Prof. Roberts on the Mess

Vernon Smith on the Mess

Leave it to a Kansan (and Nobel Prize winner) to make it simple for people.

There's no easy way out of a bubble

NRA Video

Links To Reading

From RealClearMarkets.com this morning:

The Bailout and the Vanishing Taxpayer

and Walter Williams:

Lessons From The Bailout

Five years ago, Congressman Barney Frank (D-Mass.) vouched for the "soundness" of Fannie Mae and Freddie Mac, and said, "I do not see any possibility of serious financial losses to the treasury." In 2004 congressional hearings, where the Bush administration sought greater oversight over Freddie Mac and Fannie Mae, congresswoman Maxine Waters (D-Calif.) said, "We do not have a crisis at Freddie Mac and particularly at Fannie Mae," adding that "the GSEs have exceeded their housing goals." Congressman Gregory Meeks (D-N.Y.) said, "There's nothing wrong with Fannie Mae and Freddie Mac." In these hearings Barney Frank said that he doesn't see "anything in the reports that raises safety and soundness problems." Earlier this year, Sen. Christopher Dodd (D-Conn.) praised Fannie Mae and Freddie Mac for "riding to the rescue" to help people get home mortgage loans, adding that they "need to do more" to help high-risk borrowers get better loans.

Have you heard Congress calling for hearings? They haven't called for hearings because many of them, both Democrats and Republicans, receiving hundreds of thousands of dollars, were in cahoots with Fannie Mae and Freddie Mac. If Americans are going to be on the hook to bail out these government-sponsored enterprises, at the minimum congressional hearings ought to be held to find out who did what and when.

Questions Of The Day

Now that the government is in the mortgage business, how do you think they will tend to the investment? If homeowners stop making payments (even the new lower ones), will Barney Frank and the rest of Congress kick out the delinquent owners?

Sounds politically dangerous to repossess the home of a voter......?

B Hussein Creates Jobs

He keeps saying that his energy plan will create jobs. However, he fails to say how he will create 5 million new jobs. Here is how I see it:

1. The government taxes the people
2. Higher taxes mean businesses have less capital at their disposal
3. Less capital means fewer jobs created or layoffs
4. B Hussein gives favors to "green" (AKA politically connected) industries to subsidize jobs.
5. Those jobs create no real value for society (unlike #3) since private industry did not think enough of the technology to invest in it before it was subsidized (think ethanol and syn fuel)
6. We now have 5 million people that could be working in productive industries that are instead consuming precious capital that the government took from #1.
7. Technology is not cost effective so government provides more short-term (AKA long-term) subsidies.
8. Repeat #1

While there might be 5 Million new jobs, there were certainly more than 5 Million before. Government redistribution is not free as the tax machine might take in $10 but only spit out $9. That would assume government is 90% efficient, wouldn't that be nice? Government never creates jobs, only work (AKA the hole diggers and hole fillers), and consumes capital the private sector would otherwise use to produce useful products.

Hate Mail

I got my first hate mail last week regarding my letter to the editor that was published by the Wichita Eagle (see Wind Energy a few weeks ago). At first I was shocked, then honored that someone actually cared to write a letter. I did write the gentlmen a nice, 2-page, typed letter in return.

Here is his letter....

To XXXX XXXXX,

There will, all the time, be people like you who will refuse to do anything to help society. The is not just about you, and your self-centered ignorance. This is for future generations. You lack integrity.

Sincerely,

Thomas J Zach
316-265-5625

(he provided the number)

By the way, the Eagle left out a couple key points that does make me sound a little rough around the edges. However, I did not mislead anyone so his integrity comment is uncalled for. Everyone that knows me has a good idea that I am only modestly self-centered, so maybe he is right. He did fail to tell me how wind power helps society by causing electric rates to be 3-4 times as high as coal power. Maybe he can explain that to people that give up food for heat this winter?

If you want my return letter, post a comment. I might throw it in there for fun.

Good Reading

Sowell has written two excellent columns lately that are must reads.

The Real Obama

Do Facts Matter?

Add some good Walter Williams too...

Destroying Liberty

Scaring Us To Death

And for a good summary of the Housing mess..

Kling Testimony

McCain Loses

McCain needed to win the debate tonight and instead he bowed down to populist ideals and failed his party and the American people. Unfortunately, B Hussein was much better on his feet and gave a message that most likely relates to the majority of irrational voters.

