The U.S. Supreme Court will soon decide D.C. v. Heller, the first case in more than 60 years in which the court will confront the meaning of the Second Amendment to the U.S. Constitution. Although Heller is about the constitutionality of the D.C. handgun ban, the court's decision will have an impact far beyond the District ("Promises breached," Op-Ed, Thursday).
The court must decide in Heller whether the Second Amendment secures a right for individuals to keep and bear arms or merely grants states the power to arm their militias, the National Guard. This latter view is called the "collective rights" theory.
A collective rights decision by the court would violate the contract by which Montana entered into statehood, called the Compact With the United States and archived at Article I of the Montana Constitution. When Montana and the United States entered into this bilateral contract in 1889, the U.S. approved the right to bear arms in the Montana Constitution, guaranteeing the right of "any person" to bear arms, clearly an individual right.
There was no assertion in 1889 that the Second Amendment was susceptible to a collective rights interpretation, and the parties to the contract understood the Second Amendment to be consistent with the declared Montana constitutional right of "any person" to bear arms.
As a bedrock principle of law, a contract must be honored so as to give effect to the intent of the contracting parties. A collective rights decision by the court in Heller would invoke an era of unilaterally revisable contracts by violating the statehood contract between the United States and Montana, and many other states.
Numerous Montana lawmakers have concurred in a resolution raising this contract-violation issue. It's posted at progunleaders.org. The United States would do well to keep its contractual promise to the states that the Second Amendment secures an individual right now as it did upon execution of the statehood contract.
Montana secretary of state
Tuesday, February 26, 2008
Saturday, February 23, 2008
A Time for Choosing, also known as "The Speech," was presented on a number of speaking occasions during the 1964 U.S. presidential election campaign by future-President Ronald Reagan on behalf of Republican candidate Barry Goldwater.
It is one of the greatest speeches in the defense of freedom and liberty that I've ever seen.
Video from Google Video
Last but not least—and here we get to the real nub of campaign-finance regulation—McCain-Feingold supporters promised that the bill would curb the scourge of "negative" and "dirty" advertising. "It is about slowing political advertising," Ms. Cantwell said during the debate. "Making sure the flow of negative ads by outside interest groups does not continue to permeate the airwaves."
Of course, curbing and "slowing" speech critical of politicians by "outside interest groups" (a.k.a. "citizens") is in no way a permissible goal under the First Amendment. But, ultimately, the politicians may have failed in this most nefarious goal. And it's not just the Swift Boat Veterans for Truth who showed the way around it.
While the Supreme Court has so far upheld the patently anti-Constitutional ban on advertising by citizens' groups 30 days before a primary and 60 days before a general election, the rise of Internet politics may eventually supercede this atrocity. Witness the anti-Hillary Clinton "1984" ad that caused such a stir on YouTube just last week. Such ads, cheaper than dirt (it costs money to distribute dirt, YouTube's free), will only be more important with every election cycle.
For this reason, look for Congress to start taking an interest in "unregulated" Internet speech any day now. Money has never been the issue. Cleansing our speech of impure thoughts about politicians is the real agenda.
Thursday, February 21, 2008
One such case was Debbie Hirst’s. Her breast cancer had metastasized, and the health service would not provide her with Avastin, a drug that is widely used in the United States and Europe to keep such cancers at bay. So, with her oncologist’s support, she decided last year to try to pay the $120,000 cost herself, while continuing with the rest of her publicly financed treatment.
By December, she had raised $20,000 and was preparing to sell her house to raise more. But then the government, which had tacitly allowed such arrangements before, put its foot down. Mrs. Hirst heard the news from her doctor.
“He looked at me and said: ‘I’m so sorry, Debbie. I’ve had my wrists slapped from the people upstairs, and I can no longer offer you that service,’ ” Mrs. Hirst said in an interview.
“I said, ‘Where does that leave me?’ He said, ‘If you pay for Avastin, you’ll have to pay for everything’ ” — in other words, for all her cancer treatment, far more than she could afford.
Officials said that allowing Mrs. Hirst and others like her to pay for extra drugs to supplement government care would violate the philosophy of the health service by giving richer patients an unfair advantage over poorer ones.
Patients “cannot, in one episode of treatment, be treated on the N.H.S. and then allowed, as part of the same episode and the same treatment, to pay money for more drugs,” the health secretary, Alan Johnson, told Parliament.
This is fundamentally immoral and a flawed policy on multiple levels.
On one level, Debbie wanted to use her savings to pay for better treatment. These savings are the fruits of her labor and nothing could be a more fundamental right than using one's lawfully gained resources to save her own life. According to the N.H.S., it's unjust for "richer patients [to have] an unfair advantage over poorer ones," but this is completely turning the concept of fairness on its head. In a system like Britain, if Debbie was "rich", it implies that she paid more taxes and most likely subsidized the healthcare of poor. The British government though says that they wouldn't allow her to augment her government-provided healthcare with her own savings. If she wants to pay for better treatment, she has to waive all her government-provided healthcare and pay all of it herself.
If she wants the cancer drug, this effectively means she must pay for healthcare multiple times. The first time was when she paid her taxes which funded the standard government healthcare. If she wants the cancer drug, she'll need to pay a second time for all the healthcare plus the drug. That would be 2x. But in reality, since she is "rich" according to the British government, it likely means she subsidized the healthcare of others. So in the end, if she wants to have choice in the healthcare she receives, she has to pay for more than 2x the healthcare.On another level, this policy isn't aimed at the rich. Debbie clearly isn't wealthy. Wealthy people don't need to sell their houses to pay for their healthcare. A wealthy person would have no problems refusing the government-provided healthcare and paying all the expenses out of pocket. So this policy isn't designed to hurt wealthy people. It's designed to hurt people who have some savings and are willing to make sacrifices in order to try to save their lives or the lives of their loved ones.
This is so immoral but socialism always is. And it's coming to America.
Wednesday, February 20, 2008
Rule by fear or rule by law?
Lewis Seiler, Dan Hamburg
"The power of the Executive to cast a man into prison without formulating any charge known to the law, and particularly to deny him the judgment of his peers, is in the highest degree odious and is the foundation of all totalitarian government whether Nazi or Communist."
- Winston Churchill, Nov. 21, 1943
Since 9/11, and seemingly without the notice of most Americans, the federal government has assumed the authority to institute martial law, arrest a wide swath of dissidents (citizen and noncitizen alike), and detain people without legal or constitutional recourse in the event of "an emergency influx of immigrants in the U.S., or to support the rapid development of new programs."
