Category: national politics & policies

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free trade & free markets national politics & policies porkbarrel politics too much government

Water’s Value — in a Desert

It’s a dam shame.

There are plenty of private sector dams in the U.S., but the biggest are federal government projects, like those on the Columbia and Colorado rivers. These government-run outfits aren’t “free,” though. Indeed, they often prove to be good examples of typical government operations, providing special favors to some people at the expense of others.

Take the Hoover Dam, cherished as the nation’s highest symbol by MSNBC’s Rachel Maddow. The dam supplies water and electricity to Las Vegas, Nevada — at cut rate prices. A typical family in Las Vegas pays half for water what the same family would pay in Atlanta, Georgia, despite the fact that Atlanta gets 13 times more precipitation. These cheap rates have predictable consequences — overuse, for one. Which then leads local water authorities to foist on consumers some heavily intrusive conservation rules.

Andrew Wilson, in a report for the Property & Environment Research Center, writes that “A market-ready solution for Las Vegas water,” though not often talked about, would have far fewer negative consequences. And it’s not a difficult idea as such: “discard the historic cost-based pricing model and move instead to a pricing system that recognizes the scarcity value of water.”

Raising the prices for water and electricity to Las Vegas (and, for that matter, electricity to favored Bonneville Power Administration customers in the Pacific Northwest — along with many other federal government “business” products) would not only help forestall shortages and draconian lawmaking, it would be equitable. There’s no reason for the rest of the country to be, in effect, subsidizing Sin City.

Or any other city.

This is Common Sense. I’m Paul Jacob.

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insider corruption national politics & policies

A Newt Public-Private Partnership

For nine years, from 1999 until 2008, Newt Gingrich worked helping Freddie Mac, the government–created, bubble-creating housing corporation. Newt’s outfit, The Gingrich Group, knocked down more than $1.6 million dollars in consulting fees during that time.

Newt says he warned the government-sponsored giant that the bubble it was busy blowing up would burst badly.

For all those years? He was either mind-numbingly repetitive or must have really drawn out his words. He is from Georgia, but still.

Folks at Freddie tell a different story. They say former Speaker Gingrich helped “build bridges” to Republicans on Capitol Hill, hoping to prevent congressional efforts to rein in the mortgage giant. Those efforts proved successful — there was no powering down of the Frankenstein mortgage monster. The Gingrich Group’s contract wasn’t canceled until the 2008 crash, when the U.S. Treasury took control of Freddie Mac and his sister housing financier, Fannie Mae.

In last weekend’s GOP presidential debate, Congressman Ron Paul argued that Newt Gingrich’s position with Freddie Mac is “something people ought to know about.”

“While he was earning a lot of money from Freddie Mac,” explained Rep. Paul, “I was fighting, over a decade, to try to explain to people where the housing bubble was coming from.”

Newt responded that, like Dr. Paul, he wanted to audit the Fed. As for his Freddie role, “I offered strategic advice,” claimed Newt, adding, “I was in the private sector.”

Laughter erupted throughout the hall. Even Mr. Gingrich couldn’t keep a straight face.

This is Common Sense. I’m Paul Jacob.

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folly free trade & free markets insider corruption national politics & policies

A $13 Billion Reward

The Federal Reserve, our central bank, hit the news big last week.

Beginning in August 2007 and continuing for the next two and a half years, the Fed lent the world’s biggest banks something like $7.77 trillion dollars at the barely perceptible interest rate of 0.01 percent. With that money, the banks bought Treasury bonds (federal debt) and made $13 billion in profit.

I reported on this multi-trillion-dollar loan figure in December 2008, a few weeks after the biggest day ever of Fed bailout fever. For some reason this information didn’t become widespread or understood until this December, when Judge Andrew Napolitano and Jon Stewart made a big deal of it on their respective TV shows, after Bloomberg reported the profits banks made off all that bailout money.

