President Obama called the Democrats’ November 2 loss of sixty-one House seats a “shellacking.” Yet in a day-after press conference, Obama sported a self-absorbed manner, contrived reflection, and a basic misread of the American people. In a “60 Minutes” interview aired four days later, he denied that voters had repudiated his agenda. The president doesn’t understand why a center-right nation would reject a left-wing Obama. This man will not “move to the center.”

The best predictor of future behavior is past behavior. In early 2008, Senator Obama accused businesses of having cultures “rife with inside dealing, questionable accounting practices, and short-term greed.” Only ten months shy of establishing a federal regime rife with inside dealing, questionable accounting practices, and greed, the senator also warned that America’s “real problem is … that the corporation you work for will ship [your job] overseas for nothing more than a profit.”

Obama’s implicit suggestion that companies should bleed dollars to keep people employed revealed his blindness to economic reality. The practice of demonizing capitalists and the free market has become an Obama favorite. So goes the “progressive” mentality. So goes Barack Obama.

Obama destroys. Wearing the cape of savior, he destroys the resolve of people seeking to be saved. Abusing the office of president, Obama destroys American prosperity. He genuinely believes that government creates wealth. But Obama’s policies and pontifications scare the hell out of the machine that creates all wealth: private enterprise.

The president makes a show of caring about private enterprise, about people. But he is in love with big government, with ideas. Almighty central planning is progressivism’s dearest idea. Barack Obama’s idea, too. Obama clings to the notion that government legislates progress. He cannot see that society progresses when doers do profitable things that improve people’s lives, an endeavor called “business.” Remove the profit motive, and action fades. Without action, no business. Without business, no progress. Yet Obama doesn’t get it. Our president is an ideologue.

Since 1900, in America as in Europe, progressive ideologues like Obama have dominated a ruling class that focuses government on one overarching pursuit: political patronage. Today, snowballing organizations like George Soros’s Open Society Institute and Tides Foundation, “green” advocacy groups; climate alarmists; social, economic, and environmental justice zealots; multiculturalism preachers; and victimhood-mongers of all kinds vie for government backing to push agendas.

In Bought and Paid For, Charlie Gasparino shows how the chummiest kowtowers to Obama’s favor, Wall Street “fat cats,” push agendas of personal profit. The president’s rhetoric and policies ooze contempt for the general idea of business, but business writ large across Lower Manhattan draws only pseudo-threats that camouflage friendly policies. The double standard subjects honest, traditional, small-business entrepreneurs to a baked-in disadvantage: omission from Obama’s corporatist gift list.

Corporatism does create prosperity, but mainly for businesses that play the game. Widespread prosperity arises when anyone with a legal business idea gets an unimpeded shot at trying out that idea in the marketplace without playing games. Entrepreneurs must be free to direct talent and money into products and services that people want.

Today’s business leaders instead navigate a maze of flagrant political patronage tailored to accommodate a chosen few. Among the few are the Wall Street fat cats, as well as “green” and “alternative energy” interests. EPA overregulation will, for instance, force consumers to buy green electricity at jacked-up prices and pay mark-ups on anything that requires electricity to produce — in other words, everything.

Barack Obama presides over this abuse while hyping the need for vision, the need to help fellow Americans. The opposite side of the presidential mouth vilifies visionary people whose business revenues do help Americans by providing jobs. Obama paints these traditional business people as coldhearted, bigoted, nature-hating Ebenezer Scrooges. What else could traditionalists be? Anyone opposing the visionary, compassionate, planet-saving Obama is obviously a Neanderthal.

The president locks out Neanderthals. The presidential network accommodates only enlightened beings who push, Kool-Aid drinkers who accept, and savvy partners who profit from fundamental transformation. It will be no surprise when Obama keeps the unenlightened Republican House Speaker, John Boehner, on the fringes of the network. Barack Obama will tolerate nothing resembling Republican accomplishments over the next two years.

Neither will the president mothball his anti-business ideology. The stunting economic effects will be insidious. Markets create maximum wealth when businesspeople move about freely, developing and ending relationships across various social networks. In those networks lie common interests, and in the interests, needs. When entrepreneurs decide to fulfill the needs, businesses are born. Entrepreneurs benefit. Networks benefit. Other entrepreneurs replicate the process. Society thrives. Prosperity grows.

Barack Obama abhors this natural order.

Obama the progressive views himself as a socioeconomic engineer. Although the free market’s health depends on government respecting citizens’ right to freely and randomly associate with each other, our control-obsessed president cannot stand for something so serendipitous derailing his brilliantly planned economy. Progressives know better. Progressives must dictate. The free market’s smooth functioning also depends on respect for the rule of law. But Obama displays staggering disregard for the law. The president has anointed dozens of policy-making “czars” accountable only to him. Halting America’s fundamental transformation now hinges on the GOP finding ways to stop vast amounts of czar-initiated backdoor regulation.

If Barack Obama cares about being reelected, he might try something new: admitting his faults. The president might reflect on how he contributed to two years of economic misery, caused the electoral slaughter of his political party, and lost the trust of Americans, who said, “No, no, no!” as he kept saying, “Yes we can!” He might try adopting the proposals of Capitol Hill conservatives and setting America’s businesses free. The private sector will produce an economic recovery for which ideologue Obama would take credit. The president’s drool-soaked media toadies would eagerly sell the claim.

But Obama is an ideologue — and a man addicted to demonizing his opponents. So the president will play ugly games with a recharged GOP. He will agree to extend the Bush tax cuts. But the left-winger will cling to left-wing dogma and choose ever sneakier routes that will burden American business. The ideologue and his czars and agency bosses will try to circumvent Congress and the Constitution to bring about state-controlled capitalism.

God give the Republicans the courage to rediscover integrity and sane economic principle. For the sake of Americans living today and Americans not yet born, may voters continue to awaken between now and November 2012 and finish the purge that was started in November 2010.

HT: American Thinker

University faculties are often ignorant of the fact of entrepreneurial value creation. One such faculty member is the influential human rights scholar Judith Blau, Professor of Sociology at the University of North Carolina-Chapel Hill. Through her membership in the American Association for the Advancement of Science (AAAS) Human Rights Coalition she defines the human rights agenda for the world’s largest and most prestigious scientific association. Through her leadership of Sociologists Without Borders she promotes an activist “public sociology” agenda internationally. She has published dozens of articles and more than a dozen books, and she has served on numerous professional committees, advisory boards, editorial boards, etc.

And yet, in a 2006 interview, she could dismiss the role of entrepreneurs.

I don’t use the word “entrepreneurs,” at least not anymore. It does not go with the global predicaments we face today, which, in my view, require collective solidarities and collective action.

This is consistent with her Marxist orientation (she was Chair Elect of the Marxist section of the American Sociology Association in 2007-2008) and her Marxist economics, which she articulated in her major book on economics, Social Contracts and Economic Markets, in 1993:

… in purely economic terms, the entrepreneur owns the capital, the means of production, and hires workers to produce commodities or services to make a profit. … The potential for profit is created by workers: Specifically, surplus value is, put simply, the difference between what workers are paid for their work and what the work is worth — as products or services — in the market [1].

According to Blau, an entrepreneur is merely someone who owns capital and hires workers, and any profit is, in essence, stolen from the workers. Her ignorance makes her a superb case study of an influential scholar, writing frequently on economic issues, who is clueless regarding the role of entrepreneurial value creation.

Israel Kirzner identified the entrepreneur as the economic agent who is “alert to opportunity” and who acts on that opportunity. An entrepreneur is someone who recognizes that there are economic goods or services that are currently undervalued, and he or she then takes action, in the hopes of realizing a profit, by means of selling the undervalued goods or services at their market price. Kirzner thus identifies “profit” as the entrepreneurial reward for being alert to opportunity. It is analytically distinct from returns on capital investment received by the owners of the capital or managerial salaries received by managers of the enterprise (though one individual might simultaneously play the roles of entrepreneur, investor, and manager).

But even Kirzner’s “arbitrage” theory of entrepreneurship undervalues the entrepreneur. Many entrepreneurs do not merely buy low and sell high; they actively create new value in the process of identifying undervalued goods and services and discovering new ways to combine them in order to create more value. Leonard Shoen, the creator of U-Haul, realized that gas stations across the U.S. had empty parking spaces on which they would be happy to park his trailers and thereby provide themselves with an additional revenue stream. Sam Wyly made his first fortune by realizing that many users who needed computer processing power could not afford their own mainframe, so he bought up mainframe time and sold it as time-sharing. In each case, the “arbitrage” interpretation of their entrepreneurial story fails to do full justice to the combination of vision, development of new systems, marketing and sales savvy, and sheer chutzpah in creating something out of nothing. Ex post, such arbitrage opportunities may sound obvious; ex ante, each new endeavor is challenging, risky, and requires tremendous talent and commitment to pull off (thus the entirely justified Randian notion of entrepreneur as hero).

