LESSONS LEARNED #28: “Politicians love failure because no one ever asked government to fix something that was working.” -Old Pithy

Posted by PITHOCRATES - August 26th, 2010

THE TELEVISION SHOW Gomer Pyle, U.S.M.C. aired from 1964-1969.  It was a spinoff from the Andy Griffith Show.  Gomer, a naive country bumpkin who worked at Wally’s filling station, joined the Marines Corps.  And there was much mirth and merriment.  To the chagrin of Sergeant Carter, Pyle’s drill instructor (DI).  Think of Gunny Sergeant R. Lee Ermey’s Sergeant Hartman in the movie Full Metal Jacket only with no profanity or mature subject matter.  Sergeant Carter was a tough DI like Sergeant Hartman.  But more suitable for the family hour on prime time television.

Gunny sergeants are tough as nails.  And good leaders.  They take pride in this.  But sometimes a gunny starts to feel that he’s not himself anymore.  This was the subject of an episode.  And Gomer, seeing that Sergeant Carter was feeling down, wanted to help.  So he stuffed Sergeant Carter’s backpack with hay before a long march.  While the platoon was worn and tired, Sergeant Carter was not.  He was feeling good.  Like his old self.  Until he found out he was not carrying the same load his men were.  He asked Pyle, “why hay?”  He could understand rocks, but hay?  Because if he outlasted his men while carrying a heavier load, he would feel strong.  But knowing he had carried a lighter load only made him feel weak.

This is human nature.  People take pride in their achievements.  They don’t take pride in any achievement attained by an unfair advantage.  Self-esteem matters.  And you can’t feel good about yourself if you need help to do what others can do without help. 

AN OLD CHINESE proverb goes, “Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime.”  Let’s say I am a fisherman in a small village.  I catch fish to feed my family and sell/trade for other family needs.  There’s a man in my village who asks me for a fish each day so he can eat.  I’m a caring person.  So I give him a fish each day.  So a pattern develops.  Each day he shows up when I come in from my fishing.  He takes the fish and goes away.  It works out well for him.  He doesn’t have to work.  He can live off of my kind charity.  Then I move.  Without me being there to give him a fish each day, he no longer can eat.  And dies.  If I only had taught that man to fish. 

Kindness can lead to dependency.  And once dependent, you become lazy.  Why develop marketable skills to provide for yourself when someone else will provide for you?  The problem is, of course, what happens when that charity ends?  If you’re unable to provide for yourself and there is no longer someone providing for you, what do you do?  Steal?

Dependency and a lack of self-esteem are a dangerous combination.  And they feed off of each other.  This combination can lead to depression.  Behavioral problems.  Resentment.  Bitterness.  Envy.  Or a defeatist attitude.

These are often unintended consequences of government programs.  A failed program, then, has far reaching consequences beyond the initial economic costs of a program.

LIQUIDITY CRISES CAUSE a lot of economic damage.  If capital is not available for businesses to borrow, businesses can’t grow.  Or create jobs.  And we need jobs.  People have to work.  To support themselves.  And to pay taxes to fund the government.  So everyone is in favor of businesses growing to create jobs.  We all would like to see money being easy and cheap to borrow if it creates jobs.

But there is a downside to easy money.  Inflation.  Too much borrowing can create inflation.  By increasing the money supply (via fractional reserve banking).  More money means higher prices.  Because each additional dollar is worth a little less. This can lead to overvalued assets as prices are ‘bid’ up with less valuable dollars.  And higher prices can inflate business profits.  Looks good on paper.  But too much of this creates a bubble.  Because those high asset values and business profits are not real.  They’re inflated.  Like a bubble.  And just as fragile.  When bubbles burst, asset values and business profits drop.  To real values.  People are no longer ‘bidding’ up prices.  They stop buying until they think prices have sunk to their lowest.  We call this deflation.  A little bit of inflation or deflation is normal.  Too much can be painful economically.  Like in the Panic of 1907.

Without going into details, there was a speculative bubble that burst in 1907.  This led to a liquidity crisis as banks failed.  Defaults on loans left banks owing more money than they had (i.e., they became illiquid).  They tried to borrow money and recall loans to restore their liquidity.  Borrowers grew concerned that their bank may fail.  So they withdrew their money.  This compounded the banks problems.  This caused deflation.  Money was unavailable.  Causing bank runs.  And bank failures.  Business failures.  And unemployment grew. So government passed the Federal Reserve Act of 1913 to prevent a crisis like this from ever happening again.  The government gave the Federal Reserve System (the Fed) great powers to tweak the monetary system.  The smartest people at the time had figured out what had gone wrong in 1907.  And they created a system that made it impossible for it to happen again.