Beginning in 1999, the government has entered into a series of single-bid contracts with Halliburton subsidiary Kellogg, Brown and Root (KBR) to build detention camps at undisclosed locations within the United States. The government has also contracted with several companies to build thousands of railcars, some reportedly equipped with shackles, ostensibly to transport detainees.
According to diplomat and author Peter Dale Scott, the KBR contract is part of a Homeland Security plan titled ENDGAME, which sets as its goal the removal of "all removable aliens" and "potential terrorists."
Fraud-busters such as Rep. Henry Waxman, D-Los Angeles, have complained about these contracts, saying that more taxpayer dollars should not go to taxpayer-gouging Halliburton. But the real question is: What kind of "new programs" require the construction and refurbishment of detention facilities in nearly every state of the union with the capacity to house perhaps millions of people?
Sect. 1042 of the 2007 National Defense Authorization Act (NDAA), "Use of the Armed Forces in Major Public Emergencies," gives the executive the power to invoke martial law. For the first time in more than a century, the president is now authorized to use the military in response to "a natural disaster, a disease outbreak, a terrorist attack or any other condition in which the President determines that domestic violence has occurred to the extent that state officials cannot maintain public order."
The Military Commissions Act of 2006, rammed through Congress just before the 2006 midterm elections, allows for the indefinite imprisonment of anyone who donates money to a charity that turns up on a list of "terrorist" organizations, or who speaks out against the government's policies. The law calls for secret trials for citizens and noncitizens alike.
Also in 2007, the White House quietly issued National Security Presidential Directive 51 (NSPD-51), to ensure "continuity of government" in the event of what the document vaguely calls a "catastrophic emergency." Should the president determine that such an emergency has occurred, he and he alone is empowered to do whatever he deems necessary to ensure "continuity of government." This could include everything from canceling elections to suspending the Constitution to launching a nuclear attack. Congress has yet to hold a single hearing on NSPD-51.
U.S. Rep. Jane Harman, D-Venice (Los Angeles County) has come up with a new way to expand the domestic "war on terror." Her Violent Radicalization and Homegrown Terrorism Prevention Act of 2007 (HR1955), which passed the House by the lopsided vote of 404-6, would set up a commission to "examine and report upon the facts and causes" of so-called violent radicalism and extremist ideology, then make legislative recommendations on combatting it.
According to commentary in the Baltimore Sun, Rep. Harman and her colleagues from both sides of the aisle believe the country faces a native brand of terrorism, and needs a commission with sweeping investigative power to combat it.
A clue as to where Harman's commission might be aiming is the Animal Enterprise Terrorism Act, a law that labels those who "engage in sit-ins, civil disobedience, trespass, or any other crime in the name of animal rights" as terrorists. Other groups in the crosshairs could be anti-abortion protesters, anti-tax agitators, immigration activists, environmentalists, peace demonstrators, Second Amendment rights supporters ... the list goes on and on. According to author Naomi Wolf, the National Counterterrorism Center holds the names of roughly 775,000 "terror suspects" with the number increasing by 20,000 per month.
What could the government be contemplating that leads it to make contingency plans to detain without recourse millions of its own citizens?
The Constitution does not allow the executive to have unchecked power under any circumstances. The people must not allow the president to use the war on terrorism to rule by fear instead of by law.
Lewis Seiler is the president of Voice of the Environment, Inc. Dan Hamburg, a former congressman, is executive director.
Our Wishbone World
The market has been dealt a historic hand and the global stakes have never been higher.
For the last six years, the ace up the Federal Reserve’s sleeve has been the U.S. dollar. They’ve let the greenback devalue with hopes that a legitimate economic recovery would take the place of the credit expansion that has dominated this decade.
Since 2002, the world’s reserve currency declined 37% while everything measured in dollars appreciated in kind. This dynamic passed largely unnoticed by stateside players but it’s been a source of stress for foreign holders of dollar denominated assets.
We call this “asset class deflation vs. dollar devaluation” in Minyanville, which is to say that we’ll toggle between the two as policy makers pull fiscal and monetary strings. While both sides of that equation can potentially falter, the deck is stacked against both the dollar and asset classes rallying in synch.
As global players pile their chips on the trading table, credit jokers have appeared with greater frequency. It started with subprime debt, moved into asset-backed commercial paper, spread to auction rate securities and is now migrating to municipalities.
While near-term nuances are difficult to digest, the big picture has come down to a simple question. Will foreigners allow the dollar to devalue further, paving the way towards hyperinflation, or will capital drain from the system and introduce a prolonged period of deflation?
What’s clear is that the game itself has experienced a seismic shift. Central banks have been extremely proactive in what they do and how they do it. This has been going on for years but the efforts increased appreciably since last summer. We opined at the time that something was afoot and the pieces have seemingly fallen in place.
We are approaching a critical crossroads. Structural imbalances have cumulatively increased since the back of the tech bubble and risk has built to a crescendo. The credit contagion simply served as a catalyst to bring this conundrum to bear. All that remains to be seen is where the bear will domicile.
Let’s look at both sides of the great debate. To the left is the socialization of markets, nationalization by governments and hyperinflation. To the right, we have asset class deflation, risk aversion and the unwinding of the debt bubble.
If the Northern Rock nationalization is the first in series of similar steps, we could conceivably see the stateside assumption of mortgage debt by the U.S government. This would hit the dollar and spike equities, at least until interest rates rose to levels deemed attractive as an alternative investment.
That is the hyperinflation scenario, one that is presumably preferred by the powers that be as an alternative to watershed deflation. The “haves” would fare better than “have nots,” which would include the former middle class that suffers as a result of moral hazard, as the costs of goods and services skyrocket.
The other scenario is the draining of liquidity from the system, which would ignite the fuse for a higher greenback as currency becomes scarcer. Asset classes across the board, from commodities to equities, would deflate and impact the top tier of our societal structure that is tied to the marketplace.
This is, quite obviously, problematic for many policy makers and the constituencies that bankroll them. Deflation in a fractional reserve banking system means that they have, for all intents and purposes, lost control of the economy. It is an admission of defeat, albeit one that may be unavoidable.
No Easy Answers
Last week, while dining with Minyanville sage Mr. Practical, we were discussing the congressional testimony of Fed Chairman Ben Bernanke and Treasury Secretary Hank Paulson. We arrived at the conclusion that they must see what we see but their hands are tied with regard to how they publicly posture themselves.
The banking system, stymied with credit contagion, is not operating normally and the communication thereof is delicate. Hidden behind proposed bailouts, stimulus packages, super-conduits, term auction financing, mortgage rate freezes, foreclosure freezes and working groups are politicians attempting to engineer a business cycle that long ago lost it’s way.
