LESSONS LEARNED #51: “The longer you wait to balance your books the harder it will be to balance them.” -Old Pithy

Posted by PITHOCRATES - February 3rd, 2011

Almost half of a Plantation’s Value was its Slaves

Slave labor wasn’t cheap.  First there was the capital expenditure to purchase the slaves.  Then you had to feed them, clothe them, house them, etc.  It took money.  But that money made money.  Mostly on the big plantations.  Where the division of labor was minimal.  And large labor gangs could work a single crop profitably.

The more slaves on a plantation the more land they could work.  So the more slaves on a plantation the more valuable the plantation was.  Like a dairy farm with many dairy cows is worth more than one with fewer cows.  A productive dairy farm makes money.  And it can borrow money to grow.  Ditto for a cotton plantation. 

Now suppose we free dairy cows everywhere.  They’re free to walk off of their farms and pursue their own lives.  What will become of the dairy farm?  It won’t make money.  It won’t be able to pay back its loans.  The farm will lose value.  Because no one will buy it without the cows to make milk.  Dairy farmers everywhere will go broke.  And they will lose their farms.   

If not for the Civil War, Abolition would have been the Greatest of all Bailouts

When we discuss slavery, we focus more on issues of morality.  But the reason we had it for so long is partly due to the economics.  There was a large price tag attached to abolition.  And the question was who was going to pay?  Slavery, though immoral, was legal.  The plantations grew.  They purchased more slaves.  Worked more land.  Incurred debts to grow further.  All based on the collateral of their plantation.  Much of which was their slaveholdings.

Based on the 1790 census, there were just fewer than 700,000 slaves in America.  At the time, the nation’s finances were in a mess.  We were begging Europe to loan us money.  There was no money available to reimburse the slave owners.  And the North didn’t want to pay for this ‘southern’ problem.  There was no easy way to free the slaves without a huge financial hit.  For someone.  So we tabled the issue.  For another generation to consider.  And resolve.

But we didn’t.  By 1860, the slave population topped 3.8 million.  That’s over 5 times the number from the 1790 census.  The cost to reimburse these slave holders had grown to over $3 billion dollars.  That was almost 70% of the 1860 GDP.  In comparison, the total budget of George W. Bush reached as high as 69% of GDP.  Clearly, the cost of freeing the slaves was huge.  It dwarfed all other federal spending.  And this is one of the reasons that it took a war to finally resolve.  And it was our nation’s bloodiest conflict.  More died in the American Civil War than did in WWI and WWII combined.  And the war devastated the southern economy.  Besides the direct war damage, the South was impoverished.  And easy pickings for northern carpetbaggers.

The issue of slavery was less costly to resolve sooner than later.  But the price was always so great that the institution continued on because no one was willing to bear the costs at any time.  This only guaranteed that the final reckoning would be greater.  Which it was.  The final cost was so great it nearly destroyed the nation.  And bitter feelings linger to this day.

Never Let a Good Crisis Go to Waste

Woodrow Wilson and his fellow Progressives were going to change the world.  But that didn’t work so well.  In fact, a lot of their meddling just crashed the economy.  Secretary of the Treasury Andrew Mellon helped President Warren Harding fix the economy.  And we got the Roaring Twenties.

But the Progressives kept tinkering.  And Republican Herbert Hoover was even a bit of a Progressive himself.  Anyway, some government mismanagement (and inept Federal Reserve actions) gave us the Great Depression.  Our nation’s greatest crisis.   Which Franklin Delano Roosevelt (FDR) would exploit to transform the nation with his New Deal.

FDR’s economic policies failed.  Only capitalism re-unfettered for the war effort brought the nation back.  Even though he failed he is still remembered fondly by most Americans.  He stood fast with our allies and defeated Nazi Germany.  And he gave us Social Security.  Which, financially speaking, will cost the nation more than defeating the Nazis did.

The Great Ponzi Scheme Social Security

Social Security was originally intended to help poor widows who had struggled through the Great Depression.  It has subsequently grown to cover retirement and disabilities.  Not a big deal then.  The actuaries crunched their numbers.  They took into account immigration, birthrates, life spans, death rates and other important stuff.  Like actuaries are wont to do.  And they figured it would work.  Because we had a growing population.  With a lot more younger people entering the workforce than there were old people retiring and collecting benefits.

So, like a Ponzi scheme, Social Security was as sound as a pound.  As long as their assumptions held.  But they didn’t.  Immigration slowed.  Our life spans increased.  And worse, we just weren’t having as many babies as we once did.  Now we had more people retiring and collecting benefits.  And fewer entering the workforce to pay for these retirees.  The pyramid inverted itself.  The base was smaller than the tip.  And that just ain’t good for a Ponzi scheme.

