Category: national politics & policies

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

Don’t Bank On It

It’s not a chorus.

If you’ve been watching the “debate” over how best to con American voters into giving troubled banks $700 billion for bad loans, you might think it’s a chorus in the financial industry, especially from bank presidents.

You might assume they’re all shouting: GIVE US THE BAILOUT MONEY! NOW!

Not so. At least one banker dissents. John Allison, president of BB&T — with $136 billion in assets and 1500 branches — sent an open letter to Congress protesting the bad economics behind the bailout. He notes that his own company, though affected by the downturn, is in a much stronger position than many of BB&T’s competitors.

Why? Well, his bank did not join the orgy of bad lending, despite the enticement of the Federal Reserve’s easy credit policies and government pressure to give loans to bad-risk borrowers.

So why should the government reward the bad economic conduct of institutions that played along with the bad government policies? Why make it harder for the economy to recover by punishing sound and productive economic conduct with burdensome new government taxes?

Allison thinks the debate has suffered from domination, as he says, by those “financial institutions [that] made very poor decisions.”

Perhaps it’s because politicians have a whole lot more in common with foolish decision-makers than wise ones. . . .

This is Common Sense. I’m Paul Jacob.

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

$700 Billion Bad Bet

The administration’s proposed $700 billion bank bailout has finally passed the Congress — in large part because of fear that the economy would crumble if “something” wasn’t done.

But the magic men in Washington don’t have any guaranteed fixes in their bag of tricks. Certainly robbing the taxpayers of $700 billion — that’s a billion, 700 times — won’t cure the economy.

It will, long run, hurt the economy. How? By hampering realistic adjustment to current market conditions. It means taking $700 billion from productive economic activities to buy up debt at prices nobody in the private market is willing to pay. As economist Arnold Kling points out, “If [Bernanke and Paulson] were taking their plan to a venture capital firm to seek funding, they would be laughed out of the office.”

How did we get here? In previous years, the federal government compelled banks to give mortgages to persons who really couldn’t afford them. Meanwhile, the easy credit policies of the Federal Reserve made it easy for banks to obey these irresponsible demands.

Hence the housing bubble. Which popped.

The only long-term solution is to get the government out of the market. Stop trying to paper over the horrendous consequences of past government interventions with even worse government interventions. The free market ought to be free. Otherwise, we’ll one day end up with no market at all.

This is Common Sense. I’m Paul Jacob.

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national politics & policies

Must It Be Racism?

One of the two major-party candidates for president is black, the other white.

Obviously, there is much more to say about them. We can talk about their ideas, character, experience, communication skills. Presumably, conscientious voters will choose the person they think can best do the job — regardless of race.

Not so, says Jacob Weisberg of Slate.com. According to Weisberg, given the collapse of the Republicans and the weak economy, everything is stacked in favor of Barack Obama. Therefore, if Obama loses the election, only racism could explain it.

Weisberg offers no coherent argument. He simply asserts that Obama has vastly more advantages than liabilities, while with McCain it’s vice versa. So the right choice is transparently obvious.

And hey, even if you disagree with Obama’s policy prescriptions, at least they’re “serious attempts” to deal with big problems. It doesn’t seem to occur to Weisberg that the “seriousness” of a proposed policy is not what makes it right or wrong. Or that a voter might reasonably consider the actual content of a proposal.

Of course, some voters might reject Obama out of racism. But it’s not self-evident that “racism is the only reason McCain might beat him.”

And would it not be racist, condescending, unjust, and downright stupid for us voters to treat a black man’s qualifications for the job of president as irrelevant, just to prove we’re not racist?

To his credit, Mr. Obama would expect more of us than that.

This is Common Sense. I’m Paul Jacob.

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

A Question Worth Asking?

The presidential candidates talk about leadership and change. What’s the one question that combines both, but is not asked? Simple: What happens if it all comes crashing down?

After the worst stock market drop since 9/11, the question doesn’t seem so out of place. Our federal government’s debt is rising fast. Even if we balanced the budget tomorrow, the government would have a deep, multi-trillion dollar debt. Trillions and trillions, you might say.