As Mr. Practical observed as we surveyed the situation, “None of these plans will affect the larger deflationary credit contraction. Debt deflation is occurring outside of the Fed’s control at the world’s money center banks, where supply and demand for credit has undergone a rapid and significant decline.”
This process will take years to manifest but will ultimately yield positive results. The destruction of debt will allow world economies to build a solid foundation for future expansion that is entirely more secure than what we currently have in place.
Deflation will cause paper wealth to evaporate and rich nations will be forced to pour real money—as opposed to cheap debt—into developing economies as a redistribution mechanism. While the path might be painful, the destination will be a sustainable starting point for future generations.
There is a marked difference between taking our medicine, which is a function of time and price, and injecting the system with drugs with hopes that the pain will pass. The latter matter continues to be the diagnosis of choice, as evidenced by current events, but the patient would be well served to understand the prognosis.
There are no easy answers but there are certainly simple truths. The sooner we prepare for the worst, the better we can in good conscience hope for the best.
"A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship. The average age of the world's greatest civilizations has been 200 years. These nations have progressed through this sequence: "From bondage to spiritual faith; From spiritual faith to great courage; From courage to liberty; From liberty to abundance; From abundance to selfishness; From selfishness to apathy; From apathy to dependence; From dependence back into bondage." - Alexander Fraser Tytler from "The Decline and Fall of the Athenian Republic" published in 1776
Monday, February 18, 2008
Episode one is titled The Battle of Ideas. It covers the evolution of Communism, Socialism, and Capitalism during the 20th century against the backdrop of war, depression, and globalization. John Maynard Keynes and Friederich von Hayek emerge as the two personalities fighting in the battle of ideas. The documentary includes interviews with Hayek, Milton Friedman, Dick Cheney, Bill Clinton, Margaret Thatcher, and many others.
The entire documentary is available for online viewing. I haven't watched episode two and three yet, but I really liked episode one. The timing for me was perfect because I am currently halfway through Hayek's The Road to Serfdom, which is one of the most important economic and political books of the 20th century.
In a time when a very popular left-wing economist like Paul Krugman says that we're all Keynsians now and compares teaching Hayek instead of Keynes to teaching creationism instead of evolution, it's very important that people understand what these economists stood for and what happened when their theories were applied. My generation didn't suffer through the stagflation of the 1970's brought about by applying Keynesian principles of inflation, economic stimulus, and heavy government regulation to the free markets. The documentary details the pain and suffering created in the United States and the United Kingdom by these policies. And they were only reversed when the theories of Hayek and Friedman were applied by Paul Volker and Ronald Reagan.
The battle of ideas continues and it takes looking no further than our Presidential candidates (both Republican and Democrat) to see that we're moving towards the principles of Keynes, government planning, and socialism. The outcome of this is already known as history is littered with examples of how prosperity is destroyed when governments interfere in the market place. Many people believe the current credit and housing crisis are a result of lack of government regulation, but they actually were caused by various government policies, most importantly how Alan Greenspan kept short-term interest rates far below the market rate for years and created moral hazard with the promise of future bailouts (the "Greespan Put").
My favorite part of episode one is Chapter 9 which discusses the economy of postwar Germany.
NARRATOR: The war left Germany in ruins. Its economy had disintegrated. Markets had broken down. Shops were empty. Already the Russians occupied East Germany and were waiting for the rest to fall into their lap. In the American and British occupation zones, raging hyperinflation had made the German currency worthless.
In the winter of 1948, the Allies appointed as director of economic affairs a rotund, cigar-chomping economist named Ludwig Erhard. A staunch anti-Nazi, Erhard was a free-market economist who shared many of Hayek's beliefs and ideas. He also believed the Allies' economic rules were making a bad situation worse.
MILTON FRIEDMAN: The occupying authorities had imposed a system under which there were extensive wage and price controls, supposedly to control inflation, but of course wage and price controls never control inflation. And you had essentially an economy that was brought to a halt.
ALFRED BOSCH, Economist and Friend of Hayek: In this situation the black markets formed, and American cigarettes were its form of currency.
MILTON FRIEDMAN: Nobody smoked cigarettes. They were for small transactions. Cognac was a medium of circulation for large transactions.
NARRATOR: The Allies introduced a new currency, the Deutsche Mark, to replace the worthless German money. But for Erhard, that was not enough. So without informing the Allies, Erhard went on the radio and made a startling announcement.
KARL OTTO POHL: Ludwig Erhard, a legendary man, he decided, without asking anybody and against the will of the American occupation powers, he decided to give up all price controls.
NARRATOR: Next day, Gen. Lucius Clay, the man in charge of occupied Germany, demanded to know what Erhard thought he was doing.
ALFRED BOSCH: Clay said, "What have you done? You have changed the Allied price controls." Erhard replied, "Herr General, I haven't changed them; I've abolished them." And Clay said, "My advisors tell me it is a big mistake." Erhard replied, "Herr General, my advisors tell me the same thing."
NARRATOR: Overnight the black market disappeared. People stopped hoarding, and goods not seen for 10 years went on sale.
MILTON FRIEDMAN: It started the markets working, with free prices. Instead of nothing being in the windows of the shops, everything started to come up. And that began the German economic miracle.
NARRATOR: Germany's "social market economy" combined free markets with a strong welfare state. Within a few years, Germany's social market economy overtook Britain's more planned economy.
But back then, nobody wanted to model themselves on Germany. Most countries preferred to plan their economies.
This is a great example of the principles of Austrian Economics. First, government intervention in the free market, no matter how well-intentioned, always results in lowering overall prosperity. Second, money is a creature of the market and not created by the state. When the state tried to interfere with the market by setting price controls, people abandoned government money and commodity money spontaneously materialized in the form of cigarettes and cognac. Third, free markets always outperform managed markets. Germany, a country ravaged and destroyed by war, overtook Britain's planned economy.
Sunday, February 17, 2008
White people spend a lot of time of worrying about poor people. It takes up a pretty significant portion of their day.
They feel guilty and sad that poor people shop at Wal*Mart instead of Whole Foods, that they vote Republican instead of Democratic, that they go to Community College/get a job instead of studying art at a University.
It is a poorly guarded secret that, deep down, white people believe if given money and education that all poor people would be EXACTLY like them. In fact, the only reason that poor people make the choices they do is because they have not been given the means to make the right choices and care about the right things.
A great way to make white people feel good is to tell them about situations where poor people changed how they were doing things because they were given the ‘whiter’ option. “Back in my old town, people used to shop at Wal*Mart and then this non-profit organization came in and set up a special farmers co-op so that we could buy more local produce, and within two weeks the Wal*Mart shut down and we elected our first Democratic representative in 40 years.” White people will first ask which non-profit and are they hiring? After that, they will be filled with euphoria and will invite you to more parties to tell this story to their friends, so that they can feel great.