Everyone predicts Social Security will go bankrupt.  They’ve been trying to fix it through the years.  To extend the solvency.  By reducing benefits.  Raising taxes.  And raising the retirement age (to decrease the years retirees collect benefits).  These ‘fixes’ have pushed insolvency out a few more years.  But it hasn’t addresses the elephant in the room.  Old people.  They’re living longer than the actuaries ever imagined.  Worse, because they’re living so long, they’re getting all kinds of medical problems that are costing Medicare and Medicaid a lot of money.  And, you guessed it, they’re going bankrupt, too.

Why Fix something Today that we can Leave for Future Generations?

Because there are so many seniors in these programs no politician wants to touch them.  They’re the ‘third rails’ of politics.  Seniors vote.  And if you cut their benefits, they’re probably not going to vote for you.  Every politician knows this well.  So, like slavery, they table the issue for a later generation to address.  But every day that passes, more seniors join the ranks of the retired and begin collecting benefits.  While fewer people enter the workforce to pay for their retirement.  Which guarantees that the cost to fix these problems will grow ever larger.

The day of reckoning will arrive.  It always does.  For the issue of slavery it was civil war.  Over in Europe as they struggle to control their out of control spending they’re having riots.  Which sometimes happens when you take away stuff from large numbers of people.  Let’s hope it doesn’t come to that here.  But one thing that we can be pretty certain about.  Fixing this problem is going to hurt someone in the wallet.  And the longer we wait, the greater that someone will hurt.

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The Rise and Fall of Liberalism – A Study in Deviousness

Posted by PITHOCRATES - December 5th, 2010

The Young and Ignorant are a Key Liberal Demographic

America is a center-right country.  In fact, the liberal left is a minority of the population.  They sound bigger than they are because their minority are in very strategic parts of the population. 

Liberals include college professors (who hide from reality on college campuses where they teach the young and ignorant).  College students (the young and ignorant).  The mainstream media (who spread the liberal propaganda, giving it legitimacy).  Celebrities (who laugh at and belittle conservatives).  The poor and government-dependent (who live in fear of losing their Big Government benefits).  The blue-blood rich (who feel guilty for inheriting their money).  Unions (who seek government protection to get better wage and benefit packages than the majority of American workers).  Government workers (high-pay and benefit-heavy work for the unemployable). 

Taken together you’re looking at about 20% of the population.  But thanks to college professors, the media and celebrities, they seem like they’re everywhere.  Especially to the young and ignorant.  Who typically vote Democrat until they get a real job.

From FDR to JFK to LBJ

The key to liberal success has been the ability to deceive.  They have to lie about who they are.  Because their numbers have been dwindling since the New Deal (see Liberalism: An Autopsy by R. Emmett Tyrrell Jr. posted 12/4/2010 on The Wall Street Journal).

In the tumultuous history of postwar American liberalism, there has been a slow but steady decline of which liberals have been steadfastly oblivious. The heirs of the New Deal are down to around 20% of the electorate, according to recent Gallup polls. Conservatives account for 42% of the vote, and in the recent election the independents, the second most numerous group at 29% of the electorate, broke the conservatives’ way. They were alarmed by the deficit. They will be alarmed for a long time.

The key to winning elections, then, is lying to independents.  For if the independents didn’t vote, Conservatives would never lose an election.  And if there is one thing liberals are good at, it’s lying.  Which is how they win elections.

Liberalism’s decline might appear, at first glance, to have begun with the 1961 inauguration of President John F. Kennedy—when historians noted the first glimmerings of what was to become liberalism’s distinctive trait, overreach. Kennedy’s soaring oratory was infectious and admirable and even impressed a later generation of conservatives. But it was a bit dishonest. There never was a missile gap with the Soviet Union, as he claimed, or any other cause for histrionics. On the domestic side, the oratory set in motion President Lyndon Johnson’s catastrophic War on Poverty.

The Big Government of FDR had failed.  The necessity of war stopped most of the New Deal nonsense.  Big Government released their oppressive hold on business to let them do what they do best.  Pure, unfettered capitalism.  And the Arsenal of Democracy won World War II.

After the Great Depression, World War II, and a couple of standoffs in the new Cold War, Ike wanted to let America be normal again.  To enjoy life a little.  Instead of facing Armageddon time and time again.  Ike had no illusions of grandeur.  Nothing to prove.  No ego to stroke.  America paid a hefty price to win World War II.  It was time to enjoy a peace dividend.

