is general because program X reduces crime, for example, and lowers costs to you in other ways.
   
2. You might need government charity someday too. Consider it insurance of which you are a beneficiary.
3. What about that fire department you mentioned? Not everyone will have a fire. So it's like insurance. Why can't we have health insurance for all too?
   

These arguments have a valid point, but one that has a built-in answer in the American system of government. The answer is local rule. The smaller the unit of collective action, the more likely it is that the beneficiaries of the activity will be have the same needs and interests. Taxation will always be an imperfect vehicle for equitably representing the desires of the the tax payer. The best we can do is to ensure that the taxpayer's contributions travel the shortest distance away from her as possible so that she can see it's effects and have a greater say in remediation of any improprieties.

The fire department, again, is a great example. Different places in the country have different approaches to fire fighting. Some areas rely only on volunteers. There is no one-size-fits-all approach. Ever since charity went Federal, we've noticed many more abuses of it. Who is a greater steward of charitable benefits, the man who receives a check from 2,000 miles away or the man who sees his benefactors as neighbors? Keep it local! And when possible, keep it private!

"The government of the United States is a definite government, confined to specified objects. It is not like the state governments, whose powers are more general. Charity is no part of the legislative duty of the government. "
--James Madison

Taxation will always be messy and imperfect. But this does not give us license to view the "rich" as an ATM and for the "poor" not to contribute. And on the spending side, if there is a risk that a program will only benefit a select group, it needs to be rethought or pushed down to a more local group (state, county, or city) or to the private sector.

My Freedom Based Vision for Health Care Reform

My Freedom Based Vision of Health Care
I would like to offer my vision for American health care for the 21st century. This vision statement is not a specific policy recommendation. It is a vision of what the world could be like after a series of incremental changes. I present my vision first because it is essential, in the current health care debate, that we have a common vision before we argue about specifics. I occasionally make mention of specific policy changes in order to persuade you that the vision is realistic. But keep your eyes on the big picture and see if you don't agree that this is a world that you'd want to live in.

My vision of health care is guided by some core principles: I believe in charity and sacrifice by those blessed with more, but I also think people should lie in the bed they make for themselves. I believe in free choice. I believe that the United States has been the beacon of freedom to the world, and that it needs to remain so.


My Vision
I envision a health care system where people choose their doctor and pay their doctor much in the same way that we choose our barber or our mechanic. People would save for health care the same way they save for home or car repairs. They would budget for it and it would be their choice where to go and how much to spend. Prices would be just as transparent as they are at the local department store. And the less fortunate would have no need of insurance because society would provide free care the same way we provide Section 8 or food stamps (no mansion, and no fillet mignon but you do get what you need)

Health care would be often be delivered at home. I'd have phone and email access to my doctor. Nurses would be allowed to do more. The licensing system for medical professionals would allow for much greater latitude in the use of physicians assistants (PA). These PA's would roam the cities to deliver in-home care at hours that are convenient for their customers. People would rarely visit the hospital. Broken leg? A PA would drop by (much like a plumber drops by for emergencies). They would be licensed to perform all manner of outpatient care. Self-blood draws and self-measurement would be the commonplace. Nobody would trudge into the doctor's office just to have their throat cultured. Everyone would have health appliances that can send vitals electronically to their doctor. An additional tier of prescription drugs would be created that would allow some drugs to be prescribed by a pharmacist (Electronic medical records would be an enabler for this.) More drugs would be available over-the-counter.

My medical records would be available instantly from a medical record provider of my choice. Standards bodies (much like the ones that govern the Internet) would ensure portability of records to any service provider. Privacy laws would be enforced to ensure my data remains private.

An aside on a new personal health paradigm: The CEO of Intel, Paul Otellini recently wrote of an entirely new paradigm in health care. Please read his views on a paradigm of personal health at Politico. You see, instead of copying France or Canada, the United States should lead.

Employers
Just as people are free to choose their doctors, they would be free to choose the funding model. No longer would employers be selecting insurance providers. In fact, the tax incentives that force employers to provide insurance would have been abolished. In lieu of health insurance, employers would have increased the salaries of the employees and gotten out of the health business. If the health of employees was important, they could require yearly physicals much like they do in the Armed Services. But they wouldn't be choosing how health care is delivered to their employees. No more worrying about losing health care because you lost or changed your job! (To get there, we need to tax employer health benefits and move the tax relief directly to individuals).