An entrepreneur is an individual who sees opportunities that are invisible to others. Entrepreneurs create value because they identify situations in which some goods or services are undervalued and apply their life’s energy to creating a reality which does not yet exist, with no guarantee of either financial or reputational reward. More than half of all new firms fail within four years in the U.S.[2]. Most entrepreneurs are losers, at least the first time.

My wife, Magatte Wade, is a Senegalese entrepreneur whose first company, Adina World Beverages, began by selling an organic hibiscus beverage that was traditional to Senegal. When she created her company, the hibiscus industry in Senegal was dying as the Senegalese were switching from hibiscus to Coke and Fanta. Meanwhile, Senegalese hibiscus was not competitive in international markets; Chinese hibiscus, for instance, was half the price and of much higher quality. Magatte recognized, however, that with the right branding and marketing, she could sell an organic hibiscus beverage to U.S. customers in the “cultural creative” demographic because they care about the social and environmental conditions under which products are produced. But in order to create her company, she first had to spend months convincing potential investors to invest in her enterprise (again, Blau’s notion that the entrepreneur is simply the person with the capital is often false). Once she had raised the first round of financing, she had to spend numerous trips to Senegal training the women’s co-ops to grow high-quality organic hibiscus, and then she had to spend several years flying around the U.S. selling her products to Whole Foods Markets, Wegmans, and other high-end retailers. Meanwhile, she and her partners went through all of the usual business nightmares of management problems, employee problems, production problems, marketing problems, etc. Anyone who has actually created a new enterprise knows that it is often a matter of nonstop problem-solving in a frenzy of work, with the constant risk that it will all collapse at any point in time. It is not mere price arbitrage, less alone is it simply a matter of exploiting the “surplus value” created by workers.

At this point, Adina is growing successfully, and if Magatte’s shares become liquid (no guarantee of that), she may become wealthy and thereby exacerbate the inequalities of wealth with which Blau and other academics are often so obsessed. In the meantime, Magatte is starting a second company, for which she is again raising capital, through which she hopes to create even more and better jobs in Africa.

There are 500,000 aid workers in Africa who have not brought prosperity to the continent, nor will they. All nations that have become prosperous have done so by means of entrepreneurial value creation. Rather than 500,000 aid workers, Africa needs a million entrepreneurs, half of whom may succeed. The ones who succeed by means of creating value that hitherto had not existed will, in many cases, become rich and thereby “exacerbate” inequality in Africa, just as the rise of entrepreneurial capitalism in China and India have created a new class of wealthy entrepreneurs and “exacerbated” inequality in those places.

The entire academic focus on inequality is an atavistic throwback to the time when we lived in a tribe of 150 and if you got more of today’s kill, then I got less. Our biology is geared to zero-sum interactions in which we must each struggle with the other to get our share. But entrepreneurial capitalism is a stunning example of a non-zero-sum game. All of the wealth created since 1800 was created out of the minds of human beings. Almost everyone on earth is better off now than their ancestors were two hundred years ago.

When Blau writes, in 2006, “It was not uncommon not so long ago for social scientists to speak of ‘progress.’ We are now wiser” [3], I wonder what planet she is living on. Once one understands the phenomenon of entrepreneurial value creation, then the world becomes an optimistic world of abundance for all, rather than a grim world of fighting and struggle. As the poet Frederick Turner has noted, the best solution for all of our problems is to “Make Everybody Rich.” Since Adam Smith, we have known more or less how to do so: Let entrepreneurs, through the system of natural liberty, create value. Once Blau understands this, she will be part of the solution, and no longer part of the problem.

Michael Strong is the CEO and Chief Visionary Officer of Freedom Lights Our World, a non-profit devoted to entrepreneurial solutions to world problems, and the lead author of Be the Solution: How Entrepreneurs and Conscious Capitalists Can Solve All the World’s Problems.

HT: American Thinker

America’s economic situation needs an emergency heart transplant, but Obama and the Democrats keep offering band-aids instead. We need a major change in government economic, tax, and fiscal policies not more government bailouts. Yet the president is doing nothing to reverse the enormous uncertainty fostered by his own administration’s aggressive anti-business and pro high-tax initiatives and rhetoric.

In the latest indication that our president has no clue why businesses are struggling and unwilling to hire, Obama is trying to force through another $30 billion government bailout program to “help banks boost lending to small businesses.” Unfortunately, it’s not the lack of available funds that are stopping businesses from expanding and generating new jobs. It’s the massive economic uncertainty and instability created by misguided government mandates (especially the oppressive regulations of ObamaCare), coupled with the massive tax increases coming in January 2011, that have spooked companies and forced them into defensive economic positions.

A few months ago, Steve Wynn, the American entrepreneur and casino resort/real-estate developer, warned that our government’s own unpredictable and irresponsible policies had created a “frightening” business climate in America and brought about an atmosphere of uncertainty for everyone.

“So when you ask me today about predictability and uncertainty in China compared to Washington, I take China. Washington is unpredictable these days. Washington is… No one in the business community from one coast to the other has any idea what’s next. And what’s even worse, the people that do business with us that buy our bonds in other countries don’t even know what’s next. The uncertainty of the business climate in America is frightening, frightening to everybody. And it’s delaying the recovery.”

Since 2006, under the “leadership” of the Democrat controlled Congress we have witnessed the unthinkable, communist China now has lower corporate rates (25%), more stable regulatory policies, and a more business-friendly economic environment than the “free-market” United States. Even the communists understand how capitalism works and what governments must do to help stimulate economic activity and encourage private sector job creation.

Meanwhile our own ivory-tower president, who has never started a company or created one private sector job in his life, continues to deny reality and blame the Republicans for refusing to go along with more socialist “solutions” and endless government bailouts; “A partisan minority in the Senate has been standing in the way of giving our small business people a simple up or down vote on this bill,” said the president. “Small business owners… don’t have time for political games.”

Ironically, it is the very “political games” and hundreds of billions of dollars in government “stimulus” programs, forced through by Obama and the Democrats, that have scared small businesses and negatively influenced economic activity, while simultaneously increasing economic risks and fiscal instability.

Small businesses, responsible for approximately two-thirds of all new jobs in the United States, are not expanding and hiring because they are frightened by what the government has done and promises to continue doing. Offering them more bank loans will do little to persuade them to ignore reality and endanger their positions. Unless and until President Obama and Congress address the threats of higher taxes, militant and oppressive government regulations, and increasing levels of deficit spending, no amount of easy money and government bailouts will ever motivate businesses to expand in the increasingly unstable and turbulent economic waters of America. They are seeing the mounting risks all around us and are correctly refusing to budge.

Originally posted at American Thinker Blog and Chris Banescu.com

John Galt is the mysterious hero lurking in the background in Ayn Rand’s infamous novel, Atlas Shrugged. He is the industrialist who went into hiding and led a strike of producers fed up with the physical and moral encroachment from a government of moral supremacists who rationalized theft with childish notions of fairness but no conception of the actual production of wealth. That synopsis should also explain why Atlas Shrugged, first published in 1957, is having a very strong resurgence in popularity.

I meet with two different groups of independent business owners focused in the southeast and their perception of current business conditions is almost unanimous. They are angry. They face conflicting and unclear regulations, and a near certainty of increasing taxes . They are impatient. Many are not profitable and are unable and unwilling to tolerate customers who cannot pay, employees who do not think, banks without judgment, and a government that despises their efforts to create wealth and jobs.

Unlike John Galt, they have not abandoned their factories and homes and headed to Colorado, but they have reduced expenses, laid off workers, and rejected growth because of the added risk. They have conserved cash because banks are not willing to lend and government is too willing to take.

Elected official have won their positions from the popular vote, but they have neglected the other votes.

We vote with our wallets. We do not want to buy what they want to sell. We will not invest if taxes on investment returns are too high. We will not start and expand businesses if you tax and regulate them into money losers.

We vote with our feet. We leave high tax states and moves to low tax states. Company close plants in unreceptive countries and move to receptive countries. We exit highly regulated industries and move capital into businesses with more certainty and flexibility.