But it is ESSENTIAL that you reassert that poor people do not make decisions based on free will. That news could crush white people and their hope for the future.
Saturday, February 16, 2008
Some of my favorite quotes from Madison:
It is a universal truth that the loss of liberty at home is to be charged to the provisions against danger, real or pretended, from abroad.
If Tyranny and Oppression come to this land, it will be in the guise of fighting a foreign enemy.
The executive has no right, in any case, to decide the question, whether there is or is not cause for declaring war.
War should only be declared by the authority of the people, whose toils and treasures are to support its burdens, instead of the government which is to reap its fruits.
The means of defense against foreign danger historically have become the instruments of tyranny at home.
Of all the enemies of public liberty, war is perhaps the most to be dreaded, because it comprises and develops the germ of every other.
No nation could preserve its freedom in the midst of continual warfare.
Each generation should be made to bear the burden of its own wars, instead of carrying them on, at the expense of other generations.
The Constitution preserves the advantage of being armed which Americans possess over the people of almost every other nation where the governments are afraid to trust the people with arms.
In framing a government which is to be administered by men over men you must first enable the government to control the governed; and in the next place oblige it to control itself.
In Republics, the great danger is, that the majority may not sufficiently respect the rights of the minority.
It will be of little avail to the people that the laws are made by men of their own choice if the laws be so voluminous that they cannot be read, or so incoherent that they cannot be understood.
The truth is that all men having power ought to be mistrusted.
What is government itself but the greatest of all reflections on human nature? If men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary.
Where an excess of power prevails, property of no sort is duly respected. No man is safe in his opinions, his person, his faculties, or his possessions.
The third most influential Princetonian was Woodrow Wilson. The article says
After serving as Princeton's 13th president, American's 28th president achieved a host of domestic reforms, including the creation of the Federal Reserve System, the income tax, and the Federal Trade Commission, which ushered in a new era of government regulation. He led the United States through World War I; his Fourteen Points remain an outstanding liberal expression of international relations, though he failed to gain the U.S. entry into the League of Nations.So to recap. Wilson achieved two of the 10 Planks of the Communist Manifesto by establishing a "A heavy progressive or graduated income tax" (plank 2) and "Centralization of credit in the hands of the State, by means of a national bank with State capital and an exclusive monopoly" (plank 5). He set the precedent for government to regulate and interfere with the buying and selling of goods in the free market. The article says he led the United "through" World War I, but it should have said he led us into World War I. He also managed to set the stage for World War II through the Treaty of Versailles, a war that resulted in the deaths of tens of millions of people. He can be considered the first neocon as he believed in spreading the goodness of American through the world by use of force. He also believed in World Government, which takes power away from the people and puts their lives under the control of bureaucrats in a far away land.
We need more James Madisons and fewer Woodrow Wilsons. Unfortunately, Clinton, Obama, and McCain have a much deeper resemblance to Wilson than to Madison.
Tuesday, February 12, 2008
As stated on the front page of the Washington State Democrat's website, the Primary will not count toward picking the Democratic candidate, and if you select a Democratic ballot in the Primary, your vote won't make any difference as to who becomes the Democratic nominee. As the name of this site implies, it will be a wasted vote.
The only outcome you can sway with your Primary vote is the Republican Primary, and we urge you to do just that on February 19th.
The key thing to realize here is that you have nothing to lose. Voting in the Republican primary is NOT a vote in favor of the Republican Party. Rather, it is an opportunity to stack the deck on the Republican side with your preference. Even if you would rather not have any of the Republicans be president, you can at least vote for the one that matches your values most closely.
Ron Paul is the only anti-war candidate running for the Republican nomination.
Many of us did not expect that a Republican could win the last election, especially not when the popular vote went against him. It is entirely possible that this could happen again. Wouldn't you prefer that you had done everything in your power to be certain that even if a Republican wins the election, we will be getting out of this war immediately?
If you want more details on why you should consider voting for Ron Paul in the Washington State Presidential Primary, click here.
We urge you not to waste your vote in the 2008 Washington primary. Please join us in voting against the cruelty of war. If you wish to cast a meaningful anti-war ballot, there is only one viable candidate: Ron Paul. Please mail in your ballot or turn it in at your polling station.
Do not forget to check the Republican box and sign your name
on the outside of the envelope (below the sticky foldover)!!!
If you have questions or comments, please email us
Ron Paul in 2002: Wisdom before War:
Monday, February 11, 2008
The only vote that ultimately counts is the vote of the delegates. According to the NY Times, "In total, there are 4,049 Democratic and 2,380 Republican delegates. In order to win the nomination, a Democratic candidate must win 2,025 delegates and a Republican must win 1,191 delegates." What this means is that the only vote that matters is the vote of the delegates at the National Convention.
Delegates can either be pledged or unpledged. A pledged delegate must vote for the candidate he is pledged to. An unpledged delegate can vote for which ever candidate he wants. For the Republican party, here is a document explaining how each state or territory selects their delegates and how they are pledged. Every state is different. There is probably a similar document explaining how the Democratic party selects delegates. The Democratic party also has approximately 796 "super delegates." These are high ranking party officials that are unpledged. The Republican also gives a number of high ranking officials delegate status, but they don't use the term "super delegate." They just call them unpledged.
At the national convention, the delegates will vote. The delegates who are pledged vote for the candidate they are pledged to. The unpledged delegates can vote for whomever they want. If a candidate has a majority, the process is complete. If no candidate wins a majority, it becomes a "brokered convention." At that point, they will keep conducting votes until a candidate wins a majority. Between these votes, there will be much horse trading and political maneuvering to try to win delegates.
This is when it becomes very important for how the delegates are pledged. In most states, the delegates are pledged for just the first vote. In some states, they can be pledged for two or three votes. Once their pledge is fulfilled, they can vote for whomever they want.
Where it gets interesting is that in some states, the candidates aren't legally pledged to any candidate. For example, let's take the state of Washington. For the Republican party, there are 40 delegates from the state of Washington. There are 27 congressional district (CD) delegates (3 for each of the 9 congressional districts), 10 at large (AL) delegates, and 3 delegates chosen by the RNC. The Washington State Republican party has both a caucus and a primary.
