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“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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Jul 16 2012

Economic Reality and Government

C.M. Phippen

“There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.” Frederic Bastiat

The newly upheld healthcare bill, passed by a president who can’t get anything right and always has someone else to blame for his failures, is supposed to add 30 million Americans (or non-Americans) to the “insured” category while at the same time not hampering accessibility or quality, and decreasing costs.

In fact, just after the Supreme Court ruling declaring the mandate unconstitutional but upholding the ability of the federal government to tax non-participation in the US insurance industry, every interview I heard with a supporter of the bill still claimed that it would save the federal government $100 million, even though every recent indication is to quite the contrary.

China is having some government v. free enterprise conflict of its own. In order to continue to grow the Chinese economy without causing inflation, which would be devastating to the 150 million Chinese living in poverty, the government has mandated that utility prices remain below market rates. Of course, we all know that if the government says something must be, then it simply must be.

The result is that private companies in China, refusing to operate at a loss, have been supplying power for fewer hours and have shut down record numbers of power plants for maintenance during the hot summer months. In some areas, power plants have stopped providing power for days at a time, leaving citizens without air conditioning, refrigeration or running water.

The chairwoman of China Power International has warned that if the government continues to enforce price controls, one-fifth of China’s 436 coal-fired power plants could face bankruptcy.

The fact is, there is a cost for goods and services, and a price below which no one will willingly produce or provide them. China’s largest electric utility, Huaneng, says that prices charged to customers should have been 13 percent higher last year to remain in line with the increase in coal prices; this year, spot prices for coal are up 20 percent because of various world events. All the while, the government is mandating almost no increase in the rate that utility providers can charge.

In order to deal with the lack of dependable power, some businesses have their workers come in at night or during odd hours when there are fewer blackouts, some restaurants have resorted to cooking over coals and hauling water by hand from wells. Additionally, the government has put pressure on the mines to sell coal at below-market rates, causing the best and purest coal to be exported while selling high-sulfer, high-polluting coal to Chinese companies.

At the end of May, at least six cargo ships carrying loads of coal from abroad were affected by deferrals or defaults on contracts by Chinese buyers as those ships remained full and waiting in ports with no one to pay. Of course, why would they when the government won’t allow utility companies to be adequately reimbursed for providing the electricity generated by that coal to consumers?

The Chinese economy is experiencing rapid deceleration and its potential growth is being hindered by bureaucrats who claim to honestly believe that their issuance of an edict will cause economic forces to fall into line behind their stated desires.

In the US, 83 percent of doctors who responded to a survey performed by a group opposed to Obamacare have considered leaving the medical profession as a result of “current changes in the medical system,” with 65 percent of those individuals pointing to government involvement as the main culprit.

We can look to Massachusetts to see that since the passage of state healthcare reform, there has been basically no difference in the usage of emergency rooms, doctor shortages abound and premiums shot up above the national average within two years and have only recently started growing at a slower rate.

In order to combat a nearly 50 percent cost overrun encountered with the implementation of the law, the state reduced costs by kicking almost 40,000 legal immigrants off of state health coverage and implementing free market principles which grant tiered health care plans to individuals based on, yes, their ability to pay. Free market principles are what finally brought down the rise in the cost of care in Massachusetts.

As for the rest of us, our president promised that with the passage of Obamacare we would see lower premiums, less federal spending and no additional federal debt, no taxes for anyone making under $250,000 a year, the ability to keep any current health plan if one were to so choose and greater access to health coverage.

Too bad saying it just doesn’t make it so.


Jun 23 2012

Principles or People

C.M. Phippen

I happened to notice the other day someone blaming President Reagan for the recent recession. Back in 2009, this was a somewhat common liberal refrain, and Paul Krugman repeatedly exclaimed that Reagan was responsible for the economic crisis because he was behind legislation (co-sponsored and passed by many Democrats as well as Republicans) that allowed for home purchases without large down-payments and that freed up the consumer credit market.

Here is no better example as to why we must discuss and focus on principles rather than people. I’ve never met a Democrat who didn’t support affordable housing policies or legislation that would make credit more available for those whose behavior doesn’t merit it. Funny how when the other guy agrees with you and things go wrong, it’s the other guy who was wrong.

Here is a list of statements or actions of individuals from both sides of the aisle regarding housing policies prior to the bubble bursting; see if you can figure out who said or did what.

1.”The White House doesn’t think those who can afford the monthly payment but have been unable to save for a down payment should be deprived from owning a home.”