What does this figure represent? To me, it represents the outrageous amount of magic money a sick and corrupt fiat-dollar/bailout-based system of moral hazard requires when it implodes.

I think we can all justifiably roll our eyes, now, when some rah-rah boy for big government tells us how absolutely necessary it is to have a central bank. The old gold standard never fell apart this badly. The gold requirement itself placed a huge check on out-of-control banking.

But a $13 billion reward for the biggest financial mess in world history? That’s the very opposite of a check or balance on risk-taking, greed, or downright stupidity.

This is Common Sense. I’m Paul Jacob.

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general freedom national politics & policies U.S. Constitution

Video: Civil Liberties During a Never-Ending War

What do you call a defense bill that allows indefinite detention at Guantanamo Bay of American citizens accused but not convicted of assisting terrorists without due process? Tyranny. Unconstitutional. Rand Paul compares the now-pending legislation to the hated Egyptian Emergency Law enforced against dissidents for 30 years, which ended with the overthrow of the Mubarak regime:

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free trade & free markets general freedom national politics & policies too much government video

Video: Milton Friedman on Drug Legalization

Nobel Laureate economist explaining why drug prohibition makes no sense:

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free trade & free markets national politics & policies too much government U.S. Constitution

The Post Office’s Future?

At some point approaching catastrophe, one has to stop offering googly sounds of uplift and hope, and just speak the truth.

Postmaster General Patrick Donahoe may understand that. The U.S. Post Office, he recently told the National Press Club, is “in a deep financial crisis because we have a business model that is tied to the past.” Deep ties to the past, indeed. Setting up a postal system was written into the Constitution.

Early in the system’s history, postal positions served as rewards to friends of successful politicians. This put a lot of bad apples into the cider; the business soured. Postage skyrocketed.

This sorry situation brought entrepreneurs into the market, delivering letters at a fraction of the government system’s prices. The politicians fought back, took the competitors to court, and won — on dubious Constitutional grounds.

But they did overhaul the system, reducing prices.

That was a long time ago. Today’s situation may be worse. As Donahoe put it, “We are expected to operate like a business but we do not have the flexibility to do so. Our business model is fundamentally inflexible.”

No surprise, Congress is inflexible. But there are competing bills rumbling around to allegedly fix the financial woes of the institution Donahoe calls “a national treasure.”

Well, if it’s a treasure, sell it off: The federal government could use the money. (Though likely not well.)

And the people could use a good privatized mail service. Or two. Or more.

This is Common Sense. I’m Paul Jacob.

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national politics & policies too much government

The Un-Super Committee

Surprise, surprise — the so-called Super Committee isn’t very super.

It appears that the august micro-body of solons will fail to come to an agreement to reduce the federal deficit by $1.2 trillion over the next ten years, not in any combination of new revenue or spending “cuts” by today’s effective deadline.

On the bright side, given the nature of the likeliest possible agreement this committee would conceive, its failure sounds like the best possible result.

We’re now over $15 trillion in debt, running a deficit of $1.5 trillion this year alone. Still, the Super Committee couldn’t sop up even 80 percent of the red ink they’re spilling just this year. Not even spread out over the decade.

It gets worse. “I think we need to be honest about it,” Kentucky Senator Rand Paul pointed out yesterday on CNN. “Spending is still rising under any of these plans. We’re only cutting proposed increases in spending.”

“The curve of spending in our country is going up at about 7.5 percent a year,” Sen. Paul went on to explain. “If you were to freeze spending for ten years, no cuts . . . they would call that a $9 trillion cut.”

So, as we face a debt crisis, the Super Committee couldn’t even manage to lessen their planned massive increases in spending.

Or talk straight with the American people.

Why? Perhaps because official Washington knows that spending is the real source of their power.

This is Common Sense. I’m Paul Jacob.

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free trade & free markets insider corruption national politics & policies too much government

Self-Interest Wins Every Time

Incentives work. Because people are self-interested.

