Chuck Colson

During the seemingly endless build-up to the Iowa caucuses, there was one consistent refrain repeated over and over. It’s like the big lie — the more you keep repeating it, the more people are going to believe it, but it remains a lie.

The lie was simply this: that the political parties have to choose between social issues and economic issues. This year, the media and the party machines are telling us ad nauseam that the only issue that matters is the economy.

So any candidate who wants to win the White House should just shut up about things like marriage, the sanctity of life, religious liberty, and those other annoying issues that distract us from focusing on jobs and the economy.

But that’s crazy! Doesn’t anybody get the connection between the social issues and economics issues

One candidate who does, Rick Santorum had the courage to link the two in a recent Iowa town hall meeting. (And before I go on, please, folks, I’m not endorsing him or anyone. I never do.)

Here’s what Senator Santorum said:

“Yes, [the election is] about growth and the economy, [but] it’s also about what is at the core of our country . . . faith and family. You can’t have a strong economy, you can’t have limited government if the family is breaking down and we don’t live good, moral, and decent lives.”

Precisely right. And what does he get for his remarks? Backhanded compliments for his showing in Iowa and a stern warning from, among others, the conservative National Review:

Here’s what the National Review wrote online: “In a general election…where the focus is almost certainly going to be on economic issues, it is questionable whether Santorum’s relentless focus on social issues will play well with independent voters, especially in the crucial suburbs.”

Hogwash. If the nation’s current economic crisis has taught us anything, it’s that a healthy economy cannot thrive in the midst of moral breakdown. Ethical failures on Wall Street, Main Street, and Capitol Hill put us into this mess we’re in today, as I’ve said many times before.

But how about some facts? I’ll have the citations for you at BreakPoint.org: Take incarceration rates: something Santorum has alluded to and I’ve seen with my own eyes: “Young men who grow up in homes without fathers are twice as likely to end up in jail as those who come from traditional two-parent families.” And “70% of juveniles in state-operated institutions come from fatherless homes.”

How about education? 71% of all high school dropouts come from fatherless homes. And children from low-income, two-parent families outperform students from high-income, single-parent homes.

I could go on and on.

Do you think that crime rates, incarceration, low educational achievement, out of wedlock births, affect the economy and government spending? Of course they do, and the statistics prove this!

If you want a healthy, thriving economy you’ve got to have a strong moral societal foundation. And any so-called “conservatives” who think otherwise are simply deluding themselves; the two issues simply can’t be separated.
As Christians, we can’t buy into the lie that we can separate economic prosperity from moral behavior. And we can’t be afraid to hold the candidates’ feet to the fire on this, either.

HT: Break Point (read full article)

President Obama has been speaking lately of what he views as an upswing in the economy. “The economy is growing again,” he declared in the State of the Union address. Not surprisingly, he failed to mention that for 104 consecutive weeks, larger and larger numbers of Americans have become dependent on welfare. Or that within those families receiving welfare, fathers have become more and more irrelevant, and youth crime has increased.

But, then, those are not facts that one expects to hear from the President in a State of the Union address, or anywhere else. What we hear, again and again, is the fantasy that government creates jobs, government drives the economy, government feeds kids and sends them to bed happy. The facts are just the opposite.

In fact, the Department of Agriculture has just reported that 43.6 million Americans are now receiving food stamps.

Significantly, in 2006, near the height of the historic Bush economic expansion, the number of Americans receiving food stamps was just over 20 million. Since then, the number of recipients has more than doubled, with nearly all of the increase coming under the presidency of Barack Obama. In fact, one of the under-reported stories of the past two years is that the number of Americans receiving food stamps has increased every single month under the Obama administration. Even with the recent decline of the unemployment rate from 10% to 9.4%, the number receiving food stamps has continued to increase.

That increase is not good for the taxpayer or for the welfare recipient. The increase in federal welfare spending is one of the main reasons for annual budget deficits now totaling $1.5 trillion. In the 2011 budget that Obama has submitted to Congress, over $1.43 trillion is to be spent on Medicare and Medicaid, with Medicaid the fasting growing component. Next to defense, health and human services is the largest component of discretionary spending in the Obama budget, coming in at $83.5 billion. But housing is not that far behind, with $41.6 billion. And other major redistribution programs, such as the Earned Income Credit, do not even appear in the budget.

The annual cost to the taxpayer of the Earned Income Credit program, which provides a maximum of $5,666 per family, is $59 billion. This is a high cost to pay, especially since as many as 30% of those claiming the credit are not entitled to it.

Clearly, Obama’s redistributionist politics are not good for the taxpayer. But welfare is not good for welfare recipients, either.

The impact of food stamps, Section 8 housing subsidies, Medicaid, and other support programs has been to create a permanent welfare class which, in terms of skills and attitudes, is poorly equipped to return to work. Not only that, the children of welfare moms are nurtured in a mentality that perpetuates dependency from generation to generation. And liberal politicians are in no hurry to end this dependency since the system of welfare patronage serves their interests.

The destructiveness of welfare goes beyond political dependency. As Daniel Patrick Moynihan documented long ago in The Negro Family: The Case for National Action, the welfare system contributes greatly to the breakdown of the family. What Moynihan wrote in the 1960s holds true today. The more welfare that families receive from government, the less necessary fathers are for their support. Lacking the role model of a responsible father, children grow up to believe that dependency is a natural condition of life.