McCain certainly removed any doubt that he is an economic idiot. His solution to the housing crisis is to work on home prices. For a micro second I thought he was on to something. But instead of saying that home prices need to fall to real market levels on their own, he begins to explain an alternate solution. This solution is one where the government buys the existing mortgage and then gives the homeowner a new mortgage based on the new value of the home. Two problems. One, the government (AKA tax payer) takes a huge bath, not the irresponsible homeowner (moral hazard). Two, how does the government know what the true market price really is? Who is to say they won't pick a price that is too high and home prices continue to fall. Will the government give the homeowner another mortgage? Government does have have the knowledge or the ability to make such a call locally, let alone nationally.

Now the really good part. How about all those people that have homes that are paid for or nearly paid for? When the government steps in to help the 5% of homeowners who are in default and seeing their mortgage drop by 25-50%, everyone that has a long-term mortgage will want a piece of that action. Again, this punishes homeowners that have no mortgage and actual equity in their home. Overnight, the government will wipe out millions in equity when they reprice the nations homes. Some of it is certainly required, but I am confident the government will get it wrong.

The market is an overwhelming force. It cannot be stopped. It toppled communism. It topples other governments that try to contain it. It has to be allowed to function. Interference of this magnitude will almost certainly create unintended consequences. My guess is the cure will be much worse than the disease.

Wouldn't it be nice if the politicians actually took responsibility for this mess? Instead they blame every other body but themselves. Now we will have a Democrat Congress and White House. It will be a very sad day for America on election day.

Ron Paul for write in......

Questions That Remain Unanswered In the Bailout

1. What/who is too big to fail now?
2. What happens when $700B is not enough to solve the problem?
3. What happens when taxpayers lose money on the bailout?
4. How will the Feds value securities that the best and brightest on Wall Street cannot seem to value?
5. How could the House reject the bill earlier this week, yet pass virtually the same bill a few days later with billions in additional pork?

If there is not massive turnover in the Senate and House over this issue, then the American public truly is irrational.

Picture Friday

How did your Senator vote on S. Amdt. 5685 to H.R. 1424?

Kansas can actually be proud of our Senators for a change. Two "nay" votes is worthy.

Politico

The Rescue (AKA Bailout) Bill Contains What?

Think the Bailout Bill was all about Wall Street? Here is what was in the Senate Bill:

Energy Related Targeted Tax Credits and Changes

Sec. 101. Renewable energy credit.
Sec. 102. Production credit for electricity produced from marine renewables.
Sec. 103. Energy credit.
Sec. 104. Energy credit for small wind property.
Sec. 105. Energy credit for geothermal heat pump systems.
Sec. 106. Credit for residential energy efficient property.
Sec. 107. New clean renewable energy bonds.
Sec. 108. Credit for steel industry fuel.
Sec. 109. Special rule to implement FERC and State electric restructuring policy.
Sec. 111. Expansion and modification of advanced coal project investment credit.
Sec. 112. Expansion and modification of coal gasification investment credit.
Sec. 113. Temporary increase in coal excise tax; funding of Black Lung Disability Trust Fund.
Sec. 114. Special rules for refund of the coal excise tax to certain coal producers and exporters.
Sec. 115. Tax credit for carbon dioxide sequestration.
Sec. 116. Certain income and gains relating to industrial source carbon dioxide treated as qualifying income for publicly traded partnerships.
Sec. 117. Carbon audit of the tax code.
Sec. 201. Inclusion of cellulosic biofuel in bonus depreciation for biomass ethanol plant property.
Sec. 202. Credits for biodiesel and renewable diesel.
Sec. 203. Clarification that credits for fuel are designed to provide an incentive for United States production.
Sec. 204. Extension and modification of alternative fuel credit.
Sec. 205. Credit for new qualified plug-in electric drive motor vehicles.
Sec. 206. Exclusion from heavy truck tax for idling reduction units and advanced insulation.
Sec. 207. Alternative fuel vehicle refueling property credit.
Sec. 208. Certain income and gains relating to alcohol fuels and mixtures, biodiesel fuels and mixtures, and alternative fuels and mixtures treated as qualifying income for publicly traded partnerships.
Sec. 209. Extension and modification of election to expense certain refineries.
Sec. 210. Extension of suspension of taxable income limit on percentage depletion for oil and natural gas produced from marginal properties.
Sec. 211. Transportation fringe benefit to bicycle commuters.
Sec. 301. Qualified energy conservation bonds.
Sec. 302. Credit for nonbusiness energy property.
Sec. 303. Energy efficient commercial buildings deduction.
Sec. 304. New energy efficient home credit.
Sec. 305. Modifications of energy efficient appliance credit for appliances produced after 2007.