2. “Fannie Mae has expanded home ownership for millions of families in the 1990s by reducing down payment requirements. Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.”

3. “In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders . . . Fannie Mae . . . has been under increasing pressure from the X Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.”

4. There exists deep concern “about increased mortgage market fragility, which, combined with growing bank portfolios in high-risk products, pose serious potential problems that could occur with dramatic suddenness.” And failure to adjust bank underwriting, reserves and capital to account for this growing risk “means that downturns from credit and/or interest rate events – let alone shocks – will be far more severe than” if precautions are taken. What is “disturbing to us is the fact that recent trends could lead to sudden increases in foreclosures.”

5. “Fannie Mae and Freddie Mac have played a very useful role in helping make housing more affordable.” Critics “exaggerate a threat of safety” and “conjure up the possibility of serious financial losses to the Treasury, which I do not see.”

6. Congress should, “enact legislation to create a new Federal agency to regulate and supervise” Fannie and Freddie because of the risks they were taking. “The concern is, if something unravels, it could cause systemic risk to the whole financial system.”

7. If Congress doesn’t reign in Fannie and Freddie, “there will be a massive default with huge losses to the taxpayers and systemic effects on the economy.”

8. “Where once more-marginal applicants would simply have been denied credit, lenders are now able to quite efficiently judge the risk posed by individual applicants and to price that risk appropriately.”

9. “President X issued America’s Homeownership Challenge to the real estate and mortgage finance industries to encourage them to join the effort to close the gap that exists between the homeownership rates of minorities and non-minorities. The President also announced the goal of increasing the number of minority homeowners by at least 5.5 million families before the end of the decade.”

10. “Back in 2005 and 2006, I argued as forcefully as I could . . . that the mortgage market would melt down in the second half of 2007, causing substantial damage to the economy.”

11. “[W]e do not have a crisis at Freddie Mac, and in particular at Fannie Mae . . . What we need to do today is to focus on the regulator, and this must be done in a manner so as not to impede their affordable housing mission, a mission that has seen innovation flourish from desktop underwriting to 100 percent loans. . . . These GSEs have more than adequate capital for the business they are in: providing affordable housing. . . . we should not be making radical or fundamental change.”

While conservatives and liberals were both supporting the expansion of affordable housing programs which not only made housing less affordable but put those least able to afford homes into them, the voices of warning were mainly coming from those outside of government. Private businesses that knew the bursting of the housing bubble could destroy them or who could profit from it, were able to see and acknowledge the downside of decades of feel-good government giveaways. Those in government were possibly too invested in the sham to see its risks, or too inexperienced in economics to understand.

Will the next bubble look any different and will the blame game remain the same? Let’s not wait to have this discussion in another decade, after the bursting of the student loan bubble, driven by the astronomical rise in college tuition due to government intervention and subsidies. Are we listening to those trying to warn us this time?

1. John Weicher, Federal Housing Commissioner (2004)
2. Franklin D. Raines, Fannie Mae chairman and CEO, Bill Clinton supporter
3. The New York Times (1999) talking about the Clinton administration
4. Suzanne Hutchinson, executive at Mortgage Insurance Companies of America (2005); http://www.foxbusiness.com/markets/2010/02/02/housing-red-flags-ignored/#ixzz1yb1vJQiv
5. Congressman Barney Frank (2003)
6. US Secretary of the Treasury John W. Snow (2003 & 2005)
7. Peter J. Wallison, scholar at American Enterprise Institute, (2005)
8. Federal Reserve Chairman Alan Greenspan (2005); http://www.nytimes.com/2010/04/04/opinion/04burry.html?pagewanted=all
9. Bush administration (2002); http://www.dailykos.com/story/2008/09/23/607383/-George-Bush-proud-parent-of-the-mortgage-crisis
10. Michael J. Burry, investment advisor at Scion Capital (2010); http://www.nytimes.com/2010/04/04/opinion/04burry.html?pagewanted=all
11. Maxine Waters, Congressional Representative from CA (2003); http://www.discoverthenetworks.org/Articles/The%20Secondary%20Mortgage%20Market.html

Quotes without a weblink were taken from the Thomas Sowell book, The Housing Boom and Bust, New York: Basic Books, 2009.


Jun 15 2012

Austerity: A Balanced Approach?

C.M. Phippen

Concerns are spreading that Germany is on the verge of losing its safe-haven status for investors. According to Bill Blain, co-head of the special situations group at Newedge Group Ltd, “[Germany] isn’t a pure safe haven anymore.” As it finds itself potentially on the hook for an additional 100 billion euros ($125 billion) after the EU bailout of Spanish banks earlier this month, investors are starting to see the cracks in the foundation of what has been a star in the EU economies.