Furthermore, a great deal of evidence points to a close relationship between crime and welfare. It is by no means an urban myth to suggest that housing projects are dangerous locales. Statistical mapping reveals that murder sites in urban areas are clustered around public housing locations.

In testimony before the Senate Judiciary Committee in 1994, Michael Tanner documented the relationship between welfare and crime. Pointing to the ill effects of high rates of out-of-wedlock birth and fatherless families among welfare recipients, Tanner concluded that “the welfare system is a significant cause of juvenile crime and violence.” Clearly, welfare entails a cost to society that goes beyond its effect on the federal and state budgets.

As to why so many Americans are receiving food stamps and other welfare benefits, one reason is that so many have dropped out of the workforce altogether. The January 2011 jobs report confirmed that Obama’s economic policies are not creating jobs. In fact, there were only 36,000 jobs created at a point in the economic cycle when one would expect a quarter million or more. The “good news” is that the unemployment rate fell to 9%, but only because so many more decided that welfare beats work. Expect the big increases in food stamp numbers to continue.

Maybe Obama is pleased with the jobless recovery we are in. America now has the lowest labor force participation rate in a quarter century. As of November 2010, the rate had sunk to 64.5%. That number includes not only those persons of working age who are employed but also those who are unemployed but looking for work — currently 16% of the workforce. In other words, 35.5% of working age adults have simply given up on finding a job.

US Labor Force Participation, Lowest in 25 Years

One would think these numbers would be alarming to a President who has already kicked off his re-election campaign with a partisan State of the Union address and numerous appearances in swing states. But Obama was schooled in the Chicago patronage system which equates dependency with votes. For a politician like Obama, a vigorous private sector expansion just means fewer votes. Maybe that’s why he has done so much to prevent it from happening.

Democrats have a vested interest in expanding the numbers of Americans who have simply given up looking for work. Why should Obama wish to create more jobs when it is welfare recipients who are his greatest fans?

HT: American Thinker

Vladimir Lenin had a much simpler time of it. Following the October Revolution, he swiftly nationalized nearly all industry, commerce, and agriculture in the Soviet Union. Those who opposed the takeovers, such as those millions of small landowners known as the kulaks, were executed or sent to die in Siberia.

American leftists are far more civilized. Rather than send landowners and stockowners to Siberia, they simply raise federal and state taxes to combined marginal rates of 60% and subject the rest to estate taxes after the owner dies. If the owner fails to pay up, he is marched off to prison. Meanwhile, corporations are subject to another form of control: the tyranny of activists on government agencies that view the private sector as the means of social change.

The August 25 vote by the Security and Exchange Commission to allow large shareholders access to proxy nominations for board members is a perfect example. In effect, the new regulation encourages environmentalist and human rights groups, as well as institutional investors, labor unions, and hedge funds, to nominate their own representatives for corporate boards. If elected, many of these board members would promote activist agendas that conflict with the interests of the stockholders. Instead of voting to maximize profits, such representatives would support narrow ideological goals. How would it be possible for a representative of a coalition of Greenpeace and other environmentalist groups to serve on the board of Chevron or Massey Energy? Such a representative would probably not be aligned with shareholder interests.

Perhaps this is the intention of the SEC in passing the proxy ruling. After all, liberal Democrats have been trying for decades to seize the profits of the more successful American corporations. The Carter “windfall profits tax” was just one such attempt. The long-running Clinton-era lawsuit against Microsoft was another. In 2007, Hillary Clinton famously screeched that she’d “like to seize the profits of Exxon Mobil” and redistribute them to alternative energy companies. Now not even Google is safe.

Proxy reform is just one among scores of anti-business initiatives being carried out by unelected bureaucrats within government agencies. Thousands of other changes are buried in the fine print of the recently passed health care and financial regulation acts. By design, none of these policy changes have received an adequate public airing.

One example is an obscure rule appended to the financial regulation bill passed in July. With no discussion or public comment, Democrats slipped in a requirement that energy and mining companies disclose payments to foreign countries for oil or mineral rights. This requirement puts American companies at a disadvantage to others because it hampers their ability to bid competitively on foreign leases.

Most of the world’s large, undeveloped oil fields are controlled by the governments of developing countries in Africa, Latin America, and the Middle East. There is fierce competition between American oil companies and those of China, as well as those of Europe, India, and Latin America, for these prized lease rights. Why would Congress pass a law that puts our companies at a disadvantage when they negotiate for drilling rights? There is only one answer: the Democratic Congress does not really care about the success of American corporations. Or if it does care, it cares only about bringing them to heel.

It is not just energy companies that are the target of Washington’s activists. Earlier this year, the Federal Trade Commission won a consent decree forcing Intel to pay a billion dollars in fines and potentially hampering that company’s competitiveness in the global technology market. Like Exxon and Massey Energy, Intel is one of America’s most successful corporations. That may well be the reason it was targeted by the left.

The irony is that even as the Obama administration has unleashed activist regulators on American corporations, that same administration is grumbling that corporations are not doing enough to spur economic growth. It’s like cutting someone’s throat and complaining when they don’t speak up.