So how are the delegates chosen? On February 19th, the Republican party held it's caucuses. At thousands of voting precincts around the state, voters arrived and picked a candidate. This is the "straw poll." This is the vote that is mentioned on CNN and there was a lot of controversy about this vote because the Republican party didn't fully count it and declared John McCain the winner even though it was possible for Huckabee to have won based on the remaining votes (they were only separated by a couple hundred). Many voters wrote down their straw poll vote and then left thinking they were done. It turns out the straw poll in a caucus state like Washington means almost nothing. The press seems to think it's all that matters. After the straw poll, the remaining voters went through the task of electing precinct delegates. These delegates then go to a county convention and they vote on who will be the CD delegates. These 27 delegates will then go to the national convention. The 10 AL delegates are chosen at the state convention in May.
Who will these CDs vote for? In Washington, they aren't legally bound. They are "morally bound" to follow the allocation. How is the allocation determined? For each congressional district, we ended up with two delegates. Two of the three delegates are allocated to the winner of the caucus straw poll. The third delegate is allocated to the winner of the primary in that congressional district (as I mentioned before, the Republican party does both a caucus and a primary in Washington state). The remaining 3 delegates are chosen by the Republican National Committee and they are completely unbound.
It turns out that a lot of Ron Paul supporters became precinct delegates in Washington on caucus night. They will choose the national delegates. I'm not sure that "morally bound" will mean anything to them given that the Republican party didn't even count all the votes. I also read an article that there were similar reports in another state on the Democratic side. In some precincts, Obama won the straw poll by a large margin and then most of his supporters left. The people remaining, mostly old party members and Hillary loyalists, then became the precinct delegates. Anything is possible with these complex rules.
Most caucus states have some variation of this -- the straw poll doesn't really matter much. Washington has the idea of being "morally bound," but in Iowa,, for example, the delegates are completely unbound. Huckabee may have won the straw poll, but did his supporters know enough to stick around for the delegate selection? And what if the selected delegates who appeared to be Huckabee voters actually supported another candidate? I don't know if that happened. Neither does the NY Times and this is why they don't include caucus numbers in their runnign delegate count like some other sites do.
In primary states, the rules are not so cut and dry either. For example, in the Republican process, many states, like Delaware, have primaries to pick a winner, but the delegates are chosen at a state convention. Those delegates are pledged to the winner for one vote at the convention. If it becomes a brokered convention, those delegates can vote for whomever they want. How are those delegates selected? They are selected at a state convention. So it just depends on who shows up to the state convention to determine where the loyalties of those delegates will be. In other primary states, like New York and California, the delegates are chosen by the candidate. They are likely to remain very loyal at the convention.
At this point, on the Republican side, it's pretty unlikely that we will have a brokered convention. If Romney had stayed in, there was a good chance it would have happened. Maybe Ron Paul would have won in the end. Abraham Lincoln only had 22 delegates in 1860, but he became the nominee because he was able to sway people at the brokered convention. Perhaps Romney dropped out to prevent this exact scenario from happening.
On the Democratic side, with only two candidates remaining, it's also unlikely we will have a brokered convention with the pledged delegates. The super delegate votes will likely decide the candidate, but there's a good chance they will vote based on who is leading the race.
In Oslo, library collections are woefully outdated, and public swimming pools are in desperate need of maintenance. News reports describe serious shortages of police officers and school supplies. When my mother-in-law went to an emergency room recently, the hospital was out of cough medicine. Drug addicts crowd downtown Oslo streets, as The Los Angeles Times recently reported, but applicants for methadone programs are put on a months-long waiting list.
In Norway, the standard line is that there must be some mistake, that such things simply should not happen in "the world's richest country." Why do Norwegians have such a wealthy self-image? Partly because, compared with their grandparents (who lived before the discovery of North Sea oil), they are rich. Few, however, question whether it really is the world's richest country.
After I moved here six years ago, I quickly noticed that Norwegians live more frugally than Americans do. They hang on to old appliances and furniture that we would throw out. And they drive around in wrecks. In 2003, when my partner and I took his teenage brother to New York - his first trip outside of Europe - he stared boggle-eyed at the cars in the Newark Airport parking lot, as mesmerized as Robin Williams in a New York grocery store in "Moscow on the Hudson."
One image in particular sticks in my mind. In a Norwegian language class, my teacher illustrated the meaning of the word matpakke - "packed lunch" - by reaching into her backpack and pulling out a hero sandwich wrapped in wax paper. It was her lunch. She held it up for all to see.
Yes, teachers are underpaid everywhere. But in Norway the matpakke is ubiquitous, from classroom to boardroom. In New York, an office worker might pop out at lunchtime to a deli; in Paris, she might enjoy quiche and a glass of wine at a brasserie. In Norway, she will sit at her desk with a sandwich from home.
It is not simply a matter of tradition, or a preference for a basic, nonmaterialistic life. Dining out is just too pricey in a country where teachers, for example, make about $50,000 a year before taxes. Even the humblest of meals - a large pizza delivered from Oslo's most popular pizza joint - will run from $34 to $48, including delivery fee and a 25 percent value added tax.
Not that groceries are cheap, either. Every weekend, armies of Norwegians drive to Sweden to stock up at supermarkets that are a bargain only by Norwegian standards. And this isn't a great solution, either, since gasoline (in this oil-exporting nation) costs more than $6 a gallon.
Sunday, February 10, 2008
Under the Rules of the United States House of Representatives, a Member of Congress is not allowed to link his campaign website to his official web site.
Also under Federal Election Commission laws, Congressman Paul is not allowed to directly link his Congressional campaign website to his support or promote his Presidential campaign website, because it would be considered an in-kind contribution.
If you are interested in learning more about Congressman Paul’s Presidential web site or his official Congressional web site, you should go to a search engine, Yahoo, or the main congressional web site. Or you can visit Ron Paul's personal website.
While the Committee believes it would be helpful to constituents and those visiting this web site to have a link to the official congressional site, or to at least note the official office telephone number, a strict reading of House Rules (and the likely pettiness of liberals opposing Rep. Paul) will not allow it.
We apologize for the inconvenience this may cause you.
Thursday, February 7, 2008
"What I compare it to: you take Enron/WorldCom, you take the Internet bubble, you take LTCM, you take the junk bond crisis, you take the S&L crisis, you take the housing recession from 1990. Roll them all into one and that's what we're looking at."
Tuesday, February 5, 2008
Landlords would be allowed to pass through 50% of the annual property tax cost of the proposed bond to tenants as permitted in the City Administrative Code. Based on these estimates, the highest estimated annual cost for a tenant in a unit with an assessed value of $140,000 would be approximately $7.80.
