LESSONS LEARNED #33: “The Founding Fathers weren’t perfect but they were closer than most.” -Old Pithy

Posted by PITHOCRATES - September 30th, 2010

Anarchy Averted

Washington men didn’t live long.  And George Washington thought about that.  A lot.  He loved his Mount Vernon.  His garden.  And he longed to retire there to spend out his years in peace under his vine and fig tree.  But he gave up that dream when he accepted command of the Continental Army.  He was already at that age when a lot of Washington men died.  So when he left, no doubt he thought he may not return.

The Revolutionary War lasted 8 long years.  And Washington spent those years with the army.  In the field.  He was at Valley Forge.  He didn’t leave to go home to see Martha.  No.  His wife came to Valley Forge to see him.

Washington was a wealthy man.  He didn’t need to make these sacrifices.  A lot of wealthy men didn’t.  But he did.  And he sacrificed a lot.  Even his eyesight.  When the army officer’s wanted to mutiny over a long list of failed promises (pay, pensions, etc.), Washington pleaded with them.  To not throw away the thing they’ve fought so long and hard for.  As poorly as the Continental Army was treated, those words did not move them much.  Then Washington pulled out a letter from a congressman to read to them.  But couldn’t.  After stumbling over a couple of words, he stopped.  He then pulled out a pair of spectacles.  No one had ever seen the great George Washington in such a public display of weakness.

“Gentlemen, you must pardon me,” he said.  “I have grown gray in the service of my country, and now find myself growing blind.”

Some cried for the old man who had given so much.  When he no doubt had so few years left to live.  If their commanding general could make such sacrifices, so could they.  So there would be no Caesar.  No Cromwell.  No armies would march to the seat of power.  This republic would not collapse into anarchy as history often scripted her republics.

The Most Powerful Man in America Surrenders His Power         

But would he be king?  He could have.  Easily.  He had the power.  And the love and adoration of the people.  In fact, some were begging him to become king.  Others, though, questioned his intentions.  They looked at the army with a nervous unease.  They were, after all, a nation built primarily from English stock.  And they knew their English history.  Of Oliver Cromwell.  The New Model Army.  Just what were his intentions?

He still stayed in touch with his officers (and later would go on to be the first president of the Society of the Cincinnati).  This seemed a bit ominous to some.  This is why once the war was over, people tried to forget about and disband the army as quickly as possible.  To renege on the promises they made to these veterans.  They just wanted these soldiers to go away.  There were too many bad memories of standing armies in their midst.  Whether they wore a red coat or a rag, they just wanted them gone.

Even King George questioned his intentions.  Few give up power.  If he did, it would place him in the pantheon of greats.  But would he?  Yes.  He would.  And did.  Washington would be a Lucius Quinctius Cincinnatus, the Roman farmer who walked away from his plow to assume dictatorial powers to help save his nation.  When the threat was past, he returned power to the Senate and returned to his plow.  And so did Washington.

Answering the Call of Duty.  Again.

Then the nation called for their Cincinnatus once again.  There were problems with the Confederate Congress.  It was having difficulty governing the peace.  There were state rivalries.  Their finances were in a mess.  And there was no national identity.  There used to be.  British.  And the European nations treated with that singular entity.  Great Britain.  Now that the mother country was gone, there was no singular entity.  No unity.  Everyone was for themselves.  And the European powers had to make multiple treaties with the multiple states.  If they wanted to go through that headache.  And many did not.

Some called for a revision to the Articles of Confederation.  But it was difficult to get the states on board.  A weak confederacy favored the individual states.  And the individual states liked that.  But it also limited their potential as a nation.  Some feared the inter-state rivalries would balkanize the nation.  Make the New World a repeat of the Old World.  To bring the nation together would take an extraordinary effort.  Or an extraordinary man.  George Washington.  Who agreed to attend the Philadelphia Convention in 1787. 

After a long and hot summer, the Philadelphia delegates produced a constitution.  With James Madison being the primary architect.  They then sent it to the states for ratification.  At which time James Madison and Alexander Hamilton began a writing campaign to urge its ratification.  (John Jay contributed to this campaign, too, but not as much as Madison and Hamilton).  Once ratified, it came time to populate the new government.  Some competed with each other for some positions.  But for one of the positions there was unanimity.    There was but one man the people would trust with the most powerful office in the land.  Their Cincinnatus.  George Washington.  But would he do it?  Would he leave his blissful retirement beneath his vine and fig tree?

Yes.  Not because he wanted to.  More than 10 years had passed since this old man had agreed to command the Continental Army.  He had outlived many Washington men.  The way he saw it, he was living on borrowed time as it was.  And there was another consideration.  Against the greatest of odds, he did NOT lose the Revolutionary War.  He had made mistakes in his life, but his name was safe for posterity.  But if he took a risk now he could lose the good name he built.  And if there was anything soldiers (and politicians) worry about, it’s their legacy.  (That’s why they write memoirs.)

Another Long 8 Years

When it was clear that he was, in fact, the indispensable one, he sacrificed his personal want for the public need.  Again.  And again, serving a second term as president.  He was ready (and looking forward to) retirement after one term.  But the party politics were threatening to tear apart the new nation.  The rift between Jefferson and Hamilton had grown.  It was splitting the government into two camps.  The Federalists (led by Hamilton) and the anti-Federalists (led by Jefferson).  They pleaded for Washington to serve a second term as he was the only one who could hold them together.  He consented.

That second term was particularly unpleasant for Washington.  Party attacks turned into personal attacks.  Even against Washington.  And the ugliness got really ugly over the Jay Treaty.  Many wanted war with Great Britain.  But having actually fought a war with Great Britain, Washington favored peace.  Yes, the treaty favored Great Britain.  And, yes, it tied American interests to Great Britain, not her war time ally.  France.  The Jeffersonians unleashed an unfettered vitriol on the Federalists.  Including Washington.  But Washington bet on the right horse.  Great Britain proved to be the dominant European power.  And her Royal Navy came in handy protecting U.S. trade with her.  Over a decade of peace and prosperity followed. 

After 8 years, though, there was no persuading Washington for another 4-year term.  He had grown ever older in the continued service of his country.  Now he felt it more than ever that his days were few.  Rarely did he know happiness like he felt at the inauguration of the 2nd president, his vice president, John Adams.  Adams wrote that after he took the oath of office, Washington said, “Ay! I am fairly out and you fairly in!  See which of us will be happiest!”  He may not have actually said this but he no doubt felt the sentiment.  And with that, he returned to his plow.  Cincinnatus had come home.  Where he would happily live out his remaining years.  All two of them.

Where is Our Cincinnatus?

Today it’s about money and power.  Not duty.  Today, people want to be full-time politicians.  For the money and power.  And the elitist status.  People get into Congress and they just don’t want to leave.  Should we vote them out of office, they have a tantrum.  They call their constituents stupid for not knowing who the better candidate was.  And they won’t go quietly.  Some will change parties.  Or run as an independent.  Or as a write-in candidate.  Anything to stay in Washington.  To hold on to their power.  To stay among the elite.

The nation has deviated far from the path of disinterested public service of the Founding Fathers.  The anti-Federalists would be shocked to see what became of the government they helped create.  Even the Federalists.  Even Hamilton.  Not even he, the champion of a strong federal government, would approve of the federal government today.  His mercantilist polices had the goal of making the nation rich and powerful.  Not to suck the wealth out from the private sector.  Which began in earnest with Wilson.  Then picked with FDR.  Then ramped up further with LBJ/Nixon/Ford/Carter.  Had Hamilton lived in the 20th century, he would have earnestly campaigned for Ronald Reagan.  To put an end to the public sector’s pillage of the private sector.

