Perhaps the biggest media story of 2010 was the influence of Tea Party voters on the congressional landscape. The new congress comes to Capitol Hill with a mandate to end profligate spending and restore fiscal sanity, we are told. But when the House and Senate convene in January, the newly elected members will face tremendous pressure to maintain spending levels for entitlement programs. Even the most modest proposals to trim Social Security or Medicare spending will be met with howls of indignation and threats of voter revolt. Legislators who propose any kind of means testing or increased retirement ages can expect angry visits from senior citizen lobbyists ready to fund a candidate back home who supports the status quo.
But millions of Americans now realize that the status quo is an illusion that will not last even another 10 or 20 years. The federal government cannot continue to spend a trillion dollars more than it collects in revenue each year, because we are running out of creditors. Fiscal reality is setting in, and the consequences may be grim even if Congress finds the courage to take decisive action now.
Courage begins with a commitment to see things as they are, rather than how we wish they were. When it comes to Social Security, we must understand that the system does not represent an old age pension, an “insurance” program, or even a forced savings program. It simply represents an enormous transfer payment, with younger workers paying taxes to fund benefits. There is no Social Security trust fund, and you don’t have an “account.” Whether you win or lose the Social Security lottery is a function of when you happened to be born and how long you live to collect benefits. Of course young people today have every reason to believe they will never collect those benefits.
Notice that neither political party proposes letting people opt out of Social Security, which exposes the lie that your contributions are set aside and saved. After all, if your contributions really are put aside for your retirement, the money is there earning interest, right? If your money is in your “account,” what difference would it make if your neighbor chooses not to participate in the program? The truth, of course, is that your contributions are not put aside. Social Security is simply a tax. Like all taxes, the money collected is spent immediately as general revenue to fund the federal government. But no administration will admit that Social Security is nothing more than an accounting ledger with no money. You will collect benefits only if future tax revenues materialize as hoped; the money you paid into the system is long gone.
My hope is that at least some members of the new Congress will cut through the distortions and see Social Security as it really is. The best way to fix the impending Social Security crisis is also the simplest: allow younger individuals to opt out of the program and use their tax savings to invest privately as they see fit. This is the true private solution. Your money has never been safe in the government’s hands, and it never will be.
Tuesday
WHAT I THINK........BILL ANDERSON
When the Republicans retook the U.S. House of Representatives last November, it meant that Ron Paul would be in line to chair the subcommittee that oversees the Federal Reserve System. Despite the intense lobbying by Ben Bernanke and others who loathed the prospect of Rep. Paul being able to subpoena them to appear before Congress and then to ask them pointed questions about their secret operations, the Republican leadership still gave Rep. Paul his rightful position.
Obviously, the Usual Suspects on the Right and the Left are not happy, and today, I wish to concentrate on the attacks on Rep. Paul by another Paul, that being Krugman, who has deliberately misrepresented Rep. Paul’s positions in recent columns and blog posts. Krugman’s December 20 column called Rep. Paul a "zombie," and then proceeded to attribute false views to the congressman. All in a day’s work for the man whose name disgraces the Nobel Memorial Prize for Economics.
Actually, Krugman’s smears began over the weekend when he first gave Rep. Paul a backhanded "compliment" for being consistent in his thinking, but then wrote that his ideas were "crazy." Wrote Krugman:
In a way, I almost welcome the frankness of someone like Ron Paul, who tells us that there’s no need for any kind of bank regulations. It’s crazy, of course – even Adam Smith called for bank regulations, comparing them to building regulations designed to prevent the spread of fires. But at least the guy’s consistent.
However, this is what Rep. Paul actually said:
"I don’t think we need regulators. We need law and order. We need people to fulfill their contracts." He added: "The market is a great regulator, and we’ve lost understanding and confidence that the market is probably a much stricter regulator."
What Rep. Paul wants is not government regulation, nor does he approve of "self-regulation," but rather he wants market regulation which comes about via profits and losses. For example, the banking crisis that came about in the fall of 2008 existed because consumers and investors were telling the banks they made wrong choices, and that they needed to pay.
However, Congress (with Krugman’s approval) intervened and then pretty much proceeded to nationalize the country’s financial system. As Austrians (and we count Dr. Paul among our number) have noted, this will not make the financial regime more stable and it certainly will not make it more solvent. It just makes the hole deeper and the Day of Reckoning even more sinister.
Krugman hardly was through. He then created another post for his blog in which he misrepresents Dr. Paul’s views on money. Krugman writes:
I used that term (paleomonetarism) – it’s probably not original, but who knows? – in a recent post about the increasingly obscure meaning of the money supply. The best example would surely be Ron Paul, who’s now going to have oversight over the Fed. If you read his stuff, it’s very clear: money is a well-defined quantity that the Fed controls, and inflation comes from – indeed is defined as – increases in that quantity.
What he means, I guess, is monetary base.
Krugman then goes on to compare the changes in the monetary base with the changes in the CPI in order to claim that Dr. Paul is wrong on money and wrong on inflation. Robert Wenzel deftly challenges Krugman in this blog post.
However, Krugman was just getting warmed up, and his December 20 column not only refers to Dr. Paul as a "zombie," but he repeats the "regulation" quote but this time fails to link Dr. Paul’s statements to the article in the Wall Street Journal from where the quote came. He writes:
When historians look back at 2008–10, what will puzzle them most, I believe, is the strange triumph of failed ideas. Free-market fundamentalists have been wrong about everything – yet they now dominate the political scene more thoroughly than ever.
How did that happen? How, after runaway banks brought the economy to its knees, did we end up with Ron Paul, who says "I don’t think we need regulators," about to take over a key House panel overseeing the Fed?
We can expect much, much more of this, and not just from Paul Krugman. Ben Bernanke has lots of friends in the media, and one can be sure that Bernanke will be the source of "anonymous" quotes that will denigrate Dr. Paul’s character and his understanding of money and the economy. For that matter, Bernanke was the chair of the economics department at Princeton when the university hired Krugman, so one can be sure that Krugman has Bernanke’s back.
Furthermore, one can bet that much of the banking and monetary establishment is going to try to destroy Dr. Paul’s character over the next two years, and given that the Washington media really does not care about facts and certainly not the truth, one can bet that every false rumor about Ron Paul will be bandied about by the mainstream media.
Of all people, Krugman understands that when an academic writer such as himself deliberately misrepresents someone by using a quote to push a point of view the other person does not have, he is engaged in fraud. This is the kind of fraud that at one time discredited someone to a point where his good reputation and sometimes his academic position were taken away from him.
Obviously, that no longer is the case. Krugman has signaled that he is quite willing to be a hatchet man for Bernanke and others and to insult and misrepresent what Ron Paul is doing and saying. That Bernanke and his Wall Street friends are willing to go along with this tells us much more about them than I really want to know.
(I would add that Henry Hazlitt, who was a much better economic thinker than Krugman ever will be, wrote columns for Newsweek for many years, yet never engaged in this kind of personal invective. Today, invective is about all Krugman and others like him understand.)
It is going to become even uglier than it is now, and the new Congress has not even been seated.
Obviously, the Usual Suspects on the Right and the Left are not happy, and today, I wish to concentrate on the attacks on Rep. Paul by another Paul, that being Krugman, who has deliberately misrepresented Rep. Paul’s positions in recent columns and blog posts. Krugman’s December 20 column called Rep. Paul a "zombie," and then proceeded to attribute false views to the congressman. All in a day’s work for the man whose name disgraces the Nobel Memorial Prize for Economics.
Actually, Krugman’s smears began over the weekend when he first gave Rep. Paul a backhanded "compliment" for being consistent in his thinking, but then wrote that his ideas were "crazy." Wrote Krugman:
In a way, I almost welcome the frankness of someone like Ron Paul, who tells us that there’s no need for any kind of bank regulations. It’s crazy, of course – even Adam Smith called for bank regulations, comparing them to building regulations designed to prevent the spread of fires. But at least the guy’s consistent.
However, this is what Rep. Paul actually said:
"I don’t think we need regulators. We need law and order. We need people to fulfill their contracts." He added: "The market is a great regulator, and we’ve lost understanding and confidence that the market is probably a much stricter regulator."
What Rep. Paul wants is not government regulation, nor does he approve of "self-regulation," but rather he wants market regulation which comes about via profits and losses. For example, the banking crisis that came about in the fall of 2008 existed because consumers and investors were telling the banks they made wrong choices, and that they needed to pay.
However, Congress (with Krugman’s approval) intervened and then pretty much proceeded to nationalize the country’s financial system. As Austrians (and we count Dr. Paul among our number) have noted, this will not make the financial regime more stable and it certainly will not make it more solvent. It just makes the hole deeper and the Day of Reckoning even more sinister.
Krugman hardly was through. He then created another post for his blog in which he misrepresents Dr. Paul’s views on money. Krugman writes:
I used that term (paleomonetarism) – it’s probably not original, but who knows? – in a recent post about the increasingly obscure meaning of the money supply. The best example would surely be Ron Paul, who’s now going to have oversight over the Fed. If you read his stuff, it’s very clear: money is a well-defined quantity that the Fed controls, and inflation comes from – indeed is defined as – increases in that quantity.
What he means, I guess, is monetary base.
Krugman then goes on to compare the changes in the monetary base with the changes in the CPI in order to claim that Dr. Paul is wrong on money and wrong on inflation. Robert Wenzel deftly challenges Krugman in this blog post.
However, Krugman was just getting warmed up, and his December 20 column not only refers to Dr. Paul as a "zombie," but he repeats the "regulation" quote but this time fails to link Dr. Paul’s statements to the article in the Wall Street Journal from where the quote came. He writes:
When historians look back at 2008–10, what will puzzle them most, I believe, is the strange triumph of failed ideas. Free-market fundamentalists have been wrong about everything – yet they now dominate the political scene more thoroughly than ever.
How did that happen? How, after runaway banks brought the economy to its knees, did we end up with Ron Paul, who says "I don’t think we need regulators," about to take over a key House panel overseeing the Fed?
We can expect much, much more of this, and not just from Paul Krugman. Ben Bernanke has lots of friends in the media, and one can be sure that Bernanke will be the source of "anonymous" quotes that will denigrate Dr. Paul’s character and his understanding of money and the economy. For that matter, Bernanke was the chair of the economics department at Princeton when the university hired Krugman, so one can be sure that Krugman has Bernanke’s back.
Furthermore, one can bet that much of the banking and monetary establishment is going to try to destroy Dr. Paul’s character over the next two years, and given that the Washington media really does not care about facts and certainly not the truth, one can bet that every false rumor about Ron Paul will be bandied about by the mainstream media.
Of all people, Krugman understands that when an academic writer such as himself deliberately misrepresents someone by using a quote to push a point of view the other person does not have, he is engaged in fraud. This is the kind of fraud that at one time discredited someone to a point where his good reputation and sometimes his academic position were taken away from him.
Obviously, that no longer is the case. Krugman has signaled that he is quite willing to be a hatchet man for Bernanke and others and to insult and misrepresent what Ron Paul is doing and saying. That Bernanke and his Wall Street friends are willing to go along with this tells us much more about them than I really want to know.
(I would add that Henry Hazlitt, who was a much better economic thinker than Krugman ever will be, wrote columns for Newsweek for many years, yet never engaged in this kind of personal invective. Today, invective is about all Krugman and others like him understand.)
It is going to become even uglier than it is now, and the new Congress has not even been seated.
DISTORTING THE TAX POLICY DEBATE
George Orwell warned us about the use of “meaningless words” in politics, words that are endlessly repeated by sloganeering politicians until they have no meaning at all. Meaningless words certainly were on display during last week’s congressional debate over the latest tax bill.
Over and over again we heard trite, empty phrases like “tax cuts for the wealthiest 2%,” “tax giveaways,” “tax earmarks,” and “borrowing money to give to millionaires.” Time and time again the same falsehoods were presented as fact, and reported as such by a credulous media.
But all of these clichés about taxes are based on the presumption that government has a right to all of your income, and so government “gives” you something when it allows you to keep a portion of that income. To this mindset, tax cuts represent a “cost” to government. After all, they argue, money that really ought to go to the most noble of purposes – wealth redistribution via taxation – is being kept by greedy people and corporations who just don’t want to pay their fair share.
Far too many Americans truly believe that tax cuts represent a government giveaway, indistinguishable from an outright subsidy or entitlement payment. To combat this mindset, we need to be clear with our language.
A subsidy, properly understood, occurs when government takes tax dollars and gives them to favored individuals, companies, or industries. A tax cut, by contrast, simply means government takes less from an individual, company, or industry. When government takes less from you, it has not given you anything; it merely has harmed you less. This is the critical distinction that has been lost in the endless, tired debate about tax policy.
Of course the bill passed last week did contain some actual spending, mostly in the form of an extension of unemployment benefits for another 13 months. The total spending in the bill amounted to about $60 billion. But the tax savings in the bill, meaning the amount of money that will remain in the hands of taxpayers rather than being sent to Washington, is approximately $850 billion. So while a clean tax bill certainly would have been preferable, the tax relief it contains is significant. It means $850 billion will be spent, saved, or invested by American citizens rather than being sent into the black hole known as the federal treasury.
The media, however, dutifully reported that opposition to the bill came from concerned members of Congress who felt the $850 billion “cost” of the bill was too high, and would add too much to the deficit. As always, they could not distinguish between government giving and government taking away. The American people already pay plenty in federal taxes; the deficit is the result of a spending problem, not a revenue problem.
Had the bill not passed, millions of Americans would have seen their paychecks shrink in January due to increased tax withholding. That is the plain and simple truth, and that is why I voted for the bill.
Over and over again we heard trite, empty phrases like “tax cuts for the wealthiest 2%,” “tax giveaways,” “tax earmarks,” and “borrowing money to give to millionaires.” Time and time again the same falsehoods were presented as fact, and reported as such by a credulous media.
But all of these clichés about taxes are based on the presumption that government has a right to all of your income, and so government “gives” you something when it allows you to keep a portion of that income. To this mindset, tax cuts represent a “cost” to government. After all, they argue, money that really ought to go to the most noble of purposes – wealth redistribution via taxation – is being kept by greedy people and corporations who just don’t want to pay their fair share.
Far too many Americans truly believe that tax cuts represent a government giveaway, indistinguishable from an outright subsidy or entitlement payment. To combat this mindset, we need to be clear with our language.
A subsidy, properly understood, occurs when government takes tax dollars and gives them to favored individuals, companies, or industries. A tax cut, by contrast, simply means government takes less from an individual, company, or industry. When government takes less from you, it has not given you anything; it merely has harmed you less. This is the critical distinction that has been lost in the endless, tired debate about tax policy.
Of course the bill passed last week did contain some actual spending, mostly in the form of an extension of unemployment benefits for another 13 months. The total spending in the bill amounted to about $60 billion. But the tax savings in the bill, meaning the amount of money that will remain in the hands of taxpayers rather than being sent to Washington, is approximately $850 billion. So while a clean tax bill certainly would have been preferable, the tax relief it contains is significant. It means $850 billion will be spent, saved, or invested by American citizens rather than being sent into the black hole known as the federal treasury.
The media, however, dutifully reported that opposition to the bill came from concerned members of Congress who felt the $850 billion “cost” of the bill was too high, and would add too much to the deficit. As always, they could not distinguish between government giving and government taking away. The American people already pay plenty in federal taxes; the deficit is the result of a spending problem, not a revenue problem.
Had the bill not passed, millions of Americans would have seen their paychecks shrink in January due to increased tax withholding. That is the plain and simple truth, and that is why I voted for the bill.
Friday
WHAT I THINK........JAMES ANTLE
The Revolution is here! Searching for leadership, congressional Republicans have finally turned to Ron Paul. Well, to chair the House subcommittee on domestic monetary policy, at least. But that does put Congress's leading critic of the Federal Reserve in charge of the panel that oversees the central bank.
Ben Bernanke, beware. The 12-term libertarian-leaning congressman from Texas has written a book-length manifesto – titled simply End the Fed – calling for the Federal Reserve's abolition. He will likely call leading Austrian economists affiliated with the Ludwig von Mises Institute to Capitol Hill to testify alongside staid mainstream economists. Fortune magazine recently asked, "Will the Fed be able to survive Ron Paul?"
For years, Paul laboured in obscurity. He ended his first stint in Congress with an unsuccessful run for US Senate in 1984 (he lost to eventual Senator Phil Gramm in the Republican primary). Before returning to the House 13 years later, in order to join the stalled government-shrinking "Republican Revolution", Paul was the Libertarian party's presidential nominee in 1988.
But it was Paul's first Republican presidential campaign in 2008 that really put him on the map. Debating alongside John McCain, Rudy Giuliani and Mitt Romney, Paul stood out as a voice for peace and civil liberties. Unlike all the other Republicans on stage, he opposed the Iraq war and the Patriot Act. A strict constitutionalist, he was also more consistent than the rest of them in his rejection of debts, deficits and runaway government spending.
Paul's views on war and peace remain deeply controversial within the Republican party. When Paul defended Wikileaks founder Julian Assange, for instance, the conservative blog RedState denounced him as "al-Qaida's favourite member of Congress". But when it comes to economics and the requirement that federal legislation be explicitly based on the Constitution, Paul's philosophy is starting to resonate.
