Archive for February, 2011

Beware of getting what you ask for

February 28, 2011

The Western media has worked itself into a pro-democracy frenzy with respect to the Middle East and North Africa, though I note that it keeps its many mouths firmly shut about the People’s Republic of China, which is currently little better than the rest with regard to civil and economic rights, and which was by far  the worst in the history of mankind during the rule of Chairman Mao (some  30 million souls murdered as compared with 1,000 or so in Libya so far).

Unfortunately, the media is pretty much ignorant about the wide range of so-called ‘democracies’ that might arise half-formed out of the Middle Eastern sand. Some of these promise to be worse than the autocracies that they are pulling down. Widespread genocide is predictable as Shi’ites confront Sunnis, as the better-off confront those who are impoverished, and as the literate confront the illiterate, all armed to the teeth in pursuit of the black gold that drives their passions. The end-game may well produce tyrannies that match those of Stalin’s USSR, Hitler’s Germany and Mao’s China, rather than the Scandinavian social democracies that the Western media so eagerly praise.

The media, unfortunately, is not well-educated in such institutional niceties as the rule of law, and civil society, or in the nature of the inalienable rights to life and liberty and the imprescriptible right to property that form the basis of the United States’ Constitution. Given the ignorance of the media in 2000, when Al Gore was lionized for losing a presidential election while winning the popular vote, I am not sure that most of the U.S. media is even aware about the nature of the United States Constitution.

Blood and Oil!  That is the predictable tragedy of the crude forces now being witlessly unleashed across the Middle East. If the world escapes Armageddon, it will indeed be fortunate. If the West meddles in the region – and its leaders are straining at the leash so to do, not least because of the lure of Black Gold – then Armageddon pretty much is inevitable. At least, the media will glorify itself in its own self- destruction as it records the unfolding events for a desolate ether.

3M CEO speaks truth to power

February 28, 2011

The CEO of one of the largest business groups in the United States has launched a scathing attack on President Barack Obama, distancing himself from the many sycophants who suck up to an anti-capitalist President in the expectation of syphoning transfers from U.S. taxpayers. In the state capitalist environment that characterizes post-2008 America, it is an exceptionally brave man, with something to lose, who speaks truth to such evil power.

George Buckley is the 64 year-old  CEO of 3M, one of the largest industrial groups in the United States, headquartered in St. Paul, Minnesota. 3M is best known as the producer of scotch tape and post-it notes. In reality 3M is now a highly-diversified corporation, with some 55,000 products, including highly complex electronic components used in touch-screen mobile phones and tablets.

The focus of the corporation is on laboratory-based innovations that are essential if the United States is to maintain a leading position in manufacturing in the twenty-first century. So confident is Buckley in the innovative process that he encourages his employees to devote 15 percent of their work-time on their own private research, whether in the labs or in  ‘tech clubs’ that bring together staff across different divisions to discuss issues of common interest.

George Buckley has just launched a scathing attack on President Obama’s post-November 2010 attempt to repair relationships with business, dubbing him ‘anti-business’. In particular, Buckley has it in for the Jobs and Competitiveness Council, chaired by Jeffrey Immelt, CEO of General Electric, that includes such CEOs as American Express’ Kenneth Chenault, Dupont’s Ellen Kullman, Kodak’s Antonio Perez and Southwest Airline’s Gary Kelly. He is also leery of the President’s meeting last month with technology chief executives, including Apple’s Steve Jobs Google’s Eric Schmidt, Oracle’s Larry Ellison and Facebook’s Mark Zuckerberg.

Fundamentally. George Buckley understands the unhealthy state capitalist relationship that is under construction between the Obama administration and such anti-capitalist,  rent-seeking executives. He does not hesitate to speak truth to power:

“I judge people by their feet, not their mouth”, he told The Financial Times. “We know what his instincts are – they are Robin Hood-esque.  He is anti-business. There is a sense among companies that this is a difficult place to do business.  it is about regulation, taxation, seemingly anti-business policies in Washington, attitudes towards science.  Politicians forget that business has a choice. We’re not indentured servants and we will do business where it’s good and friendly.  If it’s hostile, incrementally, things will slip away.  We’ve got a real choice between manufacturing in Canada and Mexico – which tend to be pro-business – or America.”

If President Obama has any concern for the People that he represents he will read Ayn Rand’s Atlas Shrugged, learn well the words of John Galt, and respond accordingly, before it is just too late. His first action should be to shut down the Council, abort cozy discussions with rent-seekers, and promote laissez-faire capitalism by withdrawing the federal government as much as possible from the private sector.