But we also vote with our hearts. With government pay double that of the private sector, with a torrent of legislation killing small businesses, with crony capitalism replacing main street capitalism, and with an endless and clear stream of propaganda from the bully pulpit, the message is clear- the private sector is for suckers. Starting businesses, creating new products, jobs, and funding schools, hospitals and the arts are all good things and our government is making it increasingly harder to accomplish. This is why corporations are sitting on top of trillions of dollars in cash. Because of the insanity currently posing as legislation and policy, their hearts are not in it.

They have ‘gone Galt’. They have dropped out of the producer ranks, not totally like Ayn Rand’s hero, but in parts. They work less, retire early, and conserve resources because they do not trust their government.

I found John Galt in the mirror and I found John Galts sharing their fears and frustrations around the tables at meeting rooms and restaurants. They are dropping out in whatever little ways they can.

I’ll bet you found him too.

HT: American Thinker

The big idea behind Reaganomics is that cutting tax rates boosts the economy, which results in more tax revenue. The history of the last three decades bears this out.

The faithful have tried to disprove Reaganomics by contending that the 1993 tax rate hike is what gave us the good economy and the balanced budgets of the 1990s. This is pure speculation, because the faithful don’t know what GDP and federal revenue would have been had rates remained lower.

But the bigger problem for the faithful is this: Reagan’s 28-percent top rate on the Feds’ largest source of revenue, the Individual Income Tax, didn’t kick in until the 1986 tax bill. And what’s more, Reagan’s 1981 rate cuts were phased in over three years. So for most of Reagan’s tenure, the top rate was 50 percent or more. Now, I don’t have a degree in economics, but 50 percent is higher than Clinton’s 39.6 percent. Also, the Republican Congress pushed through the tax rate cuts of 1997, which Clinton signed.

So the inconvenient truth the faithful fail to grasp is that the case for Reaganomics continued to be made during the 1990s, and it might have been demonstrated even more conclusively under Clinton than under Reagan.

But that doesn’t stop the faithful — guys like Marxist Andy Stern, former president of the Service Employees International Union (SEIU), who said on “60 Minutes,” “I think I’m going to win the Nobel Prize because I think I can finally prove that Ronald Reagan is wrong, George Bush is wrong. Wealth does not trickle down, it trickles up.”

And the late left-wing columnist Molly Ivins wrote, “[The] tax cut is part of a continuing right-wing fantasy going back to the Laffer Curve.”

But this “continuing right-wing fantasy” has been the de facto policy of the U.S. since 1981, during which America has enjoyed her longest expansions, record job creation, low inflation, exploding GDP, etc, etc. Look at the numbers: Total federal revenue for fiscal 1980 was $517 billion, and for fiscal 2000 was more than $2 trillion. You do the math: During those twenty years, revenue shot up by a factor of 3.86, with radically lower tax rates throughout.

So the Age of Reaganomics never ended, not even under Clinton, and it continues apace to this day. The question becomes: for how much longer? Because now we hear that we can cure what ails us by raising tax rates. That’s the plan of the Anointed One. And the faithful are falling in line behind Him. He who doubts Himself Not has designs on your money, which occasions another question:

How exactly does one help a faltering economy by taking money out of it?

On January 20, 1981, Ronald Reagan inherited the worst economy since the Great Depression. A new disease called “stagflation” infected America — simultaneous high unemployment and high inflation, which theoretically weren’t supposed to co-exist. The economy was so bad economists threw out economic theory, like the Phillip’s Curve. The stock market hadn’t inched up for fifteen years; parts of the country were in depression.

So if not with Reaganomics, how do the faithful explain the turnaround? (Historical inevitability?)

One of the cardinal sins the faithful regularly commit is their conflating the economy with the government. Whenever you hear the faithful talk about the economy, notice how quickly they segue into government finances, especially the federal deficit. It’s as though their only criterion for judging an economy is whether or not it’s adequately funding the government; if there’s a federal deficit, it’s the economy’s fault.

We’ve had gangbusters economies while running deficits, and we’ve had lousy economies with balanced budgets. Example: The feds ran an on-budget surplus of $86.5 billion in fiscal 2000, the largest ever, even though the stock market suffered a historic meltdown and the fourth quarter saw negative GDP.

Deficits are a function of two things: revenue and spending. We understand how to increase revenue (Reaganomics), but Congress just can’t help itself when it comes to spending. Increase revenue, and Congress will find something to spend it on, be it universal health care, universal pre-K, the Cowgirl Hall of Fame, a bridge to nowhere, or some public works project in West Virginia named for Robert Byrd.

The real reasons the feds ran budget surpluses at the end of the 1990s are:

• The Republicans kept a lid on new spending. Even before they captured Congress in 1994, they killed HillaryCare, which would have been a budget-buster.
• It was smack-dab in the middle of the dot-com bubble. As soon as the bubble burst, the extra revenue vanished.
• We weren’t spending nearly enough on defense, homeland security, intelligence, and anti-terrorism. When we started spending again on these essentials, the deficit returned.
• We were practicing Reaganomics.

It should be obvious that a tax rate can’t be too high lest it kill off whatever it’s taxing. The “killing effect” of high tax rates is implicit in sin taxes, which seek to mold folks’ behavior. For example, the government uses high tax rates on tobacco to deter kids from smoking. If government wanted to totally kill off the tobacco industry, it could, say, raise cigarette taxes to a hundred bucks a pack.

Let’s define “optimal tax rate” as that rate which brings in the most revenue over the long haul. Government could jack up tax rates above the “optimal tax rate” and perhaps get more revenue — but only for a while. Eventually the disincentive of the higher rates would come into play, and revenues would plunge.

As to what the “optimal tax rate” might be, I haven’t the foggiest. But fiscal 2007 saw total federal revenue of $2.568 trillion (see Table 1.1). This is the record, the most federal revenue ever. It is five times the revenue right before Reagan, and 26 percent more than Clinton’s best year. And it happened under the Bush tax rates.

Those would be the same Bush rates that are set to expire in 2011. So Obama and the Democrats could be setting themselves up for a fall if their higher rates fail to quickly bring in more revenue than the lower rates did in 2007. That kind of revenue is unlikely without considerably higher economic growth. But Obama has also instituted a slew of new taxes with ObamaCare that are set to go into effect in 2011. If these new taxes and the return of higher rates on the old taxes coincide with a double-dip in the recession, then Reaganomics will have additional vindication.

In the April 16, 2008 Democratic debate on ABC, Charles Gibson asked Senator Obama about tax rates:

GIBSON: All right. You have, however, said you would favor an increase in the capital gains tax. As a matter of fact, you said on CNBC, and I quote, “I certainly would not go above what existed under Bill Clinton,” which was 28 percent. It’s now 15 percent. That’s almost a doubling, if you went to 28 percent. But actually, Bill Clinton, in 1997, signed legislation that dropped the capital gains tax to 20 percent.

OBAMA: Right.

GIBSON: And George Bush has taken it down to 15 percent.

OBAMA: Right.

GIBSON: And in each instance, when the rate dropped, revenues from the tax increased; the government took in more money. And in the 1980s, when the tax was increased to 28 percent, the revenues went down. So why raise it at all, especially given the fact that 100 million people in this country own stock and would be affected?

OBAMA: Well, Charlie, what I’ve said is that I would look at raising the capital gains tax for purposes of fairness. … [Emphasis added.]

GIBSON: But history shows that when you drop the capital gains tax, the revenues go up.

OBAMA: Well, that might happen, or it might not.

Obama seems more committed to “fairness” than to higher revenue. But since we’ve had record federal revenue with the current rates, why change them?

If Congress taxed at the “optimal tax rate” but ran a deficit, the reason for that deficit would clearly be spending. Congress is forever tinkering with tax rates, but it has never controlled its spending. Mechanisms like Gramm-Rudman, which trigger automatic cuts, don’t work because Congress will just override them. And pay-go? Pay-go is a fraud.

The only way a rate hike could be justified is if Congress preceded it with radical spending cuts. Otherwise, it’ll just be more billions down the rat hole — your money, squandered by professional politicians. So let’s see Congress pass some rescission bills and reform entitlements before we allow them to even think about raising tax rates.

The faithful have given President Bush so much grief for his tax rates. For eight years, he had to endure an unending chorus of “tax cuts for rich, tax cuts for the rich.” But Bush’s phased-in rate cuts for the top bracket totaled only 4.6 percent. Did Reagan ever receive such flak for his massive 42-percent cut?

Do the faithful really wish to go back to the 70-percent top rate under Carter? Or would they prefer the 91-percent rate Kennedy inherited? Or do they just have a fetish for the number 39.6? In any event, it would be a stunning victory if the faithful would just agree that a man should be allowed to keep 50 percent of what he makes.