The letter follows:
Last night, I read proposition A. I was upset to find out that landlords can pass through only 50% of the annual property tax increase to tenants. Let me state for the record that I am not a landlord. I do not own a business or any property in San Francisco. I rent from a newer building that is not under rent control. That said, I am quite bothered by this bill. It's almost impossible for a landlord to stay in business in this city. By preventing landlords from passing on these taxes according to the supply and demand of the free market, this proposition will force landlords to find a way to reduce their costs. This will probably mean worse maintenance of apartments. It's like telling the baker that he must pay extra for every pound of flour but can only raise the price of bread by half the increase. Eventually, that business becomes unprofitable and it discourages anybody from entering that market.
It upsets me that San Franciscans think it's a good idea for the government to interfere in the market and allow the costs landlords pay to increase faster than the amount they can charge. This measure is another example of how anti-business San Francisco is. As long as San Francisco embraces such anti-business practices and doesn't respect property rights, I will never buy property, own a business, or invest in a business in this city. What that means is that none of the money I make will ever be invested back back into this city and when the city increase my taxes too much to pay for its bad policies, I will just leave. I am sure many others share my views and this means that San Francisco loses millions of dollars in capital investment and jobs.
I just finished the chapter on rent control in Henry Hazlitt's Economics in One Lesson. I love the fact that he wrote the book in 1946, but the lessons are as applicable today. People always complain that the rents are too high in San Francisco and it's so hard to find an apartment. But they rarely consider that it's bad policy that causes this. Hazlitt does a great job explaining this. I've included the chapter below. I've decided I will send a copy of his book to your office.
Government control of the rents of houses and apartments is a special form of price control. Most of its consequences are substantially the same as those of price control in general, but a few call for special consideration.
Rent controls are sometimes imposed as a part of general price controls, but more often they are decreed by a special law. A frequent occasion is the beginning of a war. An army post is set up in a small town; rooming houses increase rents for rooms; owners of apartments and houses increase their rents. This leads to public indignation. Or houses in some towns may be actually destroyed by bombs, and the need for armaments or other supplies diverts materials and labor from the building trades.
Rent control is initially imposed on the argument that the supply of housing is not "elastic"—i.e., that a housing shortage cannot be immediately made up, no matter how high rents are allowed to rise. Therefore, it is contended, the government, by forbidding increases in rents, protects tenants from extortion and exploitation without doing any real harm to landlords and without discouraging new construction.
This argument is defective even on the assumption that the rent control will not long remain in effect. It overlooks an immediate consequence. If landlords are allowed to raise rents to reflect a monetary inflation and the true conditions of supply and demand, individual tenants will economize by taking less space. This will allow others to share the accommodations that are in short supply. The same amount of housing will shelter more people, until the shortage is relieved.
Rent control, however, encourages wasteful use of space. It discriminates in favor of those who already occupy houses or apartments in a particular city or region at the expense of those who find themselves on the outside. Permitting rents to rise to the free market level allows all tenants or would-be tenants equal opportunity to bid for space. Under conditions of monetary inflation or real housing shortage, rents would rise just as surely if landlords were not allowed to set an asking price, but were allowed merely to accept the highest competitive bids of tenants.
The effects of rent control become worse the longer the rent control continues. New housing is not built because there is no incentive to build it. With the increase in building costs (commonly as a result of inflation), the old level of rents will not yield a profit. If, as often happens, the government finally recognizes this and exempts new housing from rent control, there is still not an incentive to as much new building as if older buildings were also free of rent control. Depending on the extent of money depreciation since old rents were legally frozen, rents for new housing might be ten or twenty times as high as rent in equivalent space in the old. (This actually happened in France after World War II, for example.) Under such conditions existing tenants in old buildings are indisposed to move, no matter how much their families grow or their existing accommodations deteriorate.
Because of low fixed rents in old buildings, the tenants already in them, and legally protected against rent increases, are encouraged to use space wastefully, whether or not their families have grown smaller. This concentrates the immediate pressure of new demand on the relatively few new buildings. It tends to force rents in them, at the beginning, to a higher level than they would have reached in a wholly free market.
Nevertheless, this will not correspondingly encourage the construction of new housing. Builders or owners of preexisting apartment houses, finding themselves with restricted profits or perhaps even losses on their old apartments, will have little or no capital to put into new construction. In addition, they, or those with capital from other sources, may fear that the government may at any time find an excuse for imposing rent controls even on the new buildings. And it often does.
The housing situation will deteriorate in other ways. Most important, unless the appropriate rent increases are allowed, landlords will not trouble to remodel apartments or make other improvements in them. In fact, where rent control is particularly unrealistic or oppressive, landlords will not even keep rented houses or apartments in tolerable repair. Not only will they have no economic incentive to do so; they may not even have the funds. The rent-control laws, among their other effects, create ill feeling between landlords who are forced to take minimum returns or even losses, and tenants who resent the landlord's failure to make adequate repairs.
A common next step of legislatures, acting under merely political pressures or confused economic ideas, is to take rent controls off "luxury" apartments while keeping them on low or middle-grade apartments. The argument is that the rich tenants can afford to pay higher rents, but the poor cannot.
The long-run effect of this discriminatory device, however, is the exact opposite of what its advocates intend. The builders and owners of luxury apartments are encouraged and rewarded; the builders and owners of the more needed low-rent housing are discouraged and penalized. The former are free to make as big a profit as the conditions of supply and demand warrant; the latter are left with no incentive (or even capital) to build more low-rent housing.
The result is a comparative encouragement to the repair and remodeling of luxury apartments, and a tendency for what new private building there is to be diverted to luxury apartments. But there is no incentive to build new low-income housing, or even to keep existing low-income housing in good repair. The accommodations for the low-income groups, therefore, will deteriorate in quality, and there will be no increase in quantity. Where the population is increasing, the deterioration and shortage in low-income housing will grow worse and worse. It may reach a point where many landlords not only cease to make any profit but are faced with mounting and compulsory losses. They may find that they cannot even give their property away. They may actually abandon their property and disappear, so they cannot be held liable for taxes. When owners cease supplying heat and other basic services, the tenants are compelled to abandon their apartments. Wider and wider neighborhoods are reduced to slums. In recent years, in New York City, it has become a common sight to see whole blocks of abandoned apartments, with windows broken, or boarded up to prevent further havoc by vandals. Arson becomes more frequent, and the owners are suspected.
A further effect is the erosion of city revenues, as the property-value base for such taxes continues to shrink. Cities go bankrupt, or cannot continue to supply basic services.
When these consequences are so clear that they become glaring, there is of course no acknowledgment on the part of the imposers of rent control that they have blundered. Instead, they denounce the capitalist system. They contend that private enterprise has "failed" again; that "private enterprise cannot do the job." Therefore, they argue, the State must step in and itself build low-rent housing.