Goldman Sachs exploits state capitalism

February 27, 2011

Goldman Sachs is a corrupt corporation. During the 2008 financial crisis it deliberately exploited its own clients, unloading upon them, without so advising them, securities deliberately designed to collapse in value. Its senior personnel move effortlessly in and out of  cabinet positions in the federal government, pursuing anti-capitalist policies wherever possible. Its personnel help corrupt governments – Greece is a particular example – in breaking rules designed to maintain transparency in budgetary affairs. Its CEO, Lloyd Blankfein, arguably is the most corrupt corporate leader in the United States.

It comes as no surprise, therefore, to find that Goldman Sachs is working hard to discredit GOP attempts to shave the 2011 budget of its massive built-in deficit.  The proposed GOP budget cuts would cut just 2 percent from the $3.6 trillion fiscal 2011 spending endorsed by President Obama.  Economists at Goldman Sachs, devastated by this threatened decline in the size of the state, are united in claiming that such a cut would wipe  2 percent from U.S. gross domestic product in the months ahead.  In so doing, they support  Big Labor claims that, if implemented, the cuts would eliminate 800.000 jobs. 

Unsurprisingly, both claims are based on hydraulic Keynesian economic models that erroneously predicted in 2009 that Obama’s stimulus package would lower the rate of unemployment to 8 percent within 12 calendar months.  Hello! Has that happened even over an ensuing two years of economic stagnation?

Implicit in such modeling is the assumption that the spending multiplier is 1.5, whereas in reality it is probably less than 1.0. A multiplier of  less than 1.0 implies that an increase in government spending lowers gross domestic product; conversely it implies that a cut in government spending increases gross domestic product.   And that is the more likely fiscal reality.

The economics department of Goldman Sachs has long been a festering hothouse for Keynesian economists.  So one might well ask  how such a policy framework can ever prove profitable for a financial corporation? And here is the sadistic wisdom of the Lloyd Blankfein mindset. Lloyd Blankfein and Goldman Sachs are not interested in whether the United States’ economy thrives or declines. They are not interested fundamentally in whether their clients prosper or fail. They are interested only in the wealth that they can transfer from unwary individuals into their corporate pockets.

If  Goldman Sachs can hold their captive politicians to a pursuit of harmful Keynesian policies, then the corporation can exploit the bad economic consequences to fill its coffers with extracted wealth.

In Goldman Sachs, you should not trust, unless you are in their employ! And even then, cover your backs whenever Lloyd Blankfein is on the premises.

Entitlement reforms: The feigned deafness of Barack Obama

February 26, 2011

“Don’t doubt that Mr. Obama’s real impulse, like that of most Democrats, is to let things ride and then simply, amid a crisis, start slashing benefits for the ‘rich’ while also raising taxes on the ‘rich.’  Unspoken has been a Democratic assumption that an aging electorate, in a crisis, would be willing to tax itself to the hilt to prop up an unreformed or barely reformed Social Security and Medicare.  Even if this assumption were electorally sound, economics won’t oblige in the crisis that’s coming.  The necessary tax hikes would kill any hope of growth.  The economy would continue its free fall without root-and-branch entitlement cuts all the more painful for having been delayed.” Holman W. Jenkins, Jr. ‘Let’s Begin Obama’s Conversation on Entitlements’, The Wall Street Journal, February 26, 2011

Just to identify the tip of the entitlements iceberg, let us glance for a moment at the crisis confronting the real killer, Medicare.  According to a recent study by the left-leaning Urban Institute, an average couple who retired  in 2010 can expect to consume Medicare benefits with a present value of $343,000.  That same average couple will have paid Medicare taxes with a present value of $109,000.

Even that dreadful shortfall is a mirage. For none of the Medicare taxes paid out by that average couple remain in the pocket of the federal government. Exactly like Bernie Madoff, American governments have spent those tax monies living high on the electoral hog. There is not a single penny of all those Medicare taxes left in the government’s empty coffers.

And the same theft can be reported with respect to payroll taxes that were supposed to go into a non-existent Trust Fund. All those monies also have been blown by vote-seeking politicians who care not a tinker’s cuss about the People that they pretend to represent. Barack Obama, a Chicago-machine politician drenched in socialist ideology is precisely the worst ideologue to preside over the entitlement system as it slides into immediate crisis.  Most probably, that is why he was elected into office.

What does this imply in economic reality?  The retirement of the baby boomers is now imminent. The government has not saved the taxes to pay for their retirement. As they retire, for the most part, they have not saved anything near enough to cover their own retirements. So a stark political choice confronts the electorate. Will the younger generations be willing and able to remit taxes sufficient to cover the unfunded commitments to their parents as well as to provide for themselves?  Or will they shrug off unfunded commitments and allow the baby-boomers to eke out their remaining lives in poverty and disease?