And now we find our nation adrift again.  But who will step in and stop it today?  Who is out there?  Willing to put down their plow for disinterested public service.  And by ‘plow’ I mean any real job.  Worked by someone who is not part of the Washington establishment.  Where is our George Washington?

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Obama Makes FDR Look Like a Conservative

Posted by PITHOCRATES - September 29th, 2010

Then

None of FDR’s New Deal programs pulled the economy out of the Great Depression.  Businesses sat on their cash.  Afraid of further liquidity problems.  Afraid of what anti-business policy the FDR administration would pass next.  And the depression had left them with so much excess capacity (because no one was buying anything) there was no need to hire anyone to expand capacity.  So they didn’t.

FDR tried to stimulate the economy with record government spending.  None of it helped.  There were some make-work projects for some people.  But public make-work projects don’t stimulate an economy.  Jobs in the private sector do.  And excessive government spending just makes the businesses in the private sector nervous.  The government has to pay for that spending eventually.  Through higher taxes.  Excessive borrowing.  Or simply by printing money.  None of these actions bode well for the private sector.  They will just increase the cost of doing business (via higher taxes, higher interest rates or a higher inflation rate which makes everything more expensive).

The Great Depression finally ended thanks to Adolf Hitler and Hideki Tojo.  With a world plunged in war, our allies needed war material.  Enter the Arsenal of Democracy.  The FDR administration suspended the New Deal policies and allowed the private industry to do what it did best.  Unfettered capitalism.  Unimpeded by government.  And the rest is history.

Now

We are trying the failed policies of the FDR administration again.  And they’re working just as well as they did for FDR.  Excessive government spending is making the businesses in the private sector nervous.  Because they know the government will have to pay for that spending eventually.  Through higher taxes.  Excessive borrowing.  Or simply by printing money.  So they’re battening down the hatches.  Preparing for a rough ride through stormy, economic seas.  Sitting on excess capacity.  And piles of cash.  Because they don’t know what anti-business policy the Obama administration will pass next.

It’s worse now than it was then.  The world is not at war.  Massed armies are not threatening our allies.  There are no customers for the Arsenal of Democracy.  World war can’t pull us out of this depression.  We are on our own.  We will pick up the tab for Obama’s spending.  Well, not us.  Our children will.  Or their children.  Or their children’s children.  And each day the Obama administration spends more, the worse that day of reckoning will be. 

It doesn’t have to be this way, though.  If we stop the spending we can mitigate the damages.  But we have to act soon.  For we are fast approaching the point of no return.

I Have this Strange Feeling of Déjà Vu                                                           

Command economies don’t work.  That is, if you go by the historical record.  The New Deal failed.  The Soviet Union failed.  And where they haven’t failed, life isn’t so good.  I mean, no one is trying to sneak into North Korea or Cuba.  Why?  Because it sucks in those countries.  And yet we keep trying to be like those countries.  Why?

How bad is it?  Well, here’s one opinion:  U.S. Economy “Close to a Destructive Tipping Point,” Glenn Hubbard Says (by Aaron Task on Yahoo! Finance).  It’s a discussion of a new book:  Seeds of Destruction: Why the Path to Economic Ruin Runs Through Washington, and How to Reclaim American Prosperity by R. Glenn Hubbard and Peter Navarro.  Based on titles, I’d say it’s pretty bad.  You might want to add this book to your reading list.

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FUNDAMENTAL TRUTH #33: “The founding fathers weren’t perfect but they were closer than most.” -Old Pithy

Posted by PITHOCRATES - September 28th, 2010

George Washington

George Washington owned slaves.  We all know this.  Whenever we try to revere our Founding Fathers, someone on the Left will speak up and remind us of this fact.  Of course, the context of the times means nothing to them.  We’ll forgive Robert Byrd’s racist and KKK past because of the context of his times.  But not the father of our country. 

Washington inherited his slaves.  With the property he inherited.  He wasn’t a huge fan of slavery.  In fact, he wanted to replace his slaves with paid laborers.  Because he wasn’t making a lot of money with his slaves.  There were large families.  Many old who could no longer work.  And lots of children.  This large slave holding consumed a good percentage of his crops for their subsistence.  While a smaller percentage of them contributed labor to produce those crops.  He tried to sell them.  But others were only interested in the workers.  Not the old and the young.  But he didn’t want to break up the families.  So he didn’t sell.  He continued to use slave labor.  Made less money than he could.  Because it was the decent thing to do.

His will freed his slaves after his wife’s death.  It also provided for them.  His heirs were to provide sufficient training to help these former slaves get a job.  To help them integrate into the community.  But you don’t hear that part from the Left.  Just that he owned slaves.

In the context of his times, he was a great man.  And he still is.  Despite what the Left will remind us of.  He was the father of our country.  The indispensable one.  Without him, there would have been no nation.  For he truly was “first in war, first in peace, and first in the hearts of his countrymen.”

Ben Franklin

Ben Franklin lived a long life.  So long you could say he lived a couple of lives.  Printer and entrepreneur.  Writer and publisher.  Inventor and scientist.  Diplomat, peacemaker and Founding Father.  A great man.  And, yes, with a few flaws.  He saw a prostitute or two in his youth.  Sired an illegitimate child.  William (who would go on and father his own illegitimate child).  He wasn’t the greatest husband.  He could have been a better father.  But he did a lot for this country.  Few did more.  So we can forgive him these few trespasses.  Most did.  Even John Adams would speak kindly of him.

Franklin and Adams were very different people.  Yes, Franklin wrote, “Early to bed, early to rise, makes a young man healthy, wealthy and wise.”  But as an elder diplomat in Paris, he came to see the pleasures in staying up late.  Enjoying the company of the ladies in the Paris salons.   And drinking Madeira.  He was a social butterfly.  And the people of France loved him.  The great American scientist and inventor.

When Adams joined Franklin in Paris, their personalities clashed.  Adams went to bed early.  Got up early.  And didn’t enjoy the company of the very forward (for the time) salon women of Paris.  Only one woman interested him.  His beloved Abigail.

Adams resented Franklin’s celebrity.  And had difficulty working with him.  Especially with the hours he kept.  But Franklin’s style worked.  Paris preferred him over Adams.  And they made it known to the Continental Congress.  This strained their relationship.  Adams was concerned the French were playing Franklin, for the French were very adept at diplomacy.  But in the end Franklin proved to be no slouch himself.  He maintained French funding, arms and supplies for the American cause throughout the Revolutionary War, promising all along there would be no separate peace with Great Britain (France was, after all, in it for the spoils a British defeat would provide).  But we made a separate peace.  France got little for all her efforts (other than her own revolution).  And Franklin minimized the damage to the Franco-American friendship.  Not bad for a naughty old drunk.

John Adams

John Adams is the most unappreciated of the Founding Fathers.  There’s no memorial for him in our nation’s capitol.  And yet there probably wouldn’t have been a nation without him.  So why is he the Rodney Dangerfield of our Founding Fathers?

Adams was a flawed man who knew his flaws.  He didn’t try to hide them, though.  He tried to fix them.  But he wasn’t very successful.  He was a very religious man.  And he was oh so pious.  But irascible.  And vain.  It always bothered him that others got so much credit.  For doing far less than he did.  Especially Jefferson.  These were his flaws.  Which could make him hard to like at times.  And bitter.  The story that Adams often told about the writing of the Declaration of Independence went like this.  He said Jefferson should write the Declaration of Independence, not him.  First of all, Jefferson was a Virginian.  With all the trouble in the North, it was important to show a united front.  All the colonies.  Even those not facing the wrath of the British army and navy.  Second, no one liked him (Adams).  So no one would like anything he wrote.  (Which was not true as he did help some colonies write their state constitutions.)