This has been the almost universal result in every country that was involved in World War II or imposed rent control in an effort to offset monetary inflation.
So the government launches on a gigantic housing program — at the taxpayers' expense. The houses are rented at a rate that does not pay back costs of construction and operation. A typical arrangement is for the government to pay annual subsidies, either directly to the tenants in lower rents or to the builders or managers of the State housing. Whatever the nominal arrangement, the tenants in the buildings are being subsidized by the rest of the population. They are having part of their rent paid for them. They are being selected for favored treatment. The political possibilities of this favoritism are too clear to need stressing. A pressure group is built up that believes that the taxpayers owe it these subsidies as a matter of right. Another all but irreversible step is taken toward the total Welfare State.
A final irony of rent control is that the more unrealistic, Draconian, and unjust it is, the more fervid the political arguments for its continuance. If the legally fixed rents are on the average 95 percent as high as free market rents would be, and only minor injustice is being done to landlords, there is no strong political objection to taking off rent controls, because tenants will only have to pay increases averaging about percent. But if the inflation of the currency has been so great, or the rent-control laws so repressive and unrealistic, that legally fixed rents are only 10 percent of what free market rents would be, and gross injustice is being done to owners and landlords, a great outcry will be raised about the dreadful evils of removing the controls and forcing tenants to pay an economic rent. The argument is made that it would be unspeakably cruel and unreasonable to ask the tenants to pay so sudden and huge an increase. Even the opponents of rent control are then disposed to concede that the removal of controls must be a very cautious, gradual, and prolonged process. Few of the opponents of rent control, indeed, have the political courage and economic insight under such conditions to ask even for this gradual decontrol. In sum, the more unrealistic and unjust the rent control is, the harder it is politically to get rid of it. In country after country, a ruinous rent control has been retained years after other forms of price control have been abandoned.
The political excuses offered for continuing rent control pass credibility. The law sometimes provides that the controls may be lifted when the "vacancy rate" is above a certain figure. The officials retaining the rent control keep triumphantly pointing out that the vacancy rate has not yet reached that figure. Of course not. The very fact that the legal rents are held so far below market rents artificially increases the demand for rental space at the same time as it discourages any increase in supply. So the more unreasonably low the rent ceilings are held, the more certain it is that the ''scarcity" of rental houses or apartments will continue.
The injustice imposed on landlords is flagrant. They are, to repeat, forced to subsidize the rents paid by their tenants, often at the cost of great net losses to themselves. The subsidized tenants may frequently be richer than the landlord forced to assume part of what would otherwise be his market rent. The politicians ignore this. Men in other businesses, who support the imposition or retention of rent control because their hearts bleed for the tenants, do not go so far as to suggest that they themselves be asked to assume part of the tenant subsidy through taxation. The whole burden falls on the single small class of people wicked enough to have built or to own rental housing.
Few words carry stronger obloquy than slumlord. And what is a slumlord? He is not a man who owns expensive property in fashionable neighborhoods, but one who owns only rundown property in the slums, where the rents are lowest and where payment is most dilatory, erratic and undependable. It is not easy to imagine why (except for natural wickedness) a man who could afford to own decent rental housing would decide to become a slumlord instead.
When unreasonable price controls are placed on articles of immediate consumption, like bread, for example, the bakers can simply refuse to continue to bake and sell it. A shortage becomes immediately obvious, and the politicians are compelled to raise the ceilings or repeal them. But housing is very durable. It may take several years before tenants begin to feel the results of the discouragement to new building, and to ordinary maintenance and repair. It may take even longer before they realize that the scarcity and deterioration of housing is directly traceable to rent control. Meanwhile, as long as landlords are getting any net income whatever above their taxes and mortgage interest, they seem to have no alternative but to continue holding and renting their property. The politicians—remembering that tenants have more votes than landlords—cynically continue their rent control long after they have been forced to give up general price controls.
So we come back to our basic lesson. The pressure for rent control comes from those who consider only its imagined short-run benefits to one group in the population. But when we consider its long-ran effects on everybody, including the tenants themselves, we recognize that rent control is not only increasingly futile, but increasingly destructive the more severe it is, and the longer it remains in effect.
State projections obtained by the Globe show the program reaching 342,000 people and $1.35 billion in annual expenses by June 2011. Those figures would far outstrip the original plans for the Commonwealth Care program, largely because state officials underestimated the number of uninsured residents.This is a small taste of what the true costs universal healthcare would be. As I explained in Government, free markets, and healthcare, only a true free market for healthcare would maximize coverage at the lowest costs. Unfortunately, we haven't had a free market in healthcare for 70 years.
Currently, 169,000 people have enrolled in the program, which is expected to cost $618 million in the fiscal year ending June 30. When it authorized the program in 2006, the Legislature estimated that about 215,000 people would eventually be enrolled at a cost of $725 million. State officials in late 2006 reduced that estimate to between 140,000 and 160,000 - a number that was surpassed last year.
I also realize that a there is a high likelihood that a Democrat will be elected. On the Democratic side, I support Barack Obama. Lawrence Lessig makes a great case for Obama saying that he has "integrity" and "moral courage," qualities which Hillary Clinton lacks. I fully agree with him on this and I believe Obama would make a far better President than Clinton.
Watch the video where Lessig makes the case for Obama and against Clinton. Lessig is eloquent and convincing as always.
Thanks to Sean for the video.
Saturday, February 2, 2008
There were several comments objecting to the word "Quixotic." My favorite one
“Quixotic” is a word which would be better used to describe the Bush administration’s invasion of Iraq. The were no Al Queda, no weapons of mass destruction and there was no link to 9/11, yet he was able to convince practically all of Congress and all the American people that we had an enemy there. Now, after untold loss of life, the Republican frontrunners insist we need to stay in Iraq longer. Gentlemen, those are only windmills. We have no enemies there except those that have come from other countries because they abhore our presence in the region. Our enemy is our own government, who represses us at home and sends our men and women to fight windmills in a country with no army. God Bless America. God Bless Ron Paul.
You don't get rich as a holder of gold during a time of serious inflation. Yet get rich as an investor with capital to invest after the crack-up boom has ended.
People do not see gold in this way. They see it as a way to get rich in a time of inflation. They do not understand this principle of economics:The division of labor through invested capital is what makes people rich, slowly. The crack-up boom destroys the division of labor. Most people get poor in the crack-up boom, except those who (1) operate successfully in a low division of labor environment (think "Amish") and (2) debtors who live outside urban areas, who pay off their debts with depreciated money.
The Amish don't pay much attention to their wealth, except maybe to buy better horses. Debtors who learn how to play the pyramiding game in the boom phase generally go bankrupt after the monetary stabilization takes place.