Republican leaders resisted pressure from the banking industry to block him from his new subcommittee chairmanship. Every GOP member of Congress, and a not insignificant number of Democrats, co-sponsor his bill to audit the Fed. His son Rand was elected to the Senate from Kentucky in November. According to a Paul profile in the New York Times, "others are beginning to credit him with some wisdom – or at least acknowledging his passionate following."
Ben Bernanke, beware. The 12-term libertarian-leaning congressman from Texas has written a book-length manifesto – titled simply End the Fed – calling for the Federal Reserve's abolition. He will likely call leading Austrian economists affiliated with the Ludwig von Mises Institute to Capitol Hill to testify alongside staid mainstream economists. Fortune magazine recently asked, "Will the Fed be able to survive Ron Paul?"
For years, Paul laboured in obscurity. He ended his first stint in Congress with an unsuccessful run for US Senate in 1984 (he lost to eventual Senator Phil Gramm in the Republican primary). Before returning to the House 13 years later, in order to join the stalled government-shrinking "Republican Revolution", Paul was the Libertarian party's presidential nominee in 1988.
But it was Paul's first Republican presidential campaign in 2008 that really put him on the map. Debating alongside John McCain, Rudy Giuliani and Mitt Romney, Paul stood out as a voice for peace and civil liberties. Unlike all the other Republicans on stage, he opposed the Iraq war and the Patriot Act. A strict constitutionalist, he was also more consistent than the rest of them in his rejection of debts, deficits and runaway government spending.
Paul's views on war and peace remain deeply controversial within the Republican party. When Paul defended Wikileaks founder Julian Assange, for instance, the conservative blog RedState denounced him as "al-Qaida's favourite member of Congress". But when it comes to economics and the requirement that federal legislation be explicitly based on the Constitution, Paul's philosophy is starting to resonate.
Republican leaders resisted pressure from the banking industry to block him from his new subcommittee chairmanship. Every GOP member of Congress, and a not insignificant number of Democrats, co-sponsor his bill to audit the Fed. His son Rand was elected to the Senate from Kentucky in November. According to a Paul profile in the New York Times, "others are beginning to credit him with some wisdom – or at least acknowledging his passionate following."
Thursday
WHAT I THINK.......BOB BAUMAN
“And when man faces destiny, destiny ends and man comes into his own.”
Those words were uttered by the late André Malraux, French adventurer, award-winning author, and statesman, but they certainly apply now to my friend and former congressional colleague, U.S. Rep. Ron Paul of Texas.
If proof were needed of that truth, one need only glance at today’s New York Times front page.
There, under the cynical headline “Rep. Ron Paul, G.O.P. Loner, Comes In From Cold” is a lengthy article that chronicles Ron’s ascension in the new Congress to the chairmanship of the House Subcommittee on Domestic Monetary Policy which oversees the Federal Reserve as well as the currency and the valuation of the dollar.
After years of blocking him from a leadership position, Rep. Paul’s fellow Republicans have elevated him to what could become a highly visible platform for exposing Ben Bernanke and the Fed’s squandering of trillions of declining paper dollars. They did so, despite the reported opposition of a number of Wall Street bankers who apparently fear Paul – as well they should.
End the Fed
Ron Paul has strong views on the issues. He has written a book called End the Fed; he embraces the Austrian school of economic thought, which holds that the government has no role in regulating the economy; and he advocates a return to the gold standard.
Sounds damn good to me!
That The Times, the declining mouthpiece of the American Left, would give such prominence to one whose presidential candidacy they routinely have vilified, is at least an acknowledgement of the power of Paul’s influence – as well as the national groundswell that is the Tea Party Revolution.
Many of the new Republicans in the next Congress campaigned on precisely the issues that Ron Paul has been talking about for 40 years: forbidding Congress from any action not explicitly authorized in the U.S. Constitution, eliminating entire federal departments as unconstitutional and checking the power of the Fed.
A Positive No
In 1973, when I was first elected to the U.S. House, my late colleague and good friend, John Ashbrook of Ohio told me: “Bob, 99% of the time in the House you can’t go wrong by voting no.”
During his 20 years in Congress, Ron has staked out the lonely end of 434-to-1 votes against legislation that he considers unconstitutional, even on issues as ceremonial as granting Mother Teresa a Congressional Gold Medal. His colleagues have dubbed him “Dr. No,” but his wife insists that they have the spelling wrong: he is really Dr. Know.
Rep. Paul wasted no time in assuming his new role in the House. In a statement on his web site he made plain his future plans:
“Since the announcement that I will chair the congressional subcommittee that oversees the Federal Reserve, the media response has been overwhelming. The groundswell of opposition to Fed actions among ordinary citizens is…in the tremendous interest shown by the financial press. The demand for transparency is growing whether the political and financial establishment likes it or not. The Fed is losing its vaunted status as an institution that is somehow above politics and public scrutiny. Fed transparency will be the cornerstone of my efforts as Subcommittee Chairman.”
Freedom Alliance
By the way, if you had been a member of the Freedom Alliance, which I chair, you would have had full audio access to an interview I did last month with Ron Paul. Ron had many interesting things to say about numerous topics and was very candid in revealing he may well run for president again in 2012.
The Times notes: “Aides, supporters and television interviewers now use words like ‘vindicated’ to describe him — a term Mr. Paul, a 75-year-old obstetrician with the manner of a country doctor, brushes off.
“I don’t think it’s very personal,” he said in an interview in his office on the Hill, where he has represented the 14th District of Texas on and off since 1976. “People are really worried about what’s happening, so they’re searching, and I think they see that we’ve been offering answers.”
The right answers, I might add.
Those words were uttered by the late André Malraux, French adventurer, award-winning author, and statesman, but they certainly apply now to my friend and former congressional colleague, U.S. Rep. Ron Paul of Texas.
If proof were needed of that truth, one need only glance at today’s New York Times front page.
There, under the cynical headline “Rep. Ron Paul, G.O.P. Loner, Comes In From Cold” is a lengthy article that chronicles Ron’s ascension in the new Congress to the chairmanship of the House Subcommittee on Domestic Monetary Policy which oversees the Federal Reserve as well as the currency and the valuation of the dollar.
After years of blocking him from a leadership position, Rep. Paul’s fellow Republicans have elevated him to what could become a highly visible platform for exposing Ben Bernanke and the Fed’s squandering of trillions of declining paper dollars. They did so, despite the reported opposition of a number of Wall Street bankers who apparently fear Paul – as well they should.
End the Fed
Ron Paul has strong views on the issues. He has written a book called End the Fed; he embraces the Austrian school of economic thought, which holds that the government has no role in regulating the economy; and he advocates a return to the gold standard.
Sounds damn good to me!
That The Times, the declining mouthpiece of the American Left, would give such prominence to one whose presidential candidacy they routinely have vilified, is at least an acknowledgement of the power of Paul’s influence – as well as the national groundswell that is the Tea Party Revolution.
Many of the new Republicans in the next Congress campaigned on precisely the issues that Ron Paul has been talking about for 40 years: forbidding Congress from any action not explicitly authorized in the U.S. Constitution, eliminating entire federal departments as unconstitutional and checking the power of the Fed.
A Positive No
In 1973, when I was first elected to the U.S. House, my late colleague and good friend, John Ashbrook of Ohio told me: “Bob, 99% of the time in the House you can’t go wrong by voting no.”
During his 20 years in Congress, Ron has staked out the lonely end of 434-to-1 votes against legislation that he considers unconstitutional, even on issues as ceremonial as granting Mother Teresa a Congressional Gold Medal. His colleagues have dubbed him “Dr. No,” but his wife insists that they have the spelling wrong: he is really Dr. Know.
Rep. Paul wasted no time in assuming his new role in the House. In a statement on his web site he made plain his future plans:
“Since the announcement that I will chair the congressional subcommittee that oversees the Federal Reserve, the media response has been overwhelming. The groundswell of opposition to Fed actions among ordinary citizens is…in the tremendous interest shown by the financial press. The demand for transparency is growing whether the political and financial establishment likes it or not. The Fed is losing its vaunted status as an institution that is somehow above politics and public scrutiny. Fed transparency will be the cornerstone of my efforts as Subcommittee Chairman.”
Freedom Alliance
By the way, if you had been a member of the Freedom Alliance, which I chair, you would have had full audio access to an interview I did last month with Ron Paul. Ron had many interesting things to say about numerous topics and was very candid in revealing he may well run for president again in 2012.
The Times notes: “Aides, supporters and television interviewers now use words like ‘vindicated’ to describe him — a term Mr. Paul, a 75-year-old obstetrician with the manner of a country doctor, brushes off.
“I don’t think it’s very personal,” he said in an interview in his office on the Hill, where he has represented the 14th District of Texas on and off since 1976. “People are really worried about what’s happening, so they’re searching, and I think they see that we’ve been offering answers.”
The right answers, I might add.
Monday
AUDIT THE FED IN 2011
Since the announcement last week that I will chair the congressional subcommittee that oversees the Federal Reserve, the media response has been overwhelming. The groundswell of opposition to Fed actions among ordinary citizens is reflected not only in the rhetoric coming out of Capitol Hill, but also in the tremendous interest shown by the financial press. The demand for transparency is growing, whether the political and financial establishment likes it or not. The Fed is losing its vaunted status as an institution that somehow is above politics and public scrutiny. Fed transparency will be the cornerstone of my efforts as subcommittee chairman.
Thanks to public pressure earlier this year, Congress did pass legislation that requires the Fed to disclose some information about its bailout of select industries and companies following the 2008 financial crisis. So two weeks ago the Fed released data concerning more than $3 trillion of assistance it offered to banks through its bailout facilities. After reviewing this data, however, we are left with many more questions about the Fed's “lending”.
In the “Term Securities Lending Facility”, the Fed was supposed to have loaned against AAA-rated securities-- yet over half of the collateral put up by banks to obtain loans had no listed credit rating. Should we assume that the Fed accepted absolute junk rated securities as collateral for loans? Presumably these securities were so bad that they wouldn’t even publicize their credit rating. So why should our central bank, backed up by your taxes, accept such collateral?
On another note, of the $1.25 trillion purchased under the Fed’s “Mortgage-Backed Securities Purchase Program,” only $877 billion in purchases have been publicized. What happened to the remaining $400 billion?
These kinds of limited disclosures by the Fed only underscore the need for a full and complete audit of the Fed’s financial books. This audit should be done by an independent third party, in the same manner that public companies are audited. The Fed should make public its balance sheet, income statement, and perhaps most importantly its cash flow statement. It also should publicize the notes explaining those financial statements.
We seem to forget sometimes that Congress created the Fed-- it is a government-created banking monopoly, and its top decision-makers are appointed by the President and confirmed by the Senate. If the Fed does not perform satisfactorily in the eyes of these politicians and their constituents, the Chairman and Governors may not be re-nominated.
In theory, Congress could even repeal the Federal Reserve Act altogether since it has the authority to do so. Obviously Congress is within its authority to audit an organization it created by statute, and it is time to assume that responsibility.
With 320 Members of Congress cosponsoring my legislation to fully audit the Fed in the 111th Congress, my hope is that we can build on our broad bipartisan coalition in 2011 and continue the push for greater Fed transparency going forward.
Thanks to public pressure earlier this year, Congress did pass legislation that requires the Fed to disclose some information about its bailout of select industries and companies following the 2008 financial crisis. So two weeks ago the Fed released data concerning more than $3 trillion of assistance it offered to banks through its bailout facilities. After reviewing this data, however, we are left with many more questions about the Fed's “lending”.
In the “Term Securities Lending Facility”, the Fed was supposed to have loaned against AAA-rated securities-- yet over half of the collateral put up by banks to obtain loans had no listed credit rating. Should we assume that the Fed accepted absolute junk rated securities as collateral for loans? Presumably these securities were so bad that they wouldn’t even publicize their credit rating. So why should our central bank, backed up by your taxes, accept such collateral?
On another note, of the $1.25 trillion purchased under the Fed’s “Mortgage-Backed Securities Purchase Program,” only $877 billion in purchases have been publicized. What happened to the remaining $400 billion?
These kinds of limited disclosures by the Fed only underscore the need for a full and complete audit of the Fed’s financial books. This audit should be done by an independent third party, in the same manner that public companies are audited. The Fed should make public its balance sheet, income statement, and perhaps most importantly its cash flow statement. It also should publicize the notes explaining those financial statements.
We seem to forget sometimes that Congress created the Fed-- it is a government-created banking monopoly, and its top decision-makers are appointed by the President and confirmed by the Senate. If the Fed does not perform satisfactorily in the eyes of these politicians and their constituents, the Chairman and Governors may not be re-nominated.
In theory, Congress could even repeal the Federal Reserve Act altogether since it has the authority to do so. Obviously Congress is within its authority to audit an organization it created by statute, and it is time to assume that responsibility.
With 320 Members of Congress cosponsoring my legislation to fully audit the Fed in the 111th Congress, my hope is that we can build on our broad bipartisan coalition in 2011 and continue the push for greater Fed transparency going forward.
Saturday
WHAT I THINK......THE ECONOMIC COLLAPSE BLOG
Is Ron Paul finally in position to really do something about the Federal Reserve? U.S. Representative Spencer Bachus, the chairman-elect of the House Financial Services Committee, has announced that Ron Paul will chair the domestic monetary policy subcommittee starting next month. This puts Ron Paul in tremendous position to be able to put significant pressure on the Federal Reserve. In previous years Ron Paul has introduced legislation to end the Federal Reserve but it never got any traction. During this most recent session of Congress an effort by Ron Paul to have a full audit of the Federal Reserve conducted gathered quite a bit of momentum for a while, but in the end it did not get passed. However, a very limited examination of Fed activities during the recent financial crisis was passed, and that examination has revealed some really shocking things. With so many Tea Party members entering Congress this upcoming session there may be more momentum than ever to hold the Federal Reserve more accountable. Ron Paul is already talking about how he is planning for a full slate of hearings on U.S. monetary policy and he has indicated that he plans to restart a push to have the Fed audited.
And why shouldn't the Federal Reserve be fully audited? The Federal Reserve has more power over the U.S. economy than any other institution and yet it has not been subjected to a comprehensive audit since it was created back in 1913.
So what would an audit accomplish?
Well, it would hopefully expose what is going on inside the Federal Reserve.
A very, very limited examination of Fed transactions that occurred during the recent financial crisis forced the Federal Reserve to reveal the details of 21,000 transactions stretching from December 2007 to July 2010 that totaled more than 3 trillion dollars. It turns out that the Federal Reserve was just handing out gigantic piles of nearly interest-free cash to their friends at the largest banks, financial institutions and corporations all over the globe.
These revelations have many members of Congress wondering what else has been going on inside the Federal Reserve.
For example, U.S. Senator Bernie Sanders was absolutely outraged by these "backdoor bailouts" by the Federal Reserve....
"The $700 billion Wall Street bailout turned out to be pocket change compared to trillions and trillions of dollars in near zero interest loans and other financial arrangements that the Federal Reserve doled out to every major financial institution."
More members of Congress than at any other time in recent memory are openly wondering if it is now time "to pull back the curtain" at the Federal Reserve. For those who would like to see the power of the Federal Reserve greatly diminished, there should be one primary goal right now.
Expose the Federal Reserve.
The truth is that the more the American people learn about the Federal Reserve and about what it has been doing the more they disapprove.
During his farewell speech on the floor of the U.S. Senate this week, Senator Jim Bunning noted that as the American people become increasingly aware of what the Federal Reserve is doing the less they like it....
"Public awareness of what the Fed is doing is increasing while public opinion of the Fed is falling."
Unfortunately, the views of Ron Paul and other anti-Federal Reserve members of the Tea Party movement are strongly opposed by many other members of the Republican Party.
In a recent Bloomberg Television interview, Barney Frank noted this division within the ranks of the Republicans....
"I do not believe that Ron Paul’s views on the Fed represent the views of most Republicans."
However, there is evidence that the tide is turning with the American public.
According to a recent Bloomberg National Poll, the number of Americans that would like to see the Federal Reserve held more accountable or even completely abolished is increasing....
Asked if the central bank should be more accountable to Congress, left independent or abolished entirely, 39 percent said it should be held more accountable and 16 percent that it should be abolished. Only 37 percent favor the status quo.
Those are very exciting numbers. A majority of Americans now want the power of the Federal Reserve to be reduced or they want it shut down entirely.
If Ron Paul is able to get a comprehensive audit of the Federal Reserve passed, the revelations that would come out of that would certainly turn public opinion against the Fed even more.
So what is so bad about the Federal Reserve?
Well, think of it as a perpetual debt machine.
Did you know that the U.S. national debt is 5,000 times larger than it was a hundred years ago?
That's right – back in 1910, prior to the passage of the Federal Reserve Act, the national debt was only about $2.6 billion.
Since that time, our debt has been endlessly skyrocketing.
Under the Federal Reserve System, the U.S. government cannot just go out and print money. It is actually the Federal Reserve that issues our currency.
The way our system works, whenever the U.S. government arranges for the Federal Reserve to issue more currency, more government debt is created at the same time. In fact, as I have written about previously, all of our money is now based on debt.
No debt, no money.
What we desperately need is for the current monetary system to be scrapped. The federal government should take back the power to issue currency and should implement a new system based on money that is debt-free.
The truth is that it is insane that any sovereign government should have to go into debt just to produce more of its own currency.
Instead, what we have under the Federal Reserve System is a money supply that will forever be expanding, a currency that will forever be deteriorating in value and a national debt that will continue to skyrocket until the entire system collapses.