When it comes to cutting tax rates, Reagan’s still the all-time champ. Since Reagan, none of the rate adjustments in the Individual Income Tax, neither up nor down, have been very sizable. Surely, we’re pretty close to the “optimal tax rate.”

Ave Ronaldus Magnus.

HT: American Thinker

Steve Wynn

6/27/2010 – Chris Banescu -

In a recent interview, Steve Wynn, the successful American casino resort and real-estate developer, made some shocking observations about the unstable and aggressively anti-business atmosphere in America perpetuated by our own government. In his interview with CNBC, Steve expressed the nightmarish situation that US companies face due to the arbitrary, punitive, and misguided manner in which legislators in Washington, DC continue to endlessly tax and regulate businesses in America, while our economy continues to suffer and deteriorate.

In a criticism clearly directed at President Obama and the Democrats, Mr. Wynn focused on the key reason why America is now less stable and less business-friendly than even China: our own incompetent government in Washington! He explained how China now offers more political stability, more opportunities, and much more business-friendly environment than the United States:

[at 1:23 in video ]
Interviewer:
“What about the regulation and government oversight of working there [Macau, China] as opposed to here?”

Steve Wynn:
“Macau has been steady. The shocking, unexpected government is the one in Washington. That’s where we get surprises every day. That’s where taxes are changed every five minutes. That’s where you don’t know that to expect tomorrow. To compare political stability and predictability in China to Washington is like comparing Mount Everest to an anthill.

Macau and China is stable, Washington is not!

Is there a businessman or a media person in America that isn’t frightened about the next crazy idea that is coming from Washington. The financial institutions, the cars, the businessmen, the taxes, the health care, everything is Coo Coo. And God knows what’s next?

Steve Wynn also explains that the unpredictable and irresponsible manner in which our government is acting had created a “frightening” business climate in America and helped created an atmosphere of uncertainty for everyone. “The politicians are ruining us“, said Steve. He goes on to warn that “It’s got to stop. It’s got to stop!”

So when you ask me today about predictability and uncertainty in China compared to Washington, I take China. Washington is unpredictable these days. Washington is… No one in the business community from one coast to the other has any idea what’s next. And what’s even worse, the people that do business with us that buy our bonds in other countries don’t even know what’s next. The uncertainty of the business climate in America is frightening, frightening to everybody. And it’s delaying the recovery.

We’re on our way to Greece, in the hands of a confused and foolish government that is living up to the prediction of Alexis de Tocqueville who in 1909 said: “The American system of democracy will prevail until that moment when the politicians discover that they can bribe the electorate with their own money.” And boy it’s in full bloom today. So extreme that it would probably have an end unto itself. The public is frightened.

This Tea Party business is all about fear. There is a sense in the land of discomfort. There is a sense of fear that the politicians are ruining us. And the people are right.

It’s got to stop. It’s got to stop!”

View more of the interview script on the Chris Banescu website.

Consider one of the economic propositions in the December 2008 poll: “Restrictions on housing development make housing less affordable.” People were asked if they: 1) strongly agree; 2) somewhat agree; 3) somewhat disagree; 4) strongly disagree; 5) are not sure.

Basic economics acknowledges that whatever redeeming features a restriction may have, it increases the cost of production and exchange, making goods and services less affordable. There may be exceptions to the general case, but they would be atypical.

Therefore, we counted as incorrect responses of “somewhat disagree” and “strongly disagree.” This treatment gives leeway for those who think the question is ambiguous or half right and half wrong. They would likely answer “not sure,” which we do not count as incorrect.

In this case, percentage of conservatives answering incorrectly was 22.3%, very conservatives 17.6% and libertarians 15.7%. But the percentage of progressive/very liberals answering incorrectly was 67.6% and liberals 60.1%. The pattern was not an anomaly.

The other questions were: 1) Mandatory licensing of professional services increases the prices of those services (unenlightened answer: disagree). 2) Overall, the standard of living is higher today than it was 30 years ago (unenlightened answer: disagree). 3) Rent control leads to housing shortages (unenlightened answer: disagree). 4) A company with the largest market share is a monopoly (unenlightened answer: agree). 5) Third World workers working for American companies overseas are being exploited (unenlightened answer: agree). 6) Free trade leads to unemployment (unenlightened answer: agree). 7) Minimum wage laws raise unemployment (unenlightened answer: disagree).

How did the six ideological groups do overall? Here they are, best to worst, with an average number of incorrect responses from 0 to 8: Very conservative, 1.30; Libertarian, 1.38; Conservative, 1.67; Moderate, 3.67; Liberal, 4.69; Progressive/very liberal, 5.26.

Surprised? Well, you shouldn’t be. Progressives and liberals are driven primarily by emotion, not reason. In their minds, good intentions are all that’s required to make people’s lives better, which is why they insisted on passing their $787 stimulus bill, $1 trillion and counting health care bill, and student load overhaul. It’s why they are still trying to pass their cap and tax bill, financial reform bill, and all the other bills that will put even more of the private economy under government control. Because they know nothing of economics they’ve got no clue that when government over taxes and over regulates an industry, such as health care, it makes the products and services flowing out of that industry more scarce, which drives up costs.

It was economic ignorance that led Henry Waxman to demand that CEO’s of various corporations come before his committee to explain why they took write downs in the days after ObamaCare passed. He and other progressives and liberals in Congress had no idea that regulations they passed would have such a detrimental impact on so many large companies. And that ignorance continues, unabated, until November when hopefully the American people will trade out as many of these mindless fools as possible for representatives who understand the free market.

Added: If you read Thomas Sowell’s book Basic Economics, you’ll come across in Chapter 2 an anecdote that Sowell imparts about an exchange that is said to have taken place between Thatcher and Gorbachev about Britain’s economy:

“How an incredibly complex, high-tech economy can operate without any central direction is baffling to many. The last President of the Soviet Union, Mikhail Gorbachev is said to have asked British Prime Minister Margaret Thatcher: How do you see to it that people get food? The answer was that she didn’t. Prices did that. Moreover, the British people were better fed than those in the Soviet Union, even though the British have not produced enough food to feed themselves in more than a century. Prices bring them from other countries.”

It’s somewhat understandable that Gorbachev would know nothing about the role prices play in free market economies since his only experience was with a centrally controlled economy.

But it’s unfathomable that American progressives and liberals lack even a basic understanding of how a free market economy works when they have been marinated in one their entire lives. At least until Obama came to town and began dismantling it.

HT: Kim Priestap

5/29/2010 – Chris Banescu –
The socialist policies implemented by the Obama administration and the Democrat leadership undermine America’s economic prosperity and prolong the misery for millions of companies and workers. Despite passing multi-trillion dollar government tax and spend initiatives, numerous bailouts of failed businesses, and repeated extensions of government benefits, Americans are suffering and the economy is languishing. Nationwide the unemployment rate has risen to 9.9%, while mortgage defaults and foreclosure rates have surged to record numbers.

Even with the tens of billions of dollars Congress has spent on preventing consumer mortgage defaults and home foreclosures, things have not improved much. How could they? Such government bailout measures are temporary band-aids that fail to address the structural problems our economy faces. They only delay the inevitable and push the problem further down the road. It doesn’t matter that house payments are now lower and the government has picked up the tab for a few months. If Americans cannot find a job or raise the capital to start a business they won’t have the money to pay even reduced mortgage payments.

The situation is grim for millions of American homeowners. The foreclosure crisis that the administration hoped to address via its “prevention program” is far from being over. In fact the situation may be getting worse. The Mortgage Bankers Association reports that during the January to March period of this year more than 10% of homeowners missed making at least one mortgage payment. This is an increase from the 9.1% that missed home payments in 2009. Right now approximately 4.3 million Americans are either in foreclosure or have missed at least three months of mortgage payments. Nationally, more than 4.6% of all homeowners are in foreclosure, a new record for the country.

New home buyers with good credit have now become the fastest growing group of homeowners facing foreclosure. Poor economic conditions and high unemployment rates have contributed to the latest rise in homeowner foreclosure rates. Even homeowners with solid credit, who signed up for conventional loans with fixed-rates, are now being effected by the weak economy. These borrowers account for almost 37% of the new foreclosures in 2010, significantly higher than the 29% last year.

The Obama administration’s $75 billion program aimed at foreclosure prevention has barely made a difference. Since the program started in March of 2009, roughly 1.2 million owners signed up, but as of April 2010 only 299,000 homeowners have qualified for permanent loan modification. Another 277,000 borrowers, about 23% of the total enrolled, have since dropped out of the program. Not quite the success story the Obama administration proclaimed.

