“Our practical choice is not between a tax-cut deficit and budgetary surplus. It is between two kinds of deficits: a chronic deficit of inertia, as the unwanted result of inadequate revenues and a restricted economy; or a temporary deficit of transition, resulting from a tax cut designed to boost the economy, increase tax revenues, and achieve . . . a budget surplus.” John F. Kennedy


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Aug 25 2010

Fear of Debate

C.M. Phippen

Just this week James Cameron backed out of a debate with Ann McElhinney, producer of the movie Not Evil, Just Wrong, which counters the error-riddled An Inconvenient Truth. Cameron is that Hollywood producer and environmentalist who is so committed to the sustainable lifestyle that he lives it when he can and only lives an energy-devouring lifestyle “because of Jim’s job” according to his wife.

Cameron had recently expressed a desire to “call those deniers out into the street at high noon and shoot it out with those boneheads.” In a move that appears to have been unexpected, his offer was accepted and a debate scheduled; Cameron and two scientists v. McElhinney, Marc Morano, and Andrew Breitbart. According to McElhinney:

But then as the debate approached James Cameron’s side started changing the rules.

They wanted to change their team. We agreed.

They wanted to change the format to less of a debate—to “a roundtable”. We agreed.

Then they wanted to ban our cameras from the debate. We could have access to their footage. We agreed.

Bizarrely, for a brief while, the worlds most successful film maker suggested that no cameras should be allowed-that sound only should be recorded. We agreed

Then finally James Cameron . . . decided to ban the media from the shoot out.

He even wanted to ban the public. . . .

No media would be allowed and there would be no streaming on the internet. No one would be allowed to record it in any way.

We all agreed to that.

And then, yesterday, just one day before the debate, his representatives sent an email that Mr. “shoot it out ” Cameron no longer wanted to take part.

At the American Renewable Energy Day summit where the debate was to take place, “Cameron and a host of other climate-change activists said there needs to be a broad educational campaign, one aimed at convincing voters and politicians that not being able to prove that fossil fuel-produced carbon is changing the temperature of Earth is not a license for inaction” (italics added).

Could that be the reason the debate was cancelled? Could it be that the “consensus” which has been so often used to end all debate might not be quite what we’ve been told? (Remember this consensus I wrote about recently where Jared Bernstein defended the Obama administration and their claim that unemployment wouldn’t exceed 8% with the stimulus by claiming that the consensus estimated top rate of unemployment was 8%, ostensibly even without the stimulus? Consensus was apparently enough to give them cover for being wrong.)

Add to that the controversy last year when Al Gore and Lord Monckton were both to appear and jointly testify before Congress about the Waxman-Markey climate legislation. This legislation would have the grand effect, according to the computer modeling used by consensus scientists, of pushing off the inevitable climate catastrophe by 2-5 years; it would decrease our estimated temperature by 0.05°C over the next 50 years while destroying our economy. Gore, friend of the Democrats controlling Congress, was allowed to testify, but Monckton was told he couldn’t. Gore allegedly wasn’t interested in appearing in a forum where his ideas could be challenged.

Christopher Monckton has asked that Gore debate him on the climate change issue for many years, without any response from the former vice president.

This is all starting to make sense: our President thinks we all have access to “too much information” in our search for truth – he recommends we stick to The Huffington Post; Nancy Pelosi wants to investigate funding of groups that actually believe they have the right to vocalize disagreement with issues supported by her (after the firestorm that statement created, she agreed that maybe we should be investigating both sides); and those who want to decimate our way of life based on unsubstantiated claims (over 80% reduction in greenhouse gas emissions for a 0.05 C decrease, really?) are unwilling to put their ideas out there side by side with those who disagree with them.

Am I the only one seeing a pattern here?

Aug 20 2010

Financial Crisis and Unintended Consequences

C.M. Phippen

During most of this past decade, the housing market rose at an unprecedented rate (12.5% in one year alone), only to come crashing down in 2008 to such a degree that $4.5 trillion in US wealth was lost. What were the circumstances that converged to cause the rate of mortgage securitization to increase over seven-fold from 2001 to 2006, allowing the underwriting of high-risk loans without fear of having to hold those loans? The answer, surely, is a complicated one, but simply chalking it up to the greed of Wall Street while refusing to look below the surface is a bit too simplistic for me.

The banking crisis which stemmed from the bursting of the housing bubble was concentrated in commercial banks, but contrary to popular belief and the myth of “lack of regulation,” the commercial banks were more heavily regulated than were the investment banks. While the investment banks were caught holding large inventories of MBS’s they hadn’t yet sold off and mortgage loans that hadn’t yet been securitized, commercial banks held large numbers of mortgage-backed securities that became essentially worthless and put many at substantial risk of failure, all while being heavily regulated.

