Monday, January 31, 2011

Debate an Austrian, Feed the Hungry?

It will be very interesting to see if Paul Krugman accepts Robert Murphy's challenge to debate him for 1 hour on the merits of Austrian vs Keynesian economics. If he accepts, funds ($60,000 and rising) pledged by the public will be donated to a food bank in NYC, if not the credit cards of the donors will not be charged. As of yet, he has not accepted this offer, which leads me to believe that he may not be as concerned about the poor and downtrodden as his rhetoric would lead us to believe. FYI, you can make the conditional pledge by going to:

Welcome to, your headquarters for the Murphy-Krugman Debate! Robert Murphy has a PhD in economics from New York University. He is a firm believer in the Austrian theory of the business cycle, which blames the boom-bust cycle on the Federal Reserve, not the free market. In contrast, Paul Krugman--Nobel laureate in economics, and writer for the New York Times—is a Keynesian economist who thinks the Fed and the government can jumpstart the economy out of recession by printing more money and increasing the deficit.

Murphy has challenged Krugman to a public debate on Austrian vs. Keynesian business cycle theory. He has set up a campaign, which currently has raised $60,000 in pledges. If Krugman actually debates Murphy, then the money goes to a food bank in New York City. If Krugman never debates, no one's credit card is ever charged; people are only going to be charged for their pledge, when Krugman actually debates.

Click on the links to learn more, or to make your pledge.

Sunday, January 30, 2011

Dismantling America (Part IV)

Dismantling America: Part IV

By Dr. Thomas Sowell

How did we get to the point where many people feel that the America they have known is being replaced by a very different kind of country, with not only different kinds of policies but very different values and ways of governing?

Something of this magnitude does not happen all at once or in just one administration in Washington. What we are seeing is the culmination of many trends in many aspects of American life that go back for years.

Neither the Constitution of the United States nor the institutions set up by that Constitution are enough to ensure the continuance of a free, self-governing nation. When Benjamin Franklin was asked what members of the Constitution Convention were creating, he replied, "A republic, madam, if you can keep it."

In other words, a Constitutional government does not depend on the Constitution but on us. To the extent that we allow clever people to circumvent the Constitution, while dazzling us with rhetoric, the Constitution will become just a meaningless piece of paper, as our freedoms are stolen from us, much as a pick-pocket would steal our wallet while we are distracted by other things.

It is not just evil people who would dismantle America. Many people who have no desire to destroy our freedoms simply have their own agendas that are singly or collectively incompatible with the survival of freedom.

Someone once said that a democratic society cannot survive for long after 51 percent of the people decide that they want to live off the other 49 percent. Yet that is the direction in which we are being pushed by those who are promoting envy under its more high-toned alias of "social justice."

Those who construct moral melodramas-- starring themselves on the side of the angels against the forces of evil-- are ready to disregard the Constitution rights of those they demonize, and to overstep the limits put on the powers of the federal government set by the Constitution.

The outcries of protest in the media, in academia and in politics, when the Supreme Court ruled this year that people in corporations have the same free speech rights as other Americans, are a painful reminder of how vulnerable even the most basic rights are to the attacks of ideological zealots. President Barack Obama said that the Court's decision "will open the floodgates for special interests"-- as if all you have to do to take away people's free speech rights is call them a special interest.

It is not just particular segments of the population who are under attack. What is more fundamentally under attack are the very principles and values of American society as a whole. The history of this country is taught in many schools and colleges as the history of grievances and victimhood, often with the mantra of "race, class and gender." Television and the movies often do the same.

When there are not enough current grievances for them, they mine the past for grievances and call it history. Sins and shortcomings common to the human race around the world are spoken of as failures of "our society." But American achievements get far less attention-- and sometimes none at all.

Our "educators," who cannot educate our children to the level of math or science achieved in most other comparable countries, have time to poison their minds against America.

Why? Partly, if not mostly, it is because that is the vogue. It shows you are "with it" when you reject your own country and exalt other countries.

Abraham Lincoln warned of people whose ambitions can only be fulfilled by dismantling the institutions of this country, because no comparable renown is available to them by supporting those institutions. He said this 25 years before the Gettysburg Address, and he was speaking of political leaders with hubris, whom he regarded as a greater danger than enemy nations. But such hubris is far more widespread today than just among political leaders.

Those with such hubris-- in the media and in education, as well as in politics-- have for years eroded both respect for the country and the social cohesion of its people. This erosion is what has set the stage for today's dismantling of America that is now approaching the point of no return.

Dismantling America (part I)

Dismantling America

By Dr. Thomas Sowell

"We the people" are the familiar opening words of the Constitution of the United States-- the framework for a self-governing people, free from the arbitrary edicts of rulers. It was the blueprint for America, and the success of America made that blueprint something that other nations sought to follow.