The truth is that the current administration is not really interested in creating jobs, nor is it interested in promoting economic growth or the corporate profits upon which growth depends. The Obama administration is dominated by leftist ideologues whose obsession is regulation of the private sector. The ideologues who now manage the EPA, FTC, FCC, and SEC are guided by a single purpose: to establish state control of the entire U.S. economy, and to do so at whatever cost to the American people. In order to achieve this goal, they are willing to accept a 17% real unemployment rate as the “new normal.” They are willing to see foreign competitors, China in particular, overtake American leadership in the technology, health care, and energy sectors. They are not just willing to accept the decline of American power, but they are intent on bringing it about.

For those who fantasize about “one world” living in “harmony with nature,” the crippling of American business may seem like a good plan. In place of spacious suburban homes, they advocate densely packed urban dwellings. In place of cars and SUVs, they promote biking or walking. Instead of treating diseases with new drugs and surgical procedures, they endorse second-generation generics or just letting patients die. Instead of defending ourselves with modern weapons, they speak of negotiating with our enemies, as if North Korea or Iran has shown a genuine interest in negotiation. This, in essence, is the left’s vision of America in the 21st century.

The left cannot understand why the American people do not share their vision of national decline. Those who resist ObamaCare are labeled “obstructionists.” Those who resist Islamification are called “racists.” Those who question global warming are called “deniers,” as if opposition to the fiction of man-made global warming were somehow akin to denial of the historical fact of the Holocaust. The left believes that its own agenda — the eradication of private property and the destruction of America as a global superpower — is a moral crusade of overwhelming importance. This is why individuals such as Nancy Pelosi become practically apoplectic (“Are you serious?” she responded, when asked about the constitutionality of ObamaCare) when their behavior is questioned.

For conservatives, there is only one rational response to the current assault on American liberty. That is to remove all leftists from office and to guard against their return. Every American needs to understand that the left is not simply attempting to “reform” our institutions: it is swiftly transforming America from a capitalist democracy into a Marxist totalitarian state. Only a complete repudiation at the polls will stop them.

Dr. Jeffrey Folks taught for thirty years in universities in Europe, America, and Japan. He has published many books and articles on American culture and politics.

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

Meanwhile, Treasury Secretary Geithner, erstwhile cheerleader for the Obama economic team, announces that unemployment rates could rise “for a couple of months.” “Of course we want to do what we can,” says Geithner, but what we’re doing is just not working.

Still, “large parts of the private sector continue to strengthen,” Geithner wrote in the New York Times on August 3. Maybe Geithner wasn’t looking at the same data as the Federal Reserve, which one week later reported that the economy was weakening. Not only that, but the Fed backed up its opinion with a commitment to new monetary stimulus. Come to think of it, Geithner’s boss was not hesitant to sign a $26-billion stimulus bill designed to bail out teachers’ unions and state Medicaid programs. If Geithner is so sure the economy is expanding, why is he supporting another stimulus bill?

The truth is that Geithner knows, as does every reputable economist out there, that the U.S. economy is not recovering as it should following the severe recession of 2008-2009. The Obama economic policies are just not working, and no one in the administration seems to have a clue about what to do.

As for Geithner, he thinks that Americans haven’t been taxed enough. In an August 4 speech, Geithner suggested that the tax cuts that began during the Reagan administration and continued through the presidency of George W. Bush actually slowed the growth of the economy. Geithner is perhaps the only economist in the universe to believe that employment rates did not increase during the period from 1983 to 2008, following reductions in marginal rates, capital gains, and other taxes during the Reagan, Clinton, and Bush II administrations. The Secretary is apparently incapable of reading a line chart, or of comprehending that the percentage of Americans employed rose from 57% in 1983 to 63% in 2008.

Geithner, of course, is saying these things only to defend the president. It is the president who plans to raise taxes on the rich, as he likes to call everyone earning more than $200,000 — even those who reinvest that money in small businesses and create new jobs. Somehow the president believes that robbing small businesses of every dime of profit is going to kick-start the economy. Once again, just about every economist except Paul Krugman disagrees with him. As Sen. Mitch McConnell pointed out on Aug. 4, the tax increases scheduled for Jan. 1, 2011 “will have a devastating impact” on the economy.

If the President really thinks that raising taxes will promote growth, why not raise taxes on everyone? More taxes, more growth. Why not let government take everything, as it already has, almost, in California and New York? If higher taxes produce jobs, where are the jobs in California and New York? Why were more new jobs created in low-tax Texas in 2009 than in the other 49 states combined?

Maybe it’s just that the Democrats have a different definition of “jobs” from most people’s. For Democrats, a job is not a job unless it’s “green.” A job need not be real — it can be “created or saved” or bought with stimulus spending. For Nancy Pelosi, collecting unemployment benefits is a job in itself. And for Tim Geithner, raising taxes on some is the precondition for putting others back to work.

The fact is that Obama’s economic policies have always been laughable. The $862-billion stimulus spending of 2009 distributed massive funding to welfare recipients, alternative energy boondoggles, environmental regulation enforcement, unionized education, and public service workers. But the spending bonanza was never intended to create jobs. It was designed to buy votes, as was the latest stimulus bill signed by the president on August 10.

Meanwhile, the economy overall has lost six million jobs since the recession began, most of them since the inauguration of Barack Obama; 14.6 million Americans are now out of work. Millions of ordinary Americans have been sacrificed so that the Democratic Party can retain the votes of welfare recipients, teachers, public service unions, and environmentalists — and what’s more important, the campaign contributions of unions, environmental groups, and trial lawyers.

