Wednesday, May 20, 2009

Today's Liberty Quotes are helpful in my efforts to recharge, so I am breaking my break briefly to share them with you. If these ideas were understood before, they can be understood again.

"Liberty has never come from the government. Liberty has always come from the subjects of government. The history of liberty is the history of resistance. The history of liberty is a history of the limitation of governmental power, not the increase of it."

-- Woodrow Wilson (1856-1924) 28th US President Speech, 1912

"That the sole object and only legitimate end of government is to protect the citizen in the enjoyment of life, liberty, and property, and when the government assumes other functions it is usurpation and oppression."

-- Alabama, Declaration of Rights Article I Section 35

"I have little interest in streamlining government or in making it more efficient, for I mean to reduce its size. I do not undertake to promote welfare, for I propose to extend freedom. My aim is not to pass laws, but to repeal them. It is not to inaugurate new programs, but to cancel old ones that do violence to the Constitution ... or have failed their purpose ... or that impose on the people an unwarranted financial burden. I will not attempt to discover whether legislation is 'needed' before I have first determined whether it is constitutionally permissible. And if I should be attacked for neglecting my constituents' 'interests,' I shall reply that I was informed that their main interest is liberty, and in that cause I am doing the very best I can."

-- Barry Goldwater (1909-1998) US Senator (R-Arizona)

Wednesday, May 13, 2009

On Break

The Price of Freedom and Stamps

I had two of my letters returned yesterday for insufficient postage.
Over the last 90 years, the average retail price of gasoline has increased about 8.5 times, from 25.5 cents per gallon in 1919 to $2.16 per gallon in 2009, according to annual price data from the EIA. Over the same period, the price of a first-class stamp in the U.S. has increased 21X, from 2 cents in 1919 to 44 cents in 2009 (starting tomorrow), according to historical stamp price data available here.-- Carpe Diem

For a small blush of hope, see 3 Ring Binder. The more that youth can understand these issues, the better chance for us all.

Tuesday, May 12, 2009

Stand-up Economist

I really needed this right about now.

Saturday, May 9, 2009

Is it worth the price?

Ian Murray points out that, even if passed, the "global warming " bill ready for review in the House will at best lower global temperature 0.09 oF, and leave unchanged the explosion in CO2 production by developing countries.

So what will the Waxman-Markey energy bill accomplish?

Answer: Wrest revenue from private citizens and businesses to offset the massive increase in federal spending.

Just What Is Waxman-Markey For?
By: Iain Murray
Washington Examiner 05-07-09


Friday, May 8, 2009

Anything---but just don't raise the price!!

Yesterday while running errands in my car, I listened to the news on NPR. I frequently do this as one way of staying in touch with the mainstream presentation of the news.

The topic was public transportation. Turns out that with the recession, the use of publicly funded transport systems (buses, subways and the like) has increased significantly. In some places, it has even doubled. At the same time, with the economic slump, government is bringing in less taxes. With less money available for government programs, many are running out of money. California's public transportation system will receive $1.1 billion less in aid from the state--a 70% decrease from last year. In Massachusetts, the MBTA is facing a $176 million funding shortfall. New York city's MTA is projecting a $3.4 billion budget deficit for next year.

The solutions proposed by commentators? Raise state and local taxes. Use federal stimulus funds. Cut services. Just about everything you could imagine, except raise prices! The underlying assumption is that because people are unwilling or unable to pay for these services directly, the government must use its power to coerce all of us, even non-users, to fund the system.

This problem involves one of the most basic principles of economics: supply and demand. When demand goes up, the relative supply goes down. The market solution to this problem is to have prices go up --which means that people must take into consideration the full cost of a good or service, including the competing needs of other people. As long as the government subsidizes transportation, the true cost is not experienced by the users, and resources are wastefully employed. A significant cause of why people use cars instead of mass transit is that for decades government has subsidized individual car ownership and use through the public funding of roads and highways.

What does a rise in price accomplish?

Scarce resources must be rationed somehow. Free market prices allow for those rationing decisions to be made voluntarily according to each individual's own priorities in combination with the resources he or she can muster. Governments impose "one size fits all" politically-derived solutions, irrespective of actual resource availability (which is why we run such extreme deficits), and lacks the necessary feedback mechanisms to make adjustments when circumstances change.

Rising prices also increase profits, which then draws inn new investors who create additional supplies. Some of the supply will be more buses, taxis and trains----but some of the "supply" will be alternative solutions to increased transportation costs: more telecommuting, working closer to home, changes in work hours. Some people will choose to pay more money in order to save time on a faster commute, while others will opt to spend more time and less money. Employers will have to adjust pay scales or benefits in order to help workers afford the cost of getting to work. But the fundamental idea is that in order to make accurate choices based on the true costs of resources, prices must accurately reflect supply relative to demand.