At the time when it was written, however, the Constitution was a radical departure from the autocratic governments of the 18th century. Since it was something so new and different, the reasons for the Constitution's provisions were spelled out in "The Federalist," a book written by three of the writers of the Constitution, as a sort of instruction guide to a new product.

The Constitution was not only a challenge to the despotic governments of its time, it has been a continuing challenge-- to this day-- to all those who think that ordinary people should be ruled by their betters, whether an elite of blood, or of books or of whatever else gives people a puffed-up sense of importance.

While the kings of old have faded into the mists of history, the principle of the divine rights of kings to impose whatever they wish on the masses lives on today in the rampaging presumptions of those who consider themselves anointed to impose their notions on others.

The Constitution of the United States is the biggest single obstacle to the carrying out of such rampaging presumptions, so it is not surprising that those with such presumptions have led the way in denigrating, undermining and evading the Constitution.

While various political leaders have, over the centuries, done things that violated either the spirit or the letter of the Constitution, few dared to openly say that the Constitution was wrong and that what they wanted was right.

It was the Progressives of a hundred years ago who began saying that the Constitution needed to be subordinated to whatever they chose to call "the needs of the times." Nor were they content to say that the Constitution needed more Amendments, for that would have meant that the much disdained masses would have something to say about whether, or what kind, of Amendments were needed.

The agenda then, as now, has been for our betters to decide among themselves which Constitutional safeguards against arbitrary government power should be disregarded, in the name of meeting "the needs of the times"-- as they choose to define those needs.

The first open attack on the Constitution by a President of the United States was made by our only president with a Ph.D., Woodrow Wilson. Virtually all the arguments as to why judges should not take the Constitution as meaning what its words plainly say, but "interpret" it to mean whatever it ought to mean, in order to meet "the needs of the times," were made by Woodrow Wilson.

It is no coincidence that those who imagine themselves so much wiser and nobler than the rest of us should be in the forefront of those who seek to erode Constitutional restrictions on the arbitrary powers of government. How can our betters impose their superior wisdom and virtue on us, when the Constitution gets in the way at every turn, with all its provisions to safeguard a system based on a self-governing people?

To get their way, the elites must erode or dismantle the Constitution, bit by bit, in one way or another. What that means is that they must dismantle America. This has been going on piecemeal over the years but now we have an administration in Washington that circumvents the Constitution wholesale, with its laws passed so fast that the public cannot know what is in them, its appointment of "czars" wielding greater power than Cabinet members, without having to be exposed to pubic scrutiny by going through the confirmation process prescribed by the Constitution for Cabinet members.

Now there is leaked news of plans to change the immigration laws by administrative fiat, rather than Congressional legislation, presumably because Congress might be unduly influenced by those pesky voters-- with their Constitutional rights-- who have shown clearly that they do not want amnesty and open borders, despite however much our betters do. If the Obama administration gets away with this, and can add a few million illegals to the voting rolls in time for the 2012 elections, that can mean reelection, and with it a continuing and accelerating dismantling of America.

Frederick Douglass

Some words of wisdom from the brave and brilliant abolitionist Frederick Douglass. His message, is just as relevant today as it was 150 years ago. African-Americans, among other groups, have experienced great abuse and marginalization and in many ways the playing field is still not even. Ensuring full legal equality, equality of opportunity and a good education for all its citizens are vital responsibilities of the government. But, grand efforts of the state to ensure equality of outcomes, such as the war on poverty, have bore little fruit. And in the end, we as individuals and groups can only rise through our own efforts, education and cultural evolution.

"Everybody has asked the question. . ."What shall we do with the Negro?" I have had but one answer from the beginning. Do nothing with us! Your doing with us has already played the mischief with us. Do nothing with us! If the apples will not remain on the tree of their own strength, if they are wormeaten at the core, if they are early ripe and disposed to fall, let them fall! I am not for tying or fastening them on the tree in any way, except by nature's plan, and if they will not stay there, let them fall. And if the Negro cannot stand on his own legs, let him fall also. All I ask is, give him a chance to stand on his own legs! Let him alone!"

-Frederick Douglass

Mimes, Latinos & Litter?

In a Boston, a group of Latino mimes attempted to address the issues of rampant littering in their community through the use of street theater and art. Apparently some people became offended and the artists were forced to “trash” the initiative. I believe that this illustrates some troubling aspects of ethno-political and community activism. Such activism almost always centers on the real or imagined grievances felt by a community or group and demands for state intervention that narrowly benefits them. Philosophies and movements that foster a sense of victimhood and entitlement rarely encourage self-reflection and broader civic responsibility. And they almost never seek to address the pathological behaviors within a group or community. So, rather than thank the artists for their efforts to improve the community, many individuals became offended. We can only imagine the level of childish outrage they would have felt if the mimes were members of another ethnic group! Friends have asked me why I find this incident so troubling. The reason is that if it's so difficult to get a community to address something as simple as littering, what are the chances that we can get them to commit to more challenging issues like global warming or debt reduction? My hope is that the majority are more like mimes, silent but civic minded, than their vocal and easily offended compatriots.