Other Tax Credits and Changes

Sec. 101. Extension of alternative minimum tax relief for nonrefundable personal credits.
Sec. 102. Extension of increased alternative minimum tax exemption amount.
Sec. 103. Increase of AMT refundable credit amount for individuals with longterm unused credits for prior year minimum tax liability, etc.
Sec. 201. Deduction for State and local sales taxes.
Sec. 202. Deduction of qualified tuition and related expenses.
Sec. 203. Deduction for certain expenses of elementary and secondary school teachers.
Sec. 204. Additional standard deduction for real property taxes for nonitemizers.
Sec. 205. Tax-free distributions from individual retirement plans for charitable purposes.
Sec. 206. Treatment of certain dividends of regulated investment companies.
Sec. 207. Stock in RIC for purposes of determining estates of nonresidents not citizens.
Sec. 208. Qualified investment entities.
Sec. 301. Extension and modification of research credit.
Sec. 302. New markets tax credit.
Sec. 303. Subpart F exception for active financing income.
Sec. 304. Extension of look-thru rule for related controlled foreign corporations.
Sec. 305. Extension of 15-year straight-line cost recovery for qualified leasehold improvements and qualified restaurant improvements; 15-year straight-line cost recovery for certain improvements to retail space.
Sec. 306. Modification of tax treatment of certain payments to controlling exempt organizations.
Sec. 307. Basis adjustment to stock of S corporations making charitable contributions of property.
Sec. 308. Increase in limit on cover over of rum excise tax to Puerto Rico and the Virgin Islands.
Sec. 309. Extension of economic development credit for American Samoa.
Sec. 310. Extension of mine rescue team training credit.
Sec. 311. Extension of election to expense advanced mine safety equipment.
Sec. 312. Deduction allowable with respect to income attributable to domestic production activities in Puerto Rico.
Sec. 313. Qualified zone academy bonds.
Sec. 314. Indian employment credit.
Sec. 315. Accelerated depreciation for business property on Indian reservations.
Sec. 316. Railroad track maintenance.
Sec. 317. Seven-year cost recovery period for motorsports racing track facility.
Sec. 318. Expensing of environmental remediation costs.
Sec. 319. Extension of work opportunity tax credit for Hurricane Katrina employees.
Sec. 320. Extension of increased rehabilitation credit for structures in the Gulf Opportunity Zone.
Sec. 321. Enhanced deduction for qualified computer contributions.
Sec. 322. Tax incentives for investment in the District of Columbia.
Sec. 323. Enhanced charitable deductions for contributions of food inventory.
Sec. 324. Extension of enhanced charitable deduction for contributions of book inventory.
Sec. 325. Extension and modification of duty suspension on wool products; wool research fund; wool duty refunds.
Sec. 401. Permanent authority for undercover operations.
Sec. 402. Permanent authority for disclosure of information relating to terrorist activities.
Sec. 501. $8,500 income threshold used to calculate refundable portion of child tax credit.
Sec. 502. Provisions related to film and television productions.
Sec. 503. Exemption from excise tax for certain wooden arrows designed for use by children.
Sec. 504. Income averaging for amounts received in connection with the Exxon Valdez litigation.
Sec. 505. Certain farming business machinery and equipment treated as 5-year property.
Sec. 506. Modification of penalty on understatement of taxpayer's liability by tax return preparer.
Sec. 512. Mental health parity.
Sec. 601. Secure rural schools and community self-determination program.
Sec. 602. Transfer to abandoned mine reclamation fund.
Sec. 702. Temporary tax relief for areas damaged by 2008 Midwestern severe storms, tornados, and flooding.
Sec. 703. Reporting requirements relating to disaster relief contributions.
Sec. 704. Temporary tax-exempt bond financing and low-income housing tax relief for areas damaged by Hurricane Ike.
Sec. 706. Losses attributable to federally declared disasters.
Sec. 707. Expensing of Qualified Disaster Expenses.
Sec. 708. Net operating losses attributable to federally declared disasters.
Sec. 709. Waiver of certain mortgage revenue bond requirements following federally declared disasters.
Sec. 710. Special depreciation allowance for qualified disaster property.
Sec. 711. Increased expensing for qualified disaster assistance property.
Sec. 712. Coordination with Heartland disaster relief.
Sec. 801. Nonqualified deferred compensation from certain tax indifferent parties.

