Another brilliant letter from Boudreaux...though I'm sure even Don would admit it isn't that hard to be brilliant when quoting Mencken.
Editor, The Wall Street Journal
200 Liberty Street
New York, NY 10281
To the Editor:
Ed Glaeser wisely argues that it's a bad deal to copy ideas from the New Deal - including that of subsidizing mortgage debt ("The GOP Has a Dumb Mortgage Idea," Feb. 5). As one of the most astute Americans ever to live, H.L. Mencken, said about the New Deal, "It is a puerile amalgam of exploded imbecilities, many of them in flat contradiction of the rest." And among the imbecilities that Mencken highlighted was the New Deal proposal "to lift the burden of debt by encouraging fools to incur more debt."*
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
Fairfax, VA 22030
* H.L. Mencken, On Politics : A Carnival of Buncombe (Baltimore: The Johns Hopkins Press, 1996 ), p. 311.
Dear Senators Udall and Bennett,
I am contacting you to urge you in the strongest possible way to oppose the current "stimulus" bill or anything vaguely resembling it.
The bill will not stimulate the economy. It will saddle my 3-year old daughter and 1-year old son with an even higher mountain of debt for the rest of their lives.
You and I would probably not agree on much in terms of economic policy. You probably enjoy the idea of the permanent enlargement of government which is the clear primary goal of this bill, despite it's "stimulus" cover story.
But at a time of national economic crisis, you have a duty to Colorado and the nation to act in good faith for the economy and not for the benefit of your party, unions, or favored liberal industries and interest groups.
If you want to support all those things, do it later, in the clear and politically disinfecting light of day, not under cover of a so-called "stimulus" bill and during a time of substantial confusion among the electorate.
At the end of the day, supporting this bill by claiming it is "stimulus" is dishonest. And while I may not agree with you gentlemen frequently on policy matters, I do think you are honest men (all prejudices against politicians aside.)
On a purely political note, I believe any rational economist (which means not Robert Reich or Paul Krugman) will tell you that this bill is simply burning money, at least in economic terms. (I realize that it may buy a lot of votes in political terms.) When it fails, at it must, to stimulate the economy, the Democrats' losses will reverse most or all of your gains in the last two elections, particularly if the Senate Republicans are smart enough to leave Senate Democrats holding the bag as the House Republicans did to Nancy Pelosi and friends. (Sadly, I don't think Senate Republicans are as smart as House Republicans.)
For the sake of my children's economic future, and in order to maintain some hope that they can reach a higher standard of living than I have, just as we reached higher than our parents, I urge you to oppose S. 1 and anything like it that might come out of a conference.
Thanks to Ben DeGrow for bringing Randall Hoven's article to my attention.
Over at The American Thinker, Randall Hoven suggests that our current recession is not an unprecedented crisis, and that economic statistics so far during this downturn are little different from other post-WW II recessions.
The first statistic Mr. Hoven mentions is the recently-reported -3.8% GDP growth rate for the fourth quarter of 2008. However, the only reason the drop wasn’t closer to the consensus forecast drop of over 5% was a huge build-up of inventories…inventories which I can’t imagine will be sold anytime soon. As Brian Wesbury noted, “That leaves two alternatives: either the inventory increase will be revised away in future reports (reducing Q4 real GDP growth) or the inventory correction in the first half of 2009 will be extremely sharp, meaning real GDP in Q1 may be even weaker than in Q4.”
It also bears pointing out, as Wesbury does, that “The weakest components of real GDP were personal consumption, which fell at the consensus expected 3.5% annual rate, and business investment in equipment and software, which dropped at a 27.8% rate. Home building fell at a 23.6% rate.”
It is hard to imagine more likely leading indicators for the economic times we’re about to live in than huge drops in consumer spending, business investment, and home prices.
What else? In December, new single-family home sales hit their lowest level since records starting being kept. Not only were fewer houses being sold, but what was sold went at far lower prices, with the median price down over 9% from a year ago and the average price down over 13%. Considering what a huge percentage of consumer spending in recent years came from mortgage equity withdrawals, this bodes extremely poorly for the overall economy, and it’s something very different from any prior post-WW II recessions.
The Rasmussen Employment Index fell to a record low for the fourth straight month. Their consumer and investor indexes aren't much better.
Also different from those recessions is the truly massive de-leveraging cycle we’re in now. In no other recession were financial and other institutions cutting back from leverage levels frequently as high as 30:1. While most Americans pay attention to the stock market, the real life blood of the economy is the debt market. And today there is no money being loaned out…not that there is much demand to borrow any. This de-leveraging will make this recession deeper and longer than others.