Well, the baby boomers have the votes, and the desperate willingness to vote themselves into safety. so that is the way that  vote-seeking politicians most likely will go. And that will be the end of the American dream for the future generations.

To mitigate a crisis that cannot be averted, immediate action is required, at the mimimum to raise the age of accessing social security and medicare to 70 years and rising, to reflect increasing life expectancy, to allow retired individuals to supplement health care spending beyond the limits of Medicare billing, and to tax social security income as regular income.

More than this surely will prove to be necessary. The payroll and medicare taxes syphoned off working Americans should be moved henceforth into personalized accounts, firewalled from the filthy fingers of the U.S. Congress. Those accounts should bear interest at the rates attained by 10-year Treasury Bills, extracted annually from the federal budget. In that way, there will be no prospect of  the federal government ever repeating its fraudulent Ponzi schemes  and ruthlessly stealing the retirement future from its own People.

To introduce such reforms requires political courage and honesty, and a willingness to sacrifice one’s office for the good of the nation. No wonder a cheap Chicago politician like Obama chooses to play golf and basketball, and to vacation in privileged locations.

Barack Obama is a union-hater in his own domain

February 25, 2011

“It will no doubt surprise you to learn that President Obama, the great patron of the working man, also happens to be the great CEO of one of the least union-friendly shopfloors in the nation. …Fact: President Obama is the boss of a civil work force that numbers up to two million (excluding postal workers and uniformed military).  Fact: Those federal workers cannot bargain for wages or benefits.  Fact: Washington, D.C. is, in the purest sense, a ‘right to work zone.’  Federal employees are not compelled to join a union, nor to pay union dues.  Fact: Neither Mr. Obama, nor the prior Democratic majority, ever acted to give their union chums a better federal deal.” Kimberley A. Strassel, ‘Union Power for Thee, But Not for Me’, The Wall Street Journal, February 25, 2011

For this enormous anti-union privilege, Barack Obama can thank his own political party.  In 1978, Democratic President Jimmy Carter, supported by a Democratic Congress, enacted the Civil Service Reform Act that severely proscribed the issues over which federal employees could bargain, while prohibiting compulsory unionization.  By God, those Democrats were not about to allow their federal employees  to dictate pay- to allow the Cattle to assume control over the Farm.  Nor were they about to allow federal workers to influence health-care or retirement plans. 

Every Democrat in federal politics understands the difference between accepting campaign contributions from the unions and becoming outright owned by them.  Under no circumstances, will such Democrats ever provide unions with the keys to Capitol Hill or to the White House.  They know full well that the primary aim of  public sector union leaders is not to improve the well-being of their members.  Rather it is to syphon off union dues in order to gain complete control over the Statehouses of the nation. 

All this explains why President Obama suddenly has become silent over the fate of Wisconsin, after unloading his Organizing for America mobs onto the Wisconsin streets, as though they were some of his own  filthy Chicago backstreets.  If the Badger State’s public sector union power is the gold-plate for the nation, then sooner or later Obama might be expected to replicate it for the federal workforce. And there is no way short of a desperate Gaddafi last stand situation, where  he would be willing to do that.

If Obama will not support the Wisconsin public sector union model for the Capital, then why does he provide lipservice support it for it in Wisconsin?  An independent media would be pressing him hard on this inconsistency.  If it did so, then Obama, like his Democratic colleagues in Wisconsin, might abandon his responsibilities and run for cover, perhaps in Hugo Chavez’s Venezuela.

In troubled times Americans should embrace their Constitution

February 24, 2011

Many good-hearted Americans feel deeply troubled by recent events. Domestically, the nation confronts political turmoil as a divided Congress spoils for a fight while a weak and intellectually lazy President looks on from the sidelines of the debate. Internationally, the nation confronts turmoil in the Middle East as despot after despot reeps the harvest that he has sown. What to do, what to do?

The answer comfortingly lies within the Constitution so superbly crafted by the Founding Fathers. Torn and tattered as it now is, still it retains the essence of American exceptionalism and should be the cloak that enfolds the People as they peer into an uncertain future.

What lessons does the Constitution offer?  First and foremost, the Founders did not craft a democracy driven exclusively by the popular will. Indeed, fearing the likely excesses of such a reflexive will, the Founders checked and balanced it in many ways. The House of Representatives – the embodiment of the popular will, is checked by the Senate, which was designed to protect the lives, liberties and properties of all. The Congress was checked by the Executive. And both branches were to be patrolled by the Judiciary. At least until FDR, this system of checks and balanced worked well. Even now, it plays a role.