JFK’s stirring language represented a break with the Burkean understanding of President Dwight Eisenhower. Ike, whether he articulated it or not, wanted to put the Great Depression and the dangerous confrontations of the early Cold War period behind us. He wanted to return to normalcy. Yet Kennedy’s inaugural put America on a different path, one that led to the Cuban missile crisis and ultimately to Vietnam. It fixed America’s stance in the world, and with that stance we were on the road to Iraq and Afghanistan. Domestically it set us on the path to a behemoth big government.

The Ike years were good years.  Prosperous years.  Happy years.  Everything a liberal hates.  Because there’s nothing for government to fix.  So to trick people into thinking things are bad and need to improve, you need to do 2 things.  You need to lie.  And you need good oratory.  And JFK did both well.

Never let a Good Crisis go to Waste

The country changed in the 1960s.  And liberals reached far.  Too far.  Conservatives pushed back.

LBJ’s Great Society caused even some liberals to warn against the “unintended consequences” of government programs. These were to be the first new recruits to modern conservatism. Jeane Kirkpatrick, Irving Kristol and, for a time, Daniel Patrick Moynihan, were in Kristol’s words liberals “who were mugged by reality.” The radicals were seeking refuge from reality in a self-regarding fantasy. Only a crisis in the leadership of President Richard Nixon, Watergate, allowed them to hide from the American electorate their fantastic delusions.

Few shared the liberals’ vision for America.  Even in the 1960s.  Other than the hippies on college campuses, the ‘silent majority’ was still conservative.  But liberals are devious.  And they never let a good crisis go to waste.  They had two big ones during the Nixon administration.  Vietnam.  And Watergate.

Liberals and Ronald Reagan both Campaigned as Ronald Reagan to win Elections

The problem with liberalism?  It’s sort of like that question ‘why climb Mt. Everest?’  Because it’s there.  Liberals want to amass power and control things.  To tax and spend.  And when you get right down to it, it’s not a popular political platform.  We want to tax and spend because we want to tax and spend.  There are no lofty philosophical ideals.  No charismatic liberal leaders advancing the cause of tax and spend.  Instead, liberalism is a vacuous abyss hidden by lies and doublespeak.

The conservatives, on the other hand, have a philosophical basis.  They are proud to quote previous conservatives.  And try to continue their work.  The best liberals can do are to point to Karl Marx’s socialism (i.e., Marxism) or the Soviet Union’s communism.  And being that this ideology (Marxism/communism) has killed more people than any other ideology in history, they offer little political capital for someone wanting to expand government power.

Conservatives have had Edmund Burke and the Founding Fathers as their cynosures. Sometimes they have provided discipline; sometimes conservatives have followed their own star. The problem for liberals is they have been denied a cynosure. Some had looked to the British Fabian Socialists and some to Karl Marx, but since the late 1940s liberals became coy about their intellectual mentors.

And because liberals have no political philosophy people want, they lie about who they are.  They run as conservatives during elections.  Bill Clinton.  Barack Obama.  They campaigned on a center-right platform.  Sometimes even quoting Ronald Reagan.  But once they won the election, they swung hard to the left.  They governed as liberals.  The electorate felt betrayed.  And at the first opportunity (i.e., the first midterm election in their administrations) their parties lost power in Congress.  Rejecting, once again, their Big Government tax and spend policies.

In 1992, after 12 years of conservatives in the White House, Bill Clinton beat George Herbert Walker Bush. Yet he too ran as a moderate. Once in office he tried to push a big government agenda and was trounced in the midterm election.

The rest of Clinton’s presidency was defined by his pronouncement that “The era of big government is over.” The Reagan revolution was secured. In 2000, Clinton’s vice president lost to the governor of Texas despite prosperity and peace. George W. Bush won the midterms in 2002. Then came the Republicans’ wilderness years in 2006 and 2008—but not conservatism’s. Conservatives remained more popular than liberals by about a 2-1 margin.

A Crisis and a Moderate Republican Candidate help Liberals win Elections

George W. Bush served two terms.  His popularity soared after 9/11.  So the liberals went to work.  All through his second term, they hammered away at the economy.  They said it was worse since the Great Depression.  (Of course, unemployment now under Obama is about twice the rate it was under Bush.  But things are better now.  Remember that lying thing about liberalism?)

And then they had a crisis.  A great big, beautiful crisis.  The Left was just ecstatic.  Their policy of putting people into houses they couldn’t afford triggered the subprime mortgage crisis.  When a Republican was in office.  It just didn’t get better than this.