If the president really wished to create jobs, he could do so in several ways. He could reduce marginal tax rates across the board, thereby returning billions of dollars to their rightful owners. He could cut capital gain, dividend, and interest taxes, thus increasing business investment and spurring expansion. He could promote tort reform and eliminate unnecessary environmental regulation. Most importantly, he could lower taxes on businesses and corporations.

Obama has done none of these things. The only “solution” he has proposed is raising taxes and distributing more stimulus funds to his key constituencies.

There are 14.6 million unemployed, and the president’s solution is to raise taxes so as to distribute more taxpayer money to his political supporters. Apparently Obama is so callous or so blind that he cannot comprehend what it means for 14.6 million families to lose a breadwinner. Everything that he has done, and that he continues to do, serves only his own interest. He appears to be ruthlessly intent on a single objective: securing his political base in advance of the 2012 election. No matter if fourteen or twenty or fifty million Americans go hungry.

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

President Ronald Reagan

From the archived pages of Imprimis, the monthly speech digest of Hillsdale College, President Ronald Reagan reminds us that economic freedom is an absolute necessity not only for political freedom, but for all freedom. That freedom must be fought for and protected in every generation. That the business community must join this fight and not remain passive.

“It all comes down to this basic premise: if you lose your economic freedom, you lose your political freedom and in fact all freedom. Freedom is something that cannot be passed on genetically. It is never more than one generation away from extinction. Every generation has to learn how to protect and defend it. Once freedom is gone, it’s gone for a long, long time. Already, too many of us, particularly those in business and industry, have chosen to switch rather than fight.”

President Reagan clearly understood that government action is the biggest threat to our economic freedom and personal freedom. He correctly identified the government as the problem, not the solution:

“During the presidential campaign last year, there was a great deal of talk about the seeming inability of our economic system to solve the problems of unemployment and inflation. Issues such as taxes and government power and costs were discussed, but always these things were discussed in the context of what government intended to do about it. May I suggest for your consideration that government has already done too much about it? That indeed, government, by going outside its proper province, has caused many if not most of the problems that vex us. How much are we to blame for what has happened?

Beginning with the traumatic experience of the Great Depression, we the people have turned more and more to government for answers that government has neither the right nor the capacity to provide. Unfortunately, government as an institution always tends to increase in size and power, and so government attempted to provide the answers.”

Ronald Reagan’s timeless wisdom can be for us a beacon of hope and inspiration in the troubled economic and political times we now face. The Great Communicator took on the establishment and persevered in the face of massive opposition from the liberals and the mainstream media. Despite being belittled, insulted, and demonized, President Reagan stood his ground, acted on his conservative principles, and made good on his promises to restore America’s greatness. His vision and leadership rescued the country from disaster and history proved him right.

More than three decades ago President Reagan concluded his speech with an ominous warning and call to action. It is as appropriate and relevant today as it was in 1978:

Will we, before it is too late, use the vitality and the magic of the marketplace to save this way of life, or will we one day face our children, and our children’s children when they ask us where we were and what we were doing on the day that freedom was lost?

Will enough Americans still heed President Reagan’s call? Will more of today’s business leaders join this fight? Will we preserve our economic, political, and personal freedoms for the sake of this and future generations?

Originally posted at American Thinker Blog and Chris Banescu.com

In what can only be described as a partisan, pro-Obama puff piece, The New York Times has now proclaimed on its Economix Blog that tax increases are the best way to “stimulate” our economy and help America reach “fiscal sustainability”:

The single biggest step our government could take this year to address the structural deficit would be to let the tax cuts expire. And a credible commitment to long-term fiscal sustainability should reduce interest rates today, helping to stimulate the economy.

Adopting the leftist fiction that Americans keeping more of their money is socially irresponsible and somehow cutting taxes “cost” the government, the authors warn that the expiration of the Bush tax cuts are too costly. They want to shame you into compliance. You see it’s not your money, it’s their money! It will be your fault if the government doesn’t collect the additional $2.3 trillion of your income it’s entitled to receive. It will be your fault when the national debt grows ever larger by 2018:

What do matter are taxes and entitlements. Therefore, the coming battle over the Bush tax cuts is of real importance. According to the Congressional Budget Office, extending the Bush tax cuts would add $2.3 trillion to the total 2018 debt.

Feigning objectivity, the writers briefly flirt with a one sentence counter-argument questioning the wisdom of increasing taxes while unemployment is still at an all time high. However, the sense of “balance” quickly dissipates as Americans are again faulted for the audacity to save their money, and therefore failing to stimulate the economy:

Critics say that this amounts to increasing taxes at a time of high unemployment, and that instead the tax cuts should be extended as a stimulus measure. This overlooks the fact that tax cuts are an inefficient form of stimulus, because many people choose to save their additional income instead of spending it.

The pièce de résistance however, is at the end of the blog article. Here the authors completely leave behind any semblance of economic and common sense and logic, and head for the hills of fantasy land. In this fictional world massive tax increases will “immediately” encourage growth and increased employment:

If the goal is to encourage growth and employment immediately, it would be better to let the tax cuts expire and dedicate some of the increased revenue to real stimulus programs.