Not only does the most recent bailout scare off private investors from Spain, who know they will be the last in line if the country does eventually default, but most analysts fear this bailout is only one of many. Estimates of future liquidity injections in Spain alone are as high as 700 billion euros, which would decimate the EU rescue funds.

Despite German fiscal restraint, high worker productivity and relatively low levels of unemployment, apparently a system where a minority put in the serious work and everybody else lives off of their largess while sipping margaritas, is an unsustainable system.

As Angela Merkel recently stated, “Germany’s powers are not unlimited,” and “All the (aid) packages will ring hollow if you overestimate Germany’s strength.” Even the German economy can be dragged down by too many dependents pulling at it for too long.

It’s time for the rest of the European countries to start playing by the rules of success, the rules of true austerity.

In Britain, promises to reform social programs and cut taxes and spending were made by Gordon Brown just before leaving office, but instead he increased the top marginal income tax rate. In 2011-2012, spending increased, the public pension system is still not reformed and “the government increased the capital gains tax, national insurance tax and value-added tax along with other fees and duties.”

In Spain, while the retirement age was increased from 65 to 67, no structural reforms have been made to entitlements. Additionally, myriad tax rates have been increased, from income and property taxes to tobacco taxes (up 28 percent). While the current budget calls for spending cuts as well as tax increases, there is little chance that the tax increases will bring in the expected revenue because of a lack of economic growth. With entitlement spending unchecked, deficits are projected to continue rising.

France’s spending increased $33.4 billion between 2009 and 2010, and $29.5 billion in 2011. The Socialist government there also plans to implement a new 75% top marginal income tax rate for anyone earning over $1.3 million, in addition to an increase in the corporate income tax rate. At the same time, they are promising significant public sector hiring, a decrease in the retirement age and an increase in the minimum wage, which has been shown to price the least skilled workers out of the labor market.

According to recent research, a “balanced approach” to austerity (isn’t that the new progressive catch phrase?) doesn’t end well. An austerity program that involves both tax increases and spending cuts does not successfully stabilize debt and leads to economic contractions in the marketplace.

Harvard economists Alberto Alesina and Silvia Ardagna looked at 107 examples of austerity in developed countries over a period of 30 years and found that spending cuts without tax increases were the key to significant debt to GDP ratio reductions. They also discovered that when those spending cuts were accompanied by structural reforms, easy monetary policy and a liberalization of markets, economic expansion was most often the result.

Across the ocean here at home, the story is, unfortunately, much the same. While we could continue down our current path of demonizing the rich and blaming them for not paying their fair share (who can possibly believe that the top 5 percent paying 59 percent of federal income taxes while earning only 35 percent of total national income is somehow not their “fair share”?!), all the while threatening onerous taxes and regulations, we wonder why corporations are sitting on massive amounts of cash and refusing to hire new workers.

President Obama’s claim that his policies would “have this done” (fixing the economy) within three years and Clinton’s encouragement in 2010 to “vote ‘em out” if the economy weren’t fixed in two years lead me to think that this administration is honestly and genuinely surprised that their understanding of the economy just isn’t reality.

Welcome to the world the rest of us live in . . .


Jun 2 2012

Get the Job Done or Get Out

C.M. Phippen

Last week I wrote about the fact that President Obama seems to want to make excuses for everything that he deems as getting in the way of him delivering his promised hope and change. Nothing works out quite like he believes it will, and yet he behaves as though there are no other options.

It was interesting then, to hear him criticizing Romney’s experience with Bain Capital. While Romney has a proven track record of turning around companies that are suffering from adverse circumstances brought on by world events, prior poor management, bad luck, structural changes in the economy, etc. Obama looks at these very same types of challenges, throws up his hands and says he can’t.

A friend recently shared with me her husband’s experience working for Bain & Co. many years ago. His job was to turn around companies and make them profitable in under six months, to take them from losing money to earning profits. Of course, as we all know, companies making money tend to hire and/or retain workers; companies losing money tend to lay off workers. And mind you, in under six months.

Admittedly, the US economy is a much larger, more complicated beast, but the principles for success and sustainability are still the same. “If I don’t have this done [the economy fixed] in three years, then this is going to be a one-term proposition.” Apparently, he felt that giving him 500 percent more time than a business consultant would get was adequate to prove the effectiveness of his strategies.