Back in 2009, the White House insisted that the $800 billion government “stimulus” plan, otherwise known as “The American Recovery and Reinvestment Act” (ARRA), was desperately needed to “save” our economy. President Obama promised that the money would go out the door “immediately” and “go directly to job creation, generating or saving 3-4 million new jobs.” He claimed that without such massive government spending the US unemployment rate would rise above 8%; implying, that with the ARRA, unemployment would be maintained at or below the 8% rate. Unfortunately, none of the claims Obama and the Democrats made were accurate.

Following the passage of the “stimulus” spending bill the country’s unemployment situation got progressively worse. In August 2009 it reached 9.7% and by October 2009 it skyrocketed to 10.1%, the highest number in 27 years. By January 2010, almost a year after the passage of the ARRA, the national unemployment settled around 9.7%. As of April of this year, the rate climbed back up to 9.9%, even with the tens of thousands of temporary workers, 66,000 of them, hired by the government Census Bureau.

These results were predictable given the anti-business policies that Obama embraced early on in his presidency. As I wrote back in July of 2009 there are at least five specific promises and initiatives from the current administration that threaten the future competitiveness and success of American businesses and the prosperity of individuals. These threats were and continue to be:

1. Higher Income Taxes (coming in Jan. 2011)
2. Higher Capital Gains Taxes (coming in Jan. 2011)
3. Government-Run Health Care/Socialized Medicine (passed in 2010)
4. Cap and Trade, Significantly Higher Energy Prices (still being considered by Obama and the Democrats)
5. Runaway Government Spending, High Inflation and Weakened Dollar (continued in 2009 and 2010)

Read the entire article on the Chris Banescu website. (re-printed with permission)

Did Carnegie, Mellon, Rockefeller and Guggenheim start out rich? Andrew Carnegie worked as a bobbin boy, changing spools of thread in a cotton mill 12 hours a day, six days a week, earning $1.20 a week. A young John D. Rockefeller worked as a clerk. Meyer Guggenheim started out as a peddler. Andrew Mellon did have a leg up; his father was a lawyer and banker. Sam Walton milked the family’s cows, bottled the milk and delivered it and newspapers to customers. Richard Sears was a railroad station agent. Alvah Roebuck began work as a watchmaker. Together, they founded Sears, Roebuck and Company in 1893. John Cash Penney (founder of JCPenny department stores) worked for a local dry goods merchant.

It wasn’t just whites who went from rags to riches through open markets; there were a few blacks. Madam C.J. Walker, born Sarah Breedlove, just two years after the end of slavery, managed to build an empire from developing and selling hair products. John H. Johnson founded Johnson Publishing Company, which became an international media and cosmetics empire. There are many modern-day black millionaires who, like other millionaires, black and white, found the route to their fortunes mostly through the open, highly competitive and more free market end of our economy.

Restricted, regulated and monopolized markets are especially handicapping to people who are seen as less preferred, latecomers and people with little political clout. For example, owning and operating a taxi is one way out of poverty. It takes little skills and capital. But in most cities, one has to purchase a license costing tens of thousands of dollars. New York City’s taxicab licensing law is particularly egregious, requiring a person, as of May 2007, to pay $600,000 for a license to own and operate one taxicab. Business licensing laws are not racially discriminatory as such, but they have a racially discriminatory effect.

The Davis-Bacon Act of 1931, still on the books today, had a racially discriminatory intent and has a racially discriminatory effect. The Davis-Bacon Act is a federal law that mandates “prevailing wages” be paid on all federally financed or assisted construction projects and as such discriminates against non-unionized black construction contractors and black workers. During the 1931 legislative debate, quite a few congressmen expressed racist motives in their testimony in support of the law, such as Rep. Clayton Allgood, D-Ala., who said, “Reference has been made to a contractor from Alabama who went to New York with bootleg labor. This is a fact. That contractor has cheap colored labor that he transports, and he puts them in cabins, and it is labor of that sort that is in competition with white labor throughout the country.” Today’s supporters of the Davis-Bacon Act use different rhetoric, but its racially discriminatory effects are the same.

The market is a friend in another unappreciated way. In poor black neighborhoods, one might see some nice clothing, some nice food, some nice cars but no nice schools. Why not at least some nice schools? Clothing, food and cars are distributed by the market mechanism while schools are distributed by the political mechanism.

Jacob Hornberger

5/7/2010 – Jacob Hornberger -
Liberals say that they love the poor, needy, and disadvantaged. Unfortunately, however, the economic philosophy that liberals favor constitutes a direct assault on the economic well-being of the poor, along with nearly everyone else in society.

Liberals claim to combat poverty in two principal ways.

First, they use the force of government (e.g., income taxes) to take money from those who have earned it in order to give it to the poor.

Second, they restrict people’s use of their property to enable the poor to have access to such property.

What liberals fail to understand, however, is that the very means they choose to combat poverty — socialism and interventionism — actually exacerbate the problem that they claim to address. Their war on poverty hurts the very people they say they are trying to assist.

In proposing welfare-state programs, by necessity liberals always make an important assumption. They assume that there is wealth in society. After all, if there is no wealth then what good would welfare-state policies do? The welfare state operates on the assumption that there are people who are earning wealth or have accumulated wealth. Those are the people from whom the government takes money in order to redistribute it to the poor.

Let’s consider a hypothetical case based on science fiction. Astronomers discover that an inhabitable planet is hurtling toward our solar system and will soon join the other planets in orbit around the sun. Faced with overcrowding of its prisons, the federal government decides to exile 50,000 prisoners on a spaceship to the planet. Everyone is given six months of supplies on which to survive — food, water, and clothing — and nothing else.

When the prisoners arrive on the planet, they call into existence a federal government, democratically elected. Federal officials are empowered to do everything and anything they can to combat the extreme poverty that is immediately facing society.

Liberals are elected to the presidency and to Congress. They propose a massive welfare-state program modeled on Franklin Roosevelt’s New Deal and Lyndon Johnson’s Great Society. Social Security. Medicare and Medicaid. Public housing. Food stamps. Grants to education. Agricultural subsidies. Unemployment relief.

Do you see the problem? The federal government isn’t a fountain of wealth. It has no money. Its coffers are empty. In order to get the money to distribute all these welfare benefits to people, it must first impose a tax on people.

But do you see the next problem? There are no wealthy or even middle-class people who can be taxed because everyone in this society is poor.

In proposing their array of welfare programs to help the poor, liberals operate under the mindless assumption that wealth exists naturally in a society. Even worse, they give nary a thought to the possibility that a society in which wealth is growing is the greatest benefit to the poor. Worst of all, they don’t consider the distinct possibility that their own tax-and-redistribute policies tend toward destroying the base of wealth in society, thereby relegating everyone to poverty.

Let’s return to our hypothetical example regarding the prisoners on the new planet. Everyone is poor. Welfare-state policies to combat the poverty will obviously not work because there are no wealthy people to take money from in order to redistribute it to the poor. So what can be done to combat poverty?

Ownership, collective and private
The liberals come up with a novel solution. They adopt a system by which the government owns everything and by which everyone works for the government. People will be assigned houses to build, businesses to run, or places in fields to grow crops. Government officials will be in charge of planning everything — which crops will be planted, which occupations people will be assigned to, which houses will be built, which consumer goods will be produced. Central planners will distribute food, housing, clothing, and other essentials in accordance with the needs of each person and each family.

Everyone seems happy with the scheme, especially since it mirrors much of the prison life to which the prisoners had been accustomed. But a problem arises, one involving human nature. No one feels like working very hard. Agricultural workers are constantly getting sick. People are doing jobs for which they are ill-suited. Goods and services are scarce, and the situation is getting worse for everyone.

Actually, this hypothetical society isn’t far from reality. It is pretty much what happened when the first colonists arrived at Plymouth Rock. They formed a society in which most property would be collectively owned and shared.

The result? Starvation and famine.

One day, Governor Bradford changed the system. From that day forward, everyone would be entitled to own his own property and keep the fruits of his labor for himself and his family. No longer would people be forced to share their earnings with others.

Immediately, everyone began working harder and accumulating wealth. No more starvation and famine. The bounty produced by this private-property system formed the foundation for the first Thanksgiving.

What would be the solution to poverty in our hypothetical example? It would a libertarian one, a solution based on private property and free markets. Everyone would be free to go into any business he chose. In that way, people could pursue their own interests and talents in an attempt to provide goods or services that other people would be interested in purchasing.