Since the Federal Reserve was created in 1913, the U.S. dollar has lost over 95 percent of its purchasing power. This continual debasement of our currency is called "inflation" and it is a hidden tax on every man, woman and child in the United States.
It is absolutely guaranteed that every single dollar that you own will go down in value over the long-term.
But the American people have come to accept that a constantly expanding national debt and a currency that is constantly losing value is the most "rational" economic system that humanity has ever come up with.
So who benefits from all this?
Well, for fiscal year 2010 the U.S. government paid out over 413 billion dollars in interest on the national debt. In future years that number is projected to rapidly skyrocket even more.
Wouldn't you like to be getting a nice chunk of that 413 billion dollars?
It turns out that loaning money to the U.S. government is very, very profitable.
That 413 billion dollars is money that was transferred from the American people to the U.S. government, and then transferred from the U.S. government to big financial institutions, foreign countries, and very wealthy bankers.
So what did we get in return for our 413 billion dollars?
Nothing.
Sadly, this is not just going on in the United States. This is going on literally in almost every nation on earth.
All over the world sovereign governments are drowning in debt and so they have to drain their citizens dry so that they can meet their obligations.
In the book of Proverbs, it tells us that "the rich ruleth over the poor, and the borrower is servant to the lender." Americans like to think that they live in "the land of the free," but the truth is that we have become enslaved to debt.
But even worse, we have consigned our children and our grandchildren to a lifetime of debt. They will have to work all of their lives to pay trillions of dollars in interest on all of the debt that we have accumulated in this generation.
How would you like to be born into a world where the previous generation had racked up a $13 trillion debt that now you were expected to pay off?
There is a reason why people like Ron Paul are so obsessed with the Federal Reserve. It is not because they don't have anything better to do. It is because the future of our country literally hangs in the balance.
Throughout American history, presidents, top members of Congress and leading business people have warned us about the dangers of having a central bank. In fact, even though our young people are no longer taught this, the debate over central banking was one of the most important themes in early American history.
But we didn't listen to the warnings.
We were convinced that we knew better.
Well, now we have an economic system that is dying and a $13 trillion debt that we are passing along to our children and to our grandchildren.
Perhaps we were not as smart as we thought we were.
And why shouldn't the Federal Reserve be fully audited? The Federal Reserve has more power over the U.S. economy than any other institution and yet it has not been subjected to a comprehensive audit since it was created back in 1913.
So what would an audit accomplish?
Well, it would hopefully expose what is going on inside the Federal Reserve.
A very, very limited examination of Fed transactions that occurred during the recent financial crisis forced the Federal Reserve to reveal the details of 21,000 transactions stretching from December 2007 to July 2010 that totaled more than 3 trillion dollars. It turns out that the Federal Reserve was just handing out gigantic piles of nearly interest-free cash to their friends at the largest banks, financial institutions and corporations all over the globe.
These revelations have many members of Congress wondering what else has been going on inside the Federal Reserve.
For example, U.S. Senator Bernie Sanders was absolutely outraged by these "backdoor bailouts" by the Federal Reserve....
"The $700 billion Wall Street bailout turned out to be pocket change compared to trillions and trillions of dollars in near zero interest loans and other financial arrangements that the Federal Reserve doled out to every major financial institution."
More members of Congress than at any other time in recent memory are openly wondering if it is now time "to pull back the curtain" at the Federal Reserve. For those who would like to see the power of the Federal Reserve greatly diminished, there should be one primary goal right now.
Expose the Federal Reserve.
The truth is that the more the American people learn about the Federal Reserve and about what it has been doing the more they disapprove.
During his farewell speech on the floor of the U.S. Senate this week, Senator Jim Bunning noted that as the American people become increasingly aware of what the Federal Reserve is doing the less they like it....
"Public awareness of what the Fed is doing is increasing while public opinion of the Fed is falling."
Unfortunately, the views of Ron Paul and other anti-Federal Reserve members of the Tea Party movement are strongly opposed by many other members of the Republican Party.
In a recent Bloomberg Television interview, Barney Frank noted this division within the ranks of the Republicans....
"I do not believe that Ron Paul’s views on the Fed represent the views of most Republicans."
However, there is evidence that the tide is turning with the American public.
According to a recent Bloomberg National Poll, the number of Americans that would like to see the Federal Reserve held more accountable or even completely abolished is increasing....
Asked if the central bank should be more accountable to Congress, left independent or abolished entirely, 39 percent said it should be held more accountable and 16 percent that it should be abolished. Only 37 percent favor the status quo.
Those are very exciting numbers. A majority of Americans now want the power of the Federal Reserve to be reduced or they want it shut down entirely.
If Ron Paul is able to get a comprehensive audit of the Federal Reserve passed, the revelations that would come out of that would certainly turn public opinion against the Fed even more.
So what is so bad about the Federal Reserve?
Well, think of it as a perpetual debt machine.
Did you know that the U.S. national debt is 5,000 times larger than it was a hundred years ago?
That's right – back in 1910, prior to the passage of the Federal Reserve Act, the national debt was only about $2.6 billion.
Since that time, our debt has been endlessly skyrocketing.
Under the Federal Reserve System, the U.S. government cannot just go out and print money. It is actually the Federal Reserve that issues our currency.
The way our system works, whenever the U.S. government arranges for the Federal Reserve to issue more currency, more government debt is created at the same time. In fact, as I have written about previously, all of our money is now based on debt.
No debt, no money.
What we desperately need is for the current monetary system to be scrapped. The federal government should take back the power to issue currency and should implement a new system based on money that is debt-free.
The truth is that it is insane that any sovereign government should have to go into debt just to produce more of its own currency.
Instead, what we have under the Federal Reserve System is a money supply that will forever be expanding, a currency that will forever be deteriorating in value and a national debt that will continue to skyrocket until the entire system collapses.
Since the Federal Reserve was created in 1913, the U.S. dollar has lost over 95 percent of its purchasing power. This continual debasement of our currency is called "inflation" and it is a hidden tax on every man, woman and child in the United States.
It is absolutely guaranteed that every single dollar that you own will go down in value over the long-term.
But the American people have come to accept that a constantly expanding national debt and a currency that is constantly losing value is the most "rational" economic system that humanity has ever come up with.
So who benefits from all this?
Well, for fiscal year 2010 the U.S. government paid out over 413 billion dollars in interest on the national debt. In future years that number is projected to rapidly skyrocket even more.
Wouldn't you like to be getting a nice chunk of that 413 billion dollars?
It turns out that loaning money to the U.S. government is very, very profitable.
That 413 billion dollars is money that was transferred from the American people to the U.S. government, and then transferred from the U.S. government to big financial institutions, foreign countries, and very wealthy bankers.
So what did we get in return for our 413 billion dollars?
Nothing.
Sadly, this is not just going on in the United States. This is going on literally in almost every nation on earth.
All over the world sovereign governments are drowning in debt and so they have to drain their citizens dry so that they can meet their obligations.
In the book of Proverbs, it tells us that "the rich ruleth over the poor, and the borrower is servant to the lender." Americans like to think that they live in "the land of the free," but the truth is that we have become enslaved to debt.
But even worse, we have consigned our children and our grandchildren to a lifetime of debt. They will have to work all of their lives to pay trillions of dollars in interest on all of the debt that we have accumulated in this generation.
How would you like to be born into a world where the previous generation had racked up a $13 trillion debt that now you were expected to pay off?
There is a reason why people like Ron Paul are so obsessed with the Federal Reserve. It is not because they don't have anything better to do. It is because the future of our country literally hangs in the balance.
Throughout American history, presidents, top members of Congress and leading business people have warned us about the dangers of having a central bank. In fact, even though our young people are no longer taught this, the debate over central banking was one of the most important themes in early American history.
But we didn't listen to the warnings.
We were convinced that we knew better.
Well, now we have an economic system that is dying and a $13 trillion debt that we are passing along to our children and to our grandchildren.
Perhaps we were not as smart as we thought we were.
LYING IS NOT PATRIOTIC
WikiLeaks’ release of classified information has generated a lot of attention world-wide in the past few weeks.
The hysterical reaction makes one wonder if this is not an example of killing the messenger for the bad news.
Despite what is claimed, information so far released, though classified, has caused no known harm to any individual, but it has caused plenty of embarrassment to our government. Losing a grip on our empire is not welcomed by the neo-conservatives in charge.
There is now more information confirming that Saudi Arabia is a principle supporter and financier of Al Qaeda and this should set off alarm bells since we guarantee its Sharia-run government.
This emphasizes even more the fact that no Al Qaeda existed in Iraq before 9/11, and yet we went to war against Iraq based on the lie that it did.
It has been charged, by self-proclaimed experts, that Julian Assange, the internet publisher of this information, has committed a heinous crime deserving prosecution for treason and execution or even assassination.
But should we not at least ask how the U.S. government can charge an Australian citizen with treason for publishing U.S. secret information, that he did not steal?
And if WikiLeaks is to be prosecuted for publishing classified documents, why shouldn’t the Washington Post, New York Times, and others that have also published these documents be prosecuted? Actually, some in Congress are threatening this as well.
The New York Times, as a result of a Supreme Court ruling, was not found guilty in 1971 for the publication of the Pentagon Papers. Daniel Ellsberg never served a day in prison for his role in obtaining these secret documents.
The Pentagon Papers were also inserted into the Congressional Record by Senator Mike Gravel with no charges being made of breaking any National Security laws.
Yet the release of this classified information was considered illegal by many, and those who lied us into the Vietnam War and argued for its prolongation were outraged. But the truth gained from the Pentagon Papers revealed that lies were told about the Gulf of Tonkin attack which perpetuated a sad and tragic episode in our history.
Just as with the Vietnam War, the Iraq War was based on lies. We were never threatened by Weapons of Mass Destruction or Al Qaeda in Iraq, though the attack on Iraq was based on this false information.
Any information that challenges the official propaganda for the war in the Middle East is unwelcome by the administration and supporters of these unnecessary wars. Few are interested in understanding the relationship of our foreign policy and our presence in the Middle East to the threat of terrorism. Revealing the real nature and goal for our presence in so many Muslim countries is a threat to our empire and any revelation of this truth is highly resented by those in charge.
Questions to consider:
1. Do the American people deserve to know the truth regarding the ongoing war in Iraq, Afghanistan, Pakistan and Yemen?
2. Could a larger question be: how can an Army Private gain access to so much secret material?
3. Why is the hostility mostly directed at Assange, the publisher, and not our government’s failure to protect classified information?
4. Are we getting our money’s worth from the $80 billion per year we spend on our intelligence agencies?
5. Which has resulted in the greatest number of deaths; lying us into war, or WikiLeaks’ revelations or the release of the Pentagon Papers?
6. If Assange can be convicted of a crime for publishing information, that he did not steal, what does this say about the future of the First Amendment and the independence of the internet?
7. Could it be that the real reason for the near universal attacks on WikiLeaks is more about secretly maintaining a seriously flawed foreign policy of empire than it is about national security?
8. Is there not a huge difference between releasing secret information to help the enemy in the time of a declared war – which is treason – and the releasing of information to expose our government lies that promote secret wars, death, and corruption?
9. Was it not once considered patriotic to stand up to our government when it’s wrong?
Thomas Jefferson had it right when he advised: “Let the eyes of vigilance never be closed.”
The hysterical reaction makes one wonder if this is not an example of killing the messenger for the bad news.
Despite what is claimed, information so far released, though classified, has caused no known harm to any individual, but it has caused plenty of embarrassment to our government. Losing a grip on our empire is not welcomed by the neo-conservatives in charge.
There is now more information confirming that Saudi Arabia is a principle supporter and financier of Al Qaeda and this should set off alarm bells since we guarantee its Sharia-run government.
This emphasizes even more the fact that no Al Qaeda existed in Iraq before 9/11, and yet we went to war against Iraq based on the lie that it did.
It has been charged, by self-proclaimed experts, that Julian Assange, the internet publisher of this information, has committed a heinous crime deserving prosecution for treason and execution or even assassination.
But should we not at least ask how the U.S. government can charge an Australian citizen with treason for publishing U.S. secret information, that he did not steal?
And if WikiLeaks is to be prosecuted for publishing classified documents, why shouldn’t the Washington Post, New York Times, and others that have also published these documents be prosecuted? Actually, some in Congress are threatening this as well.
The New York Times, as a result of a Supreme Court ruling, was not found guilty in 1971 for the publication of the Pentagon Papers. Daniel Ellsberg never served a day in prison for his role in obtaining these secret documents.
The Pentagon Papers were also inserted into the Congressional Record by Senator Mike Gravel with no charges being made of breaking any National Security laws.
Yet the release of this classified information was considered illegal by many, and those who lied us into the Vietnam War and argued for its prolongation were outraged. But the truth gained from the Pentagon Papers revealed that lies were told about the Gulf of Tonkin attack which perpetuated a sad and tragic episode in our history.
Just as with the Vietnam War, the Iraq War was based on lies. We were never threatened by Weapons of Mass Destruction or Al Qaeda in Iraq, though the attack on Iraq was based on this false information.
Any information that challenges the official propaganda for the war in the Middle East is unwelcome by the administration and supporters of these unnecessary wars. Few are interested in understanding the relationship of our foreign policy and our presence in the Middle East to the threat of terrorism. Revealing the real nature and goal for our presence in so many Muslim countries is a threat to our empire and any revelation of this truth is highly resented by those in charge.
Questions to consider:
1. Do the American people deserve to know the truth regarding the ongoing war in Iraq, Afghanistan, Pakistan and Yemen?
2. Could a larger question be: how can an Army Private gain access to so much secret material?
3. Why is the hostility mostly directed at Assange, the publisher, and not our government’s failure to protect classified information?
4. Are we getting our money’s worth from the $80 billion per year we spend on our intelligence agencies?
5. Which has resulted in the greatest number of deaths; lying us into war, or WikiLeaks’ revelations or the release of the Pentagon Papers?
6. If Assange can be convicted of a crime for publishing information, that he did not steal, what does this say about the future of the First Amendment and the independence of the internet?
7. Could it be that the real reason for the near universal attacks on WikiLeaks is more about secretly maintaining a seriously flawed foreign policy of empire than it is about national security?
8. Is there not a huge difference between releasing secret information to help the enemy in the time of a declared war – which is treason – and the releasing of information to expose our government lies that promote secret wars, death, and corruption?
9. Was it not once considered patriotic to stand up to our government when it’s wrong?
Thomas Jefferson had it right when he advised: “Let the eyes of vigilance never be closed.”
Monday
FOCUS ON THE POLICY, NOT WIKILEAKS
We may never know the whole story behind the recent publication of sensitive U.S. government documents by the Wikileaks organization, but we certainly can draw some important conclusions from the reaction of so many in government and media.
At its core, the Wikileaks controversy serves as a diversion from the real issue of what our foreign policy should be. But the mainstream media, along with neoconservatives from both political parties, insist on asking the wrong question. When presented with embarrassing disclosures about U.S. spying and meddling, the policy that requires so much spying and meddling is not questioned. Instead, the media focus on how so much sensitive information could have been leaked, or how authorities might prosecute the publishers of such information.
No one questions the status quo or suggests a wholesale rethinking of our foreign policy. No one suggests that the White House or the State Department should be embarrassed that the U.S. engages in spying and meddling. The only embarrassment is that it was made public. This allows ordinary people to actually know and talk about what the government does. But state secrecy is anathema to a free society. Why exactly should Americans be prevented from knowing what their government is doing in their name?
In a free society, we are supposed to know the truth. In a society where truth becomes treason, however, we are in big trouble. The truth is that our foreign spying, meddling, and outright military intervention in the post-World War II era has made us less secure, not more. And we have lost countless lives and spent trillions of dollars for our trouble. Too often "official" government lies have provided justification for endless, illegal wars and hundreds of thousands of resulting deaths and casualties.
Take the recent hostilities in Korea as only one example. More than fifty years after the end of the Korean War, American taxpayers continue to spend billions for the U.S. military to defend a modern and wealthy South Korea. The continued presence of the U.S. military places American lives between the two factions. The U.S. presence only serves to prolong the conflict, further drain our empty treasury, and place our military at risk.
The neoconservative ethos, steeped in the teaching of Leo Strauss, cannot abide an America where individuals simply pursue their own happy, peaceful, prosperous lives. It cannot abide an America where society centers around family, religion, or civic and social institutions rather than an all powerful central state. There is always an enemy to slay, whether communist or terrorist. In the neoconservative vision, a constant state of alarm must be fostered among the people to keep them focused on something greater than themselves-- namely their great protector, the state. This is why the neoconservative reaction to the Wikileaks revelations is so predictable: “See, we told you the world was a dangerous place,” goes the story. They claim we must prosecute- or even assassinate- those responsible for publishing the leaks. And we must redouble our efforts to police the world by spying and meddling better, with no more leaks.
We should view the Wikileaks controversy in the larger context of American foreign policy. Rather than worry about the disclosure of embarrassing secrets, we should focus on our delusional foreign policy. We are kidding ourselves when we believe spying, intrigue, and outright military intervention can maintain our international status as a superpower while our domestic economy crumbles in an orgy of debt and monetary debasement.