So, Mr. Obama; so, Mr. McCain — what do you do when the Treasury can’t find anyone to invest in all the debt we have created, and must maintain? What do we do when the compounding of interest and increased deficits make monthly maintenance impossible?

Neither of you have even suggested a balanced budget early in your first term. So what do you do when our credit goes crunch?

Add to this the federal government’s obligations to the citizenry, in the form of Social Security retirements and Medicare and pensions and such, and what can you do?

How do you stave off — or, if not, survive — a worldwide depression?

The scenario is not fantastic. Just look at current figures and crunch the numbers.

So, what would Senators Obama and McCain say? I’d be curious what Bob Barr and Ralph Nader would say, too. Have they thought of the possibility?

This is one question that sure would make the upcoming debates interesting.

This is Common Sense. I’m Paul Jacob.

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local leaders national politics & policies

True Outsider Experience

John McCain’s choice of Alaska Governor Sarah Palin as his running mate shocked a lot of people.

Even people in the media didn’t know very much about her. She hasn’t spent any time on Meet the Press, for example.

But I knew who she was long before her selection as Republican nominee for Vice President. That’s because Sarah Palin has real street cred as a reformer.

For starters, as mayor of Wasilla, Alaska, she followed through on her campaign promise to cut property taxes — by 40 percent.

Though a Republican, she has not hesitated to challenge Party bigwigs. She went after the state’s Republican Party chairman for ethics violations — violations he later admitted. She joined a Democrat in filing an ethics complaint against the Republican attorney general. He later resigned.

Then, in 2006, she ran against the incumbent governor of her own party, and by connection the whole corrupt GOP cabal in Alaska. And she won.

Today, Sarah Palin is the most popular governor in the country.

Of course, questions remain. Though she has taken on GOP leaders in her state, she has been friendlier to their pork projects than I like.

But while some belittle her experience, her readiness to be president, I say, think again: Twenty or 30 years of Washington experience disqualifies a candidate for the job.

Now, I don’t mean to speak ill of politicians . . . well, yes I do.

This is Common Sense. I’m Paul Jacob.

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

McCain’s Admission

John McCain is a man on a mission. But it was his admission that Republicans in Washington have lost their way that jumped out at me as I listened to his speech accepting the Republican Party presidential nomination.

“I fight to restore the pride and principles of our party,” he told Republicans. “We were elected to change Washington, and we let Washington change us.”

Everyone already knows this. We’ve watched power politics triumph over principle.

But it was still nice to hear McCain say it. The first step toward solving a problem is to recognize you have one.

McCain went on to admit, “We lost the trust of the American people when some Republicans gave in to the temptations of corruption. We lost their trust when rather than reform government, both parties made it bigger.”

Oh, yeah, a whole lot bigger.

I began shouting about Republicans selling out principle early on, when, after Republicans took the House back in the 1990s, they quickly also took a dive on enacting term limits.

And the sell-outs just kept coming. Republicans traded their rank and file supporters for a bevy of big special interests.

McCain says he wants to take the party “back to basics,” vowing “low taxes, spending discipline, and open markets.”

That’s the right message. And McCain’s opposition to earmarks is to his credit. But are voters ready to believe it?

This is Common Sense. I’m Paul Jacob.

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national politics & policies political challengers

A Plan for Republicans?

Three. Count ’em. Three special elections where congressional Democrats have defeated Republicans in seats previously held by Republicans, the latest in Mississippi.

GOP Minority Leader John Boehner offered reporters, “[T]his is a change election, and if we want Americans to vote for us, we have to convince them that we can fix Washington.”

Republicans are in big trouble. Because no one much believes they even want to fix Washington, much less that they could accomplish the task. Unless Boehner means “fix” in a different sense, as in “the fix is in.”

Years of pork-barrel pig-outs have taken a toll on the public. After losing the majority in ’06, congressional Republicans are poised to lose a lot more seats in ’08.

Not because folks are inspired by congressional Democrats. Not at all. No, the problem is the negatives associated with Republicans, who have discredited themselves.

In Mississippi, the Democratic Congressional Campaign Committee spent $1.8 million on ads blasting the Republican candidate for raising taxes.