And sometimes he could come across as kind of an elitist.  Because he was so well learned and so well disciplined.  He was part of that old school who thought that the best and brightest should serve in government.  And some thought he was too British.  Yes, he represented the British soldiers implicated in the Boston Massacre and supported the Jay Treaty, but he was no British toady.  At a last attempt at peace and reconciliation, King George was willing to forgive many who rebelled against the crown.  But not Adams.  He was ‘too’ responsible for all that independence trouble.  He would hang.

Anyway, that’s about the extent of Adams’ flaws.  A bad personality trait or two.  Nothing scandalous.  He had a loving marriage.  He was a good father.  Highly principled.  Honest.  And just.  One of the best of the best.

James Madison                                                        

James Madison was the most erudite of the Founding Fathers.  Jefferson may have thought big thoughts.  But Madison could, too.  As well as master the details.  When it came to constitutionality in the inaugural administration, Washington didn’t turn to his Secretary of State (Jefferson).  He went to the Speaker of the House.  James Madison.

Washington had no children.  But he admired and loved Hamilton, Jefferson and Madison like sons.  And then the fighting started between his ‘children’.  Especially between Hamilton and Jefferson.  Who saw two different Americas.  This animosity would extend to the president.  And the entire Federalist ‘party’.  Jefferson and Madison saw Washington as a senile old man manipulated by a puppet master.  Hamilton.  So Jefferson and Madison led an opposition party against the Washington administration.  While Jefferson was still a member of the administration.  The Jefferson-Hamilton feud got so bad that Jefferson would eventually leave and ‘retire’ to Monticello.  Madison would carry on the opposition, taking his orders from Monticello.  Sort of a Jefferson toady.

The Jefferson-Madison hatred of the Federalists bordered on the ridiculous.  They saw everything through a prism of conspiracy.  That the Federalists were trying to reunite America with Great Britain.  Thus making them, the Republicans, fiercely pro-France.  Even during the height of the Terror of the French Revolution.  Jefferson once advised the French ambassador not to worry about Washington.  He was old and senile.  Those of right mind were clearly on France’s side.  When Washington learned of this, he never would talk to Jefferson again.

Madison kept up the hysteria.  Even during the Adams administration.  He was sure Adams wanted war with France.  And when the French insulted the Americans in the XYZ Affair (you want to talk to us French?  First you give us French a lot of money), Madison said Adams fabricated the whole thing.  So he could declare war on France.  Well, he didn’t make it up.  It happened.  And while war fever gripped the nation, Adams tried one last time.  And got peace.

Despite this Hamilton/Federalist paranoia, Madison was one of our best.  He was the father of our constitution.  He (and strangely enough Alexander Hamilton) led the ratification process.  And Madison led the fight to add the Bill of Rights.  Few men have been so instrumental in the founding of a nation.

Thomas Jefferson

Thomas Jefferson may have had an intimate relationship with a slave.  Some may call it rape.  But, in the context of the times, it was no big deal.  Others were doing it.  Just like we forgive the Aztec for their human sacrifices.  In the context of their times, it was no big deal.  A lot of less-advanced people were doing it. 

Jefferson was a complex man.  Some would call him a sphinx.  He could tell lies that even he believed.  Quiet and shy, he was not the ladies man.  He looked like one, but he wasn’t.  Rejected once while in college and he was ready to live a life of celibacy.   But he did meet another woman.  Who he loved and married.  She was a frail thing, though.  And a couple of babies later, she died.  This just devastated Jefferson.  Shook him to his core.  It took months before he emerged from that deep depression.  He would never marry again.  And the female company he kept after that was often with married women.  His daughters.  Or, perhaps, a slave.  He no doubt yearned for female companionship.  But he would never open his heart again to another woman.

Perhaps he did, though.  With Sally Hemings.  His slave.  His concubine.  If the allegations are true (DNA evidence cannot conclusively prove but indicates a high probability).  She looked after his daughters.  Sort of a mother role.  Perhaps she was a surrogate wife.  If so, perhaps it was less than rape.  Maybe there were mutual feelings.  Anything is possible.  But we’ll never know.  What we do know is that if anything did happen, they hid it.  Out of shame on one part.  Perhaps fear on the other.  She was, after all, only a concubine.  Property.  And being a concubine is not being a wife, wedded or common-law.  No doubt it was a complicated ‘relationship’.  If there was a ‘relationship’.

That said, he did do a lot of good.  He was one of the greatest champions of limited government.  He was one of the gentlemen of the Enlightenment.  And there was little to fear from them.  But some of these gentlemen wanted to give the new central government great power.  Because it was the dawn of a new era.  Where like-minded gentlemen would follow them and continue to govern with disinterest.  But Jefferson had his doubts.  He didn’t trust men with power.  He didn’t trust government.  And because of him, they’d keep the beast of Big Government at bay.  For a little while.

Alexander Hamilton

Alexander Hamilton had illusions of grandeur.  And this from a man who had done some fantastic things.  Still, he always wanted more.  He was a driven man.  Probably goes back to his illegitimate birth and abandonment.  He always had something to prove.  To himself.

Some feared him.  First Jefferson.  Then Madison.  They thought he was pulling the strings in the Washington administration.  When he proposed his funding, assumption and banking plans as Treasury Secretary, Jefferson & Madison were frightened by what they saw.  A way too powerful central government.  So they formed the opposition.  Thus American party politics was born.  But neither side was as bad as the other side thought. Still, it didn’t stop Jefferson from trying to destroy Hamilton. 

Hamilton had money from a successful law practice.  And he ran the treasury department.  Someone took notice.  A guy named James Reynolds.  A con man that was in Philadelphia preying on veterans.  His wife, Maria, was beautiful.  And quite the actress.  One sob story of an indebted husband who abandoned her with his debts later, she lured Hamilton into her home.  He brought money to help her settle her debts.  But they soon ended up in her bedroom.  Once they consummated their affair, Mr. Reynolds stormed in on cue and began the extortion of Alexander Hamilton.

Well, when Jefferson learned of this juicy little morsel, he leaked it to the press.  The newspapers attacked him.  Said he was stealing money from the treasury to pay his blackmailer.  He wasn’t.  They did look, though.  And how they looked.  When they couldn’t find the evidence they wanted to find, Jefferson said that was proof positive of what a good thief Hamilton was.

But Hamilton was no thief.  Say what you will about him, but he was a man of integrity.  And the father of American capitalism.  The American dream took root and grew largely because of him.  And his financial acumen.  You know what they say.  Money talks and bull [excrement] walks.  Jefferson could write and he wrote some good stuff.  But words don’t build a nation.  Money does.  Foreign credit.  And Hamilton delivered.

Flawed but Great

Flawed men, yes.  But compare them to our contemporary politicians.  To their flaws.  To their accomplishments.  Who were/are better?  And who were/are more flawed?  More corrupt?  The comparison is ridiculous.  For there is no comparison.  Our Founding Fathers, with all of their flaws, are THE greatest generation.

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Obama to Small Business: Take the Money. Please.

Posted by PITHOCRATES - September 27th, 2010

Smart Dumb People

Imagine you’re a business owner.  Let’s say you manufacture and sell fancy, high-end, architectural lighting for high-end homes.  Business was good during the housing bubble.  So good you expanded production.  Built a new factory.  Then, with the subprime mortgage crisis, sales took a nosedive.  You had to shutter the new plant you built during the bubble.  And you had to cut a shift at your other factory.  Because with the new home market in the crapper, high unemployment and a general lack of optimism in the future, few people are buying fancy, high-end, architectural lighting.  So what do you do?  Borrow money so you can expand production and hire more people?  If you’re an idiot, perhaps.  But you’re not.  So you won’t.