The economics is straight forward. Price-fixing leads to shortages. Subsidy leads to over-supply. Right now the lack of a free market in transportation has created a shortage of mass transit and an excess of traffic congestion. Freeing prices from government interference--and requiring users of resources to pay for them--will force people to use those resources in a manner that reflects their true availability. Continued government control will bring further misallocation and wastefulness--as well as loss of creative problem-solving by individuals (and entrepreneurs) faced with solving the problems of daily life.

In order for us to use our resources wisely, we need to know how much is available, how much does it cost, how many other people also want to use the same resource. Free market prices provide that information. Government subsidies and price-fixing disrupt that flow of information---substituting political agenda for supply-demand calculations. The solution to a scarcity is a rise in price, whether in transportation or health care or energy. Let the market set the price of both mass and private transportation, and resources will flow from areas of over-supply to meet the demand in areas of shortage.

Rather than the result to avoid at all costs, a rise price is the solution we need to embrace.

Thursday, May 7, 2009

Tuesday, May 5, 2009

More on Rule of Law, Contracts and Property

Interview with Tom Lauria, attorney for some of the non-TARP Chrysler creditors, on Frank Beckmann's WJR radio show in Detroit.


Be Forewarned

It's not about "reform." It's about socializing the rest of our health care industry. Remember, over 50% of health care is already under government control.

UPDATE: Here's a brief explanation of why socialized health care will not reduce costs.

Monday, May 4, 2009

Economic Stability Requires Property Rights

The more the economy is politicized, the more special interest groups will be able to successfully lobby for laws which work in their favor to the detriment of someone else. The most important victims of this economic downturn continues to be property rights and the rule of law.

The newest push in the recent spate of abusive government power is the attempt by Congress to rewrite private contracts. The "Helping Families Save Their Homes in Bankruptcy Act," sponsored by Rep. John Conyers of Michigan, could also be named "The Overturning Private Contracts Act."

In a recent Wall Street Journal editorial, two investment advisers explain some of the complex, yet well-established relationships which exist between mortgage debtors, creditors and investors. The proposed legislation would use the brute force of legislation to favor not just the debtors, but also the banks who provided second mortgages--many of which just happen to be the same banks in partnership with the government through the defacto-nationalization effects of TARP. And who loses in this scheme? Owners of security-backed first mortgages, which means those who have invested on behalf of pension funds, retirement plans, college endowments and others such strategies for savings and investment.

In their rush to act as our saviors, politicians are abandoning the very principles necessary for a sound and stable economy, as well as a sound and stable society! The political push-and-pull of special interests directly undercuts all individual rights, but here the attack is primarily on the right to property. The protection of private contracts is central both to the predictability needed for long-term economic and personal planning, and more, fundamentally, to the concept of justice. The Framers of our Constitution did their best to devise a system to protect individual rights from the tyrannical tendencies of both government and of popular whim, but its preservation depends on our ability to understand and defend the requirements of a free and moral nation: a government limited to the protection of the rights to life, liberty and property.


Saturday, May 2, 2009

Rule of Law takes another hit

Supreme Court Justice David Souter is retiring. As constitutionally mandated, President Obama will name Souter's successor. This is appropriate and presents no problem. The problem arises in the selection criteria that the President has announced he will use in chosing the next judge to serve on our country's highest court. The Washington Times reports, "empathy" will trump knowledge of the law.

President Obama said Friday he will look beyond traditional legal experience to fill the seat of retiring Supreme Court Justice David H. Souter -- to someone who can relate to average Americans...

"I will seek someone who understands that justice isn't about some abstract legal theory or footnote in a casebook; it is also about how our laws affect the daily realities of people's lives, whether they can make a living and care for their families, whether they feel safe in their homes and welcome in their own nation," Mr. Obama said.

He is being encouraged in this by political supporters:

Liberal interest groups said in replacing him, Mr. Obama must push for a judge who will look beyond the letter of the law to consider race, and vulnerability.

What is "the rule of law"? Wikipedia provides a decent introduction to this essential ingredient of a liberal (liberty and rights-based) political system.

The rule of law, also called supremacy of law, is a general legal maxim according to which decisions should be made by applying known principles or laws, without the intervention of discretion in their application.[1] This maxim is intended to be a safeguard against arbitrary governance. The word "arbitrary" (from the Latin "arbiter") signifies a judgment made at the discretion of the arbiter, rather than according to the rule of law...[2][3]

All government officers of the United States, including the President, the Justices of the Supreme Court, and all members of Congress, pledge first and foremost to uphold the Constitution. These oaths affirm that the rule of law is superior to the rule of any human leader.[10]

Rule of Law is a legal-political concept identifying the supremacy of law over the arbitrary judgment of men. It's ultimate purpose is the protection of individual rights from the government's abuse of power. The Rule of Law acts as a restraint on government, requiring it to abide by objective, predictable rules. Lady Justice is blindfolded--not to obscure her review the facts or the law, but to prevent knowledge of specific individuals from influencing her judgment. Fear, empathy, favoritism, all must be excluded from a judge's decision in order to achieve equal treatment before the law.