Apparently the multi-trillion dollars government “stimulus” programs already passed with little economic benefit are not “real” enough for The New York Times. There’s still more work to be done with the additional $2.3 trillion of our money they must confiscate in order to “help” us.

Back in the real world, Ronald Reagan’s across-the-board tax cuts in the 1980s stand as a testament to true and effective economic and fiscal policies. His relentless pursuit of economic reforms and lower taxes lead to the “largest peacetime economic boom in American history and nearly 35 million more jobs,” while federal revenues doubled, increasing from $517 billion in 1980 to over $1 trillion in 1990. President Reagan proved what all sensible economists and logical individuals already know, that cutting taxes inevitably leads to economic growth and increased prosperity, which in turn creates jobs and provides the government with more revenues.

Luckily, we don’t have to go that far back in history for a lesson on economics and taxes. One has to look no further than the tax-dogging behavior of former Senator John Kerry, owner of a $7 million yacht, to realize that higher taxes always negatively influence economic activity, motivate individuals to avoid paying those taxes, and ultimately lead to reduced state revenues.

If that’s not convincing enough, maybe The New York Times can look to communist China for a clue on how to stimulate an economy and increase government revenues. While American companies now face an average combined income tax rate (federal + state taxes) of approximately 39.3% corporations in China pay only a 25% tax rate as of January 2008. The communists realized the dangers of the economic crisis spreading across the world and quickly moved to lower taxes to help their businesses and people. Our own Congress however, has done nothing about tax rates, choosing instead to let current rates increase on their own come January 1, 2011. If Obama and the Democrats allow this to happen, we will witness the once unthinkable: the “free-market” United States will tax its businesses and corporations at 46.2%, almost double the rate of communist China at 25%; even before ObamaCare’s new Medicare levy of 3.8% kicks in 2013, raising the marginal rates to 50%.

If The New York Times can’t learn this simple lesson from the actions of a quintessential limousine liberal or by looking at communist China, then no evidence will suffice to wake them up to reality.

Originally posted at American Thinker Blog and Chris Banescu.com

A rising number of supports champion inflation as a salvation strategy. Richard Russell in a recent newsletter provides the rationale (emboldening by Mr. Russell):

In my opinion, the US MUST default on its debt. There are two ways to default. One is simply to renege on the debt … The other way to default on the debt is to inflate it away. I’m absolutely convinced that this is the path that the US will take. If the US inflates enough, then over time (many years) the devalued dollar will tend of reduce the power of the debts.

Mr. Russell lived during the Great Depression and has been involved in the financial world ever since. His experience and observations are valuable. The desperation of our current economic situation should be apparent when default is presumed the only option. The idea is hardly unique to Mr. Russell. Anyone who has studied the numbers knows the mathematical impossibility of paying off the debt.

I differ with Mr. Russell — not on the government’s intent, but on their ability to execute such a strategy. They do not possess the knowledge to manage it. Nor is the government likely to have the luxury of time to succeed, given the rate at which we are adding new debt.

I expect inflation because it is based on a universal political characteristic: cowardice. Politicians are not going to stop welfare, social security, unemployment, and Medicare, at least not willingly. Furthermore, the Federal Reserve is not going to force the government into insolvency. The Fed, while de jure independent, is de facto not. It was created by legislation and can be disposed via legislation. The Fed must be a willing slave of the government.

Bernanke will “print” so long as the federal government is unable to support itself via tax revenues and market-based bond sales. Government as presently constituted will never regain this stasis of self-sufficiency. The Fed has been forced into an accelerating Quantitative Easing spiral which will not stop until market or political forces intervene. The timing of the end and its ultimate form are not yet knowable.

Former Fed Chair Paul Volcker understood the dangers of inflation in the early 1980s and took forceful action at a critical time. It is likely his actions prevented hyperinflation from destroying the economy. His was a personal act of courage, aided by at least two factors not present today. First, the economy was much more resilient and not overburdened with debt. Second, Mr. Volcker had President Reagan backing him. Reagan took the political heat because he considered inflation an evil: “Inflation is as violent as a mugger, as frightening as an armed robber and as deadly as a hit man.”

Today, we have no Volcker, Reagan, or functioning economy. To argue that our economic salvation depends on default is to admit the intractability of our problems. To believe that we can manage an inflationary default strategy is the height of folly. It represents more of the Keynesian arrogance that an economy can be run from the top. Friedrich Hayek aptly phrased an inflationary strategy as akin to having “a tiger by the tail.” His analogy captured a situation that is neither enviable nor manageable.

Not all economists agree on the definition of inflation, how to measure it, or its causes. Yet many believe inflation is a cure that can be applied in proper doses to resolve insolvency. The economy, akin to a cooking recipe, can be improved by adding the right dosages of this or that at just the right temperature and at the proper time. What ignorance and hubris!

At this point, Bernanke’s rather simple goal of avoiding deflation appears to be failing. If he is unable to create inflation under the insane spending and QE of the last couple of years, why would anyone believe he can manage inflation to save the economy?

Inflation, once begun, is difficult to stop from a political standpoint. Reducing inflation always produces a slowdown in economic activity: the higher the inflation, the greater the slowdown. The recession Volcker triggered was severe and produced the usual painful effects.