Business people are smart.  They understand business.  The people in the Obama administration, on the other hand, are a bunch of idiots.  When it comes to business.  They may have their Ivy degrees and their smug condescending arrogance, but they are some of the dumbest smart people that ever were.  To them all business owners are thieves who exploit their employees.  They don’t like them but they understand they need them.  To provide the jobs.  Because everyone can’t work in government.  Someone has to work in the private sector so the government has someone to tax.

With their simplistic understanding of business, they believe business just needs more money.  That’s their answer to everything.  More money.  A business owner can hire more people if only he or she had more money.  Ergo, get them more money.  Hire the people.  Create jobs.  Build stuff.  Just do it already.  What’s the problem?

“Ah, Mr. President, what am I going to do with all this stuff if no one buys it?”

“Huh?  What?”

“That’s what I thought.”

Spend Baby Spend

The economy is a complex thing.  But it’s simple to operate.  All you have to do is get the hell out of the way.  But there are those who just can’t.  They need to tinker.  Because they are smarter than you.  And every other consumer.

Economists are like weather forecasters.  They’re wrong more than they’re right.  Let’s face it; if these people could figure out the economy, they wouldn’t need a day job.  But they do.  They need to offer ‘expert’ commentary.  And advise presidents.  To feel important.  To feel better about themselves.  For being such abject failures that they need a day job.

And, of course, the ones who find favor with those in power are the ones who favor the use of that power.  Keynesians.  Unemployment, Mr. President?  Why you fix that by spending money.  Inflation, Mr. President?  That’s just too much money chasing too few goods.  So you need to spend more.  To stimulate the economy to build more goods.  Inflation is good.  It stimulates.  And it helps to pay off the debt you’re building with your deficit spending.  A trillion dollars today may only be a few hundred billion, say, 10 years from now.  Billions are easier to repay than trillions.  And the more we inflate, the easier it will be to pay off that debt.  See?  Deficit spending and inflation are good things.  So keep spending.

It’s a load of crap.  But it’s doesn’t take much to sell it to a president.  Especially if they want to spend.  As the current president does.  And, boy, does he.

Failed Policies of the Past

Easy money and irrational exuberance created the housing bubble.  People borrowed money and bought over-priced houses.  Then the bubble burst.  The huge inventory of unsold homes corrected the market.  Prices plummeted.  Interest rates went up.  Adjustable Rate Mortgages (ARMs) reset at higher rates.  Subprime mortgages defaulted.  Foreclosures.  More houses thrown on the market, pushing prices down further.  People still paying their mortgages found they owed more than their houses were worth.  Some walked away.  More houses thrown on the market, further depressing housing prices.  That’s what easy money and excess capacity gives you.  A bubble.  Then a deflationary spiral.

And now the Obama administration wants to return to these failed policies of the past.  Obama wants business to borrow money to increase capacity to build stuff no one will buy.  (See AP article Small biz, banks may spurn Obama’s $30B program by Pallavi Gogoi on My Way.)  It’s not housing.  But it’s still the same.  Irrational exuberance.

It’s the Government, Stupid

It’s not a tight credit market that’s hurting this economy.  It’s the Obama administration.  Just like it was the FDR administration.  There’s just too much uncertainty.  Too many anti-business policies.  When you see government dissolve a legal obligation (screwing the bond holders) in favor of helping a political constituency (the UAW), business owners take notice.  And get nervous. 

If you want to help the economy, you got to stop scaring business owners.  You got to stop running roughshod over the rule of law.  If people enter into legal contracts, they need to have some assurance that the government will honor those contracts.  And, to date, the Obama administration’s actions don’t give much assurance.

Until they stop scaring business, what idiot is going to expand and hire people?  That doesn’t work for the government?

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Oppressed Migrant Workers are Good for Democrats

Posted by PITHOCRATES - September 26th, 2010

Farm Labor is Hard

Ever drive through the Midwest during a harvest season?  See the acres of wheat, corn and soybeans?  And the migrant workers to harvest those crops?  Well, no.  You don’t.  What you typically see is a mechanical harvester (such as a combine that cuts, threshes and cleans grain) and a mechanical collection bin (like a dump truck).  Instead of an army of migrant workers, you typically see two pieces of equipment and two drivers.

We call it advancement.  Modern farmers invest capital into machinery to mechanize their farms.  Sure, some don’t like it.  Modernization.  It reminds me of an anecdote an old friend of mine told me once.  He was operating a ditch-digging machine (like a big chain saw with wide blades that slices a narrow trench into the ground).  He was working at a municipal facility.  An older union employee was watching him with disgust.  Eventually, he spoke up.  He said, “You know how many men you and that machine are putting out of work?”

You ever dig a ditch?  It’s back-breaking work.  Manual ditch diggers would agree.  They would join a union for higher pay to do something no man should have to do.  And when we free men everywhere from doing something no man should do, a disgruntled union employee will go and cut your hydraulic lines.

Congress Gets Serious about Migrant Workers…with a Comedian

Comedian Stephen Colbert recently testified before Congress.  In character.  (You can read about it and see some highlights -or lowlights, depending on how you feel about a comedian taking his shtick to Capitol Hill- in Rachel Rose Hartman’s Stephen Colbert draws attention to self, then farmworkers during Hill appearance on The Upshot, a Yahoo! News Blog.)  So he could testify about migrant workers in California.  He did a skit on Comedy Central’s The Colbert Report about migrant workers in California.  He spent a day trying to work like they did.  Alongside other migrant workers.  Many who were there illegally (and are the subject of ‘comprehensive’ immigration reform).  Colbert said it was back-breaking work in unbearably hot weather.  He hated it.  He then closed on a serious note saying we exploit these illegal aliens.  As being in the country illegally doesn’t really give them the full protection of the law.

My question is, why aren’t these farmers mechanizing their farms?  Wheat, corn and soybeans are NOT the only crops harvested mechanically.  There are mechanical harvesters for oranges, grapes, cucumbers, peppers.  Even tomatoes.  And, of course, green beans, which Colbert was picking.  So why are there still so many migrant pickers crossing our borders?

The Economics of Farming

Generally, there is as tradeoff between capital and labor costs.  When labor costs are high, we invest capital into machinery.  When capital costs are high, we invest in labor.  It would appear the California farmers are using labor instead of machinery because illegal aliens are cheap and plentiful.  But they’re not indispensable.  If they were not so plentiful, labor costs would go up (basic economic rule of supply and demand).  Which would lead these farmers to make capital investments into machinery.  Problem solved.  No more illegal immigration.  No more exploitation of illegal aliens.  And no more back-breaking labor.  The kind a person shouldn’t have to do.

But they’re still there.  Because our border is so porous.  Why?  Are we reluctant to take a job away from an oppressed migrant worker?  Afraid he may become disgruntled and…cut a hydraulic line?  It makes you scratch your head.  Why won’t we seal that border?  Make the illegal immigrants less plentiful and more expensive.  So farmers use machinery instead.  I mean, sure, the illegal aliens have friends in Washington who care about their plight.  But they don’t have a labor union protecting their low-paying, god-awful jobs by lobbying against the mechanization of those farms.  It would appear that the rich farmers are not the only ones exploiting these migrant workers.

The Democrats Need Voters

The government could seal that border.  But they won’t.  And the government makes repeated attempts to grant amnesty.  (And downplay the horrific drug violence near the border.)  A shortcut to citizenship for these illegal aliens.  You put these together and it means only one thing.  The government wants these illegal aliens there.  And they want those farmers to exploit them.  Because that makes good political fodder.  To help them pass amnesty.  And get a boatload of grateful new citizens who will remember them in the voting booth.