So domestically, those who would balance the federal budget quickly should understand that this will not happen, because checks and balances work both ways. Domestically, impatience should be tempered as those who would save the Republic educate the electorate into responding appropriately in November 2012.

So internationally, Americans should not rush to cheer Middle Easterners into following the path of unconstrained populism without the checks and balances of a constitutional republic. Untrammeled democracy rarely works well. Too often it results in turmoil, bloodshed and tyranny, as occurred in France following the French Revolution. The memory of Napoleon Bonaparte striding like some disgusting Colossus across the European continent, after all is not yet entirely dimmed. There are few Arthur Wellesleys’ (The Duke of Wellington) available to save the modern world from tyranny; and the Battle of Waterloo itself was  ‘a damn close run thing’.

So be thoughtful and be calm, and do not wish upon others what you have rejected for yourselves,  is the message to carry forward as you contemplate an uncertain future. Your noble predecessors faced far graver threats without resorting to mob rule.

United States government arms Middle Eastern Tinpots to the teeth

February 23, 2011

Tinpot dictatorships throughout the Middle East are arming themselves to the teeth, to a significant extent with materiel supplied by United States arms-dealers. In 2010, defense procurements totaled $19 billion in Saudi Arabia,  $4.4 billion in Iran, $3.3 billion in UAE, and $1.6 billion in Egypt. U.S defense contractors are currently salivating on multibillion-dollar arms deals to Gulf States that are engaged in or preparing to turn those weapons loose to put down popular uprisings.

The Obama administration is aggressively pushing to sell sophisticated arms to oil-rich ‘ Arab ‘allies’, whose contempt for their own people is now increasingly apparent. As recently as October 2010, the U.S. government unveiled a record 10-year $60 billion deal to sell advanced F-15 fighters, helicopters and other arms to the Saudi Arabia dictatorship.

Even now, the Obama administration is hedging any decision to curtail arms deals with Bahrain, following the murderous use of such weapons on innocent citicens by the ruling dictator.  A senior Obama administrator (notably unnamed) announces that ‘any Bahraini unit involvement in human-rights abuses would be a factor in the future as we contemplate support for specific units.”  A senior U.S. military official (also unnamed) states that “It is premature to make any decisions about future military assistance to Middle East allies.”

How contemptible must government officials and military apologists become before the media rips the masks off their faces?  By the way, does Colonel Gaddafi still rank among those favored Middle Eastern allies?  Will President Obama bow to the Colonel, the next time that they meet, should the Colonel’s bloody suppression ultimately succeed? Or will he emulate President Reagan in defining such autocrats as ‘Mad Dogs’? Your suspicion is as good as mine.

When will the elected representatives of the Land of the Free stand firm on higher principle and run the gun-runners out of town whenever they service despots with military materiel?

“Accumulate, accumulate. That is Moses and all the prophets!”  Karl Marx, Das Kapital

Western hypocrisy comes home to roost

February 22, 2011

The leaders of Western nations have developed cosy relationships over the years with some of the Middle East’s most despicable dictators. In attempts to secure oil supplies, to cultivate the sale of armaments, and to dampen anti-Israeli aggression, the United States, Britain and other European governments have sucked up to Arab leaders in Saudi-Arabia, Kuwait, Yemen, Libya, Egypt, UAE, Bahrain and Jordan, without reference to their records with respect to human rights and economic freedom.

Now that the internet has reduced the cost of organizing effective revolutions by the oppressed of these nations, Western governments are initiating unbelievable about-turns, castigating despotic leaders for the very despotism that they have actively encouraged and funded. The Western media blinks not an eyelid at this remarkable volte-face. All friends of liberty should expose such past hypocrisy and urge the future abandonment of meddling in the affairs of other nations.  It is none of our business unless it directly affects our own lives, liberties and properties.

Typically The Wall Street Journal tends to be more respectful of the affairs of others than much of the United States media. Yet, here is an extract from today’s Editorial that amounts to nothing less than Jingoism of the kind that led the British Empire into eventual overreach and dissolution:

“It’s time for the West to drop its studied neutrality and help Libyans topple one of the world’s most loathsome regimes.  Paul Wolfowitz (yes that neocon who encouraged President George W. Bush to walk under-armed and under-equipped into Iraq) has some useful suggestions  starting with humanitarian aid and support from Western capitals to keep communications open inside the country…We’d go further and tell the Libyan armed forces that the West will bomb their airports if they continue to slaughter their people.  Arming the demonstrators also cannot be ruled out. ”

Perhaps the WSJ should have added:  “We don’t want to fight, but by Jingo if we do: we’ve got the men, we’ve got the ships,we’ve got the money too!”