I’d also point out that most of the horrible economic numbers we get lately end up being revised to even worse numbers at the next report. This is true of consumer sentiment, manufacturing indices, productivity measures, etc.
In terms of employment, I think the uptick in unemployment, with 7.2% reported for December, is just the beginning. Mr. Hoven makes some strange arguments trying to show that “payroll shrinkage”, “GDP shrinkage” and other measures of economic (in)activity are about average in comparison to prior recessions. But those comparisons are worthless because they are with completed recessions…we’re already “average” in comparison and our recession feels like it’s just getting up to speed.
I do not believe this will end up being a “typical recession” by any stretch.
And, as I’ve written about frequently in recent weeks, another enormous difference between the current recession and prior ones is that we now have a government which aims to “fix” the problem by destroying attacking capitalists and capitalism, by socializing medicine, by pandering to the cult of Algore and his global warming hoax, and by turning the majority of Americans into wards of the state.
The Democrats’ medicine will be worse than our current illness, and will turn what should have been a moderately annoying case of the fiscal flu into a devastating economic pneumonia.
I realize that just about everybody who's paying attention to politics has already seen this, but just in case...
The following is a slightly modified version of a comment I posted on the Rocky Mountain News web site in response to an article about radio talk show host Mike Rosen's losses in the Bernie Madoff pyramid scheme. Or, more precisely, in reaction to comments made to the article. A much shorter letter has been submitted to the Rocky for their consideration for publication.
I can't believe how repulsive so many of you "liberal" commenters are. Not only are you simply mean (probably due to jealousy) but you also clearly have no understanding of what happened to Rosen or Agile.
I have no connection to Agile in any way, for the record.
Investors gave them money in order to try to create some combination of increased returns and diminished risk versus standard stock or bond market investments.
Agile then looked for what I presume it believed to be the best places to accomplish those goals.
Madoff's fund seemed like one of those places...and not just to Agile. Madoff had apparently taken in over $50 billion from all over the world. In the late 1980's his firm was one of the most active in terms of shares traded on Wall Street and he was one of the highest-paid guys on the street. Indeed, Madoff was Chairman of the Board of Nasdaq for about 4 years starting in 1990.
In other words, there were very few people who didn't think Madoff was Midas.
No doubt there were very early signs that Madoff, or at least his associates, were doing something shady. That's the first place where the SEC has a hell of a lot of explaining to do...and Rosen has none to do. Furthermore, one Harry Markopolos "spent nearly a decade trying to blow the whistle" on Madoff, according to the Boston Herald, but was ignored by the SEC. This article is a great read:
Basically, Rosen was robbed by Madoff, along with thousands of others Madoff robbed. It wasn't Rosen's fault, nor Agile's. Very few people would have passed up the chance to invest with Madoff. Luckily for me, I never got the chance.
You seem to think that conservatives like Rosen had this coming. First of all, that's ridiculous because this was not a case of a free market run amok. Madoff was a criminal and what he was doing was not something permitted in any market, free or otherwise. Nothing that Rosen supports would allow behavior such as Madoff's. Indeed, those of us who understand markets know that a rules-based system is absolutely critical. In fact, I wrote a story for my web site on this very topic. The link, if you care is:
And the relevant paragraphs:
It's a shocking story, and while some liberals might claim some glee at seeing any "capitalist" go down, the bottom line is that capitalism is not a system of "anything goes" and any real capitalist hopes that Madoff, if guilty, spends the rest of his live in prison and loses any assets he has left. Indeed, even (or especially) for those of us who argue for limited government regulation and interference in markets, prosecution of fraud is a legitimate and important role of government.
Bernie Madoff has done more damage to the economy (and probably not just the American economy) than General Motors could ever have done. GM executives are dunces, failures, and pawns; Madoff is an unforgivable deceiver and destroyer of a system he had long pretended to support and celebrate. May he rot in hell, if there is such a place.
It's only liberals who believe that fundamental rules are relative, changing with time, place and culture.
And it's only liberals who believe that Mike Rosen, just because they disagree with him about politics, is an Enemy in the strongest sense of the word.
The other reason that you liberals who are glad to see what happened to Rosen are idiots is that a huge number of Madoff's investors were liberals, including large numbers of Jewish organizations and high-net-worth individuals as well as many colleges, universities and foundations. And as if your liberal friends didn't lose enough money directly, Madoff was also a huge contributor to Democratic politicians.
Mike Rosen was robbed. It's only a modern "liberal" who checks out a crime victim's political party registration before deciding whether he feels sympathy for the victim or glee for the perpetrator. You people should be ashamed of yourselves.