In 2001, the Federal Reserve, along with the FDIC, Comptroller of the Currency, and the Office of Thrift Supervision instituted what is known as the recourse rule. This rule was meant to steer the funds of banks into “safe” assets and make it attractive to buy MBS’s as opposed to actually lending out their own money. (In 2006, a similar rule was instituted for non-US banks, exposing them to the same types of risk just before the housing meltdown in 2008.)

[U]nder the recourse rule, “well-capitalized” American commercial banks were required to spend 80 percent more capital on commercial loans, 80 percent more capital on corporate bonds, and 60 percent more capital on individual mortgages than they had to spend on asset-backed securities, including mortgage-backed bonds, as long as these bonds were rated AA or AAA or were issued by a government-sponsored enterprise (GSE), such as Fannie or Freddie. Specifically, $2 in capital was required for every $100 in mortgage-backed bonds, compared to $5 for the same amount in mortgage loans and $10 for the same amount in commercial loans.

As the demand for MBS’s increased, so did the supply from Wall Street and the GSE’s. This timing coincided nicely with the fact that major pressure had been put on banks during the 1990s to make loans to individuals who wouldn’t qualify under traditional guidelines. The banks, of course, weren’t willing to hold on to those loans – they simply sold them off to Wall Street and bought back highly rated bonds that offered them a huge tax advantage.

As I’ve written in a previous post,

According to economist Milton Friedman, the use of political channels, as opposed to the market, for the provision of resources leads to the straining of social cohesion. The reason for this is that markets allow diversity, while government policies require conformity. In Capitalism and Freedom, he states that the more extensive the range of issues we attempt to solve through political means, the greater the strain on the “delicate threads that hold society together.”

The problems found in the issue of lack of diversity v. conformity apply when dealing with economic issues, as with other public policy issues. Regulations have the express purpose of homogenizing behavior, and in a capitalist system where competition reigns supreme, the natural state is one of diverse behavior, ideas, and experimentation.

If capitalists stop acting heterogeneously–if they compete through imitation, rather than innovation–the risk of systemic failure increases . . . Regulations are like mandatory instructions for herd behavior, automatically increasing systemic risk.

The more we expect the government to regulate, the more we can expect risk to increase throughout society and have a greater and greater negative impact on ever-larger numbers of people. Is there another way?

Aug 18 2010

The Battle for Freedom and Fiscal Responsibility, Yet Again

This cartoon was originally published in the Chicago Tribune in 1934.

David Horowitz succinctly summed up this seemingly never-ending battle when he explained that our history is one of two “distinct revolutionary traditions,” as opposed to the idea of an old order (conservatism) and a new revolution (progressivism). Our two-hundred year history, that which has shaped our nation, is a history of two disparate revolutionary paths to the modern world, “two different paradigms of the European Enlightenment that took root, respectively, in America and France.”

He goes on to say that, “the radical ethos of the French Revolution became the wellspring of a socialist revolt against bourgeois order that culminated in the creation of the Soviet empire. On the other hand, the libertarian ethos of the American Revolution inspired the conservative opponents of the Soviet tyranny, a counterrevolution based on individual rights, free markets and democratic constitutions.”*

You’d think once the battle had been won by the historic experiences of the past century, the debate would be over; that, unfortunately, would be asking too much. So the same arguments must be won, the same battles must be fought, and the same truths must continuously be told.

*The Politics of Bad Faith, David Horowitz, The Free Press, 1998, p. 142.

Aug 12 2010

Debt Monetization and Solutions (courtesy of The Onion)

C.M. Phippen

Anyone competent enough to figure a few simple math problems must have already come to the conclusion that our government is headed down a road of utter financial armageddon. Recently, a friend mentioned to me that he thinks taking a long-term approach to analyzing our economic state as a nation can only lead to extreme conclusions, and thus not realistic for the United States. Just what is it that makes us so different from all the other nations that have defaulted on their debts over the years?

It seems as though Sheldon Finger, over at the Huffington Post (presidentially approved news source, BTW) is agreeing with me on the very conclusions I’ve drawn, and which were viewed by my friend as “extreme” – that we are being led down a path that is looking more and more like Zimbabwe or the Weimar Republic, and it’s time for hard choices.

The Onion has a solution to our debt problems and I think it might work better than the recently-announced policy of federal debt monetization, which is precisely the next step on the path to the aforementioned armageddon. Take a look and let me know if you agree or if you have any ideas for a better way!

U.S. Government Stages Fake Coup To Wipe Out National Debt

Aug 9 2010

Truth and Fear

C.M. Phippen

Reformation period art had two consistent characteristics in its illustration of the believers.  Catholics were portrayed holding rosaries, while Lutherans were shown holding books, usually Bibles.