Not only did Bain Capital (the investment firm), under Romney, have a 78 percent save rate with regard to companies that were headed toward bankruptcy before Bain stepped in, but when Bain & Co. (the consulting firm) itself was headed for trouble in the early 90s, Mitt Romney was the person called in to turn around that company. Within a year under Romney’s leadership, Bain & Co. was again profitable and able to grow throughout the 90s at a rate of 25 percent per year, more than doubling the number of offices and increasing the number of employees.

On the other hand, the Obama administration handed out large amounts of money to various failing companies that have continued to fail even after receiving grants and loan guarantees from us, the taxpayers. Marc A. Thiessen had a piece in the Washington Post that outlined Obama’s record of public equity failures. These included:

Abound Solar, Inc. received a $400 million guarantee, drew on $70 million before halting production and laying off 180 workers.

Beacon Power received a $43 million taxpayer loan guarantee and filed for bankruptcy in fall 2011. We can assume loss of jobs for 100% of the workforce.

ECOtality received $126.2 million in taxpayer money. The company has sustained $45 million in losses and claim to have no foreseeable profits anywhere in the future.

First Solar received $3 billion in loan guarantees, yet the company’s trading price fell to record lows this month due to “$401 million in restructuring costs tied to firing 30 percent of its workforce.”

Nevada Geothermal Power (NGP) was given a $98.5 million loan guarantee in 2010. As of October 2011, its own auditor concluded that there was “significant doubt about the company’s ability to continue as a going concern.”

Raser Technologies was given a $33 million grant and filed for bankruptcy protection this year. The plant for which the money was used has fewer than 10 employees and owes $1.5 million in back taxes.

SunPower received a $1.2 billion loan guarantee and now owes more than it’s worth.

Many of the companies this administration chose to invest in were rated as junk bonds. Maybe that’s because “71 percent of the Obama Energy Department’s grants and loans went to ‘individuals who were bundlers, members of Obama’s National Finance Committee, or large donors to the Democratic Party.’” And maybe that’s why over 100 investigations have been launched relating to the Department of Energy’s green energy programs.

If this is what Obama calls capitalism, no wonder he thinks it doesn’t work.

The very things Romney was able to overcome at Bain are the very things Obama claims are outside of his control. Could it be that our president is right, that he just isn’t capable of working through the roadblocks in his way? If so, then I guess it’s time to elect someone who is.


May 26 2012

What Is It that Our President Actually Does Know?

C.M. Phippen

The greatest economy the world has ever seen, the one responsible for the majority of the medical and technological innovation of the past century and for leading the way in eradicating 80 percent of the world’s worst poverty in the past 40 years, is being run by a man who claims himself a victim at every turn.

With each succeeding policy failure, President Obama can’t help but claim he just didn’t understand or for some reason he just had no power to overcome the obstacles in his way.

While holding the most powerful office in the world, he is paralyzed by events outside of his control. He blames Pres. Bush, natural disasters, Pres. Bush, Arab Spring, Pres. Bush, bad luck, Pres. Bush. In one of his most astounding excuses yet, he blamed a lack of job creation on greater efficiency (“structural issues”) in the economy.

The difficulties faced by our president are simply a part of the realities of life. Does Obama truly believe that no man before him has ever dealt with a financial crisis, a predecessor whose policies he didn’t agree with, bad luck, a shifting labor market or natural disasters? What if every man before him chose to make the same excuses or to walk away from the real solutions because they weren’t a part of his political strategy?

In every past recession over the previous 100 years, entrepreneurship has led us out and placed us back on the path to greater prosperity. For the first time ever, this is not occurring. Does President Obama even stop to ask why?

Over 4,000 new federal regulations are in the pipeline and “pending major regulations – those costing the economy $100 million or more – have increased 60 percent since 2005.” Recently, “20 percent of small-business owners said ‘government regulations and red tape’ was the single most important problem facing their business,” ranking ahead of anything else, including poor sales.

According to President Obama, because of these structural changes, “. . . what we have to do now . . . is identify[ing] where the jobs for the future are going to be; how do we make sure that there’s a match between what people are getting trained for and the jobs that exist; how do we make sure that capital is flowing into those places with the greatest opportunity.”

Entrepreneurs just figure those things out on their own. They don’t need a government program so that a bureaucrat who’s never run a company, met a payroll or put his life’s savings on the line to start a company can make decisions as to the proper allocation of resources within the economy; let alone rely on that individual to determine where those resources will be most needed at some point in the future. In a dynamic economy, where growth is encouraged, someone will always step up and take a risk as long as that risk has the potential for a commensurate reward in the end.