My Vision on Insurance
People would carry only catastrophic health insurance. This is much like how we use home insurance to cover unforeseen events. Home insurance premiums would sky rocket if we expected insurance companies to clean our bathrooms and replace our worn carpets.

The health of society would be measured by whether people receive care or not (the number of insured wouldn't matter). Most people would buy insurance. Some people would choose not to have insurance. In my vision of health care, these people would still receive the health care they desire and can afford. Most health care will be so affordable, it will be paid for out-of-pocket (and with tax credits) If they really can't afford it, they can receive charitable care, which I talk about below.

A word about genetics. In my vision, genetic information would be strictly guarded as a private information. Insurance companies would be prohibited from requiring genetic tests. But, as now, they would be able to ask about lifestyles, habits, and past health history.

A word about pre-existing conditions. If someone waits until their house burns down to get home insurance, it is too late. It would be down right nonsense to require an insurance company to take on a customer that will be a guaranteed liability from day one. Insurance wasn't invented to take care of people. It was invented to enable people to have peace of mind while they buy homes and have children during their prime working years. If you didn't buy this peace of mind, you will need to rely on charity, as I describe below.

My Vision of Charity:
Local and state governments would provide free access to student hospitals and clinics. The care in these hospitals would be rationed the same way it is in Canada. The difference being that, had they chosen to insure themselves, they would not be receiving rationed care. (In Canada you have no choice but to receive rationed care). And unlike Canada, the indigent care would be funded to a high degree by philanthropists, organizations like the United Way, and by state and local taxes. It is a fallacy that only the federal government is rich enough to help the poor. Several states refused New Deal handouts during the Great Depression and took care of their poor quite well. The funding of these clinics, in principle, would not come from the federal government. However, because the Supreme Court has already broadened the General Welfare clause, I would be swimming against the current to deny any role for the federal government. We would continue to provide Medicare-like services for the elderly. The federal government would be allowed to fund student and research hospitals which provide free care as long as it can be shown that the expenditures fell evenly across the states in proportion to their populations. Such federal expenditures would be modest in comparison to the size of the health care economy. In my ideal world, a constitutional amendment would have restricted all "General Welfare" expenditures of the federal government to be 10% of GDP or less.

Under my vision, every American would receive basic health care. Those who choose to provide for themselves will receive the best and most timely health care. We cannot turn our backs on the principle of the harvest. People must reap what they sow. If you didn't plan ahead, you will be cared for, but it will be Canadian style, and prompt delivery cannot be guaranteed. And your doctor will probably be less experienced. But look at it this way, those who receive free care are providing a service to society by helping doctors gain experience.

Cheap Health Care
In my vision of health care, we would honor contract law. Contracts that cap liability would be enforced. People would be free to undergo experimental treatments. The FDA would provide an experimental tier of drug availability. Doctors would guarantee their work, much like a roof contractor guarantees a new roof. Now, obviously, they can't insure every procedure will be successful. But they can guarantee specific treatments by providing free follow-ups and/or money-back if the customer is not satisfied. And because everyone is paying for their care in much the same way they pay their mechanic, costs will be driven way down for any treatments that enjoy economy of scale. (Think Brakes Plus, Midas Muffler, or Pep Boys.) And don't under estimate how cheap care would be if we allowed more in-home care as I mentioned above.

My Vision of Honoring the Constitution
In my ideal world, all law would have to be accompanied by a statement of constitutionality. People would honor the spirit, not just the letter of the the Constitution. The distribution of government from federal, to state, to county, to city would look more like a uniform rectangle rather than an inverted triangle.

The Constitution does not enumerate the power to manage health care. (Please read the 10th amendment in the Bill or Rights.) It does allow taxation and court precedent does allow spending on the "General Welfare". But the spirit of the law is that the federal government does not micromanage the affairs of the people.

Health care services arise from the fruits of someone's labor. Health care is no more a right than dental care, automotive service, or housing. That the government might decide to bestow services to the needy does not make it a fundamental right. Constitution guarantees equal rights, not equal things. Rights have to do with free agency, not with the receipt of goods and services.

A word about Social Security:
In my opinion, Social Security violates the spirit of the Constitution. However, it was found to be constitutional by the 1937 Supreme Court. The old-age portion of SS won assent by 7/2 vote and the unemployment portion squeaked through on a 5/4 vote. Some historians speculate that Justice Owens, the swing voter, was influenced by FDR's court packing scheme. So we now have a legacy in which the "General Welfare" clause of the Constitution can allow the federal government to justify almost any spending. But this does not nullify the spirit of the law.