The worst liquidity crisis of all time happened from 1929-1933.  It’s part of what we call the Great Depression.  The 1920s had a booming economy.  Real income was rising.  Until the Fed took action.  Concerned that people were borrowing money for speculative purposes (in paper investments instead of labor, plant and material), they put on the brakes.  Made it harder and more expensive to borrow money.  Then a whole series of things happened along the way that turned a recession into a depression.  When people needed money, they made it harder to get it, causing a deflationary spiral.  The Great Depression was the result of bad decisions made by too few men with too much power.  It made a crisis far worse than the one in 1907.  And the Roosevelt administration made good use of this new crisis.  FDR exploded the size of government to respond to the unprecedented crisis they found themselves in.  The New Deal changed America from a nation of limited government to a country where Big Government reigns supreme.

ONE PROGRAM OF the New Deal was Social Security.  Unemployment in the 1930s ran at or above 14%.  This is for one whole decade.  Never before nor since has this happened.  Older workers generally earn more than younger ones.  Their experience commands a higher pay rate.  Which allows them to buy more things.  Resulting in more bills.  Therefore, the Great Depression hit older workers especially hard.  A decade of unemployment would have eaten through any life savings of even the most prudent savers.  And what does this get you?  A great crisis.

The government took a very atypical moment of history and changed the life of every American.  The government forced people to save for retirement.  In a very poor savings plan.  That paid poorly by comparison to private pensions or annuities.  And gave the government control over vast amounts of money.  It was a pervasive program.  They say FDR quipped, “Let them try to undo this.” 

With government taking care of you in retirement, more people stopped providing for themselves.  When they retired, they scrimped by on their ‘fixed’ incomes.  And because Social Security became law before widespread use of birth control and abortion, the actuaries of the day were very optimistic.  They used the birth rate then throughout their projections.  But with birth control and abortion came a huge baby bust.  The bottom fell out of the birth rate.  A baby bust generation followed a baby boom generation.  Actually, all succeeding generations were of the bust kind.  The trend is growing where fewer and fewer people pay for more and more people collecting benefits.  And these people were living longer.  To stay solvent, the system has to raise taxes on those working and reduce benefits on those who are not.  Or raise the retirement age.  All these factors have made it more difficult on our aged population.  Making them working longer than they planned.  Or by making that fixed income grow smaller.

FDR used a crisis to create Social Security.  Now our elderly people are dependent on that system.  It may suck when they compare it to private pensions or annuities, but it may be all they have.  If so, they’ll quake in their shoes anytime anyone mentions reforming Social Security.  Because of this it has become the 3rd rail of politics.  A politician does not touch it lest he or she wishes to die politically.  But it’s not all bad.  For the politician.  Because government forced the elderly to rely on them for their retirement, it has made the Social Security recipient dependent on government.  In particular, the party of government who favors Big Government.  The Democrats.  And with a declining birth rate and growing aged population, this has turned into a large and loyal voting bloc indeed.  Out of fear.

A PROGRAM THAT straddled the New Deal and LBJ’s Great Society was Aid to Families with Dependent Children (AFDC).  Its original New Deal purpose was to help widows take care of their children.  When program outlays peaked in the 1970s, the majority of recipients were unmarried women and divorced women.  Because this was a program based on need, the more need you had the more you got.  Hence more children meant more money.  It also reduced the importance of marriage as the government could replace the support typically provided by a husband/father.  Noted economist Dr. Thomas Sowell blames AFDC as greatly contributing to the breakdown of the black family (which has the highest incidence of single-parent households).

With the women’s liberation movement, women have come to depend less on men.  Some affluent women conceive and raise children without a husband.  Or they adopt.  And the affluent no doubt can provide all the material needs their children will ever need.  Without a husband.  Or a father for their children.  But is that enough?

The existence of ‘big brother’ programs would appear to prove otherwise.  Troubled children are often the products of broken families.  Mothers search for big brothers to mentor these fatherless sons.  To be role models.  To show an interest in these children’s lives.  To care.  When no such role models are available, some of these troubled children turn to other sources of acceptance and guidance.  Like gangs.

AFDC has compounded this problem by providing the environment that fosters fatherless children.  And another government program compounds that problem.  Public housing.

POOR HOUSING CONDITIONS hurt families.  They especially hurt broken families.  Without a working husband, these families are destined to live in the cheapest housing available.  These are often in the worst of neighborhoods.  This is an unfair advantage to the children raised in those families.  For it wasn’t their fault they were born into those conditions.  So, to solve that problem, government would build good public housing for these poorest of the poor to move into.  Problem solved.