As the electorate continually rejects the Democrats and their policies, they are constantly looking to add new voters to the rolls who haven’t rejected them yet.  They ‘get out the vote’ to as many young (and naive) voters as possible once they reach voting age.  They get as many people as possible dependent on government and tell them those benefits will be cut by Republicans if given the chance.  And now, the greatest Democrat voter-registration drive of all time.  Granting citizenship to millions of illegal aliens.  And the Democrats will probably tell them that the Republicans will revoke that citizenship if given the chance.  Fear does work well for them.

Of course, the Left has to depend on deceit.  Because no one knowingly votes for higher taxes, a weakened economy and a more dangerous world.

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Look Out – Here Comes the Middle Class Tax Hike

Posted by PITHOCRATES - September 25th, 2010

A Little Business Primer

Who hires more people?  Big corporations?  Or small businesses?  Some may be surprised to learn that small business provides the majority of American jobs.  Little guys taking a risk.  Doing something they love.  Are good at.  They earn a living.  And provide jobs with benefits for others.  Not too shabby.

These people start their own construction company.  Buy a restaurant (from a lunch counter to a fancy place with table cloths and a wine steward).  Captain a fishing boat.  Move up from fixing cars in a backyard to operating a three-bay service garage.  Open a multi-chair hair salon.  Run a landscaping business (and snow removal business in the winter).  Sell ice cream to tourists from an independently owned Ben & Jerry’s on the strip.  Or buy and operate a McDonalds, Pizza Hut, Dunkin’ Donuts, Kentucky Fried Chicken, Taco Bell, etc.

These are not fat cats running fortune 500 corporations.  They’re no Donald Trump.  So they keep things simple.  And yet protect themselves.  They operate as an ‘S’ corporation.  This is sort of a hybrid between the regular ‘c’ corporation and a partnership.  There’s limited liability (you limit your losses to only what you invested into your business).  And there’s no business tax on earnings like in a partnership.  All earnings are distributed to the shareholders (which could be just one person).  And taxed as personal income. 

I Will Not Raise Taxes on Anyone Earning Under $250,000

Sounds good.  Stick it to the rich fat cats.  But who else makes more than $250,000?  I’ll give you a hint.  Reread the previous section.

A small business owner operating as an ‘S’ corporation is likely to earn more than $250,000.  But they’re not fat cats.  Far from it.  Let’s pick a number.  Something you think is fair for a business owner’s salary.  Someone who probably has his or her house mortgaged to the hilt.  Works 7 days a week and puts in on average 80 hours each week.  If they could earn, say, $75,000 working for someone else, would you begrudge them earning, say, $100,000 working for themselves?  For the sake of the argument, let’s say you don’t.  That’s less than half of the $250,000 tax threshold.  The small business owner, the generator of American jobs, should be safe from any Obama tax hike, right?  Wrong.

As a business struggles to grow, a business owner plows most of their earnings back into their business.  To buy a new copier.  Replace a furnace.  Buy new software.  New computers.  A network for your computers.  Inventory tracking.  A new delivery truck.  Decals for your new delivery truck.  Building signage.  A ‘yellow pages’ ad.  New telephones.  A new website.  New invoicing software with a custom-designed invoice form.  Etc.  But before you can spend this money, you have to earn it.  And, once earned, an ‘S’ corporation small business owner pays taxes on it.  Even if they invest it back into the business.  So, the higher the tax rate, the less they can grow.  And the fewer jobs they can create.

The Obama administration keeps bitching about the greedy bankers and big corporations who are sitting on their cash.  (And they sit on their cash for good reason.  They already have excess capacity.  So there’s no reason to expand.  Because there’re no markets to expand into).  The one area, though, where there may be expansion possibilities is in small business.  Raising taxes on those earning over $250,000 per year, though, will kill small business growth.  Kill jobs.  And prolong this recession.  So why do they persist in attacking the ‘rich’?  Because in terms of voters, they’re less of them than those earning under $250,000.

Playing the Numbers

The Bush tax cuts expire at the end of this year.  If Congress doesn’t extend them, taxes will go up and the economy will tank even further.  And Obama will have violated his no tax rate increase for anyone earning less than $250,000 pledge. 

But there will be no vote before the midterm elections.  (See Congress Punts on Taxes by Martin Vaughan and John D. McKinnon at the Wall Street Journal on line.)  The Republicans want to extend them across the board.  This is a problem for Democrats.  If they do, it endorses George W. Bush’s economic policies and discredits their own.  And angers the liberal base.  They would rather extend the cuts only for the middle class.  This, however, won’t help the small business owners (i.e., the job creators).  So the Republicans are opposing this as it will not help the economy. 

Let’s look at the numbers.  Note the chart at the bottom of the Wall Street Journal article referenced above.  Especially the fine print.  It reads, “2008 tax year, an additional 25% of filers are in the 0% rate category.”  In other words, 25% of the voters pay no federal income taxes.  If you add that figure to the sum of the top three ‘Pct. of filers’ in that chart it equals 95.1%.  In other words, approximately 95.1% of voters earn $140,550 or less.  Only 4.9% of the voters earn more.  Hence the class warfare.  And after stirring up the masses (the 95.1%) to hate the rich (the 4.9%), they have no choice but to keep on hating.  I mean, they can’t tell the 95.1% that they were wrong, can they?  Especially when the poll numbers are moving against them.

So, of course, the Obama administration sticks to the time-honored playbook.  And attacks the rich.  In hopes of persuading enough of the 95.1% to forget about results and to just vote their hate.  We call it playing the numbers.  There’s only one problem.  Most of the 95.1% work for the 4.9%.  So if you make it too costly for the 4.9% to expand and create jobs, they won’t.  They may even cut back.  And the 95.1% are the ones who will suffer.  They may see a reduction in their benefits.  Work longer hours (because their boss can’t afford to hire a new employee). They may even lose their job.  And their house.  They may not like that.  But at least they can find solace in their hate.

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Look Out – Here Comes the Public Option

Posted by PITHOCRATES - September 24th, 2010

Insurance or Welfare?

People must think insurance companies can crap money.  The truth is, though, they can’t.  They take a little bit of money from the many so they can make big payments to the few.  That’s insurance.  You pay a little to protect yourself from big, unexpected medical costs.  Like an accident.  Or a disease.

Years ago I worked in a small company.  One of my duties was managing our healthcare.  The older employees (especially those with children) always did the responsible thing.  They enrolled.  The young single men didn’t.  Employees contributed to the plan.  And, well, a young man had better uses for that money.  But when one knocked up his girlfriend and saw the pregnancy costs, he came a running to enroll. 

Insurance doesn’t work when you only buy the policy when you have a known expense coming.  If we all did that look at what would happen.  Everyone paying a premium will be collecting a benefit far greater than their premium.  And it just can’t work that way.  I mean, where is the insurance company going to get the money to keep paying benefits that exceed the amount they collect in premiums?  There’s only one way.  Jack up premiums.  Or decline coverage.  Well, two ways.  To stay in business, insurance companies, as well as every other business in the world, gotta have revenues that exceed their costs.  If they don’t, they go belly up.