Well, how far is The Wall Street Journal prepared to go? Will they recommend carpet-bombing  Saudi Arabia when the Royal Family  moves to quell its own impending revolution?  Or pouring napalm onto the Chinese military in Beijing, once the revolution makes its way to the Peoples’ Republic of China?

When will the West ever learn to take care of its own business and leave others to do likewise and to take responsibility for their own actions?

If the ‘Mad Dog’ falls, where will it all end?

February 21, 2011

For 41 years, Libya has been ruled by an insane autocrat- ‘Mad Dog’ Moammar Gaddafi – whose brutal tinpot dictatorship has completely repressed the people and rendered Libya the biggest laughing-stock of  all the  clown-regimes in Arabia. Now it appears that the salivating ‘Mad Dog’ himself may be taken down, as the Libyan people throw off the shackles of their fear in the  Brave New World of the internet, and as many of  his once-loyal military thugs recoil in their unaccustomed exposure to the eyes of a watching world.

The eyes of many are now on the autocratic remnants of the Middle East, who yet await their likely democratic  fates – Morocco, Sudan, Syria, Jordan, Kuwait,  Yemen, Qatar,  U.A.E., Oman, Saudi Arabia and Iran. And these, indeed, would be fine jewels to add to the Crown of Democracy (if that is not an oxymoron).  Yet, the finest jewel in that Crown lies many leagues further to the East. 

Once all the Middle Eastern dominoes have fallen, how long can the Gerontocratic Dictatorship of the People’s Republic of China survive?  That is the $64,000 question.  How long will 1.4 billion down-trodden Chinese souls continue to labor under the Red Flag?  Is it feasible, in an  internet-dominated world, for the Chinese dictatorship to impose a new Great Wall of China, this time designed to shut down the internet in order to choke off a populist uprising? And if they prove able to do so – and no one wisely underestimates the cleverness of the Chinese – at what cost will this impose on their economy?  Is it possible, in the 21st century, for China to emulate the Japanese Shoguns in shutting off their nation completely from the Rest of the World?

Some public choice tips for the GOP House majority

February 20, 2011

The House of Representatives has now voted out a 2011 spending bill that would cut some  $61 billion from the 2010 budget. Since the 2011 budget year is now well-advanced, with the government running on continuing resolutions, this is as honest a budget as can be advanced. Notably, it is a spending bill that passed through the House on almost partisan lines, with no Democrat voting in favor and with three Republicans voting against.

The House bill now meets a stone wall in the Senate, with a Presidential veto lying in wait should the Democratic-majority crumble in the Senate.  In reality, the probability that the House budget will pass into law is zero. Public choice wisdom suggests that the House majority should not press hard for the impossible, and surely should not shut the government down.

The Founding Fathers crafted well to forge a federal government that would be slow to respond to changes in the popular will. That is why the United States is a constitutional republic and not a democracy. The House was designed as the engine and the Senate as the brake, and this served as a bulwark against the full thrust to socialism over the period 2009-2011. So one should not begrudge the system if it restrains the counter-revolution over the period 2011-2012. The fruits of any populist revolt against excessive government inevitably must await the 2012 elections.

In preparing for a political rout in 2012, the GOP must play a clever hand.  The GOP has a little less than two years to prepare and condition the American electorate for the harsh climate that past profligacy has induced. What is required for such a preparation is a little blood on the budget table for 2011, and quite a few drops more for 2012. In the meantime, the GOP  should hire high quality economic expertise- Greg  Mankiw, Edgar Browning and  John Taylor would provide an outstanding base – and develop a convincing framework for effective fiscal reform for the years 2013-2020.  This framework should form the economic platform for the 2012 elections.

So,  public choice wisdom suggests that the GOP should logroll with moderate Democrats in the Senate – especially those who must confront the electorate in 2012 –  strip out the most contentious cuts from the House bill, and bring in a ‘dishonest’ bill that cuts just $45 billion for 2011. If the President chooses to veto such an already ‘dishonest’ bill, then his true colors are on display – dictatorial red. And the electorate surely will remember this in November 2012.

And if he vetoes the bill, or the Senate refuses to vote out even the the ‘dishonest’ bill, then the GOP should endorse what they might label  the ‘corrupt’ bill already supported by Harry Reid and Barack Obama – a bill that would strip out only $30 billion  – and advise the American public quite bluntly that, for the moment, they are living under conditions of dictatorship, and that the country will pay a very high price for this political corruption.