When has a centrally planned economy, or any variation of it, actually worked?

Here’s a guy who’s admitted that when he entered office his administration had no idea how bad this downturn was, despite the fact that he claimed it was the worst economic crisis since the Great Depression and called it a crisis of historic proportions. Yet he wants us to trust that he and his administration have the expertise to know how to allocate the various resources administered through the federal government in order to adequately train the unemployed to be prepared for the jobs of the future? He doesn’t even understand what the jobs and businesses of the future are.

This is the guy who told us that Solyndra was a model for economic growth, one of those companies of the future. As I wrote in an earlier post, while Obama was touting the “ingenuity and dynamism” of Solyndra, T.J. Rodgers, founder of Cypress Semiconductor, former Chairman of Sunpower and a man who apparently knows what real ingenuity and job creation look like, had a very different take. He has said that on the day of President Obama’s visit to Solyndra in 2010 a secretary asked him what it meant that the President was there, visiting their competitor. His response apparently was, “Set your watch. That company will be out of business in one year.” So much for Obama’s ability to judge the future.

This is the same guy who told us that if his massive stimulus of nearly $1 trillion were passed, we wouldn’t see unemployment rise above 8 percent. What we haven’t seen is it actually come down below 8 percent at any point since.

This is the man who told us that recovery summer was two years ago. Most of us are still waiting, as are the many businesses that are choosing to sit on the sidelines with record amounts of cash and not hire new workers in such an uncertain environment. Those threats to tax the rich and blame corporations may actually have a downside.

This is the same guy who said that the healthcare bill “will help reduce our deficit by as much as $1.3 trillion in the coming decades, making it the largest deficit-reduction plan in over a decade.” Updated CBO estimates now project cost increases over 10 years from $938 billion to $1.76 trillion, and that’s before we’ve had to actually start paying. If history is any indication, the cost is likely to be many times greater than even the new estimates.

Yes, still the same guy, the one who said that with his new healthcare bill, “Families will save on their premiums.” Unfortunately, though the CBO initially projected per family premium savings of over $2,500, more recent studies show increases of over $1,500 above what premiums would have been without the legislation.

Exactly what is it this guy actually does know? Maybe this, “We can’t doom another generation of Americans to soaring costs . . . and exploding deficits.” Yep, same guy.


May 19 2012

Income Equality v. Economic Stability

C.M. Phippen

Income inequality has always been a part of the human condition. When men hunted for food for their families, the families of the best hunters always had more to eat than their neighbors. Under dictators and kings, friends and family have comprised the wealthy while most of the rest of humanity under their rule have been peasants, paupers and slaves.

While living in the Czech Republic in the early 1990s, the inequality of Communism was quite clear. When entering a neighborhood of party officials it was obviously different, and erased any confusion over the myth of equality in a system where a few ruled the rest by force.

Today is no different. Individual ability, motivation, education and access to power, especially government power, often differentiate the top strata from the bottom in any society. The question is which of these factors we want most prevalent in our society when success is determined – those indicating merit or those indicating the right government connections, i.e. corruption.

When government is allowed to determine who succeeds and who fails, not only are the least competent often elevated to the top, but the incentives for producing the best product, offering the best service, and meeting the needs of the customer or client become warped. For those who think they already are, I would argue that not only is government already too involved in picking economic winners and losers today, but that the alternative to what we have is substantially worse.

According to a report by the OECD released in 2008, the three countries that have bucked the trend of growing inequality from the mid-1980s through the mid-2000s are Greece, France and Spain. None of these countries are exactly models of fiscal sustainability, and none have been able to create an environment where businesses are encouraged to hire for any reasonable period of time.

In all three countries during the period beginning in the mid-1980s, the rate of unemployment has ranged anywhere from 8 percent all the way up to 25 percent with few exceptions. Crisis rates of unemployment in the US are the norm for these countries.

Greece has generally hovered around 10 percent, while enjoying a multi-year spike now over 20 percent. France has historically been in the 8 – 10 percent range with a few dips below for short periods. Spain has seldom fallen below 10 percent, generally in the 12 – 17 percent range, and has had three climbs to nearly 20 percent within that period.

The report also pointed out that the increased differential in incomes isn’t because the poor and middle-class are becoming poorer, rather it is because the upper class are becoming richer. This would seem to indicate that those societies that are decreasing the gap between rich and poor are generally doing so because the rich aren’t becoming richer and suggests a lack of dynamism, creativity, and vibrancy in those economies, at least when compared to other developed nations.