To win elections you have to connect with voters. Pledge to do what voters want.

I remember back in 1994, when Republicans took the Congress. They had a Contract with America. They had ideas, actual plans. What were they? Hmmm . . . Balanced Budget Amendment . . . Term limits . . . Spending restraint . . . political reforms.

Hey! Should we remind the Republicans about this?

This is Common Sense. I’m Paul Jacob.

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

Welfare Kings

Bear Stearns. You gotta like an investment company with the word “bear” in it. If you are the kind of investor to go bullish over anything big, Bear, Stearns & Co., Inc., was BIG. For years its subprime mortgage biz made investors go all squirmy with bullishness.

They could pretend that the word “bear” was there for irony.

Call it prophecy, instead: The Bear Stearns bull lies on the ground, gored. Time to sell off the carcass.

The Federal Reserve has forced through a takeover deal, with J.P. Morgan buying out the dead bull. At a low, low price – though not nearly as low had the Federal Reserve stayed out. It’s another so-called capitalist bailout, an attempt to make a failure not seem so big.

This is not free-market capitalism, folks. This is big business welfare-statism.

In their normal run of operation, businesses negotiate the uncertainties of markets using tools like the profit-and-loss statement, aiming for profit. When they don’t manage this, they fail. Remember that term, loss?

Well, in today’s truly bipartisan political economy, the bigger you are the more scared our rulers get when you fail. So they prop up, as best they can, the biggest failures.

Forget welfare queens. The welfare kings are businessmen on the take from government. The losers are everybody else, as idiotic risks and bad business practices get propped up by government.

This is Common Sense. I’m Paul Jacob.

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free trade & free markets national politics & policies

Ptolemaic Obama

I’m all for democracy, but I’m sure glad science isn’t put up for a vote. If geocentrism were up for political grabs, would governments be forced to go against Galileo again? After all, a plurality could say: See, the sun rises and sets — all the proof you need that the sun revolves around the Earth!

Just so with trade policy. There are few truths so firmly established as comparative advantage and the notion that with free trade we all gain.

But some see only the negatives, fearing competition. Who? Some businessmen, some workers.

Which is why Barack Obama has been making noises to renege on NAFTA.

Now, NAFTA is no free trade utopia. It’s a real-world political document that freed up a lot of trade, far from perfectly. Still, most of the complaints against it are nonsense.

Which is also why major Obama campaign consultants have whispered to Canadians that, no, Obama does not mean what he says. The candidate’s only saying nasty things about NAFTA to pick up extra votes.

I don’t know what Obama really believes. Right now he’s pandering to the protectionist Democrats. I am glad, however, not to feel such a need to lie.

And I am happy to affirm, once again, that the Earth revolves around the sun.

This is Common Sense. I’m Paul Jacob.

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

Nifty Doesn’t Cut It

Just because something can be done doesn’t make it economical to do. There is a big difference between physics and economics.

Take ethanol. It might seem nifty to grow the fuel for our cars and trucks like we do our food, in fields. But niftiness alone is not enough. Nifty notions, like un-nifty ones, must prove out in terms of all the costs involved.

A growing amount of research shows that ethanol doesn’t cut costs at all.

The most recent ethanol debunker I’ve come across is Robert Bryce, author of a forthcoming book with a provocative title, Gusher of Lies: The Dangerous Delusions of “Energy Independence.” Interviewed on ReasonOnline by Brian Doherty, Bryce offers some fascinating perspectives on energy economics and policies.

  • Did you know that for every gallon of ethanol, there’s at least 51 cents of subsidy?
  • Had you heard that corn-based ethanol produces more greenhouse gases than does our use of fossil fuels?
  • Have you stopped to think about all the water that raising more corn would require, and the increasing expense of getting gargantuan more amounts to farms in the midwest?

These and other considerations lead Robert Bryce to call current ethanol policy a “scam”and “the longest running robbery of taxpayers in American history.”

Some forms of bio-product may be more economically feasible than ethanol, like the biodiesel made from the unused parts of slaughtered animals. But we should wait to see how they cost out, too, without subsidy.

This is Common Sense. I’m Paul Jacob.