An economy with extreme levels of debt would be especially vulnerable to massive bankruptcies and defaults. Such a debacle would bring debt back to sustainable levels, but at enormous social and economic costs. The term “Great Depression II” is something no politician wants associated with his legacy.

At some point, the political costs of accelerating inflation must be dealt with. Public unrest then becomes a bigger fear for politicians than making difficult spending cuts. Political action will then occur, but not because of “courage.” Fear of peasants with pitchforks marching toward the Capitol has immeasurable motivational value.

When inflation is finally addressed, action will likely come too late. The problem with higher levels of inflation is that a new dynamic is encountered. Inflation is a function of both the supply and demand for money. While the Fed has substantial, but not total, control over supply, it has virtually no control over demand. As inflation accelerates, individual and business demand for money decreases. It does so because the cost of holding money goes up as its purchasing power declines.

Under these conditions, money is spent faster to get in front of expected price increases. This behavior appeared during the latter stages of the Carter administration, before the Volcker-Reagan clamps were applied. Under extreme conditions, people refuse to hold money (think Weimar Germany or Zimbabwe). They spend it as soon as they receive it.

Monetarists use the term “velocity” to describe the behavior of the demand for money. Velocity is a measure of the rate at which money turns over. In all hyperinflations, demand for money turns down and velocity turns up. This is a sign that the Fed has lost control of monetary policy and inflationary expectations. As an aside, the rather unexpected turndown in velocity in this recession has offset much of the Fed’s easy money efforts.

The economy collapses in a hyperinflation when money ceases to be an acceptable medium of exchange. Barter replaces money. Trade is drastically curtailed, plunging the economy into a hyperinflationary depression.

While it is true that a hyperinflation will wipe out debts, it will also wipe out the value of savings, loans, and fixed income. The wealth of the middle class of a country is generally wiped out. Society is reduced to two classes — the haves and the have-nots.

Inflation is not an economic strategy. It is the worst thing that can happen to a country. It is not manageable! Economists have less chance of managing inflation than they do of controlling a tiger by the tail. Great harm will come to both the tail-holder and the economy.

Inflation is a political strategy, and a damn poor and dangerous one to boot. It represents a desperate attempt to kick the can down the road one more time. It is the last hope for scoundrels. It will destroy the economy and society. As a political strategy, inflation has only two purposes:

The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring a permanent ruin. But both are the refuge of political and economic opportunists.
- Ernest Hemingway

The way to crush the bourgeoisie is to grind them between the millstones of taxation and inflation.
- Vladimir Lenin

The reader should make his own judgment as to whether either or both intentions might be applicable.

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

While this is the reality, the political leaders are not leading. In their speeches they make claims and projections no one believes, others are blamed for the present state of affairs, they are everywhere perpetually campaigning and offering solutions that cannot be trusted to be reality based. They are, in the words of Daniel H Burnham of Chicago architectural fame, “making no little plans.” We only see massive, burdensome, prohibitively expensive and unpopular policies and programs thrust upon us. Now comes the piper who wants to be paid for all this stuff. Since there is no money, we borrow. There is insufficient tax revenue to pay the bills, so they tax more heavily, driving down the incentive to work and invest, a hideous cycle.

[...]

Webster’s defines poverty as,”the state of one who lacks the usual or socially acceptable amount of money”. It is an undeniable fact that almost everyone in Lake Bluff agrees that a municipal swimming pool that complies with standards and codes is part of the fabric of this family oriented community and an asset that has been available to residents for many years, is an important facility. The problem is, we are broke; we are collectively poor and over taxed as individuals, we have exhausted our resources and taken on unsustainable debt, there are commitments to staggering Medicare and Social Security entitlements and public employee benefit obligations, at every level; Village, City, Township, County, State and Federal.

[...]

No wonder a swimming pool generates debate and has the potential to polarize us. But the pool is purely symbolic; a microcosm of what truly ails our society. We want to make plans and buy things we cannot pay for, and our credit card is maxed out. We are frustrated and even angry. A tea party movement is created in response.

As this all this is going on, our politicians and those in political leadership positions show blinding indifference to our country’s fiscal condition and emotional psyche. They pile on massive new entitlements, ignore the unaffordable future obligations from the ones that already exist, are determined to micro manage our lives, slaughter Constitutional freedoms, incur trillions of dollars of new debt, tax us to the point of exasperation. At the same time, obvious needs are ignored. We desperately need private sector growth that will increase tax revenue without rate increases or new sources, create real and permanent jobs, stabilize the economy and markets, expand wealth, and restore our confidence.

Sure, there are other problems facing America, foremost is national security. However, our pathetic economic condition is, as Admiral Mike Mullen stated, a national security matter. Unless and until we solve our long term fiscal challenges, we are a far weaker nation and more vulnerable.

Let’s concentrate then on real and long term fixes for the economy. After that, we can build our pools, defend our country and get on with our lives, confident and more certain of our future.

HT: American Thinker

The worries of the DoD are well-justified; missile guidance systems, smart bombs, night vision gear, unmanned aircraft, and much more are dependent on the rare earth elements in some way. Without these metals, our weapons technology would be approximately that of the Korean War. Battery-powered tools, hybrid vehicles, the environmentalists’ precious windmills, and almost everything else electric cannot get by without them.

Rare earth elements have been described as the vitamins of modern technology. It took Beijing approximately twenty years to strip this technology from its birthplace in the United States and move it to China.