Mime plan's language draws offense

E. Boston residents say Latinos maligned

By Maria Cramer

May 3, 2005

Its creators saw it as a bright, well-intentioned idea. An antilittering campaign designed for East Boston's heavily immigrant population: Amusing street mimes, transcending language barriers, would perform in public spaces, grab residents' attention, and help persuade them to stop dropping trash on neighborhood streets.

But an initial proposal that the small group of local artists drafted about the effort described its mission as ''educating Latinos to stop throwing garbage in the city streets." And before creators could revise the language, they were embroiled in a community dispute.

The creators of the ''Change Your Attitude" campaign, who are themselves Latino, are now trying to persuade neighbors that their campaign does not single out one racial group as litterers. The flier was a rough draft that should never have gone public, they say, and the campaign, funded by the nonprofit East Boston Foundation, targets the whole neighborhood.

But their experience showed the sensitive nature of racial and ethnic relations in Boston, where word of the project set off a reaction of resentment and offense. In East Boston, where Latinos make up an estimated 40 percent of the population, many say the draft was a blow to a community that often feels maligned.

''It caused a lot of pain," said 47-year-old Jose Ortiz, an East Boston electrician. Not only did the flier divide Latinos over whether to support the campaign, he said, but it reinforced negative stereotypes held by some longtime Bostonians.

Ortiz said he supports the campaign, but added: ''What I don't support is the words used."

Diego Luis Peña, a 45-year-old writer from Colombia who now lives in East Boston, said the draft's authors should apologize.

''People are very hurt," Peña said. ''It wasn't the best way to educate [residents]."

The campaign is part of a broader effort to build community spirit and commerce in East Boston, a neighborhood that some outsiders know little about, other than their familiarity with Logan International Airport. Though tensions have flared occasionally in the densely built enclave of three-deckers and apartment buildings, the neighborhood boasts rich diversity, with Salvadoran, Colombian, and Brazilian residents living alongside the Italians that settled here during the last century.

No one denies that an aggressive campaign is needed to clean up the streets in East Boston. But many say that the early effort damaged the cause.

The draft, which is ungrammatical at times, described Latinos as ''very nationalist," or still tied to their native countries, and said they do not feel a sense of belonging in the United States.

''This feeling of not belonging to a place creates and [sic] ideas of not caring for their city or the neighborhood where they live," the draft says.

Brighton resident Alex Gómez, also a native of Colombia, said he wrote the original draft in Spanish last May as a project proposal.

''It was a first attempt," he said. ''It's a draft. That's why it's called a draft. It changes."

East Boston resident German Velasquez, a photographer directing the campaign, gave the draft to his son to translate into English. Velasquez then gave a copy of the draft to an East Boston resident for her opinion, Gómez said. Gómez and Velasquez already had realized it would be a mistake to keep the original language of the draft and decided the campaign should be directed to all people in East Boston. But by then, copies of the original draft were already circulating throughout East Boston.

Gómez said he he never meant to offend anyone.

''I am a person who fights against stereotypes," he said. Newspaper ads for the campaign against littering will be written in both Spanish and English. And the mimes who will perform in Maverick and Central squares Friday and Saturday are not intended to represent any race, Gómez said.

Velasquez said the controversy has cast a pall over his attempts to help East Boston solve its longtime problems of dirty streets. ''I feel uncomfortable because there are people who think I'm betraying my community," he said.

Last week, Velasquez and Councilor Paul Scapicchio, who decided to help with the campaign after the group approached him and has donated $2,500, spoke to a group of about 16 East Boston residents about the effort. The men showed a public service announcement featuring the mimes, passed around posters and discussed a study about why people litter. Scapicchio also asked the group if any part of the campaign was offensive. The mostly-Latino group expressed no concerns, praising the approach.

''I think that's where we are in our society, everybody is very, very ready to take offense," Scapicchio said after the meeting. ''We tried to be as thoughtful and as inoffensive as possible."

Scapicchio said he still has faith in the project. ''If the attention this issue has gotten gets people to think about cleaning the street, it will have been for a good purpose," he said.

Globe correspondent Christine MacDonald contributed to this report.Maria Cramer can be reached at

Keynes You Can Believe In!