We’re Not Stupid

Obamacare’s mandates began to kick in this week.  On Thursday (9/23/2010), insurers must wave pre-existing conditions for children.  Also, they can no longer limit the amount of health care a person receives per year or in their lifetime.  (See Insurers Dropping Some Coverage For Children by Matthew Sturdevant on the Insurance Capital blog.)  This means you don’t have to buy insurance for your kid anymore.  If he or she gets sick or is hurt in an accident, THEN you visit your friendly insurance agent and enroll your kid into a plan.  And the open-ended benefit limit?  Yeah, you try to work something like that in your household budget.  House payment, property insurance, car payment, car insurance, utilities, groceries, cable and sundry expenses…$3,500 per month.  And the unknown, open-ended, potentially catastrophic expense…$25,000 per month.  Hmmm.  Maybe we should drop the cable.

Now you don’t need to be particularly sharp with numbers to draw the obvious conclusion.  Insurance companies can NOT stay in business under Obamacare.  Even those in Washington know this.  Unless those in Congress are extremely stupid.   So why, then?  Why would they do this when they’ve said all along that we’ll be able to keep our current plans?  Think about it.  It’ll come to you.  Why would they do something that would do exactly what they said it wouldn’t do?  Because it’s what they wanted all along.  To put the private insurance companies out of business. 

‘No’ Means ‘No’.  Unless You’re the Federal Government

The people said ‘no’ to nationalizing our health care.  They said ‘no’ to the watered down version of nationalized health care.  The public option.  But the Obama administration wanted this.  It’s the Holy Grail of Big Government.  So what to do when the people say “no?”  You screw the people and find a way around them.  And you make it look like the insurance companies’ fault.  Make them look greedy.  By writing laws that will put them out of business UNLESS they make huge rate increases.  Threaten and bully them when they do.  Exclude them from the pool because they did.  Then you step in with the public option.  Then, Bob’s your uncle, you got what you wanted.  Control of one seventh of the U.S. economy.

Lying or stupid.  You pick.  Either way it’s a sad commentary on our elected ‘representatives’.

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LESSONS LEARNED #32: “America is great but it can’t make bad ideology good.” -Old Pithy

Posted by PITHOCRATES - September 23rd, 2010

Hamilton vs. Jefferson

So what was the deal with these two Founding Fathers?  Why did they hate each other so?  They were exceptionally bright, among the best read of the founders.  They each had impeccable revolutionary credentials.  And, prior to 1787, they had similar visions for their new country.  So what happened?

Despite their similarities, they were two very different men.  Hamilton was a bastard child whose father left him at a young age.  His life was hard.  He had a job while still a child.  Anything he had he had to earn.  Jefferson, on the other hand, was born into the planter elite of Virginia.  His life was not quite so hard. 

A bit shy, Jefferson buried himself in books.  He loved to read.  And to think.  To ponder the great questions of life.  While Hamilton worked in and learned the import/export business in the Caribbean.  As Jefferson pondered about what might be, Hamilton mastered commerce.  Understood capitalism.  Pondered what was.  And could be.  If he ever got off of that godforsaken island.

Eventually, he did.  He came to the colonies and went to college.  And gave Jefferson a run for his money in the smarts department.  And in one area, he simply left Jefferson in the dust.  Hamilton could understand things if you put dollar signs in front of them.  Jefferson could not.  For all his genius, Jefferson couldn’t make a buck.  He was forever in debt.  Because he struggled in these areas, he distrusted banking and commerce.  And the big cities that they corrupt.  Hamilton, though, understood banking and commerce.  He understood capitalism.  And what it could do.

Thus the divide between these two men.  Hamilton, a champion of capitalism.  And Jefferson, a champion of the yeoman farmer (a farmer who owns and works his own land.).  Of course, Jefferson was anything but a yeoman farmer.  He had others (i.e., slaves) work his land.  Here he was like the contemporary liberal.  Do as I say.  Not as I do.  For wealth and luxury obtained from the labors of others is okay for me and my fellow planter elite.  But not for you.  Especially when the ‘black arts’ of commerce and banking are concerned.

London, Paris/ Versailles and Madrid

The old world capitals had many things in common.  They were the homes of powerful monarchies.  They were the financial capitals of their countries.  And they caused a lot of mischief in the world.  Jefferson saw the connection between money and power.  More money, more power.  More power, more mischief.  Another good reason to hate commerce and banking in Jefferson’s book.

Of course, Hamilton saw it differently.  He saw one empire in ascent.  And two in descent.  And it was no coincidence that the better practitioner of capitalism was also the empire in ascent.  Great Britain.  He may have fought against her in the Revolutionary War, but he still admired her.  Where Jefferson feared the combination of money and power, Hamilton saw the Royal Navy.  Great wooden walls (as John Adams called them) that had protected the empire since she became an empire.  Grew her empire.  Increased her wealth.  And her power.  In fact, losing her British colonies was the only real defeat this empire had suffered.

When the Founding Fathers looked west they saw great potential.  Jefferson saw farms.  Hamilton saw empire.  One greater than Great Britain.  For after all, the Americans did what no other European nation could.  They defeated her in war and took huge chunks of her empire.  (Of course, our Revolutionary War was but one theater in a world war Great Britain was fighting at that time.)  Hamilton saw great potential for his new nation.  If only business and government partnered to harness that great potential.

Money + Power = Corruption

When business partners with government we don’t get capitalism.  We get mercantilism.  Or crony capitalism.  But you have to understand things were different in Hamilton’s day.  A good politician then went to great lengths NOT to profit from his time in public service.  It was expected.  Selfless disinterest.  In fact, it was unseemly to even campaign for public office.  That was just something a gentleman of the Enlightenment wouldn’t do.  And if anything was important in those days, it was showing how much a gentleman of the Enlightenment you were.

That said, business partnering with government would NOT lead to corruption.  At least, in Hamilton’s eyes.  With the right men in power, only good would result.  Though Jefferson, too, was a gentleman of the Enlightenment, he had no such faith in government.  To him, it was simple arithmetic (as long as there were no dollar signs involved):

                Money + Power = Corruption

So the new American capital wouldn’t be in a big American city.  Not in New York City.  Not in Philadelphia.  It would be in a swamp.  On the Potomac.  In Virginia’s backyard.  So Jefferson and his planter elite brethren could make sure the new American government would speak with a southern accent.  So much for that enlightened disinterest. 

Both Right.  Both Wrong.

No man is perfect.  Not even me.  No, really.  It’s true.  I’m not.  And neither were Hamilton nor Jefferson.  Hamilton may have wanted to conquer the world.  And Jefferson may have been such a good liar that he even fooled himself.  But the Hamilton treasury department gave this nation international respectability and allowed her to service her debt.  Which allowed her to borrow.  Which allowed her to survive.  And Jefferson fully understood what Lord Acton would say a century later:  Power corrupts.  Absolute power corrupts absolutely.

However benign a government may be, however it may look out after the people’s interests, government is still a body of men.  Jefferson understood this.  The Founding Generation was special.  They knew it.  They knew they were making history.  But were they unique?  Would this moment of selfless disinterest in time prove to be fleeting?  (As it turned out, yes.)  And, if so, what would happen to later generations?  When men of lesser character assume offices of sweeping powers?  What then?  Well, they would abuse their power.  So what to do?

Simple.  You prevent such a scenario from happening.  By not giving government sweeping powers.  And by not letting them accumulate great wealth.  Because bad things happen when you do.

The French Revolution

France was the cradle of the Enlightenment.  In the 18th century, anyone who mattered spoke French.  France was the dominate European power.  And some in France lived very well.  Most did not.  The majority were still feudal peasants.  Or poor laborers, artisans and craftsmen.  And they were hungry.  Poor.  And without breeches (those fancy knee-length pants the rich people wore).

While the sans-culottes (those without breeches) went without, the king, nobles and clergy were living large.  All the wealth of the largest European country was concentrated in their few hands.  As was the power.  And, of course, you add money and power and what do you get?  That’s right.  Corruption.  Add to that some crop failures and you get a very unhappy population.  Who overthrow the monarchy.  Execute their king.  And his queen.  And quite a few others before they stopped the bloodletting. 