At its core, the Wikileaks controversy serves as a diversion from the real issue of what our foreign policy should be. But the mainstream media, along with neoconservatives from both political parties, insist on asking the wrong question. When presented with embarrassing disclosures about U.S. spying and meddling, the policy that requires so much spying and meddling is not questioned. Instead, the media focus on how so much sensitive information could have been leaked, or how authorities might prosecute the publishers of such information.
No one questions the status quo or suggests a wholesale rethinking of our foreign policy. No one suggests that the White House or the State Department should be embarrassed that the U.S. engages in spying and meddling. The only embarrassment is that it was made public. This allows ordinary people to actually know and talk about what the government does. But state secrecy is anathema to a free society. Why exactly should Americans be prevented from knowing what their government is doing in their name?
In a free society, we are supposed to know the truth. In a society where truth becomes treason, however, we are in big trouble. The truth is that our foreign spying, meddling, and outright military intervention in the post-World War II era has made us less secure, not more. And we have lost countless lives and spent trillions of dollars for our trouble. Too often "official" government lies have provided justification for endless, illegal wars and hundreds of thousands of resulting deaths and casualties.
Take the recent hostilities in Korea as only one example. More than fifty years after the end of the Korean War, American taxpayers continue to spend billions for the U.S. military to defend a modern and wealthy South Korea. The continued presence of the U.S. military places American lives between the two factions. The U.S. presence only serves to prolong the conflict, further drain our empty treasury, and place our military at risk.
The neoconservative ethos, steeped in the teaching of Leo Strauss, cannot abide an America where individuals simply pursue their own happy, peaceful, prosperous lives. It cannot abide an America where society centers around family, religion, or civic and social institutions rather than an all powerful central state. There is always an enemy to slay, whether communist or terrorist. In the neoconservative vision, a constant state of alarm must be fostered among the people to keep them focused on something greater than themselves-- namely their great protector, the state. This is why the neoconservative reaction to the Wikileaks revelations is so predictable: “See, we told you the world was a dangerous place,” goes the story. They claim we must prosecute- or even assassinate- those responsible for publishing the leaks. And we must redouble our efforts to police the world by spying and meddling better, with no more leaks.
We should view the Wikileaks controversy in the larger context of American foreign policy. Rather than worry about the disclosure of embarrassing secrets, we should focus on our delusional foreign policy. We are kidding ourselves when we believe spying, intrigue, and outright military intervention can maintain our international status as a superpower while our domestic economy crumbles in an orgy of debt and monetary debasement.
Saturday
WHAT I THINK.......ROBERT WENZEL AND SOME OTHERS
With Republican control of the House, Ron Paul, as senior member of the House Financial Services subcommittee that oversees monetary policy, is scheduled to become chairman of that subcommittee.
The banking elitists that were thrown billions upon billions by Ben Bernanke and the Federal Reserve sure don't want the real supervision that Ron Paul would bring. And they are plotting.
Write Phil Mattingly and Robert Schmidt at Newsweek:
Officials at several major banks have privately raised concerns with Republican leaders that, by allowing Paul to become a chairman, his radical views would gain legitimacy, according to three bank lobbyists...Five GOP leadership aides, speaking anonymously because a decision isn't final, say incoming House Speaker John Boehner has discussed ways to prevent Paul from becoming chairman or to keep him on a tight leash if he does.
Mattingly and Schmidt continue:
If Boehner, who will help determine who gets to chair subcommittees as early as Dec. 8, rejects Paul, he may have to contend with thousands of grassroots supporters and dozens of younger lawmakers who see Paul as a hero. Boehner, through a spokesman, declined to comment.
If Boehner as much as takes away Paul's bathroom privileges, there is likely going to be serious hell to pay. There is no way Ron Paul's followers will take any messing around with Paul's chairmanship or the power that now comes to the subcommittee. All they need is a cause to rally around, and messing with Ron Paul would be such a cause. Boehner would be a very wise man to move on and pick on somebody that isn't principled and who doesn't have a following many, many times greater than those who participated in the original Boston Tea Party.
The banking elitists that were thrown billions upon billions by Ben Bernanke and the Federal Reserve sure don't want the real supervision that Ron Paul would bring. And they are plotting.
Write Phil Mattingly and Robert Schmidt at Newsweek:
Officials at several major banks have privately raised concerns with Republican leaders that, by allowing Paul to become a chairman, his radical views would gain legitimacy, according to three bank lobbyists...Five GOP leadership aides, speaking anonymously because a decision isn't final, say incoming House Speaker John Boehner has discussed ways to prevent Paul from becoming chairman or to keep him on a tight leash if he does.
Mattingly and Schmidt continue:
If Boehner, who will help determine who gets to chair subcommittees as early as Dec. 8, rejects Paul, he may have to contend with thousands of grassroots supporters and dozens of younger lawmakers who see Paul as a hero. Boehner, through a spokesman, declined to comment.
If Boehner as much as takes away Paul's bathroom privileges, there is likely going to be serious hell to pay. There is no way Ron Paul's followers will take any messing around with Paul's chairmanship or the power that now comes to the subcommittee. All they need is a cause to rally around, and messing with Ron Paul would be such a cause. Boehner would be a very wise man to move on and pick on somebody that isn't principled and who doesn't have a following many, many times greater than those who participated in the original Boston Tea Party.
Friday
DON'T START ANOTHER KOREAN WAR
Before the US House of Representatives, November 30, 2010, on the resolution condemning North Korea
Mr. Speaker, I rise in opposition to this saber-rattling resolution that unnecessarily escalates tensions between North and South Korea and may in fact put U.S. troops stationed in the area at risk. This resolution portrays the recent hostilities between the two Koreas as "an unprovoked military attack'' by North Korea, which is untrue. We know that South Korea was conducting live fire military exercises in the vicinity of disputed territory and that this action, taken with U.S. military support and participation, likely led to the exchange of gunfire between the two sides.
As the resolution states, the "USS George Washington Carrier Strike Group is conducting exercises with Republic of Korea naval forces in the waters west of the Korean Peninsula.'' Let us for a moment imagine the Chinese military holding joint exercises with Venezuela off the Texas coast. Might that be viewed as provocative by the United States? This is not to excuse or endorse the actions of the North Korean military, which are certainly regrettable, but it is important to accurately portray the events.
This resolution is long on inaccuracies and hyperbole but it avoids the real issue, which is why, more than fifty years after the end of the Korean war, the American taxpayer is still forced to pay for the U.S. military to defend a modern and wealthy South Korea. The continued presence of the U.S. military as a "tripwire'' to deter North Korea is ineffective and dangerous. It is designed to deter renewed hostilities by placing American lives between the two factions. As we have seen recently, South Korean leaders, emboldened by the U.S. protection, seek to provoke North Korean reaction rather than to work for a way to finally end the conflict. The U.S. presence only serves to prolong the conflict, further drain our empty treasury, and place our military at risk. I encourage my colleagues to reject this jingoistic resolution and instead use our Constitutionally-granted authority to finally end the U.S. military presence in and defense of South Korea.
Mr. Speaker, I rise in opposition to this saber-rattling resolution that unnecessarily escalates tensions between North and South Korea and may in fact put U.S. troops stationed in the area at risk. This resolution portrays the recent hostilities between the two Koreas as "an unprovoked military attack'' by North Korea, which is untrue. We know that South Korea was conducting live fire military exercises in the vicinity of disputed territory and that this action, taken with U.S. military support and participation, likely led to the exchange of gunfire between the two sides.
As the resolution states, the "USS George Washington Carrier Strike Group is conducting exercises with Republic of Korea naval forces in the waters west of the Korean Peninsula.'' Let us for a moment imagine the Chinese military holding joint exercises with Venezuela off the Texas coast. Might that be viewed as provocative by the United States? This is not to excuse or endorse the actions of the North Korean military, which are certainly regrettable, but it is important to accurately portray the events.
This resolution is long on inaccuracies and hyperbole but it avoids the real issue, which is why, more than fifty years after the end of the Korean war, the American taxpayer is still forced to pay for the U.S. military to defend a modern and wealthy South Korea. The continued presence of the U.S. military as a "tripwire'' to deter North Korea is ineffective and dangerous. It is designed to deter renewed hostilities by placing American lives between the two factions. As we have seen recently, South Korean leaders, emboldened by the U.S. protection, seek to provoke North Korean reaction rather than to work for a way to finally end the conflict. The U.S. presence only serves to prolong the conflict, further drain our empty treasury, and place our military at risk. I encourage my colleagues to reject this jingoistic resolution and instead use our Constitutionally-granted authority to finally end the U.S. military presence in and defense of South Korea.
Monday
DON'T RAISE THE DEBT CEILING!
As of November 7th, the total U.S. public debt outstanding reached an astonishing $13.7 trillion. This means that although Congress just raised the debt ceiling to $14.3 trillion back in February, the new Congress will face another debt ceiling vote almost immediately next year. Otherwise, the Treasury will not be able to continue issuing debt to fund government operations.
The upcoming vote will provide an interesting litmus test for the new Republican congressional majority, especially those new members closely identified with Tea Party voters. The debt ceiling law, passed in 1917, enables Congress to place a statutory cap on the total amount of government debt rather than having to approve each individual Treasury bond offering. It also, however, forces Congress into an open and presumably somewhat shameful vote to approve more borrowing.
If the new Congress gives in to establishment pressure and media alarmism about “shutting down the government” by voting to increase the debt ceiling once again, you will know that the status quo has prevailed. You will know that Congress, despite the rhetoric of the midterm elections, is doing business as usual. You will know that the simple notion of balancing the budget, by limiting federal spending to federal revenue, remains a shallow and laughable campaign platitude.
Of course congressional leaders-- now Republicans-- will tell America that they plan on balancing the budget soon, but they just need some time. After all, we have to keep the government open, right? We can’t have an “emergency” shutdown of vital government services. But somehow Congress always finds money for emergency spending, in the form of supplemental appropriations bills for TARP bailouts, troop surges, and the like. Why is there never an emergency that justifies less spending???
Surely we are facing an emergency debt spiral, as evidenced by the Federal Reserve’s recent commitment to buy another round of Treasury debt. It’s now quite obvious that the U.S. government plans to inflate its way out of debt, and the world is fleeing our dollar in response. Just 7 years ago Congress raised the debt ceiling to $6.4 trillion, which means the federal government had doubled its indebtedness in less than a decade. Annual deficits for 2011 and beyond are projected to be at least $1 trillion. By contrast, the entire federal debt amassed from the founding of our nation until President Reagan took office in 1981-- a period of roughly 200 years-- was $1 trillion. So it’s no exaggeration to state that federal debt is growing exponentially.
I have two simple proposals when the new Congress convenes in January. First, refuse to raise the debt ceiling. Find a way, month by month, for Congress to spend only what the Treasury raises in revenue. Second, start over from scratch with the 13 appropriations bills that fund the federal government. Reject any talk of baseline budgets or discretionary spending. It is all discretionary, and members of both parties should vote against any 2012 appropriation bill that is not at least 10% smaller-- in nominal dollars-- than its 2011 counterpart.
A motivated Congress could begin to slow the tide of debt by taking the simple step of cutting federal spending by 10% across the board for the next few years. Let’s hope it does not take the complete collapse of the U.S. dollar to provide this motivation.
The upcoming vote will provide an interesting litmus test for the new Republican congressional majority, especially those new members closely identified with Tea Party voters. The debt ceiling law, passed in 1917, enables Congress to place a statutory cap on the total amount of government debt rather than having to approve each individual Treasury bond offering. It also, however, forces Congress into an open and presumably somewhat shameful vote to approve more borrowing.
If the new Congress gives in to establishment pressure and media alarmism about “shutting down the government” by voting to increase the debt ceiling once again, you will know that the status quo has prevailed. You will know that Congress, despite the rhetoric of the midterm elections, is doing business as usual. You will know that the simple notion of balancing the budget, by limiting federal spending to federal revenue, remains a shallow and laughable campaign platitude.
Of course congressional leaders-- now Republicans-- will tell America that they plan on balancing the budget soon, but they just need some time. After all, we have to keep the government open, right? We can’t have an “emergency” shutdown of vital government services. But somehow Congress always finds money for emergency spending, in the form of supplemental appropriations bills for TARP bailouts, troop surges, and the like. Why is there never an emergency that justifies less spending???
Surely we are facing an emergency debt spiral, as evidenced by the Federal Reserve’s recent commitment to buy another round of Treasury debt. It’s now quite obvious that the U.S. government plans to inflate its way out of debt, and the world is fleeing our dollar in response. Just 7 years ago Congress raised the debt ceiling to $6.4 trillion, which means the federal government had doubled its indebtedness in less than a decade. Annual deficits for 2011 and beyond are projected to be at least $1 trillion. By contrast, the entire federal debt amassed from the founding of our nation until President Reagan took office in 1981-- a period of roughly 200 years-- was $1 trillion. So it’s no exaggeration to state that federal debt is growing exponentially.
I have two simple proposals when the new Congress convenes in January. First, refuse to raise the debt ceiling. Find a way, month by month, for Congress to spend only what the Treasury raises in revenue. Second, start over from scratch with the 13 appropriations bills that fund the federal government. Reject any talk of baseline budgets or discretionary spending. It is all discretionary, and members of both parties should vote against any 2012 appropriation bill that is not at least 10% smaller-- in nominal dollars-- than its 2011 counterpart.
A motivated Congress could begin to slow the tide of debt by taking the simple step of cutting federal spending by 10% across the board for the next few years. Let’s hope it does not take the complete collapse of the U.S. dollar to provide this motivation.
ARE AIR TRAVELERS CRIMINAL SUSPECTS?
The growing revolt against invasive TSA practices is encouraging to Americans who are fed up with federal government encroachment in their lives. In the case of air travelers, this encroachment is quite literally physical. But a deep-seated libertarian impulse still exists within the American people, and opposition to the new TSA full body scanner and groping searches is gathering momentum.
The growing revolt against invasive TSA practices is encouraging to Americans who are fed up with federal government encroachment in their lives. In the case of air travelers, this encroachment is quite literally physical. But a deep-seated libertarian impulse still exists within the American people, and opposition to the new TSA full body scanner and groping searches is gathering momentum.
I introduced legislation last week that is based on a very simple principle: federal agents should be subject to the same laws as ordinary citizens. If you would face criminal prosecution or a lawsuit for groping someone, exposing them to unwelcome radiation, causing them emotional distress, or violating indecency laws, then TSA agents should similarly face sanctions for their actions.
This principle goes beyond TSA agents, however. As commentator Lew Rockwell recently noted, the bill “enshrines the key lesson of the freedom philosophy: the government is not above the moral law. If it is wrong for you and me, it is wrong for people in government suits… That is true of TSA crimes too.” The revolt against TSA also serves as a refreshing reminder that we should not give in to government alarmism or be afraid to question government policies.
Certainly, those who choose to refuse the humiliating and potentially harmful new full body scanner machines may suffer delays, inconveniences, or worse. But I still believe peaceful resistance is the most effective tool against federal encroachment on our constitutional rights, which leads me to be supportive of any kind of “opt-out” or similar popular movements.
After all, what price can we place on our dignity, personal privacy, and physical integrity? We have a right not to be treated like criminals and searched by federal agents without some reasonable evidence of criminal activity. Are we now to accept that merely wishing to travel and board an aircraft give rise to reasonable suspicion of criminality?
Also, let’s not forget that TSA was created in the aftermath of 9/11, when far too many Americans were clamoring for government protection from the specter of terrorism. Indeed it was congressional Republicans, the majority party in 2001, who must bear much of the blame for creating the Department of Homeland Security and TSA in the first place. Congressional Republicans also overwhelmingly supported the Patriot Act, which added to the atmosphere of hostility toward civil liberties in the name of state-provided “security.”
But as we’ve seen with TSA, federal “security” has more to do with humiliation and control than making us safe. It has more to do with instilling a mindset of subservience, which is why laughable policies such as removing one’s shoes continue to be enforced. What else could explain the shabby, degrading spectacle of a long line of normally upbeat Americans shuffling obediently through airport security in their stocking feet?
TSA may be merely symbolic of much bigger problems with the federal government, but it is an important symbol and we have a real chance to do something about it. We must seize this opportunity, before TSA offers some cosmetic compromise or the media spotlight fades. If you don’t live in my congressional district, please consider contacting your member of Congress and asking him or her to cosponsor HR 6416, the American Traveler Dignity Act of 2010. With enough help, we can push the bill to a vote early next year. Unless grassroots Americans take action, federal agencies like TSA will continue to bully us and ignore our basic constitutional freedoms.
The growing revolt against invasive TSA practices is encouraging to Americans who are fed up with federal government encroachment in their lives. In the case of air travelers, this encroachment is quite literally physical. But a deep-seated libertarian impulse still exists within the American people, and opposition to the new TSA full body scanner and groping searches is gathering momentum.
I introduced legislation last week that is based on a very simple principle: federal agents should be subject to the same laws as ordinary citizens. If you would face criminal prosecution or a lawsuit for groping someone, exposing them to unwelcome radiation, causing them emotional distress, or violating indecency laws, then TSA agents should similarly face sanctions for their actions.
This principle goes beyond TSA agents, however. As commentator Lew Rockwell recently noted, the bill “enshrines the key lesson of the freedom philosophy: the government is not above the moral law. If it is wrong for you and me, it is wrong for people in government suits… That is true of TSA crimes too.” The revolt against TSA also serves as a refreshing reminder that we should not give in to government alarmism or be afraid to question government policies.