So, don't expect to get rich in an age of inflation by owning gold. That's because you would have to sell it to get rich. Your timing had better be perfect.
Friday, February 1, 2008
JIM ROGERS: Oh no, of course he is. I mean he’s laid the foundation for the demise of the Federal Reserve. Between Greenspan and Bernanke, we may see the Federal Reserve fail. We’ve had three central banks in America. The first two failed. This one’s going to fail too. I mean if you really – we could spend a whole program, a whole year of programs, reading quotes from Greenspan and you would realize what a fool he’s been.
In my book, “Investment Biker,” I wrote that the man was a fool. I’ve been on TV many times talking about, oh, he just sat and watched CNBC and repeated it and said, “This is the way the world is.” He never got it right, Lindsay. What was so astonishing to me was that his PR machine made some people think he was a smart guy. He never got it right in his entire investing career. I could go back over many of his failures too, but let’s go on with the program.
RESOURCE INVESTOR: Yeah, let’s do. But briefly, before we leave the subject, do you think that Bernanke is just going to become another Greenspan?
JIM ROGERS: He’s worse. All he knows is to print money. His whole intellectual career has been spent studying the printing of money. America’s now given him the printing presses and all he knows to do it to run them. He doesn’t know about markets. He doesn’t know about foreign currencies. We know now he doesn’t even know about economics. I mean, he’s got a PhD in economics and he was a professor of economics, but he doesn’t have a clue about economics.
I will quote you – I hate to quote you, but one more time - I was watching him testify before congress and I almost fell out of my chair. He said under oath, so we presume he wasn’t lying, that he was just a fool, he said if an American only buys American products, it does not matter to him if the value of the U.S. dollar goes down. He will not be affected. I was looking at the man to see if he was lying, giving government propaganda, but then I could see he didn’t even really understand.
He didn’t understand if, you know, even if say I’m an American, Lindsay, and I only buy American tires. Well if the price of foreign tires goes up, obviously the price of American tires are going to go up too. Plus, if the dollar goes down, the price of rubber’s going to go higher, etcetera, etcetera, etcetera.
So the man doesn’t even understand economics. He’s going to print money. He’s going to throw money out the window. The dollar’s going to go down further and further and further. Inflation’s going to get worse and worse and worse throughout the world – the world, not just America - and we’re going to have a worse recession in the end.
The book focuses on how most economic misconceptions arise from people seeing only what is visible and salient and missing the unseen unintended consequences. It begins with the Parable of the Broken Window:
The logic of this argument seems almost obvious, yet we see this broken logic applied over and over again. For example, people say the war in Iraq is good for the economy. Or Kartrina was a tragedy but at least it will create jobs to rebuild New Orleans. Even Paul Krugman thought that 9/11 had positive effects for the economy
A young hoodlum ... heaves a brick through the window of a baker’s shop. A crowd gathers ... After a while ... several of its members are almost certain to remind each other or the baker that, after all, the misfortune has its bright side. It will make business for some glazier. As they begin to think of this they elaborate upon it. How much does a new plate glass window cost? Two hundred and fifty dollars? That will be quite a sum. After all, if windows were never broken, what would happen to the glass business? Then, of course, the thing is endless. The glazier will have $250 more to spend with other merchants, and these in turn will have $250 more to spend with still other merchants, and so ad infinitum. The smashed window will go on providing money and employment in ever-widening circles. The logical conclusion from all this would be ... that the little hoodlum who threw the brick, far from being a public menace, was a public benefactor.
Now let us take another look. The crowd is at least right in its first conclusion. This little act of vandalism will in the first instance mean more business for some glazier. The glazier will be no more unhappy to learn of the incident than an undertaker to learn of a death. But the shopkeeper will be out $250 that he was planning to spend for a new suit. Because he has had to replace a window, he will have to go without the suit ... Instead of having a window and $250 he now has merely a window. Or, as he was planning to buy the suit that very afternoon, instead of having both a window and a suit he must be content with the window and no suit. If we think of him as a part of the community, the community has lost a new suit that might otherwise have come into being, and is just that much poorer.
The glazier’s gain of business, in short, is merely the tailor’s loss of business. No new “employment” has been added. The people in the crowd were thinking only of two parties to the transaction, the baker and the glazier. They had forgotten the potential third party involved, the tailor. They forgot him precisely because he will not now enter the scene. They will see the new window in the next day or two. They will never see the extra suit, precisely because it will never be made. They see only what is immediately visible to the eye.
So the direct economic impact of the attacks will probably not be that bad. And there will, potentially, be two favorable effects.
First, the driving force behind the economic slowdown has been a plunge in business investment. Now, all of a sudden, we need some new office buildings. As I've already indicated, the destruction isn't big compared with the economy, but rebuilding will generate at least some increase in business spending.
Second, the attack opens the door to some sensible recession-fighting measures ... Now it seems that we will indeed get a quick burst of public spending, however tragic the reasons.
In the first six chapters, Hazlitt has applied this logic to many different examples including public work projects and government loan guarantees. This book was written in 1946 and last updated in 1979. This paragraph almost seems to be written yesterday:
The advocates of government-guaranteed mortgages also forget than what is being lent is ultimately real capital, which is limited in supply, and that they are helping identified B at the expense of some unidentified A. Government-guaranteed home mortgages, especially when a negligible down payment or no down payment whatever is required, inevitably mean more bad loans than otherwise. they force the general taxpayer to subsidize the bad risks and defray the losses. They encourage people to "buy" houses that they cannot really afford. They tend eventually to bring about an oversupply of houses as compared with other things. They temporarily overstimulate building, raise the cost of building for everybody (including the buyers of the homes with the guaranteed mortgages), and may mislead building industry into an eventually costly overexpansion. In brief, in the long run they do not increase overall national production but encourage malinvestment.
Now some may argue that the subprime problem wasn't caused by government guaranteed loans, but it's only a small step to see how government effectively distorts the market and created the environment in which the current problems came into being. I don't want to turn this into a post on the housing market, but I'll briefly list a few government policies that are at fault:
- Extended periods of below market interest rates,
- Subsidies through the tax code on owning a house versus renting,
- Government-guaranteed loans by FreddieMac, FannieMae, and the FHA,
- The Federal Reserve Chairman encouraging "innovative" mortgage products,
- SEC regulation of the credit rating agencies that resulted in the debt seller purchasing the ratings instead of the debt buyer,
- Previous government bailouts (1980's S&L, dotcom bubble, Long Term Capital Management) that created the moral hazard of expected future government bailouts. Also known as the Greenspan Put. Also known as the Bernanke Put.