China’s success in capturing the entire production and manufacturing cycle for the rare earth elements is only the beginning. Their long-term strategy seems to be to repeat their rare earth coup in other sectors of mining and manufacturing. Awash in cash, they are on a gigantic worldwide shopping trip for resources of all kinds. Copper, lead, zinc, and iron are on their list, to name a few. Their reserves of U.S. dollars are being converted to hard assets. Anyone with experience with the Chinese knows that they are in the game to win. Their objective is world domination by whatever means necessary. Aided by our intellectually and morally challenged elites, they stand a good chance of accomplishing it without firing a shot.

Why the Chinese were able, at so little cost, to take away this vital sector of our technology is a question that needs to be asked. The answer is not hard to find. It is the natural result of a fifty-year “jihad” against America’s producers by the environmental left. This alarm signal from the Department of Defense marks the beginning of the endgame in this struggle. It should now be clear that there is nothing less than the survival of our Republic at stake. Fifty years of rapine and pillage by a nihilistic, deranged environmental movement and a government bureaucracy whose sole mitigating feature is its incompetence has left us more and more dependent on somebody else for the commodities and technology necessary for our existence as a nation. A terminally ignorant public has watched with detached indifference or has actively supported this assault on our basic industries. Our national consciousness is in the grip of such insanity that schoolchildren are routinely taught to hate the people and businesses that make their way of life possible. These environmental chickens are now coming home to roost. We are at the point where the bill for this half-century-long economic and environmental stupor is coming due.

This nation is going to have to realize that the ability to produce resources and manufacture products defines its military capability and its standard of living. This fact is as certain as the laws of thermodynamics. Everything you can touch comes from the earth. It must be mined, pumped, cut down, or grown by somebody. Somebody has to process it, refine it, manufacture it, and deliver it. In the vital sector of basic mineral commodities and energy, those “somebodies” need to be domestic, not foreign. The global economy, that our rulers told us would provide all our necessities, is turning out to be the private property of the Chinese, bought with our former money. Our present leadership in Washington, D.C. and most of the rest of our major institutions appear to have no concept of this reality and do not vehemently object to it. It is no accident that the military, our only government institution left with any grounding in reality, is the one to sense the danger.

Mindless obstruction by environmental NGOs and federal regulators now make it almost impossible to develop new or upgrade old productive facilities in this country. Work, absent bureaucratic harassment and NGO opposition, that would have cost hundreds of millions and taken months to complete, now needs billions and takes decades to complete, if it ever is completed at all. We are literally thirty years behind now, and we are rapidly losing the ability to catch up

The government’s solution to this existential crisis is to tax its way out of a recession and enact energy legislation so horrendous that it will guarantee to “fast track” us to third-world status. Environmental zealots in the EPA are on the verge of crippling both the domestic shale oil/gas industry and the Texas petrochemical complex. Legislation is in progress that will essentially make it uneconomic to develop any mineral resources on public land in the United States. The fevered plan to stop Gulf oil development is their latest sortie into the Twilight Zone. The damage now being inflicted on this country is long-lasting and, if not reversed, fatal. If these insane initiatives are implemented, the day will not be far off when the United States will not have the talent, technology, or money to restart its productive sector even if it wants to.

When a country is on a social and economic course so suicidal that the Russians are warning us about it, some introspection is called for. Post-racial, post-industrial, postmodern, post-fossil fuel, post-common sense America has very little time left to straighten out its priorities and reverse its slide into what Leon Trotsky called “the dustbin of history.”

The ironic epilogue to all this is that when the United States completes its journey to political, economic, and military impotence, the Chinese will walk in and buy up our vast reserves of mineral and energy resources with our own dollars and produce them for their own use. They will not be bothered by environmental niceties, and they will have the power to do as they please. Environmentalists in their uncompromising, unhinged war against our producers will have destroyed the environment they were claiming to save.

HT: American Thinker

Obama’s poorly coded message to investors is to take your money out of America and keep it out. Whether through excessive taxation, suffocating over-regulation, or thuggish confiscation, the lesson to be drawn by anyone with excess capital is to look for friendlier places to put it to work.

The list of friendlier places excludes North Korea, Venezuela, and Iran for the time being, but almost everywhere else qualifies. Russia’s president spent several days in Silicon Valley recently looking for adventurous investors and came away with a $1B commitment from Cisco Systems. For Cisco, sitting on a cash hoard of $30B, with years of experience partnering with the burgeoning Russian venture capital industry, the decision was probably not a very tortured one. And what a perfect opportunity for Cisco’s CEO John Chambers to keep his cash as far from Obama’s collection agencies as possible.

President Medvedev promises Cisco a capital gains tax rate of zero; President Obama promises to retire the evil George Bush capital gains rate of 15% and increase it to 20% in 2011. Cisco is merely telecasting to anyone who wants to tune in that Russia is taking advantage of Obama’s lurch towards socialism (or worse). While Russia is portraying itself as a stable bastion for capitalists, America is increasingly seen as the land that mauled Chrysler and GM bondholders. While erstwhile command economies are liberalizing, America under Obama is nationalizing. The lesson is clear: Don’t leave cash within the American financial system, earning minimal returns, with the fear that at any moment your assets can be confiscated or redistributed by a lawless and capricious federal government.