Even the seemingly altruistic protagonist played by Kevin Costner in the movie Field of Dreams exclaims, “I haven’t once asked what’s in it for me,” only to then ask, “What’s in it for me?”

That line comes to mind when I hear politicians and business folks talk about private-public partnerships, from subsidies for ethanol to billions in government loans to supposedly spur “green” technology.

The bankruptcy of the solar panel maker Solyndra cost taxpayers more than half a billion dollars. But it’s not merely that government is less than stellar at picking investment winners; it’s that the interests of politicians and businesspeople aren’t “the public interest.”

Never will be.

Sure, Energy Secretary Steven Chu told Congress yesterday, “I did not make any decision based on political considerations.” But internal company emails feature complaints about pressure from the Obama Administration to delay announcing layoffs until after the 2010 elections.

Whose interest did that serve?

Documents also uncover Solyndra executives hiding bad news the better to win additional federal funds and, alternatively, threatening that the company was about to go under hoping the potential bad press for Obama might shake down additional bucks.

Companies have an interest in the big money the federal government dangles before them. Politicians have an interest in appearing to be economic wizards creating jobs and spurring a new world with bright green hues.

Neither incentive promotes sound business behavior nor equates with the public interest.

This is Common Sense. I’m Paul Jacob.

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free trade & free markets national politics & policies too much government

Clunker Flunked

When the Obama Administration hit the ground running in 2009, one of its first “hopeful” and “audacious” programs was “Cash for Clunkers,” a sort of triple-action economic stimulus, carbon-emission reduction, and automaker bailout bill. Congress got on board, a lot of trades were made, billions spent. There was much brouhaha.

Skepticism should have been the order of the day, of course. So many things could have gone wrong.

And did.

Now, with the clarity of 20-20 hindsight, a consensus emerges: Cash for Clunkers was a clunker itself. An economic analysis from Resources for the Future is just the latest (mostly negative) judgment: “[T]he program increased new vehicle sales by about 0.36 million during July and August of 2009, implying that approximately 45 percent of the spending went to consumers who would have purchased a new vehicle anyway. Our results suggest no gain in sales beyond 2009 and hence no meaningful stimulus to the economy.”

Further, fuel economy gains and pollution reductions were minuscule.

The study is far from exhaustive. A lot of old cars were scrapped, recycled. Guess what this does to the used car and parts market? It’s been devastating.

Who’s hurt by supply reductions and consequent price rises? Cash-strapped folks, the kind of people who usually buy used cars, or keep old cars running — which is a lot of people during a depression.

I bet that Cash for Clunkers served, on net, to transfer wealth from the working poor to far wealthier individuals.

This is Common Sense. I’m Paul Jacob.

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free trade & free markets national politics & policies too much government

Nails & Ball-Peen Hammers

When all you have is a hammer, every problem looks like a nail. When it comes to “jobs,” our politicians prove the truth of this adage over and over. They think that they have to “do something,” or at least “look busy” providing “leadership.”

Wrong — unless they take the lead to get out of the way.

Alas, few have the courage for that kind of leadership.

Republican politicians — fearing “looking bad” — are, even now, floating various “plans” to create “jobs.”

“I thought it was incumbent on me to at least say . . . ‘We’re working on a plan,’” says one incumbent.

Trouble is, whatever plan he or his colleagues put up to counter the president’s absurdities, odds are that it, too, will not work.

Why?

The trouble with markets right now is uncertainty. Several sectors went bust, and it’s not easy to get progress started again . . . especially when the government keeps cooking up game-changers. Solutions. “Fixes.” Political machinations — subsidies or regulations or any of the usual tools in the politicians’ tool belt — just increase uncertainty, muddying up the recovery.

The neat thing about markets is that none of us need to know how, exactly, to order the “economy” for order to be discovered. It works out. This is old wisdom, but even actual experimentation has shown that this is the case.

The economy is not a mess of boards half-nailed down. The last thing it needs is more hammering from politicians.

This is Common Sense. I’m Paul Jacob.