As most of my readers are aware, I am generally not a follower of the economic principles of John Maynard Keynes . However, I did come across some of his writings on inflation that I found insightful. He exhorted his reader on the economic and social damage caused when governments inflate the currency to help pay for unsustainable domestic and foreign adventures (welfare & warfare). According to Mr. Keynes, "profiteers" and "speculators" are not the cause of rising prices, rather they are the consequences of it.

In the case of the housing bubble, first the low interest rates and flood of loose credit generated by the Federal Reserve discouraged savings and encouraged prolific borrowing. And a combination of tax policies (deduction of interest paid on mortgages) and federal mandates (to increase home ownership in diverse communities) channeled this speculative energy towards the housing market. Once a price bubble is created, it becomes a self sustaining phenomena, growing as it attracts more and more capital and labor from productive segments of the economy, until a painful market correction occurs.

When the fiscal policies of regimes cause out of control inflation; speculation, hoarding, black markets and eventually bartering become the only means in which individuals can avoid losing their savings and livelihood. And when governments seek to curb inflation with price controls and heavy handed measures against "speculators", they only exacerbate the problems that they caused in the first place. And when prices are frozen by government mandates to ensure "affordability," shortages always ensue, Thankfully, for now, we are nowhere near that point.

In the coming year we should pay heed to Mr. Keynes' warnings about the adverse effects on foreign trade that occurs when a central bank debases the currency. Early in the Great Depression, trade wars erupted that heralded the near universal imposition of high tariffs, which impeded trade and economic recovery. If Mr. Keynes is correct, our government's conscience efforts to devalue the dollar may lead to a "devaluation war," which will weaken trade and the economic welfare of the United States and other nations. He must be rolling in his grave that epic fiscal irresponsibility and monetary mismanagement are being carried out in his name.

Keynes on Inflation

Excerpts from The Economic Consequences of the Peace by John Maynard Keynes, 1919. pp. 235-248.

Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security but [also] at confidence in the equity of the existing distribution of wealth.

Those to whom the system brings windfalls, beyond their deserts and even beyond their expectations or desires, become "profiteers," who are the object of the hatred of the bourgeoisie, whom the inflationism has impoverished, not less than of the proletariat. As the inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a gamble and a lottery.

Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.

In the latter stages of the war all the belligerent governments practiced, from necessity or incompetence, what a Bolshevist might have done from design. Even now, when the war is over, most of them continue out of weakness the same malpractices. But further, the governments of Europe, being many of them at this moment reckless in their methods as well as weak, seek to direct on to a class known as "profiteers" the popular indignation against the more obvious consequences of their vicious methods.

These "profiteers" are, broadly speaking, the entrepreneur class of capitalists, that is to say, the active and constructive element in the whole capitalist society, who in a period of rapidly rising prices cannot but get rich quick whether they wish it or desire it or not. If prices are continually rising, every trader who has purchased for stock or owns property and plant inevitably makes profits. By directing hatred against this class, therefore, the European governments are carrying a step further the fatal process which the subtle mind of Lenin had consciously conceived. The profiteers are a consequence and not a cause of rising prices. By combining a popular hatred of the class of entrepreneurs with the blow already given to social security by the violent and arbitrary disturbance of contract and of the established equilibrium of wealth which is the inevitable result of inflation, these governments are fast rendering impossible a continuance of the social and economic order of the 19th century. But they have no plan for replacing it....

The inflationism of the currency systems of Europe has proceeded to extraordinary lengths. The various belligerent governments, unable or too timid or too short-sighted to secure from loans or taxes the resources they required, have printed notes for the balance. In Russia and Austria-Hungary this process has reached a point where for the purposes of foreign trade the currency is practically valueless. The Polish mark can be bought for about [three cents] and the Austrian crown for less than [two cents], but they cannot be sold at all. The German mark is worth less than [four cents] on the exchanges....

But while these currencies enjoy a precarious value abroad, they have never entirely lost, not even in Russia, their purchasing power at home. A sentiment of trust in the legal money of the state is so deeply implanted in the citizens of all countries that they cannot but believe that some day this money must recover a part at least of its former value.... They do not apprehend that the real wealth, which this money might have stood for has been dissipated once and for all. This sentiment is supported by the various legal regulations with which the governments endeavor to control internal prices, and so to preserve some purchasing power for their legal tender....

The preservation of a spurious value for the currency, by the force of law expressed in the regulation of prices, contains in itself, however, the seeds of final economic decay, and soon dries up the sources of ultimate supply. If a man is compelled to exchange the fruits of his labors for paper which, as experience soon teaches him, he cannot use to purchase what he requires at a price comparable to that which he has received for his own products, he will keep his produce for himself, dispose of it to his friends and neighbors as a favor, or relax his efforts in producing it.