People would be free to engage in any economic trade with anyone else, without interference or regulation by the government.

People would also be free to accumulate the fruits of their earnings. There would be no income tax imposed on the people.

Obviously, at first there would still be manifest poverty, given the difficulties in accumulating wealth. People struggling to survive have a difficult time saving any money. But by the time of the second generation, things will have improved a bit, with families actually accumulating savings that they would then be free to pass down to the third generation.

Within a few decades, such a system of free enterprise would not only generate millionaires but also raise the standard of living for those at the bottom of the economic ladder. Equally important, the poor would know that they had a chance to join the ranks of the middle class and wealthy simply by working hard and providing a product or service that other people were willing to pay for.

This, too, is not as hypothetical as it sounds, as it pretty much describes the situation in the United States after the adoption of the Constitution in 1787 and continuing through the early 1900s. For the first time in history, people were able to engage in enterprise freely (that is, without government regulation or control) and accumulate unlimited amounts of wealth (that is, without their incomes’ being taxed).

That’s not to say, however, that the process of wealth creation was an immediate one. For the first few decades, life was very difficult, as it would be in any society in which there exists only a small base of wealth.

Liberals often point to the Industrial Revolution as an example of the horrors of the free-market system. Factory conditions, for example, were horrific for those working there, including wives and children, as liberals are so fond in reminding us.

But liberals miss an important point. Those factories, as bad as they were, offered a chance for survival to those who were working in them. A society in which there is no foundation of wealth and no chance of accumulating wealth will inevitably have people starving to death.

A society in which there is limited wealth but in which people are free to engage in enterprise and accumulate wealth will inevitably have people struggling to survive but at least having a chance to survive.

That’s what was occurring during the Industrial Revolution. American husbands and fathers were sending their wives and children into factories not because they hated them but because they knew that that was the only chance they had to keep them alive.

Then, as families began accumulating wealth, the need to send the entire family into the factories became less desperate. It was not government but rather capital — the accumulation of savings — that ultimately brought wives and children out of the factories.

The key, then, to a rising standard of living in a society lies in savings and capital. Let’s examine how this is so. [...]

HT: Campaign For Liberty

Back in 1976, when Gerald Ford was President, Ben Stein, then a consultant on Washington and conservatism for the Normal Lear show All’s Fair, sent this memorandum to its creators:

What I don’t like is the way rich liberals, who have made their money through the operations of the capitalist system and who would be miserable bureaucratic cogs in a socialist system, are nevertheless socialists. I suspect that a large part of their motivation is a style of asceticism which has been fashionable among the rich since the time of the Pharisees. Another motivation for the rich liberals to dislike the capitalist system is that they have already gotten theirs and they don’t want to be challenged by other people coming along and getting theirs.

I don’t like the way liberals of any income group assume that they have a monopoly on morality and that the only conscionable position on issues is their position. A sanctimoniousness runs in the liberal mind which is a direct descendant of the Calvinist assuredness of moral superiority. Liberals assume that any challenge to their position comes from impure motives, often motivations having to do with “profit and loss” instead of the “human” factors that liberals allegedly consider. I resent the assumption of liberals that only they truly understand human needs and suffering.

I especially resent the claims of white liberals that they know best about how to solve the problems of the poor and the black. There is hardly any evidence that liberal programs to help the poor and the black have done much good. The ordinary operations of the capitalist system, however, have made enormous gains economically for the poor and the black. Liberals don’t seem to understand that if they take a dollar from one person and give it to another, there is rarely any benefit. If the economic system produces new dollars for everyone, everyone benefits.

Liberals who send their children to private schools while advocating busing are particularly distasteful. The liberals who plead for integration of someone else’s children are particularly blind to their hypocrisy.

I resent the notion that everything that corporations do is wrong and everything that “people” do is right. Liberals don’t understand that corporations are people. They are the people who work for the corporation, buy its products, and own its stock. There is no mechanical person who is benefited if corporations make a good profit. Real people benefit, just as real people lose when corporations lose money.

I don’t like it particularly when liberals say that more money for this or that project can come out of profits. Most people don’t realize that profits are small parts of total earnings for most companies and that without the profits, people, even liberals, wouldn’t invest their money. And there is nothing wrong with big profits. It’s a sign of good management and creativity, which are rewarded in the artistic sphere as they should be in the management area. And the stockholders who get the dividends for those profits are often widows and orphans and most often of all, pension funds. The liberals’ idea that profits all go into buying Balmain gowns is just dangerous nonsense.

I resent the influence that liberals have gotten over our educational system. Even in those schools which are other than jungles of fear, students don’t learn anything. Liberal parents and teachers who have seized control of the schools teach “Sensitivity” and ”Interpersonal Relations” to children who barely know how to read and write because the basics have been so badly neglected. Students will have more in life if they know how to read and write than if they have had “peer group effectiveness” training. Children who are without financial resources are not being done any favors if they are not taught how to perform the basic skills with which to earn a living.

I resent the idea that labor unions are the workingman’s best friend. Unions too often just represent the organized few and raise their wages so high that the unorganized many cannot find work. Unions are just monopolies by another name. They control the wages and place them at a level where employers can only hire a relative few. When the others who are unable to find work want a friend, they cannot even get into the union.

Similarly, I get mad especially about the minimum wage. The minimum wage is just a device guaranteeing that those people whose labor is not worth the minimum wage will remain unemployed. It does not raise any one’s real wage because if an employee were worth the minimum wage, he would have been paid it already. For example, every time the minimum wage is raised or its coverage broadened, the number of unemployed black teenagers rises dramatically. They are people who are largely unskilled and if they are to be hired at all it will have to be at low wages. But the minimum wage law does not allow employers to hire them at the wage they’re worth, so they are not hired at all. Liberals should ask black people in the ghetto what they think of the minimum wage.

I am annoyed at the condescending way liberals look at religion and patriotism. Both of those are forces which make a people work and sacrifice for others and are genuine altruistic forces. Yet liberals scoff at them. Liberals should try to think whether this country could have been built without a sense of mission greater than the love of government money. In fact, liberals ought to think whether or not their own feelings do not constitute a religion of sorts before they make fun of others’ religious practices. They might consider whether or not they have a double standard for people who think like they do as compared to people who have different thoughts. This problem of double standards runs through the liberal mind, in fact. The liberals think nothing of lavishing praise on China, which has put millions to death for political reasons and runs the tightest thought control in history. But they scream bloody murder if a government allied with us, with a thriving and open political system, closes a newspaper for a week. This double standard can also apply closer to home. There are too many liberals who care deeply and sincerely for the disadvantaged across the seas, while they cannot bring themselves to say a kind word to a secretary or to some unfortunate staff person who works under them.

Other examples of the liberals’ double standard are their attitude towards criminals. Their hearts bleed without limit for the poor misguided youth who has just killed or raped or beaten a perfectly innocent person but they don’t care a damn about the victims of the crime. If you look carefully at our cities today, the worst thing about them is that they have become unlivable because people are terrified of street crime. A major reason for that is that liberal attitudes towards punishing crime simply return criminals to the streets because of trifling technicalities or mischievous schemes that place the happiness of the prisoner above the safety of the public.

The liberal attitude about welfare is also worth getting furious about. They are tender and sympathetic towards the mother of ten illegitimate children who is being supported by the taxpayers through Aid to Families of Dependent Children. Who said that that woman should be allowed to make so many mistakes and then have the state make up her losses? The liberal doesn’t care about the working poor who might want to have another child but don’t because they can’t pay for the child. But for the irresponsible people who live off welfare, there is endless sympathy.

That is yet another aspect of the double standard, and there are more. The liberal wants to make a state in which people who have worked hard and abided by the rules are taxed to death to pay for those who do not work at anything except reproducing themselves. The liberal wants a state in which the lower- and middle-middle classes bear the brunt of all social change, while the liberals sit back with their union pay, or university pay, or inherited pay, or money they have gotten from the system they hate, and watch the action.

Another instance of the liberals’ lack of concern with real compassion is their attitude about environmental issues. No one doubts that there are important environmental problems. But there are also people whose jobs depend on taking a close look at environmental issues and not running off half-cocked whenever a cockroach is threatened. Trees may have rights, but they don’t have as many rights as people.

I resent the liberals’ looking the other way whenever there is a threat to decency or peace from the Communist nations and refusing to take seriously threats to our security from countries and movements which openly plan to destroy us. It is the most pious and dangerous nonsense to think that the Soviets are deterred from dominating the entire world by anything but force. Moral suasion has never accomplished a thing against the Communists, yet that is all liberals want us to have in our arsenal. They would have a disarmed and vulnerable America, trusting to the goodwill of people who have no goodwill.