Wow! What a load of non-sense. How could a body possibly debate all of these sections to the point any Senator could vote confidently yes? More reasons to dispise congress.

DeMint (R-SC) Should Be On The National Ballot

The Bailout Has Been Tried...And Failed..Twice

The Japanese tried a similar real estate induced bailout in the 1990's. The result was a lost decade. A decade with no economic growth since there was an artificial support for overpriced real estate.

Earlier, FDR attempted to intervene and turned a recession into a depression.

From Dan Mitchel at NRO:

The bailout repeats the mistakes Japan made in the 1990s. There are several historical episodes that indicate the dangers of government intervention to prop up a bubble. Japan faced a similar situation at the end of the 1980s, with real estate prices rising to absurd levels. The bubble then burst, but rather than let market forces operate, Japanese politicians sought to prop up both insolvent institution and asset prices. This interfered with the orderly reallocation of labor and capital, created considerable uncertainty, and contributed to a "lost decade" of economic stagnation. Another worrisome parallel is what happened during the 1930s. Policy mistakes such as protectionism (Hoover), higher tax rates (Hoover and Roosevelt), increased government spending (Hoover and Roosevelt), and increased intervention (Hoover and Roosevelt), helped turn a stock-market correction into the Great Depression.

What Credit Crunch?

Good article from Cato today.

Table One
U.S. Bank Loans (Billions of Dollars)

In August, bank loans to consumers were 9.5% higher than they were a year earlier--the fastest increase since 2004. The year-to-year increase in consumer and industrial loans was 15.5%, down only slightly from a recent record high of 21.6% in March. Real estate loans were up 4.1% for the 12-month period ending this August--flat lately, but not down.

Did bank lending suddenly turn south since August? The latest data is for the week ending Sept.17, when the U.S. expropriated 80% of AIG (nyse: AIG - news - people ) equity and thus tanked most financial stocks. U.S. bank credit hit a record of over $7 trillion in the latest week--up from $6.57 trillion a year earlier and $6.92 trillion at the end of July.

Political scare tactics are misleading tax payers. There is no credit crunch. People are buying fewer cars today because they are scared, not because they cannot get a loan. Mortgage rates are up to 6.1% on a 30-year loans, still at historical lows. If credit was tight, mortgage rates would be much higher.

Letter to my Senators...

Since the Senate is voting on Bailout Legislation tomorrow....

Dear Senator:

I beg that you reject the current legislation being proposed to bailout the financial system with any taxpayer money. This government action will do nothing but prolong the current problems.

Please consider a couple of things. This month, there were over $7 Trillion in loans and leases in the US according the Federal Reserve Bank in St. Louis, a new record. Given this fact alone, there is no shortage of credit. In addition, why would banks loan money between themselves when the Fed has made it so easy to borrow from the bank of last resort?

Consumer loans also reached an all-time high of $845 Billion according to the St. Louis Fed. Just yesterday, Lowes gave my wife a no-questions asked $2000 credit line. After filling out the application, it was $13,500. She does not even have a job. Again, more evidence there is no credit crunch.

A government bailout does nothing to alleviate the real problem, housing prices that are over inflated. It is five states causing the problem as houses were not priced at market prices because money was too easy. More money just prolongs the current problem as housing prices have to reflect a market reality and they simply do not today. I know this means a lot of pain for a lot of people, but these same people should never have been homeowners at these price levels in the first place.

Assume we have 3 million homes in foreclosure and they carry a $250,000 mortgage. This is close to the $700B congress is asking for. You would be better off buying the homes and selling them back to residents at half price only costing tax payers half the money. This would re-price homes and accelerate the needed price declines. Of course this in an over simplification, but buying derivatives does nothing but get bad assets of bank balance sheets. These banks should be allowed to go bankrupt and the valuable parts of the business sold off to better institutions.