Well, not exactly.  Public housing concentrates these broken families together.  Usually in large apartment buildings.  This, then, concentrates large numbers of troubled children together.  So, instead of having these children dispersed in a community, public housing gathers them together.  Where bad behavior reinforces bad behavior.  It becomes the rule, not the exception.  Making a mother’s job that much more difficult.  And because these children live together, they also go to school together.  And this extends the bad behavior problem to the school.  Is it any wonder that public housing (i.e., the projects) have the worst living conditions?  And some of the highest gang activity? 

Government didn’t plan it this way.  It’s just the unintended consequences of their actions.  And those consequences are devastating.  To the poor in general.  To the black family in particular.  AFDC and public housing enabled irresponsible/bad behavior.  That behavior destroyed families.  As well as a generation or two.  But it wasn’t all bad.  For the politicians.  It made a very large constituency dependent on government.

THERE ARE SO many more examples.  But the story is almost always the same.  Dependency and a lack of self-esteem will beat down a person’s will.  Like an addict, it will make the dependent accept poorer and poorer living standards in exchange for their fix of dependency.  Eventually, the dependency will reach the point where they will not know how to provide for themselves.  The dependency will become permanent.  As will the lack of self-esteem.  Conscious or not of their actions, Big Government benefits from the wretched state they give these constituencies.  With no choice but continued dependence, they vote for the party that promises to give the most.  Which is typically the Democrat Party.

But how can you fault these politicians?  They acted with the best of intentions.  And they can fix these new problems.  They’ll gather the brightest minds.  They’ll study these problems.  And they will produce the best programs to solve these problems.  All it will take is more government spending.  And how can you refuse?  When people are hungry.  Or homeless.  Or have children that they can’t care for.  How can anyone not want to help the children?  How can anyone not have compassion?

Well, compassion is one thing.  When the innocent suffer.  But when government manufactures that suffering, it’s a different story.  Planned or not the result is the same whenever government tries to fix things.  The cost is high.  The solution is typically worse than the original problem.  And the poorest of the poor are pawns.  To be used by Big Government in the name of compassion. 

Of course, if Big Government were successful in fixing these problems, they would fix themselves right out of existence.  So as long as they want to run Big Government programs, they’ll need a stock of wretched, suffering masses that need their help.  And, of course, lots of crises.

www.PITHOCRATES.com

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FUNDAMENTAL TRUTH #25: “War is costly. Peace, too.” -Old Pithy

Posted by PITHOCRATES - August 3rd, 2010

ONE OF THE lasting consequences of war is the feminization of men.  War makes widows.  And fatherless sons.  Their mothers raise them the best that they can.  But women tend to be kinder and gentler than men.  More nurturing.  Fathers are, after all, the disciplinarians.  “Just wait until your father gets home.”  Sons with fathers knew what that meant.  And it wasn’t kind, gentle nurturing.

The American Civil War killed some 600,000 men.  A generation of fathers was lost.  When their sons came of age, they were more sensitive to the suffering of others.  And they felt a mothering urge to do something about it.  In politics they became Progressives.  They grew government.  Because government knows best.  Well, mother knows best.  And a government that mothers would solve all our social ills.  And these men would mother.  Compassionately.  And they thought all that rugged individualism was overrated.

World War I killed some 9 million men in uniform and about another 7 million in civilians.  These fatherless sons would rise in power and help create the cradle-to-the-grave welfare state known as European Socialism. 

World War II killed some 400,000 American men.  And their sons would follow the European’s lead.  They would attend the universities where the progressives taught.  They came out with heads filled with caring and compassion for victims everywhere.  LBJ’s Great Society would grow out of this movement.  As well as a hatred for American rugged individualism.  And anti-war fervor.

AND THEN YOU had the filthy, maggot-infested hippies.  South Park is a crude comedy.  And Cartman has few redeeming qualities.  But he’s right about hippies.  They ruined this country.  Born in the baby boom following World War II, most had the benefit of a father.  However, by the 1960s, the universities they attended were a lost cause.  Their professors would attack whatever their parents taught them.  They would learn to hate.  In a kind, gentle, nurturing way.

They hated America.  How it became.  What it did.  What its values were.  Are.  Instead, they would embrace America’s enemies.  Have kind, gentle, nurturing compassion for them.  They were proud Marxists.  And Communists.  They relished their First Amendment right to attack the American Republic that gave them that right.  While they supported oppressive regimes where you had no such right.  And spoke ill of the government at your own peril.  Oh, they damned America and its allies for all of their ‘crimes against humanity’.  But they said nothing about the reigning co-champions of human rights abuses.  The Soviet Union.  And Communist China.  No, they wanted to extend the proletarian revolution to America.  So more could suffer the worst of human rights abuses.  Why would anyone adopt such a conflicting course of political action?  Because they’re idiots.