The struggle for power is always a struggle of those who desire their power through our ignorance v. those who seek the empowerment of all through education, enlightenment, and consequently, freedom.  In our day, a new reformation is underway; we can choose to allow those with power to take even more through our ignorance and their empty promises which can never really be, or we can become empowered by seeking, learning, questioning, and thinking.

When I was young, a book was published that was not only vitriolically critical of my religion, but full of half-truths and flat out lies.  Churches of different faiths in my hometown were holding meetings to talk about the book, show a movie based on it, and basically sit around bashing this religion they didn’t agree with.

One day I came across this book in my home.  I was only 11 or 12, and I went to my mother and asked if I could read it.  Her response was that I could, but she had me commit to read my scriptures diligently during the period of time I was reading the book, and she in fact gave me specific guidelines for my own study to ensure my exposure to the whole story.

My parents weren’t afraid of me being exposed to lies, half-truths, and criticisms; they knew where the truth lay, and they had confidence in my ability to find it as long as I had both sides of the discussion in front of me.  They knew that to shield me from discussion and debate about things they didn’t agree with or knew to be untrue would only serve to weaken me intellectually and spiritually.

I know it’s human nature to be so wrapped up in one’s opinions and ideas that we refuse to acknowledge anything on the other side.  I think it’s probably even human nature to want to shut up those on the other side of the discussion, as our president seems truly pained to not be able to do (although he and many of his associates have given it a good try).  It could even be human nature to want to call names, try to demean and discredit, and essentially attempt to undermine those who disagree with us without even addressing our real issues of divergence.

There is, though, danger in this approach.

When our opposition is founded on anything other than truth and its principles, we falter.   We become fearful of others being “bombard[ed] with all kinds of content,” and being exposed to “all kinds of arguments.”  We shouldn’t fear those arguments, even if we feel they “don’t always rank that high on the truth meter.” Since when, in America, did too much information become something other than a “means of emancipation?” (I know he said epancipation, but I’m trying to not distract from the issue at hand.)

Too many are fooled by platforms founded on lies because they’ve never been exposed to anything other than those lies.   Those who’ve not developed the ability to adequately and systematically reason through real and complicated issues can be fooled by one promising the most lavish benefits, or one who places all the blame for everything wrong in your life on the other guy (guilty or not), or one who screams the loudest and tells you that progress is achieved by undermining the building blocks of the most successful society in human history.

I’m trying to figure out what is so scary that our president and so many around him have been systematically working to undermine the free exchange of ideas and attempting to shut down opposition.  Remember, if truth is on your side there is nothing to fear.  Why so afraid?

Aug 6 2010

Unemployment, With or Without the Stimulus

C.M. Phippen

While listening to an interview with Joe Biden’s chief economic advisor, Jared Bernstein, I heard what sounded like an admission that the White House hadn’t necessarily expected the stimulus bill to hold unemployment at a rate any lower than was already the “consensus” estimated rate.  Larry Kudlow, on The Kudlow Report, asked Bernstein about the promise made by the White House that if the stimulus bill were passed quickly, the unemployment rate would not exceed 8%;  it currently stands around 9.6%.

Mr. Bernstein responded by saying that during the fourth quarter of 2008, the consensus was that 8% would be the height of unemployment in this country.  He went on to say, “We were right with the central forecast.  We did not know that the, nor did any other, hardly any other economists, that the unemployment rate was headed up so quickly, that the economy was headed off a cliff . . .”

Okay, I get it.  You spoke before you realized the extent of the recession, and hey, who knew a consensus could be wrong, right?

But wait, Obama wasn’t yet in office in the fourth quarter of 2008.  The president had not at that time even submitted a stimulus plan to be considered by those formulating the “consensus,” had he?

I’ve attempted to contact the White House to for clarification; I’ve rewound my TiVo and watched it again; I’ve emailed The Kudlow Report to see if they can get clarification.  If this administration made a promise to us that unemployment wouldn’t exceed the level they now claim was the “consensus”  maximum even before a stimulus bill, if we would only spend over $800 billion, then we all just got shafted.

Not only did unemployment far exceed the promised 8% maximum, but I can only assume the administration didn’t  have much confidence in the effectiveness of their own bill, the one that just had to be passed right now!  If they did believe it would actually “create or save” a significant number of jobs, it only makes sense that they would have taken the consensus peak unemployment rate and reduced it by the percentage of jobs they planned on saving or creating.  I understand, though, not wanting to overpromise.

On the other hand, the fact that they took the consensus peak and assured us their $860 billion bill to reduce unemployment would keep us below that already assumed high, and then it still didn’t, doesn’t bode well for all of us who weren’t close enough to the administration to get our own big fat stimulus check.  Nor does it bode well for our children and grandchildren, who will be paying for those checks for years to come.

Watch the video here (the portion I reference starts right around 6:10 if you don’t want to watch the full 12 minutes):

Aug 4 2010

Steve Wynn Doesn’t Trust Washington; Can We?