The essence of tyranny is arbitrary power. The progress of civilization has a been a battle against the arbitrary and tyrannical use of force by thugs and by governments. It is a battle fought not just with swords (although Justice requires a sword as well) but with ideas. The principles of "The Rule of Law" and its corollary "Equality Before the Law" are not just "some abstract legal theory" to be subordinated to "the daily realities of people's lives" but are instead the essential principles which differentiate a liberal republic from tyranny. Our President's ignorance of this is inexcusable, and cause for great concern.

Note: The bronze statue of Lady Justice is displayed at the Saint Louis University School of Law. I tried to find the name of the sculptor and the photographer but so far have been unable to locate them. For more of my thoughts on this wonderful sculpture, click here.


Friday, May 1, 2009

The President and the Rule of Law

President Obama says he doesn't want to own auto companies--but his actions are speaking louder than his words.

Mike Shedock summarizes the current deal being negotiated with GM:

If the deal goes through as currently proposed....
  • The Treasury (taxpayers) would be stuck with 50% of GM's equity (currently worth $625 million) in exchange for forgiving about $10 billion in federal loans.
  • The UAW would get 39% of GM's equity (currently worth $488 million) in exchange for giving up $10 billion in health care benefits
  • Corporate bondholders would get 10% equity (currently worth $125 million) in exchange for giving up $27 billion in bonds.

The UAW will own 39% of GM, and the US Government will officially own 50%! As the Wall Street Journal points out, this also means that the US Government will receive 87 cents-on-the dollar, the UAW receives 76, and the bond holders only 5 cents-on-the-dollar. Bond holders are, not surprisingly, trying to hold out for a better deal.

But the government's defacto control of the auto industry has been going on for decades: forced negotiation with unions, CAFE regulations which required the manufacture of cars customers did not want, threat of anti-trust actions effecting pricing and other key business decisions (read a summary here.) These interventions into the management decisions of a private company have served to hobble it into its current state of failure.

It's a classic example of government intervention causing a "market failure" which is then used as an excuse for further government intervention.

More recently, taxpayer bailout of GM was accompanied by government control over the choice of the company's CEO, the imposition of limits on executive compensation, and threats of "green" requirements on future car production. The government's heavy hand is playing a major part in trying to resurrect this business which it helped to kill. It is incredible that there is not more outcry against these overt acts of statism.

The latest "news" is that Chrysler is also bankrupt.

This proposed deal includes an attempt to run rough-shod over Chrysler's bond-holders. (See the pattern?) The Washington Post had this to report on the negotiation process:

A group of about 20 firms who declined to go along with the 11-th hour deal struck by the Obama administration to save Chrsyler from bankruptcy, has just released a statement claiming that the deal was unfair...

The holdout lenders -- who said their combined debt holding represents about $1 billion of the $6.9 billion owed to senior secured lenders – ... said they had offered to accept 60 cents on the dollar, despite “long recognized legal and business principles” that gives senior lenders such as themselves the right to be repaid in full before others recover anything in bankruptcy court.

“Our offer has been flatly rejected or ignored,” the group said. “In its earnest effort to ensure the survival of Chrysler and the well being of the company’s employees, the government has risked overturning the rule of law and practices that have governed our world-leading bankruptcy code for decades.”

Another WSJ article captures the essence of these actions through the experience of one man's struggle against President Obama's calls for "sacrifice" versus standing on principle against "government's strong-arm tactics."

Usually secured lenders are paid back in full before other unsecured creditors, which includes employees. This time, he says, the government is brokering a plan that he says goes against decades of bankruptcy law...

"We did not contemplate having our first liens invalidated by a sitting president...I feel personally threatened because of what the government is doing at Chrysler and General Motors and how they are changing the rules of the game, instead of allowing bankruptcy laws to be carried out the way they are written."

The chief executive is supposed to execute the law, not rewrite it.

One more ominous twist: As part of the proposed plan for Chrysler, the UAW will end up owning 55% of the company.

With the UAW as a significant owner in these two large auto companies (don't forget the UAW's 39% share of GM), doesn't that mean the Union will be negotiating against itself in setting up contract agreements? And what about the relationship between Ford and the Union? When it goes into contract negotiations, won't it be negotiating with it's main competitors?

Private property rights and the rule of law are two essential bastions of liberty and civilization. Our chief executive is trampling on both. He justifies it in the name of averting an economic disaster. But the real disaster is the long term effect his policies will have on our future liberty and prosperity. You can not save the economy, or anything else of real value, by destroying the very foundations of civilized society.

UPDATE:More on this over at Rational Capitalist, and Instapundit.