Beyond the idea of income inequality it is interesting to note that, “the difference between income and wealth disparities is largest in countries with relatively equal distribution of incomes, such as Germany and Sweden.” In countries where the government provides more services and benefits for the lower-income population, while at the same time potentially disincentivizing growth for top wage earners, there remain the largest differences in wealth accumulation.

In other words, those who earn their own money, even while being forced to support large percentages of the population with that money, are still substantially better at saving and investing it than those who are simply given benefits. This has led to a greater disparity in income “from capital: dividends, interest, rent, capital gains and so on.”

Two factors significantly improve one’s chances of living above the poverty line. The first is marriage before children; single-parent households are three times as likely to be poor. This means that other workers in society take the place, financially, of the missing parent, which takes money out of the pockets of families often already struggling to make ends meet. The second is work; households with at least one working adult have very low rates of poverty.

The greater the dependence on government for support and subsidies, the greater will become the gulf between the rich and the poor, as well it should be. It is a consequence of comparing relatively stagnant wealth transfers meant for short-term use to keep people from starving to death with what ought to be dynamic, innovative economic transactions.

The alternative is a quasi-socialist economy that closes the gap between rich and poor just before the whole structure crashes and burns or the government is forced to do what socialist Spanish Prime Minister Jose Luis Rodriguez Zapatero has been doing: drastically cutting spending in order to “avoid bankruptcy.”

Let’s not play the game of the Greeks, 75% of whom want to stay in the Eurozone while at the same time casting 70% of their votes for anti-austerity parties, but rather face what is rather than imagine what can never be.


May 12 2012

The One-Way Street of (In)Tolerance

C.M. Phippen

The furor over the legal definition of marriage as between one man and one woman has escalated this week with the passage of a constitutional amendment to that effect in North Carolina, even as our President came out in support of states being allowed to define it as such or not, while personally supporting such a change in the historical definition. Huh?

I just have one question: Just when is tolerance and acceptance going to become a two-way street?

One of the primary drivers of resistance to changing the definition of marriage, and therefore offering government endorsement of any variation on marriage a person may prefer, is that under federal civil rights legislation, the rest of us have already become obligated to change our behavior and speech in order to suit the whims of those who reject societal norms. At what point will our freedoms be protected – freedom of association, freedom of speech, freedom to live our religion without government interference?

I find it fascinating that when a state passes civil rights protection legislation based on sexual orientation, there must be exemptions put into these laws for churches. Without such exemptions, churches could (and most definitely would) be sued for refusing to perform same-sex marriages or unions. Oh no, already happened, even with those legislature-granted exemptions.

Based on President Obama’s recent pronouncement declaring that religious organizations must provide contraceptive coverage in their insurance plans, despite the fact that religious exemptions were promised during the passage of the Obama healthcare law (seriously, you believed a politician?), the maxim that what government has the power to give, government certainly has the power to take away could not have been proven more true. Our founders declared that those rights came from God. And no, Barack, they didn’t mean you.

So if a law must have exemptions for churches written into it, doesn’t that tell us that the law itself is probably already overstepping its bounds with regard to our individual freedoms? While “Congress shall make no law respecting an establishment of religion” probably has to do with the operation of the churches themselves, the part about “or prohibiting the free exercise thereof” certainly applies to us as individuals exercising our own rights to apply the principles of our religion in our daily lives as we see fit.

That personal application of religion could include, for some, not being willing to participate in activities or ceremonies that they find offensive or blasphemous. Who could balk at that in this great nation of diversity? Oh, the same people pushing for you to accept and celebrate everything about their lives while at the same time attempting to undermine and disparage anything they don’t agree with or like about yours.

A few cases in point:

EHarmony was sued for not providing gay dating services. According to a settlement, EHarmony will need to “do more to welcome gays and lesbians to its site.” Just makes you feel so good, doesn’t it? An entirely new company was formed under the settlement, just to accomodate gays.

Ever think of starting your own company if the businesses out there aren’t meeting your needs or desires? That’s what many of the rest of us would do, but no, not the open-minded, non-judgmental crowd. According to them, you not only have to accomodate whatever they want, but you ought to be required by law to provide it personally, and on a silver platter, thank you very much. Oh, and by the way, $500,000 was set aside in the settlement for those who were harmed by EHarmony not providing this service prior to the settlement. I’m wondering if I can sue because they weren’t providing services at all before I was married, and I wasted a lot of time dating and getting to know people on my own!