Liberals, seemingly, will spend money on anything except what is absolutely essential for the entire system to continue — a strong defense. Their blindness to that need is something I actually marvel at. There is seemingly no lesson which will teach liberals that a strong America is a free America except actual domination by the Soviets, and that may be happening.

In a similar vein, I resent the way liberals condescend to people in the military as mentally inferior warmongers and brutes. In fact, the military has plenty of decent, concerned people. They have to suffer the most if there is war, so they are most sober about the need to deter it.

I resent also a kind of cultural imperialism which dominates liberal thought. Liberals tend to put down any cultural force, such as television, which has not been anointed by some kind of special holy water which can only be conferred by the elites of Cambridge, Massachusetts, and Manhattan. Rock is lowlife and fascistic, but tennis elbow from playing in a court that cost $40 an hour in Manhattan is deeply “in.” Television is beneath discussing in serious terms according to your really important liberals, but ballet and the opera, which can only be seen by the rich few and which the great mass of people find boring, are immensely significant.

I resent the liberals’ belief that all American greatness began with JFK and ended with him.

I resent the liberals’ idea that the average American is a savage.

I resent the constant liberal putdown of what is American and praise of what is foreign.

I resent the liberals’ idea that great ideas always come from the big cities and that small towns are only suitable for summer homes, that the countryside is peopled by dolts looking to shoot every person with long hair that they see.…

HT: American Spectator

UC Berkeley students protest

All across the country there were demonstrations on March 4 by students (and some faculty) against cuts in higher education funding, but inevitably attention focused on California, where the modern genre originated in 1964. I joined the University of California faculty in 1966 and so have watched a good many of them, but have never seen one less impressive that this year’s. In 1964 there was focus and clarity. This one was brain-dead.

The former idealism and sense of purpose had degenerated into a self-serving demand for more money at a time when both state and university are broke, and one in eight California workers is unemployed. The elite intellectuals of the university community might have been expected to offer us insight into how this problem arose, and realistic measures for dealing with it. But all that was on offer was this: get more money and give it to us. Californians witnessing this must have wondered whether the money they were already providing was well spent where there was so little evidence of productive thought.

The content vacuum with filled with the standby language of past demonstrations, and so there was much talk of “the struggle,” and of “oppression,” and—of course—of racism. “We are all students of color now” said Berkeley’s Professor Ananya Roy, and a student proclaimed that this crisis represented “structural racism.” (Why not global warming too?) Berkeley’s Chancellor Birgeneau called the demonstrations “the best of our tradition of effective civil action.” Neither Chancellors nor demonstrations are what they used to be. The nostalgia for the good old days surfaced again in efforts to shut the campus down by blocking the entrance of UC Berkeley and UC Santa Cruz. It didn’t seem to occur to anyone that the old “shut it down” cry was somewhat misplaced when keeping it fully open was what the present demonstration was about, but then this was not an occasion when anyone seemed to have any idea of what they were trying to achieve.

One group at UCLA stumbled into the truth, though it was a truth they did not understand. At Bruin Plaza a crowd chanted “Who’s got the power? We’ve got the power.” In its context this was just another slogan of a mindless day, but the reality is that those people do indeed have the power, and routinely use it in a way that makes them the author of their own troubles. Let me explain.

Unemployment in California is still rising. It just went up from 12.3 to 12.5%, nearly three points above an already bad national average. This horrendous figure is the source of California’s budget problem. The huge loss of tax revenue is compounded by greatly increased unemployment outlays. If we look at the few other states that have unemployment figures well above the national average, there are obvious explanations. Michigan is at 14.6 because employment in its major industry (automobiles) has collapsed. Nevada, at 13.0, is dependent on discretionary cash at a time when there isn’t any. But California is too big to be dominated by one industry, and its plight can only be explained by the state’s having grossly mismanaged its affairs.

In 2007 Raymond Keating formulated a Small Business Survival Index, which is a composite of various aspects of the climate for business in a particular state: business and personal taxes, regulations, mandates, and so on. In that index California ranked 49 among the 50 states. Rhode Island ranked just above California, and its unemployment rate is 12.7. At the bottom of the Index is D.C., and its unemployment rate is 12.1.

In the component parts of the SBSI index, California ranks worst of 51 (including D.C.) on top personal tax rates, worst on top capital gains tax rates, 42 on corporate taxes, 43 on health insurance mandates, 46 on electric utility costs, 47 on workman’s compensation costs, rock bottom again on state gas taxes, 45 on state and local government five year spending trends, and 47 on state and local per capita government spending. It also ranks 49 among the states on the US Economic freedom index, and it has the highest state sales tax rate too: where some states have an income tax but no sales tax, and others have a sales tax but no income tax, California has both, AND it has the highest rates in both.

In short, California is a disaster for business. The state has piled up so many taxes, regulations and mandates that businesses are leaving the state. Just this week I learned that a spare part order for my Lennox fireplace is delayed because Lennox is moving this division of its business to Tennessee. Wealthy individuals are also fleeing the state to avoid the country’s highest tax bracket. When both wealth and wealth creation leave the state, tax revenues leave with them.

How has this happened? As everyone knows by now, California has a dysfunctional legislature. Already in 2003—well before the current national crisis, and when the national unemployment rate was only 5.9%—California was bankrupt, and spending was so out of control that a Governor was recalled. The legislature enacts every politically correct whim that comes into its head, loading on one mandate and regulation after another. Cap and Trade could not pass nationally, but the California legislature proudly passed its job-killing global warming bill.

That is why the state now has a budget crisis of staggering proportions, and why university students are seeing those large fee hikes. But why is the California legislature so irresponsible, not to say goofy? Well, California is extremely rich in state university campuses: the UC and CSUC systems alone amount to 33 campuses, about a third of them mega-campuses of 30-35 thousand students, with another 10 around 20,000. The mega-campuses completely dominate the Assembly districts they are in, and their large concentrations of students and faculty skew the district electorate not just to the left, but to the devoutly politically correct but hopelessly unrealistic left. Virtually all of them routinely send Democrats to Sacramento. College towns with more modest sized campuses play their part too, but mega-campuses make their districts so one-sided that in the last election UC Berkeley’s Assembly seat had no election even though it was vacant: the Democratic nominee still ran unopposed. Where there is real competition between the parties the two sides keep each other honest and realistic, but when Assembly seats are so inevitably left that there is no contest, there is nothing to stop the side that has automatic electability from sliding into fantasy. Those districts provide the margin that allows an immature leftism that has lost contact with reality to control the state legislature and ruin the business climate of the state.

The irony here really cries out for attention: a large state university system needs a free market economy that hums along in top gear so that the revenue needed to support it can be generated. But California’s two unusually well developed state university systems provide enormous local voting power in many Assembly districts for a bitterly anti-capitalist ideology that sabotages the California economy. The campuses are shooting themselves in the foot. The power that those students and faculty chanted about is indeed theirs, and if they used it to elect sensible assemblymen and state senators their problems would be solved by the healthy business climate that would result. The votes that they actually cast are the source of their troubles.

Only one idea for solving the funding crisis was floated on March 4. It was to repeal the state’s requirement that taxes can only be raised by a two thirds vote, so that taxes can be raised yet again and more money made available to the campuses. In other words, let’s make the funding crisis even worse, by driving out of California even more wealth and wealth creating capacity, and raising the unemployment level even more. “California is not a tax-heavy state,” said Assemblyman Joe Coto, whose office is right next door to San Jose State University, which enrolls 31,000 students. And that raises the question: how much longer will the California citizenry want to support a system of higher education that keeps its legislature stuck on stupid? It’s not a question for this state alone.

———————————————————
John Ellis is President of the California Association of Scholars, and a Professor Emeritus at the University of California, Santa Cruz

HT: Minding the Campus

To deal with our American disaster, experts call for our economy to be “transformed.” President Obama wants a “fundamental” transformation. But what America really needs is a transformation that would undo a century of malignant progressivism that perverted the free-market capitalism on which our nation was founded. Returning to those free-market basics will not be painless.

Current events in Greece illustrate the misery that comes from ignoring the basics. The Greek economy is collapsing. A rampant entitlement mentality and the resulting government expansion have ballooned publicly-held debt to 121 percent of the country’s 2010 economic output. (America could exceed the 100-percent debt-to-output threshold in 2011.) The European Community’s reaction to the Greek tragedy? Mixed. French Prime Minister Sarkozy says the euro block will help “if needed.” German Chancellor Merkel offers no aid. A senior member of Merkel’s party suggests that Greece sell some of its islands to raise money.