Certainly, those who choose to refuse the humiliating and potentially harmful new full body scanner machines may suffer delays, inconveniences, or worse. But I still believe peaceful resistance is the most effective tool against federal encroachment on our constitutional rights, which leads me to be supportive of any kind of “opt-out” or similar popular movements.
After all, what price can we place on our dignity, personal privacy, and physical integrity? We have a right not to be treated like criminals and searched by federal agents without some reasonable evidence of criminal activity. Are we now to accept that merely wishing to travel and board an aircraft give rise to reasonable suspicion of criminality?
Also, let’s not forget that TSA was created in the aftermath of 9/11, when far too many Americans were clamoring for government protection from the specter of terrorism. Indeed it was congressional Republicans, the majority party in 2001, who must bear much of the blame for creating the Department of Homeland Security and TSA in the first place. Congressional Republicans also overwhelmingly supported the Patriot Act, which added to the atmosphere of hostility toward civil liberties in the name of state-provided “security.”
But as we’ve seen with TSA, federal “security” has more to do with humiliation and control than making us safe. It has more to do with instilling a mindset of subservience, which is why laughable policies such as removing one’s shoes continue to be enforced. What else could explain the shabby, degrading spectacle of a long line of normally upbeat Americans shuffling obediently through airport security in their stocking feet?
TSA may be merely symbolic of much bigger problems with the federal government, but it is an important symbol and we have a real chance to do something about it. We must seize this opportunity, before TSA offers some cosmetic compromise or the media spotlight fades. If you don’t live in my congressional district, please consider contacting your member of Congress and asking him or her to cosponsor HR 6416, the American Traveler Dignity Act of 2010. With enough help, we can push the bill to a vote early next year. Unless grassroots Americans take action, federal agencies like TSA will continue to bully us and ignore our basic constitutional freedoms.
WHAT I THINK.......SETH LIPSKY
One of the most exciting features of the new Congress is the prospect that the chairmanship of a House subcommittee that oversees the Federal Reserve will go to Ron Paul. Final assignments are still being worked out, and the leadership may yet shy away from giving the position to a congressman who doesn't believe the Fed should exist. But Dr. Paul, an obstetrician, has been the ranking Republican of the Domestic Monetary Policy and Technology subcommittee, and tradition suggests he will be the next chairman.
This couldn't come at a more timely moment, though Dr. Paul has been working his way up to the assignment for more than a generation.
I first met the congressman nearly 30 years ago, back when the physician-turned-legislator was emerging on the national scene as a member of the United States Gold Commission. The commission had been formed at the start of the Reagan administration to consider whether America, in the wake of the collapse of Bretton Woods, should move to sound money.
In the event, the committee recoiled from reform. But Dr. Paul wrote a dissent that made the case for gold and is still being read today.
At the time, the value of the dollar had recently plunged to less than 1/800th of an ounce of gold. The collapse was reversed by the pro-growth policies of President Reagan and by a Fed chairman, in Paul Volcker, of uncommon vision and courage. Momentum for a gold standard was hard to sustain when inflation was being brought down, if not conquered, by other means.
View Full Image
Associated Press
Texas Rep. Ron Paul
.Right now we are experiencing an even more dramatic collapse of the greenback—this time to little more than 1/1,400th of an ounce of gold—and the issue has returned with a vengeance. The Fed is reacting to the dollar's collapse with a campaign of quantitative easing. The plan is to cascade hundreds of billions of additional dollars into the economy on the theory that we need inflation. No doubt this kind of thing will, if Dr. Paul accedes to the chairmanship, come in for a good deal more focused oversight than the committee has provided under Democratic leadership.
Heretofore, the subcommittee has "basically been a committee that's dealt with commemorative coins," as Dr. Paul has put it. In a conversation with me on Monday, the congressman said that he intends to get into the question of monetary policy itself. He would start by bringing in to testify to the committee not only the Fed chairman, but some of the leading officers and economists of some of the regional banks in the Federal Reserve system.
More far-reaching still is the prospect that Dr. Paul might use the committee to open up the deepest monetary issues, pressing for audits of America's gold holdings and of the Fed itself. At one point this week, the congressman's book, "End the Fed," ranked No. 2 on Amazon's list of the best-selling business books dealing with money and monetary policy, ahead of volumes by such luminaries of the right and left as Milton Friedman, George Soros and John Maynard Keynes himself.
Most exciting is the prospect that Dr. Paul will be able to bring into the national conversation such figures as, say, Edwin Vieira Jr., the visionary lawyer who has become the sage of the idea of constitutional money. That's a reference to the unit of account to which the Founders were referring when they twice used the word "dollars" in the Constitution, and which they codified in the Coinage Act of 1792 as 371¼ grains of pure silver, the same as in a then-ubiquitous coin known as the Spanish Milled Dollar, or its free-market equivalent in gold.
If Dr. Paul does accede to the chairmanship of the monetary subcommittee, he will, in but a few months, gavel it to order on the 40th anniversary of the summer in which President Nixon closed the gold window and brought an end to Bretton Woods. Yet a few weeks ago, former Fed Chairman Alan Greenspan himself, speaking at the Council on Foreign Relations, warned that "fiat money has no place to go but gold." Even the president of the World Bank, Robert Zoellick, has just called for restoring a role for gold in the monetary system.
The great debate is finally starting up again. Who better to host it in Congress than the diminutive doctor who, more faithfully than anyone else on the Hill, has for more than a generation stood for the idea of sound money?
This couldn't come at a more timely moment, though Dr. Paul has been working his way up to the assignment for more than a generation.
I first met the congressman nearly 30 years ago, back when the physician-turned-legislator was emerging on the national scene as a member of the United States Gold Commission. The commission had been formed at the start of the Reagan administration to consider whether America, in the wake of the collapse of Bretton Woods, should move to sound money.
In the event, the committee recoiled from reform. But Dr. Paul wrote a dissent that made the case for gold and is still being read today.
At the time, the value of the dollar had recently plunged to less than 1/800th of an ounce of gold. The collapse was reversed by the pro-growth policies of President Reagan and by a Fed chairman, in Paul Volcker, of uncommon vision and courage. Momentum for a gold standard was hard to sustain when inflation was being brought down, if not conquered, by other means.
View Full Image
Associated Press
Texas Rep. Ron Paul
.Right now we are experiencing an even more dramatic collapse of the greenback—this time to little more than 1/1,400th of an ounce of gold—and the issue has returned with a vengeance. The Fed is reacting to the dollar's collapse with a campaign of quantitative easing. The plan is to cascade hundreds of billions of additional dollars into the economy on the theory that we need inflation. No doubt this kind of thing will, if Dr. Paul accedes to the chairmanship, come in for a good deal more focused oversight than the committee has provided under Democratic leadership.
Heretofore, the subcommittee has "basically been a committee that's dealt with commemorative coins," as Dr. Paul has put it. In a conversation with me on Monday, the congressman said that he intends to get into the question of monetary policy itself. He would start by bringing in to testify to the committee not only the Fed chairman, but some of the leading officers and economists of some of the regional banks in the Federal Reserve system.
More far-reaching still is the prospect that Dr. Paul might use the committee to open up the deepest monetary issues, pressing for audits of America's gold holdings and of the Fed itself. At one point this week, the congressman's book, "End the Fed," ranked No. 2 on Amazon's list of the best-selling business books dealing with money and monetary policy, ahead of volumes by such luminaries of the right and left as Milton Friedman, George Soros and John Maynard Keynes himself.
Most exciting is the prospect that Dr. Paul will be able to bring into the national conversation such figures as, say, Edwin Vieira Jr., the visionary lawyer who has become the sage of the idea of constitutional money. That's a reference to the unit of account to which the Founders were referring when they twice used the word "dollars" in the Constitution, and which they codified in the Coinage Act of 1792 as 371¼ grains of pure silver, the same as in a then-ubiquitous coin known as the Spanish Milled Dollar, or its free-market equivalent in gold.
If Dr. Paul does accede to the chairmanship of the monetary subcommittee, he will, in but a few months, gavel it to order on the 40th anniversary of the summer in which President Nixon closed the gold window and brought an end to Bretton Woods. Yet a few weeks ago, former Fed Chairman Alan Greenspan himself, speaking at the Council on Foreign Relations, warned that "fiat money has no place to go but gold." Even the president of the World Bank, Robert Zoellick, has just called for restoring a role for gold in the monetary system.
The great debate is finally starting up again. Who better to host it in Congress than the diminutive doctor who, more faithfully than anyone else on the Hill, has for more than a generation stood for the idea of sound money?
Thursday
Wednesday
REJECT THE WELFARE/WARFARE STATE
Last week’s midterm elections have been characterized as a victory for grassroots Americans who are fed up with Washington and the political status quo. In particular, the elections are being touted as a clear indicator that voters demand reductions in federal spending, deficits, and debt.
If the new Congress hopes to live up to the expectations of Tea Party voters, however, it faces some daunting choices. For all the talk about pork and waste, the truth is that Congress cannot fix the budget and get our national debt under control by trimming fat and eliminating earmarks for “Bridges to Nowhere.”
Real reductions in federal spending can be achieved only by getting to the meat of the federal budget, meaning expenditures in all areas. The annual budget soon will be $5 trillion unless Congress takes serious steps to reduce spending for entitlements, military, and debt service. Yet how many Tea Party candidates who campaigned on a platform of spending cuts talked about Social Security, Medicare, foreign wars, or bond debt?
With regard to entitlements, the 2010 Social Security and Medicare Trustees report tells it all. It paints a stark picture of two entitlement programs that cannot be sustained under even the rosiest scenarios of economic growth. No one, regardless of political stripe, can deny the fundamental problem of unfunded future liabilities in both programs.
We should understand that Social Security was intended primarily to prevent old widows from becoming destitute. Life expectancy in 1935 was only about 65, when there were several workers for each Social Security recipient. The program was never intended to be a general transfer payment from young workers to older retirees, regardless of those retirees’ financial need. Yet today Social Security faces an unfunded liability of approximately $18 trillion.
First, Congress needs to stop using payroll taxes for purposes not related to Social Security, which was a trick the Clinton administration used to claim balanced budgets. Second, Congress should eliminate unconstitutional spending - including unnecessary overseas commitments - and use the saved funds to help transition to a Social Security system that is completely voluntary. At some point in the near future Congress must allow taxpayers to opt out of federal payroll taxes in exchange for never receiving Social Security benefits.
Medicare similarly faces a shortfall of $30.8 trillion in unfunded future benefits. The Part D prescription drug benefit accounts for approximately $15.5 trillion, or half of the unfunded Medicare liability. Congress should immediately repeal the disastrous drug benefit passed in 2003 by President Bush and a Republican Congress.
Fiscal conservatives should not be afraid to attack entitlements philosophically. We should reject the phony narrative that entitlement programs are inherently noble or required by “progressive” western values. Why exactly should Americans be required, by force of taxation, to fund retirement or medical care for senior citizens, especially senior citizens who are comfortable financially? And if taxpayers provide retirement and health care benefits to some older Americans who are less well off, can’t we just call it welfare instead of maintaining the charade about “insurance” and “trust funds”?
Military spending and interest on the national debt similarly represent large federal expenditures that Congress must address by rethinking our foreign policy and exercising far greater oversight over the Federal Reserve and the Treasury department.
I have for a long time criticized our interventionist foreign policy and the Fed, and I will continue to do so. It’s time for Congress to face the fundamental problems that affect Social Security and Medicare, and show the courage necessary to make real changes to both programs by rejecting the welfare/warfare state.
If the new Congress hopes to live up to the expectations of Tea Party voters, however, it faces some daunting choices. For all the talk about pork and waste, the truth is that Congress cannot fix the budget and get our national debt under control by trimming fat and eliminating earmarks for “Bridges to Nowhere.”
Real reductions in federal spending can be achieved only by getting to the meat of the federal budget, meaning expenditures in all areas. The annual budget soon will be $5 trillion unless Congress takes serious steps to reduce spending for entitlements, military, and debt service. Yet how many Tea Party candidates who campaigned on a platform of spending cuts talked about Social Security, Medicare, foreign wars, or bond debt?
With regard to entitlements, the 2010 Social Security and Medicare Trustees report tells it all. It paints a stark picture of two entitlement programs that cannot be sustained under even the rosiest scenarios of economic growth. No one, regardless of political stripe, can deny the fundamental problem of unfunded future liabilities in both programs.
We should understand that Social Security was intended primarily to prevent old widows from becoming destitute. Life expectancy in 1935 was only about 65, when there were several workers for each Social Security recipient. The program was never intended to be a general transfer payment from young workers to older retirees, regardless of those retirees’ financial need. Yet today Social Security faces an unfunded liability of approximately $18 trillion.
First, Congress needs to stop using payroll taxes for purposes not related to Social Security, which was a trick the Clinton administration used to claim balanced budgets. Second, Congress should eliminate unconstitutional spending - including unnecessary overseas commitments - and use the saved funds to help transition to a Social Security system that is completely voluntary. At some point in the near future Congress must allow taxpayers to opt out of federal payroll taxes in exchange for never receiving Social Security benefits.
Medicare similarly faces a shortfall of $30.8 trillion in unfunded future benefits. The Part D prescription drug benefit accounts for approximately $15.5 trillion, or half of the unfunded Medicare liability. Congress should immediately repeal the disastrous drug benefit passed in 2003 by President Bush and a Republican Congress.
Fiscal conservatives should not be afraid to attack entitlements philosophically. We should reject the phony narrative that entitlement programs are inherently noble or required by “progressive” western values. Why exactly should Americans be required, by force of taxation, to fund retirement or medical care for senior citizens, especially senior citizens who are comfortable financially? And if taxpayers provide retirement and health care benefits to some older Americans who are less well off, can’t we just call it welfare instead of maintaining the charade about “insurance” and “trust funds”?
Military spending and interest on the national debt similarly represent large federal expenditures that Congress must address by rethinking our foreign policy and exercising far greater oversight over the Federal Reserve and the Treasury department.
I have for a long time criticized our interventionist foreign policy and the Fed, and I will continue to do so. It’s time for Congress to face the fundamental problems that affect Social Security and Medicare, and show the courage necessary to make real changes to both programs by rejecting the welfare/warfare state.
Monday
SAUDI ARMS DEAL IS ABOUT IRAN
This month the US Administration notified Congress that it intends to complete one of the largest arms sales in US history to one of the most repressive regimes on earth. Saudi Arabia has been given the green light by the administration to spend $60 billion on some 84 new F-15 aircraft, dozens of the latest helicopters, and other missiles, bombs, and high-tech military products from the US weapons industry.
Saudi Arabia, from where 15 of the 19 September 11 hijackers came, is a family-run dictatorship, where there are no political parties, no independent press, and where any form of political dissent is met with the most severe punishment. We are told that we must occupy Afghanistan to encourage more rights for women, an issue on which the Saudi regime makes the Taliban look rather liberal by comparison. We are told that our increasingly aggressive policies toward Iran are justified by that country’s rigid Islamic laws and human-rights violations, while the even more repressive Islamic rule in Saudi Arabia is never mentioned.
So why would the US government, which spends hundreds of billions of dollars yearly and maintains hundreds of bases overseas to push global democracy, approve a deal like this with such a regime? As Stockholm Institute scholar Pieter Wezeman told the Washington Post, "Of course it's against Iran. Of course it's against Yemen. You can read between the lines ... but there are not any official statements about it." Although the deal must be approved by Congress, there is little chance of any significant Congressional opposition for the above reason.
Imagine if China had armed an aggressive, anti-American Mexico to the teeth. How would we feel? Threatened? That is likely how Iran feels with this massive arms sale to Saudi Arabia. To underscore this message, the US quietly announced early this month that it was selling 20 F-35 Stealth fighters to Israel. As Israeli military purchases are paid for with US foreign aid, we must realize that the weapons pointed at Iran in the Middle East are American made and largely paid for with American tax dollars. Certainly Iran understands this. Will such a provocative move, arming two anti-Iranian powers in the region to the teeth, lead to a trigger event to bring about a full invasion of Iran? The economic tsunami that would result from such a horrific turn of events would only be eclipsed by the death and destruction in the region -- and likely beyond.
Some will argue that these arms deals are international trade which we should encourage and applaud. Sadly, the United States does not build much that we can export these days. But the fact is that the US weapons industry is underwritten by the American taxpayer. From research and development to acquisition by the US military, the costs of the US arms industry are borne by American citizens. But, as so-called “private” companies, the enormous profits they make selling weapons to countries like Saudi Arabia are of course privatized. So the costs are socialized and the profits are privatized. There is a word for this arrangement and it is not “capitalism.”
Saudi Arabia, from where 15 of the 19 September 11 hijackers came, is a family-run dictatorship, where there are no political parties, no independent press, and where any form of political dissent is met with the most severe punishment. We are told that we must occupy Afghanistan to encourage more rights for women, an issue on which the Saudi regime makes the Taliban look rather liberal by comparison. We are told that our increasingly aggressive policies toward Iran are justified by that country’s rigid Islamic laws and human-rights violations, while the even more repressive Islamic rule in Saudi Arabia is never mentioned.
So why would the US government, which spends hundreds of billions of dollars yearly and maintains hundreds of bases overseas to push global democracy, approve a deal like this with such a regime? As Stockholm Institute scholar Pieter Wezeman told the Washington Post, "Of course it's against Iran. Of course it's against Yemen. You can read between the lines ... but there are not any official statements about it." Although the deal must be approved by Congress, there is little chance of any significant Congressional opposition for the above reason.