A system of compelling the exchange of commodities at what is not their real relative value not only relaxes production, but [also] leads finally to the waste and inefficiency of barter. If, however, a government refrains from regulation and allows matters to take their course, essential commodities soon attain a level of price out of the reach of all but the rich, the worthlessness of the money becomes apparent, and the fraud upon the public can be concealed no longer.

The effect on foreign trade of price-regulation and profiteer-hunting as cures for inflation is even worse. Whatever may be the case at home, the currency must soon reach its real level abroad, with the result that prices inside and outside the country lose their normal adjustment. The price of imported commodities, when converted at the current rate of exchange, is far in excess of the local price, so that many essential goods will not be imported at all by private agency, and must be provided by the government, which, in re-selling the goods below cost price, plunges thereby a little further into insolvency....

The note circulation of Germany is about 10 times what it was before the war. The value of the mark in terms of gold is about one-eighth of its former value....

It is a hazardous enterprise for a merchant or a manufacturer to purchase with a foreign credit material for which, when he has imported it or manufactured it, he will receive mark currency of a quite uncertain and possibly unrealizable value....

It may be the case, therefore, that a German merchant, careful of his future credit and reputation, who is actually offered a short-period credit in terms of sterling or dollars, may be reluctant and doubtful whether to accept it. He will owe sterling or dollars, but he will sell his product for marks, and his power, when the time comes, to turn these marks into the currency in which he has to repay his debt is entirely problematic. Business loses its genuine character and becomes no better than a speculation in the exchanges, the fluctuations in which entirely obliterate the normal profits of commerce....

Thus the menace of inflationism described above is not merely a product of the war, of which peace begins the cure. It is a continuing phenomenon of which the end is not yet in sight....

The Austrian School of Economics

Pictured Above: The Great Ludwig Von Mises

I am not a strict adherent to the Austrian School of Economics and Ludwig Von Mises, because I recognize that their methodology poses some problems, however their explanation of the business cycle does seems to fit our current situation. As with any school of thought, it's worth exploring and integrating the more sound theoretical elements into your worldview and rejecting that which does not stand up to the tests of observation, experience and analysis.

Austrian economists focus on the amplifying, "wave-like" effects of the credit cycle as the primary cause of most business cycles. Austrian economists assert that inherently damaging and ineffective central bank policies are the predominant cause of most business cycles, as they tend to set "artificial" interest rates too low for too long, resulting in excessive credit creation, speculative "bubbles" and "artificially" low savings.[35]

According to the Austrian business cycle theory, the business cycle unfolds in the following way. Low interest rates tend to stimulate borrowing from the banking system. This expansion of credit causes an expansion of the supply of money, through the money creation process in a fractional reserve banking system. This in turn leads to an unsustainable "monetary boom" during which the "artificially stimulated" borrowing seeks out diminishing investment opportunities. This boom results in widespread malinvestments, causing capital resources to be misallocated into areas which would not attract investment if the money supply remained stable.

Austrian economists argue that a correction or "credit crunch" – commonly called a "recession" or "bust" – occurs when credit creation cannot be sustained. They claim that the money supply suddenly and sharply contracts when markets finally "clear", causing resources to be reallocated back towards more efficient uses.

The Unfunded Liabilities Time Bomb

Richard Fisher, the President of the Dallas Fed stated that the Federal Government's total unfunded liabilities are approximately $99 Trillion! In other words, the projected gap between future payments social security and medicare payments promised and revenue entering the system is $99 Trillion! Even if taxes were substantially increased (to the detriment of the general economy) and payments were decreased, the system would still be deep in the red.

The least painful outcome we can hope for is to commit ourselves to following through on the payments promised, because two generations of Americans have in good faith planned around anticipated social security and medicare payments. As for those 45 years and younger, fiscal realities dictate that universal entitlements will have to be phased out. In other words, if we immediately begin a regimen of extreme austerity (higher taxes, lower spending) we may be able to preserve a limited, emergency safety net for the poorest, most deserving Americans. But, wealthy, middle class and upwardly mobile individuals must plan their retirement based on the assumption that they will receive nothing from the federal government. This means they will have to cut consumption, save money and strengthen their nuclear and extended family ties; in other words plan on living with your kids, as the elderly do in 80% of the world.

Sustaining a limited, emergency safety net will be contingent upon ceasing the subsidies towards fiscally unsustainable behaviors, such as widespread singlemotherhood and the chronically unemployed. Progressives will surely howl in protest, but the fact of the matter is we cannot continue to subsidize those who choose to produce child after child that they cannot support. And some (so called) conservatives will equally resist calls to dismantle the American Empire; but we cannot continue to build or uphold other nations, when we cannot even pay for our own. Rather than undertake the painful and unpopular steps required to defuse the unfunded liabilities time bomb, I expect our political class to continue the easy, but ultimately destructive path of printing money or what Über Douche Meister, Herr Krugman refers to as "quantitative easing."