Greece’s Prime Minister Papandreou says that Greece has become “a laboratory animal in the battle between Europe and the markets.” Progressives view society as their laboratory. Just as President Obama preaches to Americans too dim to swallow his wisdom, Euro-progressives want to force foolishness on a people’s unreceptive leader.

Greece needs to address its own problems, the first of which is reality-blind union workers violently whining for government to hand over money the government doesn’t have. But the E.C., observes Manhattan Institute’s Nicole Gelinas, cannot bear to let Greece solve Greek problems. Too risky. Greece is too big to fail. Gelinas writes, “The empty purse is Papandreou’s best tool for keeping public resolve strong in the face of crippling strikes by public workers.” In other words, forcing bratty children to take the hit for bankrupting mom and dad is just the right medicine. In Greece, severe pain just might spark sane policies.

In America, we’d first have to purge Washington of most of that asylum’s patients; otherwise, sanity would remain a pipe dream. Buffoonery abounded in our 2008 economic crash — partly induced by over-borrowing induced by over-lending induced by everybody-must-own-a-house nonsense. Even now, Barney Frank and other starry-eyed congressional ideologues still deny that lending to moneyless borrowers assures disaster.

To deal with our American disaster, experts call for our economy to be “transformed.” President Obama wants a “fundamental” transformation. But what America really needs is a transformation that would undo a century of malignant progressivism that perverted the free-market capitalism on which our nation was founded. Returning to those free-market basics will not be painless.

New America Foundation fellow Reihan Salam compares our current jam to the early 1980s recession. He finds that the economic restructuring that President Reagan and Federal Reserve Chairman Volcker implemented “subjected American families to extreme economic pain, and hundreds of thousands of industrial jobs evaporated and never returned.” By reducing taxes and not interfering with business and financial market shakeouts that must occur in economic down cycles, Reagan and Volcker allowed failing companies to fail, disappearing jobs to disappear, and worthless investments to remain worthless.

Not much fun, but the solution worked. Reagan’s phased-in tax cuts gradually eased America’s economic pain and freed up capital to ignite the most prosperous twenty years in modern times. Had Reagan chosen the course elected later by George W. Bush and Barack Obama, doing “everything in their power to preserve the economy,” Salam believes that America “would be an economic backwater.” It’s hard to escape the feeling that Salam had Obama’s fundamental transformation in mind.

Still, America does need change. Economists Brian Wesbury and Robert Stein point out, “Even if Greece, Illinois, California, or the U.S. itself … declared it would make zero [debt] payments … it would still have substantial annual budget deficits. At that point, the only fix would be to cut spending because potential lenders would go on strike.” So the reality is that even before considering loan payments, Washington spends more taxpayer money than Form 1040 grabs — a modus operandi that Obama wants to turbo-charge.

To clean up our economic mess, we must face up to its causes. The subprime mortgage meltdown played a role, but the biggest driver was enormous government spending — not just on welfare state entitlements, but also on corporatism that rewarded favored big businesses and motivated Wall Street to create the flimsiest investment schemes ever. Then, when subprime mortgages and investments derived from those mortgages collapsed, Washington rejected anything resembling back-to-basics and also did nothing to unburden the small business engine that could quickly restart the economy. Instead, Bush and Obama threw trillions of future taxpayer dollars at big business bailouts and phony “job-saving” programs, thus delaying the inevitable: the liquidation of bad investments and bad companies allowed by Reaganesque tough love.

Other presidents successfully applied tough love. In 1914, Calvin Coolidge noted, “Self-government means self-support … History reveals no civilized people among whom there was not a highly educated class and large aggregations of wealth”[1]. Such honesty about how freedom breeds inequality of results is rare in American politics. Coolidge acknowledged the importance of industrious individuals garnering large rewards and creating wealth from which all individuals benefit proportionate to individual contribution. As president, Coolidge helped engineer a quick recovery from the early 1920s recession by continuing President Harding’s tax-cutting and spending reduction. Americans agree with Coolidge: A moral government frees people to account for themselves.

HT: American Thinker

We hear people speak of “business” and “capitalism” as being somehow evil, including comments about capitalists victimizing employees and customers in pursuit of the goal of “maximizing profits”.

In conversations with supposedly educated people who lean to the left, the concept is an accepted axiom, that maximizing profits – at the expense of everything good in the world – is the one and only purpose of business. It is the socialist rallying cry these days.

This really frosts me. I have been in business for 35 years, and there are many shades of business management styles, and only one puts “maximizing profits” first. In my opinion, “maximizing profits” as a management goal is the most ill-conceived and destructive business management style. It causes loss, not gain.

Survival is the first objective of any business. Profit is not the goal of running a business, it is the result of running a business well. Through the business cycles, profits are never a constant, you make hay while the sun shines and hunker down during the winter. Real profit comes in two forms, increase in total value and cash in the bank.

In today’s parlance, running a business “to maximize profits” means to run it to maximize short-term profits, disregarding the long term best interests of the stockholders as well as the employee. Short term profits really only benefit the management, and only if their reward system (salary and bonuses) is structured in a manner based upon short term profits.

Example: I recently had a situation where two suppliers (both NYSE listed companies) showed completely different ways of doing business.

Company A is much larger and has an enormous customer base. They provide a service with complex billing, hidden fees and 3 year contracts based upon the customer’s responsibilities, not theirs. They are “milking” their customer base for short-term profits. The high pressure environment, misleading marketing and dog-eat-dog management style make this a lousy place to work. They are losing customers, but making very good short-term profits. The upper level management is making enormous salaries and bonuses as the company, in reality, slowly shrinks. The stockholders don’t see much benefit, but the financial reports look good.

Company B is growing quickly, picking up the customers who become disgusted with Company A. They have lower prices for an identical product, no contracts, no fees or surcharges, simple billing and good service. It is a nice place to work and the stockholders are seeing a slow but steady increase in the value of their investment.

Now on the face of it, company A is doing better, but which one would you rather invest in or work for? Which one would you rather be an executive for?

Bad management don’t look bad all the time, but good management is unmistakable.

Look at General Motors. This is a classic example of a company run into the ground by bad management. This is not the fault of the evils of capitalism, it is the fault of the evils of bad management. Communism is the ultimate form of bad management, not a solution to capitalism’s ills.

If you think capitalism is at fault for bad management, you know nothing of human nature. To paraphrase Steve Forbes – If government run business was better than privately run business, then Communist Russia would have won the Cold War.

HT: American Thinker

Amazon.com | by Nicole Gelinas | 2009

Robust financial markets support capitalism, they don’t imperil it. But in 2008, Washington policymakers were compelled to replace private risk-takers in the financial system with government capital so that money and credit flows wouldn’t stop, precipitating a depression.

Washington’s actions weren’t the start of government distortions in the financial industry, Nicole Gelinas writes, but the natural result of 25 years’ worth of such distortions.

In the early eighties, modern finance began to escape reasonable regulations, including the most important regulation of all, that of the marketplace. The government gradually adopted a “too big to fail” policy for the largest or most complex financial companies, saving lenders to failing firms from losses. As a result, these companies became impervious to the vital market discipline that the threat of loss provides.

Adding to the problem, Wall Street created financial instruments that escaped other reasonable limits, including gentle constraints on speculative borrowing and requirements for the disclosure of important facts.

The financial industry eventually posed an untenable risk to the economy—a risk that culminated in the trillions of dollars’ worth of government bailouts and guarantees that Washington scrambled starting in late 2008.

Even as banks and markets seem to heal, lenders to financial companies continue to understand that the government would protect them in the future if necessary. This implicit guarantee harms economic growth, because it forces good companies to compete against bad.

History and recent events make clear what Washington must do.

First, policymakers must reintroduce market discipline to the financial world. They can do so by re-creating a credible, consistent way in which big financial companies can fail, with lenders taking their warranted losses. Second, policymakers can reapply prudent financial regulations so that markets, and the economy, can better withstand inevitable excesses of optimism and pessimism. Sensible regulations have worked well in the past and can work well again.

As Gelinas explains in this richly detailed book, adequate regulation of financial firms and markets is a prerequisite for free-market capitalism—not a barrier to it.

About the Author
Nicole Gelinas, a Chartered Financial Analyst (CFA) charterholder, is a Manhattan Institute senior fellow and contributing editor to City Journal. She lives in New York City.