Imagine if China had armed an aggressive, anti-American Mexico to the teeth. How would we feel? Threatened? That is likely how Iran feels with this massive arms sale to Saudi Arabia. To underscore this message, the US quietly announced early this month that it was selling 20 F-35 Stealth fighters to Israel. As Israeli military purchases are paid for with US foreign aid, we must realize that the weapons pointed at Iran in the Middle East are American made and largely paid for with American tax dollars. Certainly Iran understands this. Will such a provocative move, arming two anti-Iranian powers in the region to the teeth, lead to a trigger event to bring about a full invasion of Iran? The economic tsunami that would result from such a horrific turn of events would only be eclipsed by the death and destruction in the region -- and likely beyond.
Some will argue that these arms deals are international trade which we should encourage and applaud. Sadly, the United States does not build much that we can export these days. But the fact is that the US weapons industry is underwritten by the American taxpayer. From research and development to acquisition by the US military, the costs of the US arms industry are borne by American citizens. But, as so-called “private” companies, the enormous profits they make selling weapons to countries like Saudi Arabia are of course privatized. So the costs are socialized and the profits are privatized. There is a word for this arrangement and it is not “capitalism.”
GOVERNMENT AND JOB CREATION
As the current economic downturn shows no signs of lifting, we hear quite a lot of rhetoric from current and potential office-holders about what government can and will do to create more jobs. This is especially disconcerting to those who understand that the best thing government can do for job creation is to simply get out of the way.
Jobs are properly created by businesses. Government-created jobs are either fueled by fiat money and manipulated market conditions or directly funded by taxes paid by businesses and individuals who then have less to hire people for real wealth creation. Government-created jobs destroy wealth and sap potential from the economy. The several stimulus bills passed by Congress have done much to expand government but not much to keep money in the hands of real job creators – the entrepreneurs.
Keynesian economists don’t see things this way. They see government spending as a stop gap measure that tides us over through rough economic patches. But is this really the case?
Far from it. The reality is instead of sustaining us until the economy can catch up, government spending perpetuates the problems the bureaucrats and the politicians created. Maintaining a high level of employment is one of the main objectives of the Federal Reserve, which is just one reason it is ill-conceived at its very core: it legitimizes economic intervention which is always destructive. When unemployment rises after the bust of a Fed-created bubble, you can be sure Congress will attempt to rescue the economy through various policies that will always prolong the agony and expand the downturn.
In the late 90’s, it was thought that encouraging home ownership would have a stimulative effect that would ripple throughout the rest of the economy and create jobs. Various government policies favorable to home ownership were enacted and the Fed kept interest rates artificially low so everyone would be able to buy a home, whether or not they could really afford it. For awhile, it worked. The housing boom increased demand for realtors, mortgage lenders, and construction workers. However, as reality sank in, not only are we back to where we were when the bubble began, but we are actually worse off. For example, not only have we lost all of the one million extra construction jobs the bubble created, but we lost another one million on top of that! So not only did the artificial wealth evaporate, but real wealth has been destroyed as well.
Even more sinister are jobs created by war. Recent reports highlight the increasing dependence on contractors to support our war efforts in Afghanistan. Massive corruption is endemic to these highly lucrative positions. Almost half of the contracting companies we use are Afghan owned and include such business models as recruiting away the very same Afghan police force we are training at great expense to the American taxpayer. Meanwhile we have pledged not to leave until the police force reaches a certain level. We also bribe many Afghans to simply not attack us. We are in a proverbial hole in Afghanistan. Our leaders need to just stop digging.
Neither a Keynesian big spending program, nor the military-industrial complex can create long-lasting employment or economic prosperity for our country. The only way to restore both peace and prosperity is to draw down our overseas commitments, along with unconstitutional spending at home and return to the founders’ vision of a limited republic that neither straddles the globe, nor micromanages the domestic economy.
Jobs are properly created by businesses. Government-created jobs are either fueled by fiat money and manipulated market conditions or directly funded by taxes paid by businesses and individuals who then have less to hire people for real wealth creation. Government-created jobs destroy wealth and sap potential from the economy. The several stimulus bills passed by Congress have done much to expand government but not much to keep money in the hands of real job creators – the entrepreneurs.
Keynesian economists don’t see things this way. They see government spending as a stop gap measure that tides us over through rough economic patches. But is this really the case?
Far from it. The reality is instead of sustaining us until the economy can catch up, government spending perpetuates the problems the bureaucrats and the politicians created. Maintaining a high level of employment is one of the main objectives of the Federal Reserve, which is just one reason it is ill-conceived at its very core: it legitimizes economic intervention which is always destructive. When unemployment rises after the bust of a Fed-created bubble, you can be sure Congress will attempt to rescue the economy through various policies that will always prolong the agony and expand the downturn.
In the late 90’s, it was thought that encouraging home ownership would have a stimulative effect that would ripple throughout the rest of the economy and create jobs. Various government policies favorable to home ownership were enacted and the Fed kept interest rates artificially low so everyone would be able to buy a home, whether or not they could really afford it. For awhile, it worked. The housing boom increased demand for realtors, mortgage lenders, and construction workers. However, as reality sank in, not only are we back to where we were when the bubble began, but we are actually worse off. For example, not only have we lost all of the one million extra construction jobs the bubble created, but we lost another one million on top of that! So not only did the artificial wealth evaporate, but real wealth has been destroyed as well.
Even more sinister are jobs created by war. Recent reports highlight the increasing dependence on contractors to support our war efforts in Afghanistan. Massive corruption is endemic to these highly lucrative positions. Almost half of the contracting companies we use are Afghan owned and include such business models as recruiting away the very same Afghan police force we are training at great expense to the American taxpayer. Meanwhile we have pledged not to leave until the police force reaches a certain level. We also bribe many Afghans to simply not attack us. We are in a proverbial hole in Afghanistan. Our leaders need to just stop digging.
Neither a Keynesian big spending program, nor the military-industrial complex can create long-lasting employment or economic prosperity for our country. The only way to restore both peace and prosperity is to draw down our overseas commitments, along with unconstitutional spending at home and return to the founders’ vision of a limited republic that neither straddles the globe, nor micromanages the domestic economy.
Wednesday
MORE INFLATION FEARS
Inflation fears are heating up this week as Fed Chairman Ben Bernanke gave a speech in Boston on Friday, causing further frantic flight into gold by those fearful of the coming “quantitative easing” the Fed is set to deliver in November. Others who view gold as a short term investment engaged in immediate profit-taking after Bernanke's speech.
Gold is more correctly viewed as insurance against bad monetary policy decisions that erode the value of savings. Those bad decisions keep coming at an ever faster clip these days and we hear more and more talk of currency wars especially between the dollar, the Chinese yuan, the Japanese yen, the Australian dollar, and the Euro. As the economies of the world continue to stagnate or contract, monetary policy decisions become more relevant to people who once thought this topic arcane. We have several examples this week of major fumbles on the part of the US Central Bank:
· The Federal Reserve continues to insist that inflation is too low, even while the monetary base remains at record levels, and food and gas prices continue to climb.
· As the Fed continues to drive down the value of the dollar, the government accuses China of deliberately devaluing its currency, and the House has passed legislation aimed at punishing China for this alleged devaluation.
· Low returns on US bonds are driving investors into higher-performing foreign bonds. Some of these countries are responding by reinstituting capital controls to guard against hot money and the carry trade.
· The spat with China and reemergence of capital controls have led some to fear that we are in the first stages of an all-out currency war.
· The instability in the international monetary system, the decreasing value of the dollar, and the large amounts of new US debt could lead the IMF and countries such as China, Japan, Russia, India, and Brazil to abandon the dollar and adopt a new multinational currency.
While the big players in these currency games sort everything out, the people hurt the most are the savers, the workers, and those on fixed incomes as their money buys less and less. Make no mistake – the Fed and the Treasury Department are playing games with our money, especially in how they report statistics like unemployment and inflation. These games erode our standard of living and hide just how much damage their inflationary policies are doing.
Official core inflation for the US is only 1.14%, but that excludes such crucial day-to-day goods such as food and energy. Real inflation certainly is higher, maybe much higher. John Williams of Shadow Government Statistics calculates true inflation at a whopping 8.48%! But manipulated inflation statistics give the government cover when they again deny seniors a cost of living increase in their social security checks. They also serve to convince the public that further expansion of the money supply will boost the economy without causing any real pain, which has essentially been the core argument of Greenspan-Bernanke fed policy for the last 20 years.
Of course, the United States is not alone in its disastrous monetary policy decisions. These pressures are inherent in any fiat monetary system where money is created at will, for the benefit of the special interests. As all these currencies race to the bottom of the inflationary barrel, the only security to be had will be in honest money like gold as the system falls apart. My hope is that we can return to the wisdom of the Constitution and get back to sound, commodity-backed money before our dollar suffers a wholesale collapse.
Gold is more correctly viewed as insurance against bad monetary policy decisions that erode the value of savings. Those bad decisions keep coming at an ever faster clip these days and we hear more and more talk of currency wars especially between the dollar, the Chinese yuan, the Japanese yen, the Australian dollar, and the Euro. As the economies of the world continue to stagnate or contract, monetary policy decisions become more relevant to people who once thought this topic arcane. We have several examples this week of major fumbles on the part of the US Central Bank:
· The Federal Reserve continues to insist that inflation is too low, even while the monetary base remains at record levels, and food and gas prices continue to climb.
· As the Fed continues to drive down the value of the dollar, the government accuses China of deliberately devaluing its currency, and the House has passed legislation aimed at punishing China for this alleged devaluation.
· Low returns on US bonds are driving investors into higher-performing foreign bonds. Some of these countries are responding by reinstituting capital controls to guard against hot money and the carry trade.
· The spat with China and reemergence of capital controls have led some to fear that we are in the first stages of an all-out currency war.
· The instability in the international monetary system, the decreasing value of the dollar, and the large amounts of new US debt could lead the IMF and countries such as China, Japan, Russia, India, and Brazil to abandon the dollar and adopt a new multinational currency.
While the big players in these currency games sort everything out, the people hurt the most are the savers, the workers, and those on fixed incomes as their money buys less and less. Make no mistake – the Fed and the Treasury Department are playing games with our money, especially in how they report statistics like unemployment and inflation. These games erode our standard of living and hide just how much damage their inflationary policies are doing.
Official core inflation for the US is only 1.14%, but that excludes such crucial day-to-day goods such as food and energy. Real inflation certainly is higher, maybe much higher. John Williams of Shadow Government Statistics calculates true inflation at a whopping 8.48%! But manipulated inflation statistics give the government cover when they again deny seniors a cost of living increase in their social security checks. They also serve to convince the public that further expansion of the money supply will boost the economy without causing any real pain, which has essentially been the core argument of Greenspan-Bernanke fed policy for the last 20 years.
Of course, the United States is not alone in its disastrous monetary policy decisions. These pressures are inherent in any fiat monetary system where money is created at will, for the benefit of the special interests. As all these currencies race to the bottom of the inflationary barrel, the only security to be had will be in honest money like gold as the system falls apart. My hope is that we can return to the wisdom of the Constitution and get back to sound, commodity-backed money before our dollar suffers a wholesale collapse.
Sunday
FREE MARKETS CREATE JOBS
In this struggling economy it is essential for politicians to take a step back and think about what government has been doing to business in this country. In less than 200 years, the free market, property rights, and respect for the rule of law took this nation from a rough frontier to a global economic superpower. Today, however, our nation and our economy clearly are headed in the wrong direction.
Of course, America has never enjoyed absolute free-market capitalism: creeping government intrusion and special interest political patronage have existed and increased since our founding. But America historically has permitted free markets to operate with less government interference than other nations, while showing greater respect for property rights and the rule of law. Less government, respect for private property, and a relatively stable legal environment allowed America to become the wealthiest nation on earth.
By contrast, the poorest nations almost always demonstrate hostility for free markets, private property, and the rule of law. Capital formation, entrepreneurship, credit, and wealth accumulation are uniformly discouraged in poor countries. Private contracts are not reliably enforced, and private property is not secure in the hands of owners. The predictable result is widespread poverty and misery.
First and foremost, the role of government in business should be limited to resolving contractual disputes. As long as both parties of a contract enter into the arrangement willingly, without coercion, and with complete and accurate information, they should be expected to live up to their end of the deal. When a party cannot or will not honor the terms of a contract, it is acceptable for government to provide a court system to resolve disputes in a fair and impartial way.
Government should not dictate the terms of a contract to the parties involved. However, throughout the 20th century, our government became increasingly comfortable mandating terms that politicians find acceptable without regard to what businesses or their customers might want. This interference has had a chilling effect on the economy.
For example, government increases labor costs through minimum wage laws, union requirements, healthcare mandates, and various other stipulations that decrease a business’s capacity to hire as many employees as they might otherwise. And because they can only hire a few, they must reserve those spots only for top candidates. Thus, a teenager or a handicapped individual may miss out on job opportunities and work experience because of government-created job shortages. What if someone was willing to work for less than the government-mandated minimum wage, and a business was willing to give them a chance? Government makes this illegal, and both the business and the worker are worse off for it.
By contrast, business flourishes when government gets out of the way. One example is playing out in the 14th congressional district in Texas. A major multinational company, Caterpillar, is building an assembly facility in Victoria, Texas, rather than in one of the heavily unionized midwest states where it operates other plants. Texas, as a “right to work” state, offers more manageable labor costs. It also offers a more business-friendly regulatory landscape, and an overall lower tax burden with no corporate income tax. I am pleased that because of this, the people of Victoria will be rewarded with more job opportunities.
Freedom and a restrained government are what made us an economic power house. If we keep chasing businesses away with onerous taxes, mandates, and regulations, they will eventually leave. The best approach to our economic woes that will help the most people is simple: get back to the Constitution and demonstrate respect for free markets, private property, and the rule of law.
Of course, America has never enjoyed absolute free-market capitalism: creeping government intrusion and special interest political patronage have existed and increased since our founding. But America historically has permitted free markets to operate with less government interference than other nations, while showing greater respect for property rights and the rule of law. Less government, respect for private property, and a relatively stable legal environment allowed America to become the wealthiest nation on earth.
By contrast, the poorest nations almost always demonstrate hostility for free markets, private property, and the rule of law. Capital formation, entrepreneurship, credit, and wealth accumulation are uniformly discouraged in poor countries. Private contracts are not reliably enforced, and private property is not secure in the hands of owners. The predictable result is widespread poverty and misery.
First and foremost, the role of government in business should be limited to resolving contractual disputes. As long as both parties of a contract enter into the arrangement willingly, without coercion, and with complete and accurate information, they should be expected to live up to their end of the deal. When a party cannot or will not honor the terms of a contract, it is acceptable for government to provide a court system to resolve disputes in a fair and impartial way.
Government should not dictate the terms of a contract to the parties involved. However, throughout the 20th century, our government became increasingly comfortable mandating terms that politicians find acceptable without regard to what businesses or their customers might want. This interference has had a chilling effect on the economy.
For example, government increases labor costs through minimum wage laws, union requirements, healthcare mandates, and various other stipulations that decrease a business’s capacity to hire as many employees as they might otherwise. And because they can only hire a few, they must reserve those spots only for top candidates. Thus, a teenager or a handicapped individual may miss out on job opportunities and work experience because of government-created job shortages. What if someone was willing to work for less than the government-mandated minimum wage, and a business was willing to give them a chance? Government makes this illegal, and both the business and the worker are worse off for it.
By contrast, business flourishes when government gets out of the way. One example is playing out in the 14th congressional district in Texas. A major multinational company, Caterpillar, is building an assembly facility in Victoria, Texas, rather than in one of the heavily unionized midwest states where it operates other plants. Texas, as a “right to work” state, offers more manageable labor costs. It also offers a more business-friendly regulatory landscape, and an overall lower tax burden with no corporate income tax. I am pleased that because of this, the people of Victoria will be rewarded with more job opportunities.
Freedom and a restrained government are what made us an economic power house. If we keep chasing businesses away with onerous taxes, mandates, and regulations, they will eventually leave. The best approach to our economic woes that will help the most people is simple: get back to the Constitution and demonstrate respect for free markets, private property, and the rule of law.
Monday
A SPOOKED ECONOMY IN OCTOBER
Last week we received worse than expected unemployment numbers, challenging recent claims that the recession has come and gone. Also, as the economy continues to suffer the after effects of the Federal Reserve-created bubbles of the last decade, there is renewed interest in gold. Fears that the Federal Reserve will pump even more money into the system had caused the price of gold to reach new highs. Also contributing to enthusiasm for gold is continued instability in the banking industry, symbolized this week by fraud allegations that have caused many banks to halt foreclosure proceedings, thus further destabilizing the housing market. Yes, October has a reputation for being a scary month economically and this month is shaping up to be frightening, as well.
The Fed has been wreaking havoc and devaluing our monetary unit steadily since 1913, and greatly accelerating it since the collapse of the Bretton Woods agreement in the 1970s. This severing of the dollar’s last tenuous link with gold allowed the Fed to create as much new money as it pleased, and it has taken full advantage of this opportunity.