And what if it can be shown that spending detracts from the General Welfare? If so, it is unconstitutional by any standard. Today, we have unfunded liabilities that if not fixed will eventually bankrupt social security. The 1937 supreme court approved a system that was self-funded. Today it is pay-as-you-go and is producing a huge generational transfer of wealth. The program has led to an unquenchable appetite for pork barrel spending. With 70 years of hindsight, we can definitely see that the program has exceeded James Madison's worst nightmares. What they needed in 1937 was a stimulus program with a sunset. That would have promoted the general welfare in a time of need and then returned the country back to the normal balance of power.

In my vision, two amendments to the Constitution would be enacted. The first, (as mentioned above) would keep "general welfare" spending to less than 10% of GDP unless temporarily overridden by a 3/4 vote. The second would be a balanced budget amendment (again with a 3/4 vote override provision).

Summary
In short, in my vision, freedom of choice is preserved while still guaranteeing help to those in need. I have no illusions about my vision being a panacea. It is just a vision. If only 80% of it were realized, we'd be the envy of the world. It would take a lot of work. As affluent as we are, we'd probably still pay 16% of GDP on health care but it would be by choice. And the rewards would be spread evenly across all people in a way that balances choice, accountability, and charity. Above all, this vision honors the spirit of the Constitution and preserves the principles of freedom which have blessed all of humanity.

Our Best Hope
The best legislation that I have seen to-date is The Patient's Choice Act. I don't understand why this Act isn't being discussed more actively. I know the President would be reluctant to give credit to two Republicans, but this bill addresses the insurance problem while providing a universal solution! He could claim victory at getting everyone covered and receive the bipartisan support which he claimed he would strive for.

Liberals, Conservatives, and the Political Spectrum

I remember being taught about stereotypes in middle school. A stereotype is an overly simplified description of a class of people. When used as a verb, it means to force people into little boxes into which they really don't fit. It creates a tendency to prejudice and false assumptions.

Such is the case with labeling people as conservative or liberal. Not only are these terms stereotypical, but they are not really that accurate. Today's conservatives can be described as classical liberals. Today's liberals can be described as neo-conservatives.

Furthermore, we have created a one-dimensional notion of Left versus Right. If you take the world's smallest political quiz you'll immediately realize how silly the Left/Right spectrum really is. The Quiz presents an improvement by adding another dimension.

But I think the Quiz authors (Libertarians I believe) miss the mark too. The opposite end of Statism should be Anarchy, not Liberty. This concept was well known to the founders of our republic. The political spectrum as they knew it was one in which being a moderate was a virtue (on the Left/Right spectrum, being a moderate has about as much clarity as the muddled conservative/liberal labels).

And so now I present you with the most concise description of political spectrum which informed the creation of the American standard of liberty:

July 4th, A time to recommit to the principles of freedom

Celebrating Freedom

This year we celebrate 233 years of freedom. We also celebrate 222 years of union. Late in 1787, in a flash of inspired genius, 55 men put aside their petty differences and forged the great balancing act we know as the United States Constitution. Get out your barbecue, head to the fireworks, but don't let July 4th pass without having pondered our founding documents.

Have you read the Declaration or the Constitution lately? Just as importantly, have you read any biographies of the founding fathers? The founding of the the longest lived constitutional republic is no small matter. I have always felt that balance is the key to most human endeavors. The Constitution of United States has it! Everywhere you turn, there is a check against those with authority. Not only are the three branches of federal government played off one another, but the entire federal government is checked by both the States and the people. (And the people are checked by the Constitution and by their chosen statesmen.)

If I were to sum up the U.S. constitution in one sentence, I'd say this:
It's all about providing freedom from abuse by those in authority.

Context for the Constitution is also important. It matters what the framers intended and it matters to understand the milieu in which their discourse took place. Thus, a study of history and of important works such as Common Sense and the Federalist Papers is also in order.

Here is an example of how context helps us understand the founding principles. While the Constitution pays homage to "We the People" it also puts a check against them. In fact, it is a great fallacy to believe our country to be a democracy. James Madison says in Federalist 10 "Democracies have ever been spectacles of turbulence and contention; have ever been found
incompatible with personal security or the rights of property; and have in general been as short in their lives as they have been violent in their deaths...A republic, by which I mean a government in which the scheme of representation takes place, opens a different prospect, and promises the cure for which we are seeking."