Note that France’s troubles were the result of the money combining with the power.  The French monarchy incurred a huge debt fighting their perpetual war (it seemed) with Great Britain.  At the end of the world war that included the American Revolution, both saw those great debts grow larger.  Great Britain, an advanced capitalist nation, was able to service her debt and get on with the business of empire.  France, still fundamentally feudal, could not.  This great nation that had sparked the modern age could not even feed her own people.  She had taken all her people could give.  And her people could give no more.

Beware the Do-Gooder

The downfall of most nations results from this combination of money and state power.  This is an ideology that history has proven a failure.  The more money the state accumulates, the more it can do.  And the less you can do.  You go with less.  And the state causes greater hardships for everyone.  It can go to war.  Which it can lose.  Or prolong.  Hitler started out strong but the German people paid a steep price in the long run.  The allied bombers destroyed their homes.  And killed their families and neighbors.  While the allied armies killed their husbands, fathers, brothers and sons.  And those Germans who unfortunately fell within Soviet controlled territory after the war faced possible retribution for the crimes their husbands, fathers, brothers and sons committed against the soviet people.  In that hell on earth know as the Eastern Front.

But war is not the only mischief a state can do.  They can build opulent palaces (like at Versailles).  Or they can create a welfare state.  Where they get as many people as possible dependent on the state.  And the more they do, the more wealth the state transfers from the private sector to the public sector.  The state does well.  Especially the inner-party members.  The few who control the wealth.  And what happens in the long run?  The state gets richer and the people get poorer.  Just like they did in pre-revolutionary France.  In pre-revolutionary Tsarist Russia.  And, ironically, the state that replaced Tsarist Russia; the Soviet Union.  Communist China.  Cuba.  North Korea.  Peron’s Argentina.  Idi Amin’s Uganda.  Saddam Hussein’s Iraq.  Etc.

Whenever the government has large amounts of money and power, they rarely do good things.  What typically happens is that the ruling elite live well while the masses suffer.  And they use fear, intimidation, torture and execution to maintain their power.  What a nation chooses depends on how much they care what the free world thinks of them.  The Communists cared little so they used more brutal force.  Social democracies do care.  So theirs is a much softer tyranny.  These people don’t use force.  They seduce with promises of free stuff and a better life.  Which they never deliver.  Well, not to the people.  They do deliver it to those who hold power.

You Get What You Pay For

It’s bad when we don’t learn from world history.  It’s especially sad when we don’t learn from our own history.  We know what works.  And what hasn’t.  Wilson’s progressivism didn’t work.  FDR’s New Deal didn’t work.  LBJ’s Great Society didn’t work.  These administrations just transferred more money from the private sector to the public sector.  Money plus power equals corruption.  And these administrations were rife with corruption.  When we suffered the stagflation of the 1970s, those in power were still living large. But we never learn, do we?

The Obama administration is transferring more money from the private sector to the public sector than any other previous administration.  Our national debt will exceed our gross national product (GDP).  For all intents and purposes, it will be permanent.  All subsequent generations will work more and more just to service this massive debt.  And pay for all that ‘free stuff’ we were promised.  Sure, we’ll have free health care.  It just won’t be any good.  Nothing free is.  The free toy in a box of cereal is never as good as the toy you pay for.  Because you get what you pay for.  And if the government is going to give everyone free health care, it will have to be ‘free toy inside a cereal box’ quality health care.  For the same reason they don’t put expensive toys in cereal boxes.  If you give something to everyone, you have to give everyone less.  It’s the only way you can afford to give something to everyone.  You have to give everyone crap.

These things have never worked.  Nor will they.  Ever.  Even if the United States does them.  Because bad ideology is just bad ideology.  No matter how great the nation is that tries it. 

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Who’s a Bigger Crook? Christine O’Donnell or Your Typical Senator?

Posted by PITHOCRATES - September 22nd, 2010

Christine O’Donnell, Republican candidate for the Joe Biden’s Senate seat in Delaware, is apparently a crook.  Or so says Melanie Sloan, executive director of the nonpartisan Citizens for Responsibility and Ethics in Washington (CREW).  According to Sloan she embezzled campaign funds and evaded taxes.  Like Timmy Giethner.  Charlie Rangel.  And [enter any Democrat or RINO here].  Oh my.

Sloan said, “…Republicans and Democrats don’t agree on much these days, but both sides should agree on one point: Thieves belong in jail, not the United States Senate.”  (See O’Donnell embezzlement accusation called ‘frivolous’ on the Washington Times website).   She’s a little late.  The Senate is a den of thieves.  If O’Donnell is a crook, she’ll fit right in.  If not, maybe she can make a difference.  Make the business of the Senate about the people and not the Senators’ pockets.

Yes, embezzlement is bad.  But the rape and pillage of a nation is a tad bit worse.  And by a ‘tad’ I mean whole frickin’ lot.

Perhaps I’m not being fair.  I mean, both congressional chambers are corrupt.  It was their legislation, after all, that caused the current recession/depression.  The subprime mortgage crisis.  Putting people into houses who had no chance in hell of paying off their mortgages.  The whole point of a subprime mortgage was to help unqualified people get qualified for a mortgage.  Why?  The government was reviewing their books.  And if they didn’t like what they saw, well, they made it known.  And, of course, any deficiency in minority approvals guaranteed a visit from Jesse Jackson or some other fair housing advocate.  The message was clear.  Approve.  Or else.  And they did. Then all those ARM interest rates reset.  And, well, you know the rest of the story.

It’s kind of funny.  Not in a ‘ha ha’ kind of way but more of a tragic, ironic way.  By trying to put more people into houses we may end up making more people homeless.  Which sometimes happens when a long-ass recession turns into depression.  Funny.  That wacky government.

I don’t know much about Christine O’Donnell.  But she has an ‘R’ next to her name.  And if we get enough ‘R’s in the Senate perhaps we’ll be able to return to the good old days.  When gridlock ruled.  Remember those days?  Good times.  One thing you can say about gridlock.  It’ll be a whole lot harder to create another subprime mortgage crisis if the government can’t conspire against the people.

It’s hard to take an attack on a Republican serious anymore.  With the biased media and their talking points, the Hollywood elite and the college professors corrupting our youth, it’s worse than the fable of the boy who cried wolf.  After awhile you just lose credibility.  When you know what they will say before they say it, what they say just doesn’t matter anymore.  We get it.  Republican bad.  Why?  Because they’re Republican.  ‘Nuff said.

I don’t know about you, but that’s just a weak argument.

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FUNDAMENTAL TRUTH #32: “America is great but it can’t make bad ideology good.” -Old Pithy

Posted by PITHOCRATES - September 21st, 2010

We’ve Always Done Things This Way

The Old World was set in her ways.  Change didn’t come easy.  When it came it often spanned centuries.  But not always.  As the Roman Empire incorporated new territories into the empire, she modernized those new territories.  Roads.  Fresh water.  Sanitation.  Rule of law.  Markets.  The things that made cites better.  Civilizations better.  But as a civilization grows, so does its government.  And as government grows, taxes inevitably become more onerous.