China warns Federal Reserve over 'printing money'

China has warned a top member of the US Federal Reserve that it is increasingly disturbed by the Fed's direct purchase of US Treasury bonds.

By Ambrose Evans-Pritchard

24 May 2009

Richard Fisher, president of the Dallas Federal Reserve Bank, said: "Senior officials of the Chinese government grilled me about whether or not we are going to monetise the actions of our legislature."

"I must have been asked about that a hundred times in China. I was asked at every single meeting about our purchases of Treasuries. That seemed to be the principal preoccupation of those that were invested with their surpluses mostly in the United States," he told the Wall Street Journal.

His recent trip to the Far East appears to have been a stark reminder that Asia's "Confucian" culture of right action does not look kindly on the insouciant policy of printing money by Anglo-Saxons.

Mr Fisher, the Fed's leading hawk, was a fierce opponent of the original decision to buy Treasury debt, fearing that it would lead to a blurring of the line between fiscal and monetary policy – and could all too easily degenerate into Argentine-style financing of uncontrolled spending.

However, he agreed that the Fed was forced to take emergency action after the financial system "literally fell apart".

US bonds sale faces market resistance 24 May 2009
Nor, he added was there much risk of inflation taking off yet. The Dallas Fed uses a "trim mean" method based on 180 prices that excludes extreme moves and is widely admired for accuracy.

"You've got some mild deflation here," he said.

The Oxford-educated Mr Fisher, an outspoken free-marketer and believer in the Schumpeterian process of "creative destruction", has been running a fervent campaign to alert Americans to the "very big hole" in unfunded pension and health-care liabilities built up by a careless political class over the years.

"We at the Dallas Fed believe the total is over $99 trillion," he said in February.

"This situation is of your own creation. When you berate your representatives or senators or presidents for the mess we are in, you are really berating yourself. You elect them," he said.

His warning comes amid growing fears that America could lose its AAA sovereign rating.

Saturday, January 29, 2011

Budgetary Fraud

President Obama announced spending cuts that are projected to reduce the deficit by $400 billion over 5 years. At a quick glance this may seem impressive, but when we consider that the budget deficit is projected to surge to $1.5 trillion this year, this $80 billion dollar a year reduction is truly a drop in the bucket. This means that in the 5 year period, we will not even begin to balance the budget, yet alone pay down the debt. At best we will slow down the rate at which we are amassing debt, which (according to the Congressional Budget Office) will result in a net increase of $6 trillion! The reason why Obama's plan is pure fraud is because IF he were serious about balancing the budget, he would not have limited the cuts to discetionary non-defense spending. How can we hope to address our fiscal ills when over 60% of the budget is off the table. I anticipate that given political realities, the budget will only be balanced when foreign lenders cut off our overextended line of credit.

Wednesday, January 26, 2011

Solution to Government Budget Deficits?

It is well known that protection from competition and market forces has allowed public workers to earn far greater wages and benefits than their private sector counterparts. During boom times it's easy to overlook this, but now that cities and states across the nation are facing rising budget deficits, unfunded pension liabilities and soaring taxes, we do not have this luxury. The first step should be to subject government workers to the market forces that determine wages and ensure that they do not exceed an enterprise's or institution's income.

We could take these budget cutting measures a step further and employ a strategy that many private sector employers have used for decades. To keep costs down, avoided cumbersome regulations, many private firms have employed hard working undocumented immigrants. From agricultural production to construction and a host of other industries, undocumented labor has kept the costs of goods and services down, while maximizing the profit of firms.

So, why not use this same strategy to bring down the high cost of government, which is a major factor in the rising deficits and soaring taxes that are plaguing Americans? Why pay a cook county carpenter $87,000 + overtime + health + pension, when undocumented immigrants would do a great job at half the pay? Why pay slothful city bureaucrats over $60,000, when private sector wages are considerably less?

Let's not just only pick on the little guys; Congressman Luis Gutierrez (D - IL) officially earns $174,000 + generous benefits and perks (like a questionable $200,000 loan that he received from a campaign contributor). I am confident that we could get an undocumented worker to do a much better job than Mr. Gutierrez for considerably lower wages and kick-backs. The only question is if Mr. Gutierrez and his compatriots would continue to support liberal immigration policies if they were subject to the increased competition and reduced wages that they engender?