Another phrase in the Preamble that has lead to much abuse in federal government is the "promote the general welfare" clause. Of this Madison had this to say: "Nothing is more natural nor common than first to use a general phrase ( like common welfare) and then to explain it and qualify it by a recital of particulars." (Federalist #41) Thus, that clause means nothing on it's own! It's meaning is elaborated by the details of enumerated powers later on. Jefferson also concurred: "Congress has not unlimited powers to provide for the general welfare, but only those specifically enumerated."(1817 letter to Albert Gallatin).

Let not another Independence Day pass without recommitting ourselves to the civic duty of understanding good government. I have assembled here some essential resources.

1. The Constitution of the United States
2. The Declaration of Independence
3. The National Center for Constitutional Studies
4. The 5000 Year Leap
5. My own MP3 collection of the Federalist Papers

Happy July 4th!

Cherry Picking Your Scapegoat

This post is just a reprint of the second half of this older post:

How Two Sides can both be right about Objective Truths
Now I will show by example how opposing viewpoints about objective truth can both be right. I will take the recent financial crisis as an example. That there is a meltdown of sorts is pretty much an objective truth agreed upon by most everyone. Over the past months I've heard two claims that were made with utmost certainty:
1. Republicans, especially President Bush (And more recently President Reagan), are 100% to blame for the crisis.
2. Democrats are 100% to blame for the crisis.

My argument is based on the fact that, whether they knew it or not, each of the above claimants is implying "according to my values and priorities" in their statement. When you take into account the implied reference point, their claims can both be verified objectively

I will do so. According to this Denver Post article and this WSJ article there are about eight causes of the financial meltdown. Some of the causes had both beneficial as well as deleterious effects. In no particular order:

1. Enactment of laws that encourage home ownership (most notably, the CRA of 1977 and the 1993 expansion of it) (D)
   
2. Political pressure on Fannie and Freddie to buy/guarantee subprime loans. Followed up by lax oversight. (D)
   
3. Deregulation of banks which allowed them to get too big and have too high a debt load (R)
   
4. Overregulation of banks which give them a false sense of security. (D)
   
5. Low interest rate policy of the Fed which fueled mortage debt (D/R)
   
6. Preditory lending practices (R)
   
7. Government created credit-rating oligopoly (providing the market with misinformation) (D)
   
8. Short Sellers (R)
   

This is a gross simplification, but each of the causes above can be loosely associated with one political party or the other. To be fair, each cause can be attributed to both parties...but I'm trying to make a larger point. I've marked each cause with the associated party.

Now a bubble can only burst when it reaches a certain level. Take away any one or two of the above factors, and you might have averted the crisis entirely. So if you order the list above according to your priority, the last few items (that the other guy caused) are the entire cause of the meltdown right? This sort of cherry picking can be justified from a subjective point of view and it is very very common. But wouldn't be better if we acknowledge the valid considerations of both sides?

Obama's Tax Increase on All Americans

10,000 for a candy bar
I'll never forget my first hand experience with 5,000 percent inflation. I was living in Argentina in 1989 as a missionary. We got our living stipend at the beginning of the month. It was denominated in Australes. The money had to be spent quickly, as prices would double by the end of the month. When I arrived in 1989 a candy bar (the tasty alfajor) was 100 australes. When I left in 1991 the same alfajor cost 10,000. I'll never forget how we used 100 Austral bills as toilet paper. I still have a wad of Australes an inch thick that I kept as a souvenir.

Inflation is a major back door tax on all citizens. Everyone with a bank account or a fixed wage suffers. Governments with debt love inflation because they can pay down debt with devalued currency. The recession is causing a temporary deflationary cycle, but with things starting to turn around, everyone knows that inflation is the true threat. I noticed that gas was already back up to almost 2.50. And it isn't because of oil demand. The dollar is losing value. The Chinese are getting nervous about holding so much U.S. debt. Even prominent central bankers are worried. Here is a random quote from fund manager Harry Lange at Magellen (one of my 401k funds) "In my view, that no-holds-barred approach to spending could mean that inflation will resurface as a serious problem once the U.S. economy enters a recovery phase. " And from the fund managers of Vanguard Primecap: "There are legitimate concerns about the increased moral hazard and unintended consequences that are likely to result from the various rescue plans and stimulus bills...We are also concerned that the dramatic increase in money supply may result in inflation."