Do not punish the taxpayers that were prudent and made good financial decisions. We all saw the new houses, cars, and consumer goods that people could not afford but some how bought. These are the people that need to bear the burden.

Respectfully yours,

Wichita, KS

The Wisdom of Ron Paul

Rep. Paul makes a lot of good points about the pending bailout. This column in townhall.com is great.

Q: You pin most of the blame for this crisis on government.

A: Oh yeah. More specifically, the Federal Reserve. (It's) responsible for the booms and the busts. You can't have this type of a boom cycle without a Federal Reserve and a central bank and it can be bounded with other parts of the government. Legislation might push an excessive amount of money into certain areas in addition to the easy-money system, and that's what I think happened. There were these affirmative action programs where banks were literally encouraged or told they had to make bad loans. The Community Reinvestment Act tells them they can be fined a lot of money for denying loans that are risky. It's sort of ironic.

And if one looks at the total problem of inflation, in which prices go up because of the increases in the money supply, certain areas go up much faster than others. So medical care and education and houses went up much faster but then there has to be corrections. They get out of whack and these prices have to come down. So we see the correction and the sooner you get the prices down, the better it is for everybody.

Q: The $700 billion figure. If you multiply roughly 3 million homes in foreclosure by $100,000 -- assuming they are underwater on their mortgages by an average of $100,000 -- that's "only" $300 billion.

A: So where's all this money going, huh?

Q: Yes.

A: Propping up derivatives; that's the scam. It's the so-called "illiquid assets." I think that's a misnomer. I think it's "worthless assets" that are being bought up so some of these big guys don't get wiped out.

Q: You say a $700 billion bailout is only a temporary fix.

A: Yeah, it is. If you come to the conclusion that you have to liquidate debt, the faster you get it over with the sooner the economy goes back to work. So they're propping up the prices artificially on houses and at the same time they are saying, "How can we stimulate housing growth?" Well, there are too many houses. You want the supply and demand of houses to adjust, so you let the prices of houses come down and let the houses get in the hands of people who really want them and can afford them and you quit building houses for a while.

So, yeah, you have a booming economy when you deceive the people and you stimulate the economy with easy credit. But you've got to make up for it eventually, and that's the part that nobody likes. We have prevented any attempt at correction essentially over the past 20 years. So we have a bigger bubble than ever before, which means we'll have a bigger correction than ever before. So the only question is, should it be a short, tough correction or a very long, tough correction?

Top Ten Reasons To Oppose The Bail Out

From freedomworks.org (Dick Armey's Movement):

1. NO REFORM: The plan attempts to mask, rather than reform, imbalances in credit markets and in U.S. economic public policy. The plan props up reckless and failed banks by buying "troubled assets" instead of focusing on real reforms that go after government sponsored culprits Fannie Mae and Freddie Mac, and sustainable policies that will increase the availability of private capital and expanded economic growth.

2. TREASURY POWER GRAB: The plan raises Constitutional concerns by dramatically expanding the power of the current and future Treasury Secretaries, giving the government agency power to directly purchase assets from for-profit financial and non-financial firms.

3. STUNNING PRICE TAG: The $700 billion bailout figure is as much money as the combined annual budgets of the Departments of Defense, Education and Health and Human Services. It amounts to $2,300 for every man, woman, and child in America.

4. INCREASES NATIONAL DEBT: Instead of cutting spending elsewhere, Congress will borrow all $700 billion on global capital markets, and the bill raises the national debt ceiling to a staggering $11.3 trillion.

5. GLOBAL BAILOUT: The plan includes taxpayer purchases of distressed assets from foreign banks.

6. HURTS RESPONSIBLE AMERICAN BANKS: The plan punishes responsible U.S. banks by keeping reckless, insolvent investment banks in business. As BB&T CEO John Allison wrote in a letter to Congress on Sept. 23rd, "....this is primarily a bailout of poorly run financial institutions.... Corrections are not all bad. The market correction process eliminates irrational competitors."

7. FLAWED PROCESS: Members of Congress and the public will have less than 24 hours and no hearings to discuss and understand the impact of this sweeping plan. This rush to pass a wildly unpopular plan without benefit of significant public debate and input will also undermine its legitimacy and effectiveness.