Sunday, January 23, 2011

Governor Quinn Issues Order 66

Governor Quinn (D - IL) has raised income taxes by 66% (from 3% to 5%) and corporate taxes by 68.5% (from 4.8% to 7%). I take a minority position among conservatives: in light of the $15 Billion deficit that Illinois faces, this was a necessary step. However, I do not look at this as a "brave act of fiscal responsibility" on the part of Illinois politicians, because their gross fiscal irresponsibility is what put us in this impasse in the first place. And before Mr. Quinn "feeds the beast" with even more of the fruits of labor of Illinois families and businesses, the proper course of action would have been to first enact major budget cuts, as well as political and pension reforms. If we are lucky, we will keep the businesses that we currently have, but rest assured, no sane businessman would choose to relocate to the high tax and spend state of Illinois.

To those who are not nerdy enough to be familiar with "Order 66," it is a reference to Star Wars.

To My Fellow Jews...

Speak with any Jew who has come out of the "conservative closet" and they will almost certainly tell you about the consternation that this caused among their friends and family. In some cases they would receive a more positive response if they told them that they had contracted leprosy.

"Oy vey, how can you support those red necks and bible thumpers?!?"

While a politician's or party's position on Israel need not be a major factor in the voting decision of my liberal Jewish compatriots, they should take note that support for Israel is waning among Democrats. These trends are starkly revealed in a recent Zogby poll that found:

92% of Republicans have a favorable opinion of Israel, as opposed to 42% of Democrats.

84% of Republicans have a favorable opinion towards President Netanyahu, whereas only 20% of Democrats do.

72% of Democrats say that the US should get tough with Israel, whereas only 14% of Republicans share those sentiments.

The results of a Gallup poll were more muted, but demonstrated similar trends showing that among conservative and religious Americans the support for Israel was the highest.

Some progressive Jews have become extremely hostile to Israel, whereas others have been put in the uncomfortable position of only diverging from their progressive compatriots on this one issue. They should take note that the same irrational analytical processes and philosophical inclinations that drive so many on the left to hate Israel, underline other progressive political and economic positions. Like it or not, Israel's future is more secure with Conservatives, Republicans and the "dreaded" Religious Right.

The Way We'll Be

U.S. Parties Split On Israeli Policy

By John Zogby, 06.02.10

Republicans are mostly pro-Israel; Democrats are on the fence, isolating their Jewish voters.

This week's flare-up involving an Israeli raid and ensuing casualties on a Turkish ship en route to Gaza shows how torn the new Democratic coalition is on Israeli policy toward Palestinians. Near unanimity for a pro-Israeli policy now resides within the Republican Party. U.S. Jews, a large majority of whom remain liberal to moderate Democrats, have the wrenching choice of staying loyal to a Democratic Party that increasingly questions Israeli policies.

Zogby International has done a great deal of work on U.S. attitudes about Israel and the Middle East. (My brother, James Zogby, is founder and president of the Arab American Institute.) The most recent survey was an in-depth interactive poll of 2,471 adults conducted in mid-March, shortly after a diplomatic brouhaha brought on by Israel's announcement of more West Bank settlements while Vice-President Joe Biden was visiting Israel.

The differences in opinion between Democrats and Republicans are stunning. Seventy-one percent of Republicans want President Barack Obama to lean the U.S. pursuit of Mideast peace in Israel's favor. Among Democrats, 73% want a middle course, and the percentages who want either a pro-Israel or pro-Palestinian policy are nearly equal at just under 10%.

Here are more examples: 92% of Republicans have a favorable attitude toward Israel, compared to 42% of Democrats; 84% of Republicans are favorable toward Israeli President Benjamin Netanyahu, compared to 20% of Democrats; 75% of Republicans believe U.S. and Israeli interests are identical compared to 29% of Democrats; 62% of Republicans support the Israelis' building of West Bank settlements and 64% of Democrats oppose it; and 72% of Democrats say the U.S. should get tough with Israel, compared to 14% of Republicans. Perhaps the most startling difference is in the perception of Obama's approach to a peace process, as 84% of Republicans believe his leans in favor of Palestinians, compared to just 12% of Democrats saying that.

On questions relating to Israel and the Palestinians, Democrats are on Neptune and Republicans are on Pluto. However, it is doubtful that this partisan schism will have a dramatic near-term impac

Monday, January 3, 2011

Post Office Shows Where U.S. Is Headed

Pictured Above: A Bloated & Inefficient Postal Service

Kevin Hassett is 100% correct - the post office represents the fundamental public paradigm: rising costs coupled with deteriorating services. Of course there are many poorly run private businesses, but the difference is that without public subsidies they face two options: reform or go out of business. This should be kept in mind when advocating for a greater government presence in health care and other sectors of the economy.

Post Office Shows Where U.S. Is Headed: Kevin Hassett

By Kevin Hassett

Oct 11, 2010 3:07 PM CT Bloomberg Opinion

(Corrects fourth paragraph to indicate billion.)