How to fund a major increase in the size of government
It is completely naive to believe that President Obama can fund all his programs by just soaking the rich. I believe he thinks it can be done, but it goes against all experience. The reality is that Obama's initiatives will be paid for by everyone. Here is how:

1. Inflation will pay for much of the debt. China will not keep buying our treasuries forever. You monetize debt by selling it to the Federal Reserve. Sure, the FED buys debt all the time to maintain a stable money supply. But now it's being pressured into it for political ends.
2. The tax increase on the "rich" will miss the target and hit smack dab on the middle class. As the 2003 Bush tax cuts proved, the upper class doesn't try as hard to hide income when taxes are relatively lower. Thus, we saw a surge in the amount that the upper 10% pays in taxes because of the Bush tax cuts. Obama will reverse that trend, and the rich will go back to either hiding income or being less productive with it. The middle class will have to shoulder the burden.
3. Cap-and-trade. Regardless of the environmental merits, carbon taxes are a tax increase on all Americans. I'd even say they are regressive. There is no such thing as a tax on a company. Only taxes on people. You can tax companies all you want, but it all lands on consumers and on shareholders. (Most Americans are shareholders of some sort, whether through a company retirement fund or a 401k plan.)
   

No matter how it turns out, the pro-Obama forces will be able to claim victory because the processes I've outlined above are all very indirect. But modern liberals have always succeeded more when they take the back door approach. Who wants to hear tough talk? Americans seem to want others to pay for their benefits, so the political class has to fool them into believing that they're getting a free ride. We'll you're not. Factor into it the opportunity costs of lost freedom and innovation, and the picture is pretty bleak.

Don't Socialize Healthcare

Again, another letter to my senator, reproduced here for my readers (what few there are):

Senator Bennet,
When this nation was founded, it was founded on the principles of local government first, federal government last. You have highlighted the advances Colorado has made in health care in your recent newsletter. That is exactly the place where we should address health care issues, here at the local and state levels.

It is your duty as Senator to ensure that Colorado remains a strong state that is not tied down by Federal constraints. Please do not sign on to socialized, or even quasi socialized measures that pump money to a federal bureaucracy only to come back to Colorado after large percentage is siphoned off. Please do not vote for measures that kill choice and freedom.

The solution to healthcare costs is to take insurance back to what it is supposed to be: insurance against disaster. Normal people should rarely use insurance. If you are using it often without any dire circumstances, it isn't insurance! It's a cost sharing system that ensures that people are disconnected from true market costs. This always encourages them to use more healthcare then is necessary. This causes costs to rise. It also forces a bureaucracy on doctors that costs more.

The solution is to make all healthcare expenditures tax deductible, wean employers from having to provide it, and letting insurance be portable.

These measures will solve the crisis without further eroding the freedom of the state of Colorado and it's citizens who would otherwise be governed by federal mandates.
Nathan

Please choose freedom over security

Here is the text of a pro-freedom letter I wrote my Colorado Senator:

Senator Bennet,
I am concerned that lawmakers are trying to take it upon themselves to control every aspect of society in an attempt to create an utopia.

In your newsletter you said we may risk being the first generation to bequeath less opportunity to our children. I believe that when government displaces private action, it does just that! I see your job creation, health care, and educational programs as displacements of private action which, no matter how well intentioned, will reduce freedom and prosperity.


America has been a dynamo of job creation precisely because of the relative freedom of private industry. And even if it means that we reap what we sow during hard times, isn't that the price of freedom? Isn't is part of freedom to experience lows as well as highs? Please don't assume that all of your constituents value prosperity over freedom or even security over freedom.


Our health care system has problems, but they are the problems of being overly socialized already! Please consider that our nation has ruined healthcare precisely because we have mandated employers to be involved. We already have a oligarchic few-payer system. The single-payer system doubles down on that. Please look at the research that shows that we can solve our health care by adding freedom, not by regulating it further.

Instead of promising the moon and the sky, please consider that America is great because we can choose our futures, not because Washington dictates safe outcomes.

Ironically, freedom breeds prosperity. If you do nothing but assure Americans that the our laws will be enforced and the dollar will be stable (by not overspending) the economy will come back all by itself. It will be cyclical, but it always has been. And if you free up Americans to choose their educational venues (via vouchers for example) you'll see education flourish. The answer is freedom.
Sir, I hope you'll have the opportunity to consider these views. Thank you.