8. BY WALL STREET, FOR WALL STREET: Treasury Secretary Paulson, the architect of the plan, was formerly the head of Goldman Sachs, one of the firms responsible for the mess and a direct beneficiary of the bailout. Further, the advisers managing the bailout auctions and assets will be Wall Street firms and will likely receive billions of tax dollars in fees.

9. OTHER OPTIONS NOT EXHAUSTED: The idea that taxpayers will make money on the bailout is not credible. There are ready buyers for these "troubled assets" -- Merrill Lynch sold its entire portfolio of mortgage backed securities in July-- provided the price is low enough. If a profit was possible, private speculators would readily buy these troubled assets.

10. MORALLY OFFENSIVE: The plan violates basic principles of American capitalism and honest governance by creating a system of "private profits, socialized losses" that transfers money from taxpayers directly to Wall Street investment banks. Free market capitalism only functions if individuals and firms are held accountable and are allowed to both succeed and profit, and also to sustain losses and even fail.

I tend to agree with all but #8. Goldman saw the problem and got out. This problem goes all the way to the crooked mortgage broker in every town, city, and burg in America and works its way up to Wall Street.

The Best Explaination of the Problem Today

I really like, and believe, this explaination of the problem.

Trust Capitalism

Further examples of how government involvement makes problems worse, not better. The very reason Paulson and Crew need to leave this one alone.

The Mortgage Blow Up BS

This NPR program goes into great detail and clearly explains the problem we are all in today. After listening, I am even more opposed to the bail out. It is worth the time to listen.

NPR

The entire process is disgusting. It is really disturbing how much fraud was part of this blow up. Now they want tax payer money? I am also convinced the government will not make money on this deal. Taxpayers will be stuck with the worst of the worst investments resulting in huge losses.

The irresponsibility that permeated this mess will cost us all dearly. My guess is it will occur again within 10 years. Privatizing profits and socializing losses makes everyone forget the nasty side effects of risk.

Bailouts and Blame

Great piece in IBD today.

We recognize that in times of financial exigency, as this clearly is, government often steps in to do what it can to stop the hemorrhaging. Politically, it may not have a choice. But we can't forget that many, if not most, of the problems in the financial sector today are a result of government over-regulation, or misregulation, and political cronyism.

We've already documented how Fannie Mae and Freddie Mac were used as a jobs program for out-of-work Clinton administration officials and other Democrats, ranging from Franklin Raines to Jamie Gorelick to Jim Johnson.

And how tens of millions of dollars in political donations from those two government-sponsored enterprises distorted decision-making in Congress. This has been the problem all along.

The U.S. government regulates the private sector on behalf of taxpayers who expect competency, fairness and transparency.

But when the federal government messes up, those principles go out the window. And the lender of last resort isn't the Fed or Treasury, as some would have it. It's always the taxpayer.

Remember this when a Democrat-led Congress holds hearings — as House Speaker Nancy Pelosi now promises — and lambastes "the private sector" and "Bush economic policies" for these market meltdowns. Neither deserves the blame.

Letter to Congressmen

Dear Senator:

I am very troubled by the prospects of the US Government providing $50 Billion in funding to the domestic auto industry. This industry has time and again failed to operate by basic business principles. Executives have failed to deliver what customers want and negotiated labor deals that were sure to send the companies into bankruptcy.

The US Government needs to stay out of the auto industry malaise. If these companies go bankrupt, so be it. Company assets will be bought by other investors at pennies on the dollar and labor agreements will be renegotiated. This will result in stronger companies and better long-term industry prospects.

Another item that needs to be reconsidered are the CAFÉ standards. If Congress wants people to use less gasoline, tax it. Forcing the auto makers to design cars to use less gas makes them design products consumers do not want. If the price of gasoline stays around $4/gallon, people will start buying those fuel efficient vehicles that GM, Ford and others are selling around the globe. We can solve the energy conservation problem without legislation by a Congress that knows little about automotive design. What we need is a market-based solution, not a bureaucratic one.

Sincerely,

Wichita, KS

Campaign for Character

Prof. Boudreaux writes a great letter to the editor today.