When will Obama decide that Cisco (or Wal-Mart, or Apple, or Google, or any other successful enterprise) is not paying its “fair share”? Aren’t the profit margins earned by Cisco on its routers — sometimes approaching 70% — too rich, or even obscene? Aren’t these gains, in essence, nothing but windfall profits resulting in the eventual gouging of the average American internet subscriber? Cisco might not drill in the Gulf of Mexico for its profits, but man-made disasters could await it too, in the form of arbitrary, BP-like shakedowns of its hard-earned wealth. Why risk shakedowns in gangland Obama when a much more competent criminal like Putin will guarantee your investments?

Cisco is not the only company sitting on a gigantic cash cushion. All told, the balance sheet cash for the non-financial segment of the S&P 500 totals around $1 trillion. Businesses sit on these huge asset cushions and accept earning virtually nothing in real terms because risks are too high to consider anything else.

In 2011, one of the largest tax increases in American history goes into effect. Not only do capital gains rise, but so too does the payroll tax, the income tax, and the estate tax. And even then, businesses large and small, while in their final financial death throes, will have nothing to look forward to other than the doom of ObamaCare and the unknown costs that Obama will attempt to afflict via cap-and-trade and a European-style value-added tax.

Fears are also emerging about the eventual burden imposed on all of us by dozens of states virtually bankrupt, especially if the federal government structures bailouts for those states deemed too big to fail. Unfortunately, the biggest and most likely to fail — California, New York, and Illinois — are Democrat and union fortresses that Obama will not let topple.

These and many other states have already been thrown a life jacket during the last near-trillion dollar stimulus in the form of unemployment insurance and other transfer payments. But the effects of those financial stimulants are beginning to wear off, and the federal drug dealer has little inventory left — except for massive money-printing.

Inflation is almost the last strategy left for the Federal Reserve, having driven short-term interest to zero and purchased all the treasuries, agency, and mortgage debt thrown its way.

Fears of excessive taxation and unpredictable costs are muting American entrepreneurial animal spirits. These fears are likely at the root of our persistently high unemployment. The issue too often is not lack of loan supply to launch a new enterprise, but a lack of demand for the loans to get started. Strangling business creation translates into no new job creation. If you launch a business today and organize as an S-Corporation, how can you be even reasonably sure will you take home enough in profits to justify the initial risk of the undertaking? And if you were successful enough to reach the revenue heights of $250K, Obama would target you as a capitalist predator and promote you to the highest tax bracket.

In contrast to Jefferson’s goal of preserving “a model of government, securing to man his rights and the fruits of his labor, by an organization constantly subject to his own will,” our current administration is brutally determined to transform government into an organ that redistributes those fruits to its cronies. The reaction of sane, rational Americans to these perverse incentives is not to create or hire or produce. Instead, existing businesses and potential founders of new ones are hunkering down, hoping to wake up from this national nightmare in 2010 and 2012 with some of their wealth still intact

HT: American Thinker

We are no more addicted to oil than we are addicted to oxygen. This extraordinary mineral is a part of every aspect of our lives; used to create plastic, used in pharmaceuticals, used for the asphalt that pave our highways, and used as the fuel for our cars, trucks, and for countless other applications.

Oil is not “finite” as the president suggested. There is no end of oil.

There are, however, tremendous challenges and costs to find it, drill for it, transport it, and refine it. It is an industry that requires huge amounts of money to discover new reservoirs of oil and even more to acquire it. It involves tremendous risk as well. Oil companies that hit too many dry wells are no longer in business.

The president cited China as a nation pursuing “clean energy”, but the president said nothing of the new coal-fired plants to generate electricity that China has been opening every week in recent years and will continue to do in the years ahead. The president did not mention that China is literally drilling for oil in the Gulf of Mexico off the coast of Cuba. Like every modern nation, China needs oil.

The president is lying. There is no “clean energy future” when he talks of solar and wind energy

America needs oil, but the policies of previous administrations from the 1970s onward have stymied production, shut down existing wells, driven oil companies to seek it anywhere but here!

Instead, he devoted the thrust of his address to tell Americans they must “embrace a clean energy future”, must “transition away” from so-called fossil fuels, and that the nation must, in fact, “accelerate” that effort.

The president is lying. There is no “clean energy future” when he talks of solar and wind energy.

Neither solar or wind can begin to compete with oil, coal and natural gas. If they were viable, the government would not have to plunder the national treasury to provide them with subsidies, requiring that they be included as a source by utilities.

Together, after many years of propaganda, they only provide about three percent of the nation’s energy requirements. They will never provide enough because the wind does not always blow and the sun does not always shine. Every wind and solar farm must be backed up by a traditional plant, be it coal-fired, nuclear, natural gas or hydroelectric.

Instead, this administration has declared war on the most abundant source of energy we have in America, coal. We are the Saudi Arabia of coal.

Coal provides fifty percent of our electricity and it could provide even more; a source that could last for centuries, except that the Obama administration is doing everything it can to thwart the building of new coal-fired plants, to shut down coal mining operations.

If Americans continue to believe this president’s lies, if we continue to believe decades of lies by environmental organizations, many of whom have been the happy recipients of oil industry largess and support, and if we abandon the very sources of energy on which our entire economy and way of life depends, this president will have led America off the cliff.

President Obama is asking America to commit suicide.

HT: CanadaFreePress