Stimulus Proponents: Admit it, it isn't about growth

Here is an insightful review of the Keynesian multiplier and why Europeans aren't as big on stimulus spending at the WSJ

They reference this study by prominent economists that shows only a temporary boost to the economy by stimulus spending. The "Keynesian multiplier" peaks at 1.4 only for a brief period and then it quickly diminishes to below 1.0 in 2010. Thus, we're paying a whole lot of money to ultimately hurt the economy long term. It's like being addicted to a narcotic. You need continually higher doses to achieve a high.

Keynesians: Admit it! This isn't about growth. It is about controlling society. It's about socially engineering outcomes. The real aim is to use the crisis to permanently create a constituency that is beholden to the Democratic Party for its livelihoods.

I was thinking about the great sacrifices of previous generations of Americans. How they died to protect freedom. Freedom was more important than life. But now, we're willing to trade our freedom for an elusive attempt to buy prosperity. It won't work and we sell our soul in the attempt. We saddle our grandchildren with even more debt. We have some noble veterans who are still willing to put it on the line for our country, but their numbers are very small as a percentage of the population. On average I think Americans have chosen material well-being over freedom. And they will get neither.

Obama's Straw Men

This was exactly my feeling as I listened to Obama. It's easy to look good when tearing down straw men.

http://online.wsj.com/article/SB123561484923478287.html

Cost of Stimulus compared to Iraq War

From this day forth, I hope I never hear a pro-stimulus advocate say another word about the dollar cost of the Iraq War. We can talk about the human cost but that would be a different blog.

This week's stimulus plan is coming in around 900 billion. That's about 1 trillion dollars, or about 7% of our entire GDP (and this on top of the trillions of stimulus and bank aid already doled out). The entire projected ten year cost of our involvement in Iraq is 1 trillion dollars, or 100 billion a year (See this analysis ). When President Obama signs this bill, it will have about the same financial consequences as the 2003 Invasion of Iraq.

I realize that money spent in Iraq is not the same as money spent in the U.S. But it is no worse than "stimulative" expenditures that create no long term infrastructure. (5% or less of the current stimulus plan actually goes to infrastructure.) Every Humvee, tank, or tomahawk missile purchased sent income to American firms, engineers, workers, and local economies. Every soldier who receives a paycheck saves it in largely American banks and spends it on products imported from the U.S. and sends money home to families in the U.S. Need we forget that WWII is what finally got us out of the great depression? (Not a fun way to get out of a depression).

Patronage by another name: The political usefulness of stimulus

In my last post, I talked about the nature of stimulus and why, at best, it adds only a few percent to the GDP. But at worst, it puts productive labor into less productive uses. People who are driven by market price signals work really hard to find efficiencies that improve our standard of living. Government often picks projects based on political usefulness, not efficiency.

The 1930 Great Recession was triggered by the missteps of a Republican administration (just as the 2008 recession was). But it took a Democratic administration, coupled with continued poor monetary policy by the Fed, to extend the recession into a 10 year depression. But worst of all, Roosevelt used the depression to permanently institute widespread dependence on federal government patronage. The depression was a political tool. And so it is with Obama today. Recently at the Elkhart town hall meeting he admitted the usefulness of the "crisis": "if we don’t use this crisis as an opportunity to start retooling..." And Obama's chief of staff has said, "Never let a serious crisis go to waste."

Roosevelt used his fiscal power to control elections. WPA workers were reminded who their benefactors were. Greater federal funding was promised to voters...if they voted correctly. Patronage went to the party faithful and was denied those who dare cross the President. Roosevelt attempted to take over the courts (through court packing) and he tried to buy influence over the legislative branch.

President Obama will not go to these extremes. But does anyone doubt that the stimulus will find its way into the pockets of Democrats to a larger degree than Republicans? Who will stimulus recipients feel obligated to vote for in the next election? That said, I do hope we can make lemonade out of this lemon. We owe it to the President to keep him honest and accountable.

Too Much Stimulus

I'm not an economist, but neither am I a neophyte. I've had an amateur fascination with economics that began in college and was rekindled when I read the Wealth of Nations fives years ago. I regularly challenge myself with various books and articles.

So I want to put in my two cents on the Stimulus Debate. I'm against any further massive stimulus packages. I will grant that a stimulus package can have some good effects. But I believe the short term gain is not worth the long term side effects.