To understand where the advocates of big government will take this country, look at the U.S. Postal Service.

Start with the fact the Postal Service is a great jobs machine, employing 712,000 people at an average annual compensation, including wages and benefits, of $83,000. And those hefty pay checks are a great source of political contributions for Democrats. In 2010, almost 90 percent of the approximately $4 million contributed to campaigns by postal unions went to Democrats. Take a guess where much of the opposition to reform comes from.

But high-priced labor, which accounts each year for about 80 percent of costs, leads to high-priced mail services, and even higher costs for taxpayers. Over the past 10 years, the price of a stamp has risen from 33 cents to 44 cents, exceeding the inflation rate at a time when computerization should have been leading to big cost savings. Even so the Postal Service lost about $6 billion this year and by its own projections it will drop a cool $238 billion over the next decade. By 2020, the last year in the projections, the Postal Service will be losing $33 billion annually.

If its losses level off and it continues to lose that much each year, the Postal Service will lose $550 billion from 2010 to 2030. If the growth rate of losses projected over the next decade continues until 2030, it will lose more than $1 trillion in that span. The fiscal black hole that the Postal Service has become is no small potatoes, even in government terms.

Broken Model

In April 2010, the Government Accountability Office released a report that analyzed the operations of the Postal Service and concluded that, “USPS’s business model is not viable due to USPS’s inability to reduce costs sufficiently.”

A 2007 GAO study looked at the Postal Service’s use of facilities, and concluded that, “A 2005 contractor assessment of 651 randomly selected postal facilities revealed that two- thirds of these facilities were in less than “acceptable” condition, including 22 percent that were rated “poor.” Inspection of one facility in Dallas led the inspector to recommend that the building be immediately evacuated.

The decaying buildings provide a handy visual clue to the quality of service. Unfortunately, we don’t know how bad the service is, because the Postal Service collects data on its own service quality, but it refuses to make the data public. Isn’t it nice that your tax dollars pay for data that you’re not allowed to see?

It’s in the Mail

The Postal Service’s ability to lose mail is, of course, legendary. Here is an example of how bad it has become: last week the American Postal Workers Union had to postpone their national election of officers because so many of the ballots were lost in the mail.

The Postal Service is able to survive because U.S. law protects it with not one but two monopolies. First, it is the only entity that is allowed to deliver many types of mail. There are a few exceptions that have allowed FedEx Corp., United Parcel Service Inc. and bicycle carriers to flourish, but low- cost, high-volume letters are walled off from competition from other providers.

Second, the Postal Service actually has a legal monopoly over your privately owned mailbox. You bought it, but if another company starts to use it as a receptacle for letters, they are violating federal law.

Legal Cover

This organization has withstood political pressure for some time, in part because Postal Service advocates have argued that the monopoly is necessary because of the national objective of providing universal service. If we want to have everyone on the postal grid, they say, then the grid will be impossible to support with private markets.

This argument, of course, is specious. It would be trivial to fully privatize postal delivery with guaranteed universal service. We need only write regulations that require firms that compete for postal business to provide universal service.

The Democrats will never let us do that, of course. The political might of the public employee unions is just too great.

As with the stimulus, the American left finds itself far to the left of even the statist Europeans. Countless other nations have recognized the possible large benefits from privatizing the postal business. In 2005, Cornell University economist R. Richard Geddes reviewed the academic literature on postal reform for the distinguished Journal of Economic Perspectives, and reported that “comprehensive postal reform has been ongoing in other countries for decades.” Countries that have introduced major reforms include Germany and Sweden.

A U.S. Gain

Reforms tended to have, he reported, three characteristics. First, they would “corporatize” or privatize postal operations. Second, reforms have tended to reduce delivery monopolies. And third, regulators have guaranteed the continuation of universal service.

The possibility for real gain in the U.S. is enormous. The Postal Service owns or operates 33,000 facilities nationwide, and owns 219,000 vehicles. If we were to auction it off to private investors, the bids would likely be enormous. FedEx and UPS, for example, have a combined market capitalization of almost $100 billion. Given that, how much might a private bidder offer for the right to start a business with the Postal Service’s footprint? The $100 billion mark might be a good first guess.

Which means we have two paths to chose between. On one, we continue to operate the Postal Service, and watch it lose hundreds of billions of dollars. Along the other, we sell it to a private contractor, avoid those losses while cashing a nice big check.

If the Tea Party activists want to fix the country, they should start by privatizing the Postal Service. If we can’t fix that, then it is hard to imagine how we will ever fix anything.

(Kevin Hassett, director of economic-policy studies at the American Enterprise Institute, is a Bloomberg News columnist. The opinions expressed are his own.)

To contact the writer of this column: Kevin Hassett at

To contact the editor responsible for this column: James Greiff at