In 1971, Gross Domestic Product (GDP) was $1.29 trillion. Today it is $14.6 trillion, nominally. But adjusted for all the inflating the Fed has been doing, it is only $2.73 trillion, which constitutes only a 1% real increase per year! So with all this extra money going around, we may appear nominally wealthier, but the reality is, we have barely moved at all. This is unfortunate especially for the prudent, conscientious savers, whose nest eggs are constantly being devalued. Unless of course, they have saved in something out of the Fed’s reach, like gold. While the economy has basically been in a holding pattern against the leeching of wealth by the Fed for 39 years, gold has seen an inflation adjusted increase in value of over 5% per year, if measured in 1971 dollars. This is due to the Fed’s ability to make dollars plentiful. And yet, this is the only tactic the Fed can come up with to rescue an economy already devastated by “quantitative easing”, as they call it.
The turmoil in the housing market demonstrates how disastrous it is to flood the economy with fiat money. Latest events with foreclosures are good examples of mistakes made in the market, in this case, by the banks, in the rush to soak up manipulated currency. This is why the truly free market depends on sound, honest money, free from false signals of artificially low interest rates.
The government finds ways to spend money even faster than the Fed can create it, bringing our national debt well past the point of the taxpayers ever being able to pay it off. Other nations who, in the past, have eagerly bought up any amount of debt we produced are now starting to resist. We are reaching a crucial point at which the dollar will no longer function, and in the absence of a functioning dollar, restoring sound money will be the only alternative.
The truly scary notion is that those in power might allow our system to collapse so chaotically to the detriment of so many people rather than simply obey the Constitution.
The Fed has been wreaking havoc and devaluing our monetary unit steadily since 1913, and greatly accelerating it since the collapse of the Bretton Woods agreement in the 1970s. This severing of the dollar’s last tenuous link with gold allowed the Fed to create as much new money as it pleased, and it has taken full advantage of this opportunity.
In 1971, Gross Domestic Product (GDP) was $1.29 trillion. Today it is $14.6 trillion, nominally. But adjusted for all the inflating the Fed has been doing, it is only $2.73 trillion, which constitutes only a 1% real increase per year! So with all this extra money going around, we may appear nominally wealthier, but the reality is, we have barely moved at all. This is unfortunate especially for the prudent, conscientious savers, whose nest eggs are constantly being devalued. Unless of course, they have saved in something out of the Fed’s reach, like gold. While the economy has basically been in a holding pattern against the leeching of wealth by the Fed for 39 years, gold has seen an inflation adjusted increase in value of over 5% per year, if measured in 1971 dollars. This is due to the Fed’s ability to make dollars plentiful. And yet, this is the only tactic the Fed can come up with to rescue an economy already devastated by “quantitative easing”, as they call it.
The turmoil in the housing market demonstrates how disastrous it is to flood the economy with fiat money. Latest events with foreclosures are good examples of mistakes made in the market, in this case, by the banks, in the rush to soak up manipulated currency. This is why the truly free market depends on sound, honest money, free from false signals of artificially low interest rates.
The government finds ways to spend money even faster than the Fed can create it, bringing our national debt well past the point of the taxpayers ever being able to pay it off. Other nations who, in the past, have eagerly bought up any amount of debt we produced are now starting to resist. We are reaching a crucial point at which the dollar will no longer function, and in the absence of a functioning dollar, restoring sound money will be the only alternative.
The truly scary notion is that those in power might allow our system to collapse so chaotically to the detriment of so many people rather than simply obey the Constitution.
Friday
HEALTHCARE REFORM: A HUGE MISDIAGNOSIS
This week marked six months since Congress passed the healthcare reform bill in what has become all-too-typical legislative chicanery. Those in power crafted a mammoth piece of legislation and rammed it through Congress under a dire sense of emergency. Insisting on time enough to read the bill was dismissed as dangerous and crazy in a time of crisis. We were told that if we really wanted to see what was in the bill, we would have to pass it first. I cannot imagine the founding fathers intended for Congress to legislate in this manner. I would think if a Member is not absolutely certain the entire legislation meets Constitutional muster, the default vote should be “no” in accordance with our oath of office.
But now that Congress has had six months to read the new law, there is a significant amount of buyer’s remorse on Capitol Hill. The more constituents learn about the law, the more angry they become. 60% of Americans are now said to be in favor of repealing the entire thing. Unfortunately, it is much more difficult to repeal a law than to pass a bill.
I wrote a while back about the egregious provision to require businesses to issue 1099s for all transactions over $600 as a way to partially pay for it. I have cosponsored legislation to fix this issue, yet this is just the tip of the iceberg.
First of all, in spite of the administration repeating over and over that this legislation would not increase costs for Americans, they are now saying they knew all along that it would. The Congressional Budget Office (CBO) estimates that American families will see their premiums rise by an average of $2100 by 2016. The Wall Street Journal has reported that the cost of compliance is forcing some insurers to increase premiums by up to 20% as soon as next year!
Also, in spite of repeated claims from the administration that we could all keep our plans and doctors if we liked them, the administration’s own officials are now predicting that won’t be true for up to 117 million Americans who will lose their current plans. Major insurers are also dropping child-only plans because of mandates and price-fixing on such policies, leaving parents with fewer choices for their children, not more.
In addition, in spite of claiming this law would contain government costs, not increase them, administration actuaries now predict it will increase healthcare spending by over $300 billion. This additional spending comes along with doctor shortages, fewer choices and more taxes. Perhaps worst of all, increases in labor costs because of health insurance mandates are discouraging employers from hiring new workers and even triggering more layoffs.
Anyone with a basic understanding of Austrian economics could have predicted the unintended consequences of these new healthcare policies. Central planning never increases choices and quality or cuts costs as promised. Price controls and government mandates always create artificial scarcity. Healthcare is not a right, nor a privilege. It is a product, like food or clothing. As with any good or service, the free market regulation of supply and demand provides the optimum quality to the maximum number of people. Once we realize the problems we are trying to solve today were created by government intervention beginning in the 1960’s, we can begin to put patients and doctors back in control of healthcare, rather than third party oligopolies and government bureaucrats. The sooner, the better.
But now that Congress has had six months to read the new law, there is a significant amount of buyer’s remorse on Capitol Hill. The more constituents learn about the law, the more angry they become. 60% of Americans are now said to be in favor of repealing the entire thing. Unfortunately, it is much more difficult to repeal a law than to pass a bill.
I wrote a while back about the egregious provision to require businesses to issue 1099s for all transactions over $600 as a way to partially pay for it. I have cosponsored legislation to fix this issue, yet this is just the tip of the iceberg.
First of all, in spite of the administration repeating over and over that this legislation would not increase costs for Americans, they are now saying they knew all along that it would. The Congressional Budget Office (CBO) estimates that American families will see their premiums rise by an average of $2100 by 2016. The Wall Street Journal has reported that the cost of compliance is forcing some insurers to increase premiums by up to 20% as soon as next year!
Also, in spite of repeated claims from the administration that we could all keep our plans and doctors if we liked them, the administration’s own officials are now predicting that won’t be true for up to 117 million Americans who will lose their current plans. Major insurers are also dropping child-only plans because of mandates and price-fixing on such policies, leaving parents with fewer choices for their children, not more.
In addition, in spite of claiming this law would contain government costs, not increase them, administration actuaries now predict it will increase healthcare spending by over $300 billion. This additional spending comes along with doctor shortages, fewer choices and more taxes. Perhaps worst of all, increases in labor costs because of health insurance mandates are discouraging employers from hiring new workers and even triggering more layoffs.
Anyone with a basic understanding of Austrian economics could have predicted the unintended consequences of these new healthcare policies. Central planning never increases choices and quality or cuts costs as promised. Price controls and government mandates always create artificial scarcity. Healthcare is not a right, nor a privilege. It is a product, like food or clothing. As with any good or service, the free market regulation of supply and demand provides the optimum quality to the maximum number of people. Once we realize the problems we are trying to solve today were created by government intervention beginning in the 1960’s, we can begin to put patients and doctors back in control of healthcare, rather than third party oligopolies and government bureaucrats. The sooner, the better.
Saturday
ARE CONSUMERS FINALLY WINNING IN WASHINGTON?
This past week the administration announced its choice for the first credit czar at the new Consumer Financial Protection Bureau. This bureau was created as part of the supposed Wall Street reform bill recently passed by Congress. This new bureau, which represents nothing more than another layer of useless Washington bureaucracy, will be housed within the Federal Reserve-- one of the most anti-consumer institutions in Washington.
The appointee named to run the bureau is an Ivy League professor. By her own admission she is an academic, not a business person. She has very little real world business experience with the highly complex financial instruments she will oversee. The administration has done nothing to refute her characterization by some in the financial press as an anti-business, ivory tower leftist with an aversion to free market principles.
She also admits to being told, or warned, that the big banks always win in Washington - yet she trumpeted the creation of this new agency as a win against those banks. I would caution her against declaring victory too soon.
Outrageously, she has been appointed as a “special advisor” to design and lead the bureau, but the administration has not disclosed the exact length of her term. There will be no Senate confirmation hearings, nor will the public or the financial industry be allowed to comment on her appointment. We simply are expected to accept the appointment of an enormously powerful regulator without question, and without regard to the constitutional requirement that the Senate advise and consent with regard to her appointment. This means you, as a voter and citizen, effectively have no say whatsoever for the duration of her appointment. In the meantime, she has unprecedented new powers over private business decisions.
The truth is that this new bureau is just more of the same ineffective and damaging regulation we typically get from a crisis. Just as the FDA serves big pharmaceutical companies, not patients, and just as the SEC serves Wall Street, not investors, this agency will end up serving the banks. All regulatory agencies eventually become co-opted by the industries they regulate, and they become chiefly concerned with restricting the entry of new competitors and protecting market share for the big players. This new bureau is not likely to straighten out Wall Street, so much as it will instill a false sense of security in the public about banking and investing again.
No bureaucrat, no federal agency, and no ivory tower academic can replace the regulatory powers of the free market. “Caveat emptor” remains the rule for intelligent investors and depositors. Buyers always need to beware, especially when politicians say they have it all under control.
Real reform starts with transparency and an adherence to the rule of law. The administration would do well to adhere to the law, rather than shoving a new economic czar down our throats without congressional involvement. Real reform would mean taking steps toward restoring sound money and getting back to the Constitution. The Constitution does not allow for favors to special interests, or handing out public money to keep private businesses afloat. The Constitution necessitates a small, impartial government that first and foremost, protects liberty, and sees all citizens as equal. It does not recognize a special banking class. The fact that measures to achieve these ends are still quashed tells me that indeed, the banks do still win in Washington.
The appointee named to run the bureau is an Ivy League professor. By her own admission she is an academic, not a business person. She has very little real world business experience with the highly complex financial instruments she will oversee. The administration has done nothing to refute her characterization by some in the financial press as an anti-business, ivory tower leftist with an aversion to free market principles.
She also admits to being told, or warned, that the big banks always win in Washington - yet she trumpeted the creation of this new agency as a win against those banks. I would caution her against declaring victory too soon.
Outrageously, she has been appointed as a “special advisor” to design and lead the bureau, but the administration has not disclosed the exact length of her term. There will be no Senate confirmation hearings, nor will the public or the financial industry be allowed to comment on her appointment. We simply are expected to accept the appointment of an enormously powerful regulator without question, and without regard to the constitutional requirement that the Senate advise and consent with regard to her appointment. This means you, as a voter and citizen, effectively have no say whatsoever for the duration of her appointment. In the meantime, she has unprecedented new powers over private business decisions.
The truth is that this new bureau is just more of the same ineffective and damaging regulation we typically get from a crisis. Just as the FDA serves big pharmaceutical companies, not patients, and just as the SEC serves Wall Street, not investors, this agency will end up serving the banks. All regulatory agencies eventually become co-opted by the industries they regulate, and they become chiefly concerned with restricting the entry of new competitors and protecting market share for the big players. This new bureau is not likely to straighten out Wall Street, so much as it will instill a false sense of security in the public about banking and investing again.
No bureaucrat, no federal agency, and no ivory tower academic can replace the regulatory powers of the free market. “Caveat emptor” remains the rule for intelligent investors and depositors. Buyers always need to beware, especially when politicians say they have it all under control.
Real reform starts with transparency and an adherence to the rule of law. The administration would do well to adhere to the law, rather than shoving a new economic czar down our throats without congressional involvement. Real reform would mean taking steps toward restoring sound money and getting back to the Constitution. The Constitution does not allow for favors to special interests, or handing out public money to keep private businesses afloat. The Constitution necessitates a small, impartial government that first and foremost, protects liberty, and sees all citizens as equal. It does not recognize a special banking class. The fact that measures to achieve these ends are still quashed tells me that indeed, the banks do still win in Washington.
Tuesday
ON MORE STIMULUS SPENDING
Faced with continuing economic decline and an impending election, the administration, predictably, is entertaining the idea of another stimulus package. To explain why the last one didn’t work, adherents to the Keynesian economic philosophy are claiming that they actually did work - it just looks like they didn’t because we don’t realize how much worse off we would be right now without trillions of dollars of public spending. The last administration bought into Keynesianism just as much as this one does, unfortunately. Until we have leaders who understand that debt is not the way to prosperity, there will be no stopping runaway government spending.
While it is nice to hear about business tax breaks, the positive results of these tax cuts will be dwarfed by its negative effects. First of all, $200 billion or so in temporary tax cuts and credits to businesses are nothing compared to the $3.8 trillion in tax hikes that will hit the economy like a ton of bricks on January 1, 2011 if the Bush tax cuts are not extended by Congress.
Second of all, businesses are reluctant to hire and invest, not because they are looking for temporary credits, but because of future uncertainty; they simply don’t know what the government is going to do next and how future government policies will affect decisions they make now. What new costs and regulations will be placed on them with healthcare reform and financial services reform? Will Congress convene a lame-duck session this winter to pass cap-and-trade and other destructive legislation? What will the cost of compliance be for hiring new employees, and will that force them to simply lay off anyone they hire now? Worse, will the government come up with fines or additional costs if businesses have to lay people off in the future? Right now, the safest thing for businesses to do is nothing. Until we regain respect for the rule of law and remove some of this uncertainty, I’m afraid none of these temporary promises, made right before an election, will do much towards any economic improvement.
The other glaring problem with this proposed stimulus package is that it couples tax cuts with spending increases, which makes no sense when we are already heavily indebted to foreign countries. We should be cutting taxes and slashing government spending dramatically. The private sector simply cannot bear the burden of our engorged public sector. In fact, one reason earlier stimulus programs did not result in any private sector growth is because large amounts went to the public sector. Indeed, the spending that the administration is now proposing arguably constitutes a bailout of the public sector and various union allies of the administration.
This administration is falling into the same dangerous trap we fell into during the Great Depression, as did the Germans leading into their hyperinflation of the 1920’s. The temptation is to do something, anything, proactive to attempt to stimulate the economy, but history has shown us that governments cannot spend their way into prosperity. The best thing government could do is get back to its Constitutional limitations and let the economy stabilize, heal and recover without the crushing burden of government holding it back.
While it is nice to hear about business tax breaks, the positive results of these tax cuts will be dwarfed by its negative effects. First of all, $200 billion or so in temporary tax cuts and credits to businesses are nothing compared to the $3.8 trillion in tax hikes that will hit the economy like a ton of bricks on January 1, 2011 if the Bush tax cuts are not extended by Congress.
Second of all, businesses are reluctant to hire and invest, not because they are looking for temporary credits, but because of future uncertainty; they simply don’t know what the government is going to do next and how future government policies will affect decisions they make now. What new costs and regulations will be placed on them with healthcare reform and financial services reform? Will Congress convene a lame-duck session this winter to pass cap-and-trade and other destructive legislation? What will the cost of compliance be for hiring new employees, and will that force them to simply lay off anyone they hire now? Worse, will the government come up with fines or additional costs if businesses have to lay people off in the future? Right now, the safest thing for businesses to do is nothing. Until we regain respect for the rule of law and remove some of this uncertainty, I’m afraid none of these temporary promises, made right before an election, will do much towards any economic improvement.
The other glaring problem with this proposed stimulus package is that it couples tax cuts with spending increases, which makes no sense when we are already heavily indebted to foreign countries. We should be cutting taxes and slashing government spending dramatically. The private sector simply cannot bear the burden of our engorged public sector. In fact, one reason earlier stimulus programs did not result in any private sector growth is because large amounts went to the public sector. Indeed, the spending that the administration is now proposing arguably constitutes a bailout of the public sector and various union allies of the administration.
This administration is falling into the same dangerous trap we fell into during the Great Depression, as did the Germans leading into their hyperinflation of the 1920’s. The temptation is to do something, anything, proactive to attempt to stimulate the economy, but history has shown us that governments cannot spend their way into prosperity. The best thing government could do is get back to its Constitutional limitations and let the economy stabilize, heal and recover without the crushing burden of government holding it back.
SUCCESSFUL ECONOMIC POLICIES? FOR WHOM?
Last week, in the wake of another uptick in the official unemployment rate, the administration continued to claim that their economic policies were working, just not fast enough. This administration inherited an unemployment rate of 7.7% and promised a peak of no higher than 8% if their policies were followed. Not only does the administration have a funny way of ending a war, but now they claim their economic policies are successful. For whom, I wonder?