BTW: If you end up agreeing with me please sign this petition: http://nostimulus.com/

Setting aside a moment whether the the stimulus would even work, I look at this way. We need to take our medicine. Recessions, even big ones, are good. Let's let the medicine do what nature intended: cause us to reset our living and saving habits to a more sustainable level.

Now back to the stimulus. Will it work? The Keynesian philosophy is that for every dollar of government money spent, there is a multiplier effect. One study suggested the multiplier is around 1.4. So we spend a trillion and GDP grows by 0.4 trillion. Sure, if your goal is to get the economy going, that is great. Adding 0.4 trillion to a 13 trillion economy can help. (A multiplier less than 1.0 would mean that the stimulus was harming the economy by crowding private investment and channeling economic activity into less productive venues.) So yes, stimulus packages can work.

But can there be any drawbacks to an additional massive stimulus program? I can think of some

1. All of the lowing hanging socialist fruit has already been picked! We already have a major stimulus package in effect. Unlike the Great Depression, we already have major social programs in place that guarantee payments to those who are hardest hit. We have employment insurance. President Bush has already signed into law an increase of unemployment benefits up to 39 weeks. That's a major stimulus package. We also have medicare recipients whose benefits guarantee a steady flow of stimulus to the health care industry. Need I mention social security? Just remind yourself how much the government already force feeds the economy here: www.usgovernmentspending.com.
   
2. How about the long term? The chickens have to come home to roost. Higher taxation or inflation must pay for the stimulus. Granted, the multiplier effect I talked of will generate more tax revenues (just as the Bush Tax cuts did) So that helps. But assuming tax revenue of 10% of GDP, you'd need a multiplier of 10 to have the stimulus pay for itself. (stimulus * 10 * 0.1 = stimulus) With a more realistic multiplier of 1.4, you don't get a free lunch. (But I will grant that multipliers can be much higher if spent on the right things)
   
3. Lag time. My gut instinct is that if we manage to keep the financial sector stable, this recession will work itself out within a year. Some economists have estimated that the lag time for stimulus packages can be such that the positive effects come after the recession is already over. Then, just as the private sector is getting going again, it is suddenly competing with government expenditures, and you get much more price pressure (inflation) and the allocation of resources is more heavily weighted to government projects which are less efficient than private ventures.
4. Even assuming that the stimulus works great and it comes in time to make a difference, what confidence do you have that the government can ever wean itself of the greater power and control over the economy? I have worked in government. I know exactly how governments operate versus the private sector. We don't need a long term society that is weighed even more heavily toward government control. The New Deal already set the bar so high that we have an impending baby boomer crisis. Let's not plant more seeds to destroy our once great country.

One more point that needs to be brought up. President Bush did not lead as a fiscal conservative. This stimulus package debate should be answered by simply looking at how well Bush's policies turned out! Government expenditures grew under President Bush by trillions of dollars. I'd have to check, but I think Bush outranks every president since Roosevelt in terms of adjusted dollars (probably not in terms of GDP) The Iraq war, Homeland Security, Prescription drugs, No child Left Behind, billions in bailouts last year. This was all government stimulus. Look where it got us? Yes there were almost 7 years of interrupted economic growth, but the chickens came home to roost.

Here are a few articles written by economists on the stimulus debate:
Against
Mankiw
For
Krugman
Middle of the Road
Cowen and also this

Other Links
Pro And anti-Stimulus arguments back in Jan 2008 (Remember the stimulus checks last year?)
Refutation of the Keynesian Multiplier
Is More Government The Answer?

Alexander Hamilton: the greatest founding father you never knew

"If Washington was the father of the country and Madison the father of the Constitution, then Alexander Hamilton was surely the father of the American government"-- Ron Chernow

This last year I was richly rewarded by reading Ron Chernow's "Alexander Hamilton". I will never look upon American history the same. Alexander Hamilton is greatly under appreciated. Hamilton's importance easily matches that of Washington, Franklin, Jefferson, Adams, et al. Hamilton was key to winning the Revolutionary War. He was key to getting the Constitution ratified. He was key to establishing a successful national government. He laid the foundation for modern American capitalism. He wrote volumes on law, government, and finance. Too much cannot be said of his accomplishments.

From Chernow's well written book, we obtain great insight into the founding of the Republic. I was fascinated by his ability to lay bare the imperfections of our founding fathers. These men were gifted, but regular people. Our heritage is that these individuals balanced out the excesses of one another to forge a new government based on citizen participation and freedom.