Power to the People.  Give Peace a Chance.  All You Need is Love.  They knew all the answers.  John Lennon et al.  War was business.  Nothing more.  Or the folly of kings.  As the Monkees sang about in this anti-war song:

They met on the battlefield banner in hand.
They looked out across the vacant land.
And they counted the missing, one upon one,
None upon none.
The war it was over before it begun.

Two little kings playing a game.
They gave a war and nobody came.

(from Zor and Zam by Bill Chadwick and John Chadwick
Album: The Birds, the Bees and the Monkees)

This is what the anti-war people believe.  Either war is business.  Or the folly of kings.  That there is no ‘bad guy’ in war.  Just pawns.  And units of production.  Because human nature is peaceful.

WHO DID THE high school bullies pick on?  Who did they pansts?  Steal their lunch money from?  Give a wedgie to?  A swirlie?   Beat up.  Belittle with name calling?  Not tough guys.  Weak guys.  This is human nature.  The strong feed on the weak.

WHEN GUN OWNERS discovered a ‘loophole’ in Floridian law about carrying concealed weapons, they started carrying concealed weapons.  What happened?  Crime on Floridians dropped.  Crimes on tourists rose.  Why?  Because the bad guys knew that tourists didn’t carry concealed weapons.  This is human nature.  The strong feed on the weak.

BACK WHEN DETROIT was the murder capital of the U.S., a friend traveled there and bought a t-shirt.  It read, “Detroit:  Where the Weak are Killed and Eaten.”  Now I don’t recall reports of cannibalism in the Motor City, but the message was clear. Figuratively, of course.  Human nature was becoming animal nature.  The strong feed on the weak.

MANY ANIMAL SPECIES have large litters.  Or numerous litters.  Like bunnies.  Cute little, fluffy, harmless bunnies.  But bunnies are tasty.  They’re low on the food chain.  They are food to almost every carnivore in the wild.  Including man.   Few bunnies live long before becoming a meal.  This is animal nature.  The strong feed on the weak.

“IN EVERY GENERATION there is a chosen one.  She alone will stand against the vampires, the demons and the forces of darkness.  She is the slayer.”  (From the television show Buffy the Vampire Slayer.)  In the world of vampires, demons and the forces of darkness, it’s kill or be eaten.  It’s even the nature of the supernatural.  The strong feed on the weak.

BIG GOVERNMENT AND UNIONS grew big and powerful in the 20th century to protect the little guy.  They said that Big Business and the free market favored the rich and powerful.  At the expense of the poor and weak.  They said it was human nature.  For the strong to feed on the weak.

DURING THE TIME of America’s involvement in Vietnam, the Communist Party of Kampuchea went on a killing spree.  While the hippies protested Vietnam, they praised the social compassion of anti-capitalistic communism.  Power to the People.  Baby.  Meanwhile, the Khmer Rouge killed their own people wholesale (by a percentage of population killed, the greatest in history).  Included in the genocide lists were students or people with glasses.   They killed any ‘educated’ person.  And those who even looked educated.  So, yes, the hippies supported a movement that would have killed their own worthless selves if given the chance.   Human nature at its worse.  The strong feed on the weak.  And the stupidity of hippies.

THERE ARE BAD guys in the world.  And there’s no denying it.  Human nature is not peaceful.  It is anything but.  Darwinian Theory never played out so fiercely.  The strong feed on the weak.  They seek them out.  Like a predator in the wild, they seek out the weak and maimed and move in for the kill.  You can’t reason with them.  Just like you can’t reason with a bully.  Those who think that we can need to man-up and face facts.  And if you can’t, don’t worry.  We have others that are more than willing to man-up and fight our battles for us.  To keep America strong.  If we let them.

Predators don’t respect weakness.  They respect power.  And power is the only thing that will deter them.  The bad guys have attacked American soil few times.  Because America is powerful.  You mess with the big dog and it’s going to bite you.  And maul you.  So the bad guys don’t mess with the big dog often.  Because they pay dearly when they do.

America has known peace and prosperity like few other people can possibly imagine.  And the reason for that is that we have the biggest and baddest military in the world.  It kept the Soviets at bay in Europe.  It thumped Iraqi’s vaunted million-man army in less than 100 hours of combat.  It then thumped them again with a smaller force.  (That display of power cowed Libya from sponsoring terrorism for fear of that awesome power thumping them next.  And it got the Saudis to do the politically unthinkable – take on Al Qaeda in their kingdom.)  It ran bin Laden deep underground leaving him more impotent than threatening.  It held the line in Korea.  And it won every battle it fought in Vietnam.  (Of course, everything went to hell in a handbasket when we left.  But that’s another story.)

But that kind of power doesn’t come cheap.  And you gotta have the will to use it.  But when you do, you get peace.  An expensive peace, yes.  But peace is always cheaper than war.  Especially when that peace deters war.

www.PITHOCRATES.com

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