Here's a letter sent yesterday to the New York Times:

Paul Krugman is correct: the McCain campaign's fabrications and half-truths say much about what a McCain administration would do ("Blizzard of Lies," Sept. 12). But an Obama administration is unlikely to be any better. Sen. Obama eloquently proclaims platitudes. He gallivants around the country to perform for adoring crowds - masses of people stirred by his mere presence and cheering his empty bromides. Because it's true, as Mr. Krugman notes, that "how a politician campaigns tells you a lot about how he or she would govern," a President Obama would be chiefly a messianic cult leader, promising miracle cures and salvation-by-the-speech - and daily coming more and more to mistake his own charisma for character, and his own rhetoric for reality.

Sincerely,
Donald J. Boudreaux

A Public Service Announcement

At times like this when the government is going wild with spending, it is good to have a reminder about its impact.

From Russ Roberts.

Economic Tradgedy in MI and OH

Phil Gramm has a good editorial today in the WSJ. Short version is that B Hussein's policies have already been tried in Ohio, Illinois, and Michigan with disasterous results. These three states have expereice economic stagnation while state like Texas, Arizona and Florida have expereiced solid growth with McCain-like economic policy.

Wall Street Journal

Lieberman Was The Right Choice

Sen. Lieberman was the right choice for McCain's VP because he is a good leader. His leadership is visible in his policy of free trade. He could not be more correct in saying that free trade helps the lowest income people in our country. It is cheap goods from all over the world that has raised the standard of living of the lowest rungs of the US economic ladder.

Here is Lieberman's editorial in IBD:

To begin with, trade supports millions of jobs in America. All told, 25% of jobs in the U.S. today are linked to world trade. And in the current economic downturn, exports are one of our few growth sectors. Demand for American exports is at the highest level ever, total exports are up 7% in the first six months of the year, and our exports to China are up 20% from a year ago.

Free trade also means that ordinary Americans pay lower prices for consumer goods. Anti-trade policies, by contrast, translate to higher prices from the grocery store to the shopping mall — an indirect tax increase that inflicts the greatest harm on those who have the least money to spend.

Forty years ago, countries in Asia like South Korea and Singapore were as impoverished as their counterparts in sub-Saharan Africa. Today, hundreds of millions of people in Asia enjoy middle class prosperity, with hundreds of millions more soon following in their path. This is one of the great success stories of human history — and it was made possible by trade.

Sadly, today's Democratic Party, including Sen. Obama, has largely turned its back on this proud legacy. Sen. Obama, for instance, voted against the Central America Free Trade Agreement, has threatened to renegotiate NAFTA — calling it a "bad deal" — and opposes pending free-trade agreements with South Korea and Colombia.

This anti-trade posture is ironic, given Sen. Obama's pledge to restore America's reputation around the world. In fact, free trade is the embodiment of international cooperation. By pledging to backtrack on longstanding agreements, throw up protectionist barriers, and abandon our closest allies, Sen. Obama has charted a course that will undermine our global leadership and risk putting our country into a deep recession.

Palin Politics...

As it turns out, New York politicians have nothing on Sarah Palin. The NYT has some interesting insight into Palin Politics. Many of her tactics are right out of the Clinton and Bush playbook. Things like cronyism, secrecy, and shady dealings are all part of Palin Politics.

The most disturbing thing for me is her secrecy and deliberately trying to get around public transparency. When government is no longer transparent to the public we should all be very concerned.

Interviews show that Ms. Palin runs an administration that puts a premium on loyalty and secrecy. The governor and her top officials sometimes use personal e-mail accounts for state business; dozens of e-mail messages obtained by The New York Times show that her staff members studied whether that could allow them to circumvent subpoenas seeking public records.

This should be a weakness easily exploited by the B Hussein camp. Now the hypocritical piece of the puzzle:

Ms. Palin discovered that the state Republican leader, Randy Ruedrich, a commission member, was conducting party business on state time and favoring regulated companies. When Mr. Murkowski failed to act on her complaints, she quit and went public.

In the middle of the primary, a conservative columnist in the state, Paul Jenkins, unearthed e-mail messages showing that Ms. Palin had conducted campaign business from the mayor’s office. Ms. Palin handled the crisis with a street fighter’s guile.

“I told her it looks like she did the same thing that Randy Ruedrich did,” Mr. Jenkins recalled. “And she said, ‘Yeah, what I did was wrong.’ ”

Mr. Jenkins hung up and decided to forgo writing about it. His phone rang soon after.

Mr. Jenkins said a reporter from Fairbanks, reading from a Palin news release, demanded to know why he was “smearing” her. “Now I look at her and think: ‘Man, you’re slick,’ ” he said.