I was fascinated with the politics of the new American government. Hamilton is peculiar in that today's Left and Right can both find much to love and hate about him. As a "High Federalist" he is known for having expanded the role of government early on. He was hated by the Anti-federalists and the Republicans (not be confused with today's GOP) for creating a national bank and for strengthening the central government. That would seem to make him a "liberal" by today's standards. But Hamilton did not believe that government programs could fix people. He believed in creating a strong financial system which honored contracts and property rights. He also deplored the secularism and the mob rule of the French Revolution. He understood that people are imperfect and always will be. That makes him a conservative.

Chernow's account of Jefferson might surprise contemporary students of politics who are accustomed to putting him on a pedestal. Jefferson was conniving and back stabbing. He was hypocritical. Despite his shortcomings, his idealism was a major contribution to American freedom. Politically, he is a mixed bag. His humanist side makes him a liberal, but his distrust of centralized power makes him a conservative. I think he would turn in the grave to know that liberalism has morphed into a socialism that has brought us the centralized oppressive bureaucracy he so feared.

One thing that really jumped out at me after reading Alexander Hamilton was: why isn't there a movie!? Exotic locales, war, dramatic courtroom scenes, the adulterous affair and subsequent extortion, internecine battles, and of course...the duel. It doesn't get any better than this. When is Hollywood going to figure out that there is a blockbuster here?

If you only read one book about the Founding Fathers, this should be it!
_________________________________________________________

Random Quotes from the book:
"Tis by introducing order into our finances--by restoring the public credit--not by gaining battles that we are finally to gain our object". -Hamilton on the economic side of national security

"A national debt, if it is not excessive, will be to us a national blessing. It will be a powerful cement of our union." -Hamilton on the benefits of public debt. (bold type added by me)

"Financial embarrassments led to those steps which led to the overthrow of the government and to all the terrible scenes which have followed." -Hamilton on how excessive debt led to crises in France

"The law is whatever is successfully argued and plausibly maintained" --Aaron Burr

"He was not a politician seeking popularity but a statesman determined to change minds." -Chernow on Hamilton's rigorous defense of an unpopular Tory. (Reminds me of John Adam's defense of the Boston Massacre soldiers)

"The rancor ushered in a golden age of literary assassination in American politics. No etiquette had yet evolved to define the legitimate boundaries of dissent. Poison pen artists on both sides wrote vitriolic essays that were overtly partisan, often paid scant heed to accuracy, and sought a visceral impact. The inflamed rhetoric once directed against Britain was now turned inward against domestic adversaries." -Chernow on the partisan politics of new nation. (Remarkable how little things change)

"The future secretary of state [Jefferson], now sailing home, was to strike Hamilton as just such a 'philosophic politician' ignorant of human nature. Hamilton later explained to a political associate that Jefferson in Paris 'drank deeply of the French philosophy in religion, in science, in politics' " -Chernow on Jefferson's infatuation with the French Revolution

"Owing in part to Hamilton's generous construction of [the general welfare] clause, it was to acquire enormous significance, allowing the government to enact programs to advance social welfare." -Chernow on Hamilton's eventual influence on modern social welfare programs.

"The superstructure of credit is now too vast for the foundation...It must be gradually brought within more reasonable dimensions or it will tumble." -Hamilton on the bank scrip bubble of 1792. (Again, how little times have changed.)

"[Hamilton] learned a lesson about propaganda in politics and mused wearily that 'no character, however upright, is a match for constantly reiterated attacks, however false.' If a charge was made often enough, people assumed in the end 'that a person so often accused cannot be entirely innocent.' " -Hamilton on the effectiveness of negative politics

"The period of John Adam's presidency declined into a time of political savagery with few parallels in American history, a season of paranoia in which the two parties surrendered all trust in each other. Like other Federalists infected with war fever, Hamilton increasingly mistook dissent for treason and engaged in hyperbole" -Chernow on party polarization. (We saw a close repeat during the last decade)

"Hamilton had intuited rightly that Jefferson, once in office, would be reluctant to reject executive powers he had deplored in opposition" --Chernow on Jefferson's flip flop regarding executive power once he was president.

"Hamilton never believed in the perfectibility of human nature and regularly violated what became the first commandment of American politics: thou shalt always be optimistic when addressing the electorate." --Chernow on Hamilton's conservative view of human nature.