A Methodist church that refused to allow same-sex weddings in its religious buildings (they had offered use of their property, just not buildings where religious meetings were held), lost its case when a lesbian couple sued them and lost their tax exempt status on the building in question. All because this couple wanted use of these privately-owned facilities and it mattered not to them what the owners of the facility wanted. Yeah, it’s all about compromise. (Is legal coercion while one side stomps its feet and throws a fit, then gets its way thanks to nanny-state courts, the same as compromise? If so, then yes, this is compromise.)

A photographer was sued by a lesbian couple whose wedding she didn’t want to shoot. The photographer was found to have violated the Human Rights Act and fined $7,000. One of the women who sued her was actually an EEO Compliance Representative with the Office of Equal Opportunity and a member of the Diversity Committee at the University of New Mexico. Apparently diversity means that you accept me and my feelings while I reject you and yours.

As a Mormon, I wouldn’t really want an anti-Mormon who didn’t have respect for the sanctity of my marriage taking pictures at my wedding; just might affect the quality. Do you think they really wanted this photographer that badly, or they just wanted to “re-educate” her? Hmmm, I could swear I’ve seen this somewhere before . . . maybe somewhere where “freedom” wasn’t much of a priority?

A Christian baker who politely informed a lesbian couple she wouldn’t feel comfortable making their wedding cake is not only facing a boycott and harassment, but could potentially be facing a civil rights suit.

So hey, I’m all for you doing your thing, just wondering when you all are going to come out in support of me doing mine?


Oct 11 2011

Elizabeth Warren and the War On Our Way of Life

C.M. Phippen

Elizabeth Warren has made waves by recently announcing that the rich aren’t paying their fair share in taxes and that as part of a “social contract,” they owe the rest of society for the wealth they have accumulated. Social contract, the most recent buzzword of the left, apparently means that if you prosper in this land of relative freedom, then you owe a greater part of your wealth to a government that has apparently granted you the opportunity to be productive by providing you with things they have been given the responsibility to provide for all of us – roads, education, freedom from criminal interference, etc. Apparently, the social contract doesn’t require anything of those who choose to bleed society dry by taking its resources and producing nothing.

A number of years ago I was involved in an organization that dealt with foster-care issues for my state. At one point, those of us involved in this organization were asked to share why we chose to become involved. The most common refrain was a desire to “give back.” My response was nothing of the sort. I don’t do good because of what society has done for me; I choose to do good because of who I am and because I care about the suffering of others. Government has no real power to provide anything beyond what the productive in society produce and pay; not the other way around.

Our greatest gift is to live an honest, constructive life by doing our best to improve ourselves and those around us every day and to work hard to provide for ourselves and our families. The greatest destruction we can wreak is to allow a sense of entitlement to lead us to expect that others owe us a portion of their labors, especially a greater portion than we ourselves are willing to give voluntarily.

Bill Gates’ and Steve Jobs’ innovation increased the productivity of every single human being in every part of the world. What honest person can say with a straight face that they owe you some cash along with the myriad blessings that are ours because they chose to develop and utilize the brilliance of their minds? Using their God-given talents in a way that makes our lives easier and enables us to do things that just a decade or two ago were completely unimaginable is an incredible gift. To be given such a blessing and then respond with, “Well, we [may or may not have] paid taxes that paid for those roads and enabled thousands of individuals to get to work so they could make all of our lives easier, but could you throw in a couple bucks too?” just sounds kind of trashy.

Would we be a better society if those innovate, productive individuals had chosen to sit on the couch watching Oprah, collecting a welfare or disability check? I’m certain Jobs could have applied for and received disability during most of the past decade if he’d chosen that road. According to the thinking of Warren, had he made such a choice he wouldn’t owe us anything. Because of the fact that he instead chose to work hard, developing products that are sought after the world over and allowing phenomenal efficiency and personal enjoyment, he owes us a portion of whatever he makes. The very act of producing something everybody wants is apparently worthy of punishment. Hey, in the old Soviet Union nobody made anything anybody wanted but everybody there had a job; maybe this administration does have a jobs plan after all!


Sep 22 2011

Dictators, Money and Freedom

C.M. Phippen

As the Arab Spring recently swept across many dictator-led countries and multitudes cheered for the reforms to soon be in place, I have to wonder how much of the reality is known to us and how much is no better than the cruel dictatorships of the past.