I got this jaw-dropping list of what's really in the so-called "stimulus" bill from the National Taxpayers Union blog, who credited it as follows: "This excellent round-up was provided by Senator Tom Coburn's office." The longer this stuff is exposed to the light of day, the harder it will be for Democrats to support it. If we could peel off even one or two Senate Dems and keep all the Republicans (not an easy task with RINOs like Maine's Snowe and Collins), the bill could implode. I'm not predicting that will happen, but it seems more possible every day. And if it does happen, I'm under no illusion that the idea of a massive Keynsian boondoggle will die. Instead, it will be re-worked and come back slightly smaller but just as stupid and it will then pass, condemning our children to higher taxes and less liberty for the foreseeable future.
Here goes...I hope you have a strong stomach:
Wasteful Spending Provisions
* $2 billion earmark to re-start FutureGen, a near-zero emissions coal power plant in Illinois that the Dept. of Energy defunded last year because the project was inefficient
* A $246 million tax break for Hollywood movie producers to buy motion picture film
* $650 million for the digital television (DTV) converter box coupon program
* $88 million for the Coast Guard to design a new polar icebreaker (arctic ship)
* $448 million for constructing the Dept. of Homeland Security headquarters
* $248 million for furniture at the new Dept. of Homeland Security headquarters
* $600 million to buy hybrid vehicles for federal employees
* $400 million for the CDC to screen and prevent STD's
* $1.4 billion for a rural waste disposal programs
* $125 million for the Washington, D.C. sewer system
* $150 million for Smithsonian museum facilities
* $1 billion for the 2010 Census, which has a projected cost overrun of $3 billion
* $75 million for "smoking cessation activities"
* $200 million for public computer centers at community colleges
* $75 million for salaries of employees at the FBI
* $25 million for tribal alcohol and substance abuse reduction
* $500 million for flood reduction projects on the Mississippi River
* $10 million to inspect canals in urban areas
* $6 billion to turn federal buildings into "green" buildings
* $500 million for state and local fire stations
* $650 million for wildland fire management on Forest Service lands
* $150 million for Smithsonian museum facilities
* $1.2 billion for "youth activities," including youth summer job programs
* $88 million for renovating the headquarters of the Public Health Service
* $412 million for CDC buildings and property
* $500 million for building and repairing NIH facilities in Bethesda, MD
* $160 million for "paid volunteers" at the Corporation for National and Community Service
* $5.5 million for "energy efficiency initiatives" at the VA "National Cemetery Administration"
* $850 million for Amtrak
* $100 million for reducing the hazard of lead-based paint
* $75M to construct a new "security training" facility for State Dept Security officers when they can be trained at existing facilities of other agencies.
* $110 million to the Farm Service Agency to upgrade computer systems
* $200 million in funding for the lease of alternative energy vehicles for use on military installations.
* IDEA, Part B State Grants: Formula grants to assist the States in meeting the excess costs of providing special education and related services to children with disabilities.
* IDEA Infants and Families: Formula grants to the States to assist them in making early intervention services available to children with disabilities aged birth through 2 and their families.
* State Medicaid Bailout: $87.7 billion Through 3 different mechanisms, the bill would provide additional federal funds to state Medicaid programs over the next 3 years. This is nearly $70 billion more than the governors asked President Obama for in December, and should be a loan to be repaid by the states.
* Eliminates fees on loans from the Small Business Administration, thus pushing private capital toward unproductive businesses and away from productive businesses.
* Increases the definition of "youth" for certain summer job programs from age 21 to age 24.
* $160 million to the Job Corps program at the Dept. of Labor, but not for job programs - rather, to construct, alter or repair buildings.
* Requires a government study on the impact of minimum wage laws on the Northern Mariana Islands and American Samoa.
* $79 billion State Fiscal Stabilization (slush) Fund to bailout the States by providing billions of dollars for "education" costs of any kind.
* $47.843 billion is appropriated for a variety of energy programs that are primarily focused on renewable energy development and energy conservation/efficiency. Not one dollar is appropriated to make fossil fuels more affordable in the near future. More than $6 billion of these funds go to environmental clean ups.
* Increases eligibility for "weatherization" assistance to households 200 percent above the poverty level.
* The "Making Work Pay" credit of $500 to every individual making less than $75,000 (or $1000 to couples making $150,000 or less) would pay people whether they are productive or not - akin to welfare.
* The Supplemental Nutrition Assistance Program (SNAP - food stamps) would temporarily suspend the 3-month limit for non-working adults to receive SNAP benefits, thus giving incentives not to find a job.