She certainly has a tendency to get rid of the old school politicians, but she replaces those people with friends. While loyalty is important, so is effectiveness.

Ms. Palin chose Talis Colberg, a borough assemblyman from the Matanuska valley, as her attorney general, provoking a bewildered question from the legal community: “Who?” Mr. Colberg, who did not return calls, moved from a one-room building in the valley to one of the most powerful offices in the state, supervising some 500 people.

“I called him and asked, ‘Do you know how to supervise people?’ ” said a family friend, Kathy Wells. “He said, ‘No, but I think I’ll get some help.’ ”

The Wasilla High School yearbook archive now doubles as a veritable directory of state government. Ms. Palin appointed Mr. Bitney, her former junior high school band-mate, as her legislative director and chose another classmate, Joe Austerman, to manage the economic development office for $82,908 a year. Mr. Austerman had established an Alaska franchise for Mailboxes Etc.

While the New York Times is normally bent to favor the left, these are the types of behaviors that are very alarming regardless of political point-of-view. Palin is not for smaller, reformed government. She has been for cronyism, secrecy, and the same politics that is taking this country down the wrong path. It will come back to hurt McCain.

One Trillion Dollar Transfer

From the Independent Institute:

How Goes the War on Poverty?

Americans transfer about one trillion dollars a year to low-income families at the bottom fifth of the U.S. income distribution. Putting that into perspective, one trillion dollars is more than twice the total spent annually on national defense, ten times as much as was spent on redistributive policies in the 1950s (adjusting for inflation), and about equal to the total before-tax cash income of middle-income households, according to Independent Institute Research Fellow Edgar K. Browning, author of Stealing from Each Other: How the Welfare State Robs Americans of Money and Spirit.

Had that money gone directly to those poor families--with no "leakage" by the federal bureaucracy middleman--that trillion would break down to about $81,000 for a family of three--higher than the median income of all American families and far greater than the poverty threshold of $15,577, according to Browning.

Those sizable sums should prompt Americans to ask rather obvious questions: Are poor Americans more independent and self-supporting than before the War on Poverty? Are children born into poor households better off than they were before the War on Poverty? Has the trillion-dollar expenditure reduced inequality? Are egalitarians grateful to Americans' sacrifices in the name of redistribution, or do they continually complain about rising inequality?

"The answers to these questions, I submit, paint a bleak picture of the accomplishments of the American welfare state," writes Browning in a new op-ed. "While a nuanced interpretation of the evidence may identify a few positive returns on our 'investment,' we have a right to expect a lot more for a trillion dollars a year."

Just more proof that government is not free of charge. The machine of big government manages to consume huge sums of money that orginally had good intentions. Just wait until that machine gets its hands on health care.

Wind Energy

My letter to the Wichita Eagle today:

Wind Energy and the Consumer

Recently I received a notice in the mail that Westar Energy was holding hearings about a potential 15% rate increase. I understand that costs in the industry are on the rise. Raw materials for infrastructure improvements, expensive government mandates, and rising fuel costs are certainly taking a toll on the bottom line for Westar Energy. However, one thing in the Westar notice regarding the reason for rate increases bothered me: Improving technology for renewable energy resources, particularly wind.

I am among a growing number of Americans that are skeptical about the man-made impact on climate change. I do not believe there is sufficient evidence to point out that our behavior is causing the changes many environmentalists tend to blame on man. So forcing me to pay higher electric rates due to unproven theories about our impact on the environment seems wrong.

I do support others in their wish to support such theories. Therefore, I think it should be those people that pay higher rates for electricity since it is their beliefs that are driving costs higher. So instead of charging all customers higher rates, only charge those customers more that want to use alternative energy sources. This policy could easily be implemented by sending all ratepayers a ballot so they can decide what energy source they prefer to use. If a ratepayer does not send in the ballot, Westar should assume they want to pay the higher, alternative energy rate.

This mechanism would fully fund alternative energy if customers truly want it. If Westar finds ratepayers are not selecting alternative sources for their energy needs, then they should stop making investments in those sources. If customers want more alternative energy, they will be collecting more revenues to invest in those sources.

A market-based solution to part of this rate increase makes perfect sense. People that believe man is responsible for climate change can pay for it and the rest of us that are skeptical can continue to enjoy lower energy bills.