Take a look at Steve Wynn’s commentary on the destruction currently being foisted on all of us, courtesy of Washington, due to out of control spending and regulatory policies.  Unfortunately, most American businessmen can’t simply relocate a portion of their business overseas to countries with “steady,” “predictable” governments like Macau and China (?!) in order to mitigate the lack of “stability and predictability” in Washington.  I’m afraid the small businessmen are the new “forgotten man,” those who did nothing to contribute to the financial meltdown but who are now being taxed to pay for the bailouts of the guilty and their cohorts in Washington.  All the while, the uncertainty of massive new regulation is strangling innovation and investment.

Aug 2 2010

Politics and Divisions

C.M. Phippen

The recent Shirley Sherrod uproar was an interesting study in human behavior and political motivation. Andrew Breitbart, on his website, posted a video of Ms. Sherrod, speaking at the NAACP and claiming that when a white farmer came to her many years ago she didn’t want to help him because she was “struggling with the fact that so many black people had lost their farm land.” She went on to say, “and here I was faced with having to help a white person save their land. So I didn’t give him the full force of what I could do.” She then says that she subsequently referred him to a white attorney, “one of his own,” to help him.

As she talks about the interchange between herself and the farmer, she says that he took a long time talking and that he was trying to show he was superior to her. According to Ms. Sherrod, all the while he was trying to show her how superior he was, she was trying to decide just how much she was going to help him. (Am I the only one who thinks that maybe Ms. Sherrod and her own lack of self-worth might be the real problem here?)

What a sad, angry, bitter way of viewing the world. Interestingly enough, she has since been exonerated by many in the media because of the fact that further on in her speech (a portion which wasn’t included in the original posting), she explained how this led to an evolution within herself; she eventually came to see that it wasn’t a matter of white against black, but rather rich against poor.

Now I get it! To hate another human being because they’re of a different race is wrong, but to hate another because they have more than you is simply what . . . normal?

Sounds a bit like John Edwards and his two Americas rhetoric. “One America does the work [ostensibly those receiving government services and wealth transfers] while another America reaps the reward [the rich, of course]. One America pays the taxes [the 46% who pay no federal income tax] while another America gets the tax breaks [the taxpayers, let's say the top 25%, who pay over 86% of the federal income taxes].” Oh, it’s making sense now.

David Horowitz, a man heavily involved in radical left-wing politics for decades before his conversion to the underpinnings of truth that lie in the conservative ideology, has said, “The radical worldview divides humanity into the oppressed who suffer as the objects of the historical process and the oppressors who inflict the process on everyone else. . . . For the traditional Marxist, the enemy system that organizes and distributes power is capitalism; for the radical feminist, it is patriarchy; and for the queer theorist, it is ‘hetero-normativity.’”*

In order for the politics of the left to thrive, there always must be a victim class. Without it there is little message, and any semblance of substance simply disappears. This mindset is echoed from the halls of left-wing ideology daily, and it doesn’t take us to a very good place.

It is the political message that leads us here, courtesy of Ed Schultz, on the special-election in Massachusetts, “I tell you what, if I lived in Massachusetts, I’d try to vote ten times. I don’t know if they’d let me or not, but I’d try to. Yeah, that’s right, I’d cheat to keep these bastards out. I would. ‘Cause that’s exactly what they are.”

Or it leads us to King Samir Shabazz, ranting in front of a polling place in Philadelphia in 2008 and saying, among other things, if “[y]ou want freedom, you’re gonna have to kill some crackers; you’re gonna have to kill some of their babies.”

Or it leads us to where I was a few years ago, having been nominated for the board of a very prestigious women’s organization. As I spoke with the CEO, she explained that a core goal of the organization was the elimination of discrimination. I asked her if discrimination were such an important issue, why weren’t men allowed to be equal members with women. The reply stunned me, “Only men can discriminate.”

Or it leads us to act as Eric Holder is accused of acting when he allegedly ordered his attorneys at the Justice Department to disregard cases involving black defendants and white victims. I’m guessing that only whites can discriminate.

Shirley Sherrod, in an interview with Anderson Cooper after she claims she was forced by the white house to resign from her job at the USDA, says that Breitbart must be a racist and that she thinks he “would like to get us stuck back in the times of slavery.”

Mary Frances Berry, who spent over a decade as the Chairperson of the US Commission on Civil Rights recently said, “Tainting the tea party movement with the charge of racism is proving to be an effective strategy for Democrats. There is no evidence that tea party adherents are any more racist than other Republicans, and indeed many other Americans. But getting them to spend their time purging their ranks and having candidates distance themselves should help Democrats win in November. Having one’s opponent rebut charges of racism is far better than discussing joblessness.”

But I’m sure it’s just really all about the issues.

*The Politics of Bad Faith, David Horowitz, The Free Press 1998, p. 156.