I recently engaged in a conversation with someone who has international commodities contacts, and he mentioned to me that he had received a request for a contract in Libya. He spoke with his supplier, who told him that only certain individuals are allowed to arrange contracts to bring this particular commodity into the country of Libya. If someone there was looking to buy, they were probably one of the individuals who had been buying for, I don’t know, 10, 20, 30 years. The contract they were requesting was worth between $250 million and $500 million, so even though Gadhafi is supposedly no longer in power, I had to wonder who the end buyer on this product could be and how closely he must have been connected to the old regime.

Like Russia and many of the countries that made up the Soviet Union, there is probably a good chance that those who will hold power in these newly “free” North African and Middle Eastern countries will be the same people who held the power previously with their dictator friends. If not, chances are it will be others just like them who are more interested in seeking control over the citizenry and the ability to drain them of their resources rather than fight for their freedoms.

Not long after the country of Czechoslovakia was freed through the “Velvet Revolution” of 1989, I was living there. Because the means of production had been in the hands of the “people” for the previous forty years (in other words, in the hands of the only rich people in the country – the Communist leadership, who certainly lived very differently from their working brothers), the decision was made to distribute ownership in industry in the form of vouchers. These vouchers could then be exchanged for stock in state-owned companies.

These vouchers were being handled by individuals who were used to having all necessities of life provided for them by the government and who, for the most part, knew nothing about investing and long-term financial planning. What they did know was that when the government fell they were on their own, and the reality of the situation for many was dire.

According to what I was told repeatedly, the events that then transpired make up the great tragedy. Those who had held power for the previous 40 years knew that most of these citizens who had lived behind the iron curtain had been shielded from witnessing economic realities and had limited resources (after all, the government gave you little more than what you needed to live, unless you were a friend to someone in power).

Those who had been high-ranking Communists and had access to massive government resources then went to these citizens and offered to buy their vouchers for far less than they were worth. Not knowing any better, many sold and were left with nearly nothing. Those who had held power in government for decades now morphed into “capitalists,” exercising their newly-found power through control of industries they had done nothing to build.

Let’s hope the changes taking place across the ocean this time are more than superficial, and result in freedom and prosperity for people who have been so long brutalized by savage dictators. Unfortunately though, with very few exceptions, history teaches us to expect little more this time around.


Sep 6 2011

Government Business v. Private Business

C.M. Phippen

We all heard the news last week that yet another company on the President’s tour of success has declared bankruptcy. Solyndra, a solar panel manufacturer and, according to President Obama “a testament to American ingenuity and dynamism,” has sought bankruptcy reorganization.

In December of 2010, with less than one month’s reserves on hand, Solyndra sought to refinance by asking the Energy Department to subordinate $385 million of the $535 million guaranteed by the government. This would allow them to obtain an additional $75 million from outside sources. The Energy Department agreed, putting taxpayers behind new investors if things were to go wrong.

T.J. Rodgers, founder of Cypress Semiconductor and former Chairman of Sunpower, said on The Kudlow Report that on the day of President Obama’s visit to Solyndra in 2010 a secretary asked him what it meant that the President was there, visiting their competitor. He says that his response was, “Set your watch. That company will be out of business in one year.”

According to Solyndra President and CEO, Brian Harrison, “Regulatory and policy uncertainties in recent months created significant near-term excess supply and price erosion.” Regulatory and policy uncertainties? Huh, hadn’t heard that anywhere before. Looks like it might be a deeper problem than that, though.

According to Rodgers, the thin-film technology used by Solyndra is “lousy,” low efficiency and the cost per watt is double other technologies. He noted that the typical Silicon Valley startup is full of great ideas in a “crappy” building; Solyndra, on the other hand, built a palace which, according to reports, cost $700 million. The company also made the mistake of building their manufacturing facility in California, the worst state in the nation to manufacture, Rodgers added.

Solyndra’s cost per job amounted to $1.5 million, and now those workers are without jobs at all. Money well spent, or simply another attempt to override private markets and supplant them with an uninformed bureaucratic vision of utopia?

Rodgers, on the other hand, knows a thing or two about the solar panel business. In 2001, he invested $750,000 in SunPower, a solar panel manufacturer which uses a technology much more efficient and easier to manufacture than most others. Within a matter a months, Cypress Semiconductor, the company he built, had invested $168 million in SunPower, including the purchase of additional plants and equipment (Solyndra’s new plant alone cost $700 million . . . in this economy?). That company, by the way, is still around and growing despite management and R&D shakeups over the past couple of years.

Reminds me of the comment made by the Social Security judge, David Daugherty, who pretty much hands out Social Security Disability like candy (nearly 100% approval rate v. an average of 60%), “Some of these judges act like it’s their own damn money we’re giving away.”