These policies are not working for the 9.6% of Americans who are out of work, nor for the over16% underemployed. They are not working for nearly 3 million Americans who have declared bankruptcy in the last two years, or the 40 million currently on food stamps. Nearly 1 in 6 Americans depend on those and other government anti-poverty programs such as Medicaid and unemployment benefits. As more Americans are added to the unemployment rolls, the tax base from which to hand out their benefits is shrinking. Still, businesses are being taxed and regulated out of the market, adding to the problem. What solutions are put forth? More government spending - even as each citizen’s portion of the public debt is over $43,000 and expected to increase by $250,000 over the next 40 years.
No, this economy is not working for these people. But current economic policy does “work” for some people. For example, it has worked out very well for certain bankers and large corporations, who took on too much risk and got themselves in hot water, and were declared “too big to fail” which is really a euphemism for “friends in high places”. It works well for large, well-connected military industrial corporations, who can always count on perpetual war and conflict to keep them in business. It also works for those on the government’s payroll, which is increasing as the tax base is decreasing.
So where does the government get all this money even as its most obvious stream of revenue dries up? How can it keep spending seemingly indefinitely? Once it steals as much from you as it can get away with through taxation, it steals even more from you through what central bankers like to call quantitative easing, which is more or less the same thing as counterfeiting. When the money is no longer based on a finite quantity of something of value, like a store of gold or silver, the amount of money in circulation is not limited by anything but the restraint of those in control of the printing presses, in our case the Fed and the US Treasury. When increasing pressure is put upon them by irresponsible politicians, it is predictable that out of thin air, more money will be created to satisfy the insatiable appetites of those on political spending sprees. As money becomes more plentiful, it becomes less valuable, and the average citizen suffers again as the value of their savings evaporates. It has happened over and over in history, and what usually follows is the total debasement of the currency, hyperinflation and chaos.
Sound economic policy would be to take our foot off the gas and apply the brakes to government spending as the economic cliff approaches. We must get back to where our economy produces actual wealth, rather than mere paper wealth. The road back to fiscal sanity and a strong economy is simple: Congress just needs to get back to following the Constitution.
These policies are not working for the 9.6% of Americans who are out of work, nor for the over16% underemployed. They are not working for nearly 3 million Americans who have declared bankruptcy in the last two years, or the 40 million currently on food stamps. Nearly 1 in 6 Americans depend on those and other government anti-poverty programs such as Medicaid and unemployment benefits. As more Americans are added to the unemployment rolls, the tax base from which to hand out their benefits is shrinking. Still, businesses are being taxed and regulated out of the market, adding to the problem. What solutions are put forth? More government spending - even as each citizen’s portion of the public debt is over $43,000 and expected to increase by $250,000 over the next 40 years.
No, this economy is not working for these people. But current economic policy does “work” for some people. For example, it has worked out very well for certain bankers and large corporations, who took on too much risk and got themselves in hot water, and were declared “too big to fail” which is really a euphemism for “friends in high places”. It works well for large, well-connected military industrial corporations, who can always count on perpetual war and conflict to keep them in business. It also works for those on the government’s payroll, which is increasing as the tax base is decreasing.
So where does the government get all this money even as its most obvious stream of revenue dries up? How can it keep spending seemingly indefinitely? Once it steals as much from you as it can get away with through taxation, it steals even more from you through what central bankers like to call quantitative easing, which is more or less the same thing as counterfeiting. When the money is no longer based on a finite quantity of something of value, like a store of gold or silver, the amount of money in circulation is not limited by anything but the restraint of those in control of the printing presses, in our case the Fed and the US Treasury. When increasing pressure is put upon them by irresponsible politicians, it is predictable that out of thin air, more money will be created to satisfy the insatiable appetites of those on political spending sprees. As money becomes more plentiful, it becomes less valuable, and the average citizen suffers again as the value of their savings evaporates. It has happened over and over in history, and what usually follows is the total debasement of the currency, hyperinflation and chaos.
Sound economic policy would be to take our foot off the gas and apply the brakes to government spending as the economic cliff approaches. We must get back to where our economy produces actual wealth, rather than mere paper wealth. The road back to fiscal sanity and a strong economy is simple: Congress just needs to get back to following the Constitution.
Monday
IRAQ - AN END OR AN ESCALATION?
Amid much fanfare last week, the last supposed “combat” troops left Iraq as the administration touted the beginning of the end of the Iraq War and a change in the role of the United States in that country. Considering the continued public frustration with the war effort, and with the growing laundry list of broken promises, this was merely another one of the administration’s operations in political maneuvering and semantics in order to convince an increasingly war-weary public that the Iraq War is at last ending. However, military officials confirm that we are committed to intervention in that country for years to come, and our operations have in fact, changed minimally, if really at all.
After eight long draining years, I have to wonder if our government even understands what it is to end a war anymore. The end of a war, to most people, means all the troops come home, out of harm’s way. It means we stop killing people and getting killed. It means we stop sending troops and armed personnel over and draining our treasury for military operations in that foreign land. But much like the infamous “mission accomplished” moment of the last administration, this “end” of the war also means none of those things.
50,000 US troops remain in Iraq, and they are still receiving combat pay. One soldier was killed in Basra just last Sunday, after the supposed end of combat operations, and the same day 5,000 men and women of the 3rd Armored Cavalry Regiment at Fort Hood were deployed to Iraq. Their mission will be anything but desk duty. Among other things they will accompany the Iraqi military on dangerous patrols, continue to be involved in the hunt for terrorists, and provide air support for the Iraqi military. They should be receiving combat pay, because they will be serving a combat role!
Of course the number of private contractors - who perform many of the same roles as troops, but for a lot more money - is expected to double. So this is a funny way of ending combat operations in Iraq. We are still meddling in their affairs and we are still putting our men and women in danger, and we are still spending money we don’t have. This looks more like an escalation than a draw-down to me!
The ongoing war in Iraq takes place against a backdrop of economic crisis at home, as fresh numbers indicate that our economic situation is as bad as ever, and getting worse! Our foreign policy is based on an illusion: that we are actually paying for it. What we are doing is borrowing and printing the money to maintain our presence overseas. Americans are seeing the cost of this irresponsible approach as our economic decline continues. Unemployed Americans have been questioning a policy that ships hundreds of billions of dollars overseas while their own communities crumble and their frustration is growing. An end to this type of foreign policy is way overdue.
A return to the traditional American foreign policy of active private engagement and non-interventionism is the only alternative that can restore our moral and fiscal health.
After eight long draining years, I have to wonder if our government even understands what it is to end a war anymore. The end of a war, to most people, means all the troops come home, out of harm’s way. It means we stop killing people and getting killed. It means we stop sending troops and armed personnel over and draining our treasury for military operations in that foreign land. But much like the infamous “mission accomplished” moment of the last administration, this “end” of the war also means none of those things.
50,000 US troops remain in Iraq, and they are still receiving combat pay. One soldier was killed in Basra just last Sunday, after the supposed end of combat operations, and the same day 5,000 men and women of the 3rd Armored Cavalry Regiment at Fort Hood were deployed to Iraq. Their mission will be anything but desk duty. Among other things they will accompany the Iraqi military on dangerous patrols, continue to be involved in the hunt for terrorists, and provide air support for the Iraqi military. They should be receiving combat pay, because they will be serving a combat role!
Of course the number of private contractors - who perform many of the same roles as troops, but for a lot more money - is expected to double. So this is a funny way of ending combat operations in Iraq. We are still meddling in their affairs and we are still putting our men and women in danger, and we are still spending money we don’t have. This looks more like an escalation than a draw-down to me!
The ongoing war in Iraq takes place against a backdrop of economic crisis at home, as fresh numbers indicate that our economic situation is as bad as ever, and getting worse! Our foreign policy is based on an illusion: that we are actually paying for it. What we are doing is borrowing and printing the money to maintain our presence overseas. Americans are seeing the cost of this irresponsible approach as our economic decline continues. Unemployed Americans have been questioning a policy that ships hundreds of billions of dollars overseas while their own communities crumble and their frustration is growing. An end to this type of foreign policy is way overdue.
A return to the traditional American foreign policy of active private engagement and non-interventionism is the only alternative that can restore our moral and fiscal health.
LET THE HOUSING MARKET NORMALIZE!
Recently there have been some encouraging signs that Congress is finally willing to admit what should have been evident two years ago. Even after a $150 billion bailout, Fannie Mae and Freddie Mac are still bankrupt and should be abolished. Indeed Rep. Barney Frank, a longtime champion of Fannie and Freddie has made a few statements alluding to this and I have signed on to a letter asking him to clarify his remarks and hold hearings on this topic. There seems to be a growing consensus in favor of abolishing Fannie and Freddie. This is the good news.
The bad news is that instead of simply returning to the free market, Fannie and Freddie will probably be replaced with something equally damaging, and at this point we can only guess what that will be. One possibility is that instead of these two giant Government Sponsored Enterprises (GSEs) the government will deputize thousands of smaller banks to do the same thing – that is to securitize mortgages with taxpayer guarantees to encourage lending that otherwise would not happen. In other words, there will be a myriad of smaller Fannies and Freddies, and government involvement will reach even deeper into the financial sector.
Fannie and Freddie, and thus the taxpayer, has an alarming $5 trillion exposure to the mortgage market. To some, spreading out this risk might seem tempting, and a smart thing to do. But the fact remains that if a bank expects to lose money on a loan, so will the taxpayers. Playing around with structures and definitions will still not deal with the root problem – government meddling in the housing market, playing fast and loose with our tax dollars, and central planning by the Federal Reserve.
Banks have complex risk assessment strategies in place that help them forecast if a particular loan will make them any money or not. If they expect to make money, they will approve the loan. If they have doubts, sometimes they will ask for a co-signer to improve their odds. You might do this willingly for a friend or a relative if you didn’t mind losing some money on their behalf, but current government policies essentially force taxpayers to become cosigners for risky borrowers that are complete strangers, who the banks have already determined to be bad risks. Taxpayers have no choice in the matter because politicians decided a few decades ago that dangling homeownership in front of more people seemed like a good way to garner votes.
That was sold to voters as a compassionate gesture to the poor and beneficial to society as a whole. After all, how could giving more Americans an ownership stake in society be bad? The combined policies of loose credit and government backing increased the demand for housing and drove prices sky high. When the housing market heated up to the breaking point everything came crashing down. Those suddenly facing foreclosure saw the reality of government compassion. Truly, when government offers you a gift, you should eye it with great suspicion.
Another tragedy is that many job seekers are now tethered to their locations because of upside down loan obligations. It takes a lot of effort with their bank and damage to their credit scores to figure out how to get out and move to a place where there are jobs. Will the government now be seeking ways to subsidize renters in some way because of this lack of mobility? Some think so.
My hope is that for the long term stability and health of the economy, the government will extricate itself from the market altogether and let it normalize. My fear is that in its usual misguided efforts at solving one crisis, it will create a thousand others.
The bad news is that instead of simply returning to the free market, Fannie and Freddie will probably be replaced with something equally damaging, and at this point we can only guess what that will be. One possibility is that instead of these two giant Government Sponsored Enterprises (GSEs) the government will deputize thousands of smaller banks to do the same thing – that is to securitize mortgages with taxpayer guarantees to encourage lending that otherwise would not happen. In other words, there will be a myriad of smaller Fannies and Freddies, and government involvement will reach even deeper into the financial sector.
Fannie and Freddie, and thus the taxpayer, has an alarming $5 trillion exposure to the mortgage market. To some, spreading out this risk might seem tempting, and a smart thing to do. But the fact remains that if a bank expects to lose money on a loan, so will the taxpayers. Playing around with structures and definitions will still not deal with the root problem – government meddling in the housing market, playing fast and loose with our tax dollars, and central planning by the Federal Reserve.
Banks have complex risk assessment strategies in place that help them forecast if a particular loan will make them any money or not. If they expect to make money, they will approve the loan. If they have doubts, sometimes they will ask for a co-signer to improve their odds. You might do this willingly for a friend or a relative if you didn’t mind losing some money on their behalf, but current government policies essentially force taxpayers to become cosigners for risky borrowers that are complete strangers, who the banks have already determined to be bad risks. Taxpayers have no choice in the matter because politicians decided a few decades ago that dangling homeownership in front of more people seemed like a good way to garner votes.
That was sold to voters as a compassionate gesture to the poor and beneficial to society as a whole. After all, how could giving more Americans an ownership stake in society be bad? The combined policies of loose credit and government backing increased the demand for housing and drove prices sky high. When the housing market heated up to the breaking point everything came crashing down. Those suddenly facing foreclosure saw the reality of government compassion. Truly, when government offers you a gift, you should eye it with great suspicion.
Another tragedy is that many job seekers are now tethered to their locations because of upside down loan obligations. It takes a lot of effort with their bank and damage to their credit scores to figure out how to get out and move to a place where there are jobs. Will the government now be seeking ways to subsidize renters in some way because of this lack of mobility? Some think so.
My hope is that for the long term stability and health of the economy, the government will extricate itself from the market altogether and let it normalize. My fear is that in its usual misguided efforts at solving one crisis, it will create a thousand others.
Tuesday
WASHINGTON'S IDEA OF FISCAL RESTRAINT
It has been months now since the new healthcare reform bill was passed into law. As is so typical, this massive piece of legislation was passed with a sense of urgency so acute that leadership declared America could not afford to wait until legislators, their staff and the general public had time to thoroughly read the bill.
The truth comes out eventually, however. Much like the recently discovered exemption from Freedom of Information Act requirements for the SEC that was slipped into the equally massive and “urgent” financial reform bill, we are finally seeing what other insidiousness has been hiding in the fine print of the healthcare reform bill. It seems that all provisions in this poorly written and poorly conceived monstrosity need to be repealed as soon as possible.
One such disaster-waiting-to-happen is one of the revenue generating provisions used to claim that the healthcare reform bill was “paid for”. $17 billion in additional tax revenues is supposed to come from an onerous new IRS reporting requirement that any taxpayer with business income who spends over $600 in one year with one business will have to report those expenditures to the IRS. Mind you, this is a cumulative total of $600 in transactions in one year. This will involve so much extra accounting and paperwork that the IRS claims it will be unable to deal with it effectively, and even the American Institute of Certified Public Accountants (to whom it should be a boon) has come out against it! Apparently they realize they will actually lose customers, especially small businesses, to bankruptcy because of this!
Gold dealers are especially alarmed by this provision, as most of their transactions easily top $600. This represents a significant outlay of time and paperwork and no additional revenue for businesses with which to hire people. Not to mention this makes every business a de facto IRS agent, as if they didn’t have enough to worry about already!
Of course, there is a tremendous outcry against this. Several other legislators also see how unreasonable this is and are trying to repeal it. However, this would simply mean that $17 billion in healthcare funding will have to come from somewhere else, and there are no good options. Taxes from some other equally bad collection scheme? Borrowing and more debt? Creating more money from thin air and adding to inflationary pressures?
The best answer, of course, would be to repeal the entire health care law, along with all other unconstitutional spending. But Congress is more likely to continue the shell game to cover the fact that we are broke and can afford none of this.
This whole idea of “paying for” new programs is a political euphemism that suggests that raising taxes is just as good as cutting spending since neither one increases the national debt. Raising taxes and overwhelming small businesses with paperwork and regulations still increases governmental burden on our fragile economy. But this is our government’s idea of “fiscal restraint” in action. Washington needs to stop creating new programs and spending so much money. That would be true fiscal restraint.
The truth comes out eventually, however. Much like the recently discovered exemption from Freedom of Information Act requirements for the SEC that was slipped into the equally massive and “urgent” financial reform bill, we are finally seeing what other insidiousness has been hiding in the fine print of the healthcare reform bill. It seems that all provisions in this poorly written and poorly conceived monstrosity need to be repealed as soon as possible.
One such disaster-waiting-to-happen is one of the revenue generating provisions used to claim that the healthcare reform bill was “paid for”. $17 billion in additional tax revenues is supposed to come from an onerous new IRS reporting requirement that any taxpayer with business income who spends over $600 in one year with one business will have to report those expenditures to the IRS. Mind you, this is a cumulative total of $600 in transactions in one year. This will involve so much extra accounting and paperwork that the IRS claims it will be unable to deal with it effectively, and even the American Institute of Certified Public Accountants (to whom it should be a boon) has come out against it! Apparently they realize they will actually lose customers, especially small businesses, to bankruptcy because of this!
Gold dealers are especially alarmed by this provision, as most of their transactions easily top $600. This represents a significant outlay of time and paperwork and no additional revenue for businesses with which to hire people. Not to mention this makes every business a de facto IRS agent, as if they didn’t have enough to worry about already!
Of course, there is a tremendous outcry against this. Several other legislators also see how unreasonable this is and are trying to repeal it. However, this would simply mean that $17 billion in healthcare funding will have to come from somewhere else, and there are no good options. Taxes from some other equally bad collection scheme? Borrowing and more debt? Creating more money from thin air and adding to inflationary pressures?
The best answer, of course, would be to repeal the entire health care law, along with all other unconstitutional spending. But Congress is more likely to continue the shell game to cover the fact that we are broke and can afford none of this.
This whole idea of “paying for” new programs is a political euphemism that suggests that raising taxes is just as good as cutting spending since neither one increases the national debt. Raising taxes and overwhelming small businesses with paperwork and regulations still increases governmental burden on our fragile economy. But this is our government’s idea of “fiscal restraint” in action. Washington needs to stop creating new programs and spending so much money. That would be true fiscal restraint.
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