A sprawling empire required a sprawling bureaucracy to control it.  And a huge standing army to protect it from without.  And to police it from within.  When you expand and conquer new territory, the spoils of conquest can fund your empire.  When your borders are relatively static, though, you have to use alternative sources of funding.  Taxation.  As the tax burden grew, dissatisfaction grew.  Fewer citizens volunteered to serve in Rome’s legions.  So Rome relied more and more on hired armies.  This increased the cost of empire.  And it increased taxation.  The tax burden grew so great that people gave up their small farms and worked for the bigger farms.  Worked for the rich landowners.  Some tried to quit farming all together.  This caused problems in trying to feed Rome’s legions.  And her bureaucracy.  The food supply became so critical that the Romans wrote new laws forbidding people to leave their farms.  Farmers were bound to the land.  They could never leave.  If you were born on the land you would farm the land.  Forever.

During the decline of the Western Roman Empire you saw the rise of the economic system that would dominate the Middle Ages.  Feudalism.  As the Western Empire declined, the power began to shift to the rich landowners.  As did loyalties.  As the empire further disintegrated, the power of Rome could no longer protect you.  Or feed you.  And thus food and protection became the foundation of feudalism.  Land owners, the nobles (i.e., lords), would let you work their lands.  The bulk of the proceeds went to the landlord.  But you also had a portion of the manor to farm for yourself.  In exchange for the use of a lord’s land you provided military service to the lord.  When needed to protect the lord and his lands.  Property rights allowed the lord’s sons to inherit the estate upon his death.  So property ownership became hereditary.  As did the nobility.   And so it would be for centuries.

England Leads the Way

From the nobles arose one.  A dominant one.  A ruler of nobles.  A king.  A king consolidated the many nobles’ estates into a kingdom.  A country.  And the king became sovereign.  The supreme authority.  The nobles pledged their loyalty to the king.  Provided for the king.  And fought for him when necessary.  Thus the few, the many and the one.  The masses (the many) served the lords and worked on their estates.  The lords (the few) were the wealthy land owners who served the king.  The king (the one) ruled the kingdom.

Thus the European monarchy was born.  In France it was absolute.  In England, in 1215, the nobles met King John on the meadow at Runnymede.  And the king reluctantly set his seal to the Magna Carta.  In England, there would be limits to the sovereign’s power.  The king may be king, but the nobles held the wealth.  And with it a lot of power.  Sometimes they saw things differently.  And the little people, the masses, often saw things differently than did the king and lords.  These different interests were reconciled, in time, by king and Parliament, a two-house or bicameral legislature (comprised of the House of Commons and the House of Lords). 

England was the place to be.  Rule of law.  Bill of rights.  Commerce.  Banking.  Capitalism.  Liberty.  Food.  Security.  Your common everyday Englishman had a better quality of life than your common everyday [insert any other European national here].  As transoceanic trade took off, the great European powers collided with each other.  Fought for that lucrative trade.  In the Old World.  And in the New World.  These wars became very expensive.  And some lasted for years.  Like the Seven Years War.  Which the British won.  And took many French possessions throughout the world.  But at a huge cost.  She incurred a great debt.  Especially in securing one of her colonies.  British North America.

Tea Anyone?

So England taxed her British American subjects.  Only problem was, these English subjects had no representation in Parliament.  And this was very un-English.  Taxation without representation.  This caused tension.  Also, Great Britain’s mercantilist policies were also rubbing the colonists the wrong way.  America was growing.  And she wanted free trade.  But that was impossible when the home country maintained a favorable balance of trade at your expense.  And had the Royal Navy to enforce it.  As a colony, everything had to ship to/from England ports on English ships so England could accumulate bullion.  The British protected their industries.  Her colonies fed raw materials to these industries.  And that’s all they did.

Trouble brewed for a while.  When Great Britain legislated what type of tea they could drink (only British East Indian tea), the American colonists had had enough.   There was a tea party in Boston, a revolution and formal independence.  And then a new nation.  With a bicameral legislation.  An executive.  And a judiciary.  It wasn’t quite Parliament, but was very similar in function.  The president was the one.  The Senate was the few.  And the House of Representatives were the many.  But there were key differences.  There was no king.  No hereditary nobility.  And there would be no mercantilism.  Despite Alexander Hamilton’s best efforts.

Let’s Just Agree to Disagree

Getting the colonies to come together to declare their independence was not easy.  It helped that there was already a shooting war going on.  Lexington and Concord.  Bunker Hill.  The coastal towns the British burnt and left in ruins.  They were already fighting a rebellion.  The declaration was almost a moot point.  But it was important.  And, after some arm twisting, they voted for independence and posted their Declaration of Independence.  But that was then.  After the Revolutionary War, there was no such unifying force.  Everyone was back to looking out for number one.  Well, most. 

Locked in a Philadelphia hall during a sweltering summer thick with horseflies, a collection of America’s finest worked to create a new government.  George Washington, Ben Franklin, Alexander Hamilton, James Madison, to name just a few, could hardly agree on anything.  The Constitution they created was not great in their eyes.  But it was probably the best that they could do.  So acknowledged, they sent it to the states for ratification.  The odds were against them.  It would take some persuading.  And persuading they did.  Hamilton and Madison (and John Jay) wrote a series of essays appearing in newspapers to make the case for ratification.  They addressed and answered all arguments against ratification.  (You can read these today in the Federalist Papers.)  And this effort was successful.  The states ratified the constitution.  There was now a nation known as the United States of America.

Our first Secretary of the Treasury was Alexander Hamilton.  A capitalist genius.  And a great admirer of the British Empire.  Being a recent transplant to the American Colonies, he had no deep-seated resentment of the former mother country.  In fact, he wanted to emulate her.  She was the greatest empire in the world.  She was obviously doing something right.  But he pushed too far.  His mercantilist plans were a bit much for some.  Especially the ‘simple’ farmers of the South.  The planter elite.  Led by Thomas Jefferson (covertly) and James Madison (overtly), they fought Hamilton tooth and nail and did everything to destroy him.  (After seeing his plans Madison switched to the opposition.)    And ultimately, did.  When Aaron Burr shot him in a duel on the field of honor at Weehawken, New Jersey, across the Hudson from New York City.  All because Hamilton tried everything within his power to keep him from becoming president of the United States and governor of New York.  Because he was on unprincipled man.  Burr took offense to that.  And, well, the scoundrel challenged him to a duel and killed him.  But I digress.

The American Ideology

The American ideology is simple.  It includes things that have been proven to work.  And excludes things that have been proven not to.  A large, diverse people make up America.  So at the heart of our ideology is that we agree to disagree. 

We don’t have kings or nobility.  We don’t have an entitled class.  No hereditary rights.  Here, it doesn’t matter who your father was.  Or what group you belong to (religious, societal, etc.).  No one person is better than another. 

We have property rights and live under the rule of law.  We honor legal contracts.  We built our nation on laissez faire capitalism.  Free markets.  With a minimum of government interference.  We do what we want and respect that others do what they want.  And we are free to do this as long as we play by the rule of law.

It was a long road getting here.  We took the best history had to offer.  And rejected the worst that history included.  Nations who did likewise went on to greatness, too (like the United Kingdom and Northern Ireland, Canada, Australia, etc.).  Those who didn’t have been repositories of great suffering and human bondage (North Korea, Cuba, The People’s Republic of China, the Soviet Union, etc.).  Of the latter nations, please note that life is getting much better in China and the former Soviet Union with the introduction of capitalism and free markets.  And it’s not in North Korea and Cuba where these governments stubbornly cling to failed policies to keep their governments in power.  Whatever the cost is to their people.

It’s the Ideology, Stupid

Good ideology makes good nations.  Bad ideology makes bad nations.  A good nation can NOT take bad ideology and make it good.  A good nation that implements bad ideology will only make that good nation bad.  All people have the capacity for greatness.  And that greatness will shine through if the government doesn’t suppress it.   To see this all we have to do is look to history.  It’s all there.  The good.  The bad.  And the ugly.

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