* Installs government as the creator of broadband deployment regardless of whether the specific local/regional market can sustain it.
* Funds new "green jobs" job-training program without eliminating inefficient job-training programs or consolidating duplicative job-training programs.
* $890 million to the Social Security Administration without any provisions to reduce improper payments, or any plan to increase solvency of the trust fund.
After the expected approval of tax-dodger Tim Geithner (Treasury Secretary) and the shameful approval of self-dealing Eric Holder (Attorney General), and the news that Obama's selection for "performance czar" (not sure what that is, but probably doesn't have to do with Viagra) withdrew herself from consideration for not paying taxes, finally an big name nominee goes down.
Tom Daschle, health-care-socializer-in-chief has withdrawn from the process to be the Secretary of Health and Human Services. And well he should have. Daschle owed over $120,000 in taxes for not properly declaring the use of a car and driver on his income taxes. Pretty ironic for a guy who campaigned with this ad:
His $140,000 make-up check to the IRS from a month ago was the least of the reasons that he shouldn't have had the job. More importantly is his role as unregistered lobbyist for several health care firms in recent years. And of course his book in which he calls for something like a Federal Reserve Bank of Health Care...a great idea as we see how great the Fed is for the economy.
Some interesting reactions to the withdrawal:
Nothing more needs to be said. Good riddance to Tom Daschle.
For those of you who haven't been paying attention to financial markets (which is probably somewhere between 0% and 2% of my readers), I'd like to point out that the Dow Jones was not only down 9% in January, but it's down 17% since the election of The Chosen One.
Here's the LINK for a chart of a few days before the election up to the end of January. (Click on the word LINK above.)
Financial markets aren't taken with the charisma of the Obamessiah. They don't see hope for profits or any change for the better.
Instead, they see with the clear vision of the aggregation of business people and investors who recognize the dead hand of government growing larger, with a longer reach, than ever. They see government spending which would make FDR blush and which will likely never be turned back because, as Ronald Reagan said, there is nothing so permanent as a temporary government program. And these Democratic changes aren't intended to be temporary.
As the "stimulus" bill brings us socialized medicine, massive debt, payoffs to corrupt organizations like Acorn, fealty to the dangerous cult of Algore and the hoax of man-made global warming, and while the NY Attorney General threatens criminal charges for employees receiving bonuses down 44% from the year before, the stock market clearly sees our capitalist system flopping around like a just-gutted fish that squirmed briefly out of the fish-monger's hands before dying on the floor.
A chart by the Heritage Foundation makes a dramatic point, even if it's not entirely fair to compare the stimulus bill, which would probably be money spent over several years, to one year's expenses for a family:
As I've said in prior notes, markets don't lie...at least not for long. This market's verdict is already loud and clear and my guess is that the market is a better sale with the Dow at 8,000 than a buy. Why would you want to own part of an American corporation with a government completely dominated by people who hate not just oil companies and banks, but also free trade, low taxes, and the most essential requirement of a successful free-market economy: Profits.
As Steve Moore and others have mentioned, we're living "Atlas Shrugged". The looters are firmly in charge. There's one important difference between the situation in the book and the situation in America today: In the book, the public were as socialist as their government. I don't believe that's the case in our nation in 2009. The Democrats are getting this stuff done behind screams of panic, while people are distracted by a serious recession, without any debate or any input from Republicans. On the bright side, it will create a huge political liability for the Democrats in coming elections. But the downside, which is much larger, is that those elections are far too distant to prevent the Democrats doing tremendous and likely permanent damage to what used to be the economic engine and envy of the world.
It's certainly true that the economic downturn began during the Bush presidency. But the market lows have happened since the election and soon enough this will be Obama's recession despite the media's attempts to block for him.
People get the government they deserve. And for electing that government, the American population is seeing their retirement savings, their employment prospects, and the prospects for a better life for our children shredded.
Hope and Change? Not according to one of the few measures that answers honestly and really matters.
This excellent piece in the WSJ by two professors of economics is just the latest scholarship explaining how FDR's New Deal policies kept us in the Great Depression for longer than we otherwise would have been.
see "How Government Prolonged the Depression", WSJ, 2/2/09
It's the sort of thing that every politician should have to read. But then that presumes that Democrats are supporting the "stimulus" because of its economic effects where they really support it for it's expected political effects: Turning many more millions of Americans into people dependent on government and therefore in the service of the Democratic Party.
Today I have an article at Human Events talking about the funding for the National Park Service in the "stimulus" bill, and the fact that House Appropriations Committee Chairman David Obey's son, Craig, is a lobbyist for an organization which lobbies for more money for the national parks.