The media went into overdrive by endorsing the moderate McCain for the Republican candidate.  It leveled the playing field.  Instead of choosing between conservatism and liberalism, the choice was between two moderates.  And the Left was able to hide Obama’s liberal past and radical associations to fool the moderate and Independent voters.  Obama won.  He swung hard to the left.  And loss the midterm election.  Because America is a center-right country.

Conservatism has steadily spread through the country since its larval days in the 1950s, and the reason is that the vast majority of Americans favor free enterprise and personal liberty. Note the tea party movement. The Republicans just took the House of Representatives by over 60 seats and gained six seats in the Senate. The social democrat in the White House has been routed.

Over the past two years the Democrats showed their true colors. Faced with an entitlement crisis, they rang up trillion dollar deficits. We now face an entitlement crisis and a budget crisis—and liberals have no answer for it beyond tax and spend. They still have support in the media, but even here they are faced with opposition from Fox News, talk radio and the Internet.

America is a Center-Right Country

The only way a liberal wins an election in a center-right country is by deception.  That’s why they pray on the young and ignorant.  It starts in the public school system.  And continues in our colleges.  The young are seduced.  By our educational system.  The mainstream media.  And the celebrity left.

It’s a tenuous coalition.  At best 20% of the population.  But that 20% is sometimes enough to fool the moderates and the independents who haven’t been lied to yet.  And this is nothing against the moderates and independents.  The Left are just good liars.

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

Posted by PITHOCRATES - August 24th, 2010

GOVERNMENT FIXES PROBLEMS.  Or so they say.  And the people think.  When something isn’t right in the country, the people demand that government do something about it.  And politicians are more than happy to oblige.  It strokes their egos.  Increases their budgets.  Their staffs.  And they get to do what they like best.  Tell others what to do.  Well, that, and spend money.

Politicians are happiest when government grows.  Because when it does, there’s more stuff to do.  More people to manage.  Bigger offices to move into.  More people to hire.  And the more they hire, the more people are indebted to them.  Who love them.  Respect them.  Are in awe of them.  Which inflates their egos even more.  As if that was even possible.  And, of course, there’s more money to spend. 

As government grows, so does their job security.  I mean, there may come the day that the good people may not reelect them.  As devastating as that may be, they can be comforted in the fact that they will leave Washington far richer than they were upon entering Washington.  And there’ll always be a place for them in an ever expanding government.  A cabinet position.  An agency position.  Or, perhaps, they’ll be named a czar.  Of something.  In charge of a policy issue.  Away from the oversight powers of Congress.  Anything is possible.  As long as government grows.  And there is more money to spend.

And just why is that?  Why does government continue to grow?  Simple.  They don’t fix problems.  They’re always ‘fixing’ problems.  But they’re never fixed.  They’re always a work in progress.  Because a fixed problem doesn’t require their services any longer.

DON’T THINK SO?  Suppose the government gives you a federal job.  An important one.  You’re in charge of the Office of Getting People to Happily Accept the Banning of Smoking in Public Places.  They give you a big office.  A staff.  A budget.  And a title.  You feel pretty good.  Important.  You diligently go about your work.  You take polls.  You analyze data.  You place public service announcements.  You intensify your polling before and after local laws are implemented banning smoking in public places. 

You analyze your data.  You correlate satisfaction with dissatisfaction.  Pacification with irritability.  Your numbers look good.  As more and more localities ban smoking from most public spaces the more your numbers show that the satisfaction/dissatisfaction ratio is trending favorably.  The trending is flatter with pacification/irritability but the trending is still favorable.  You conclude that these new laws come in, on average, at 9.875.  And that’s very good on the scale you created to measure overall effectiveness and acceptance of new laws to influence social behavior.   You happily report your findings to your superior.

“What are you,” your superior asks, “stupid?  Trying to put yourself out of a job?  Are you trying to cut my budget?  Because that’s exactly what’s going to happen if you turn in a report like this.  Now here’s what you’re going to do.  You’re going to report that your findings indicate some improvements in some select demographics.  But overall there is still much work to do.  Then write up a proposal for additional work required and throw in a budget that increases your current budget by 12%.  For starters.  Then I’ll critique your findings and find your funding request insufficient because of a mistake you made in your analysis.  Have it on my desk by the end of the week.”

Sound ridiculous?  That’s probably because it is.  And probably all too true.  I mean, how many federal programs do politicians shut down because they were successful in achieving their objective?  I think few.  If any.  Because no one wants to put themselves out of a job.  Especially a federal job.  Because there’s no job like a federal job.  At least, not in the private sector.

IN THE PRIVATE sector, your work has to have value.  When people are voluntarily paying for goods or services, you can’t have fat payrolls and fat budgets to produce goods and services no one wants.  You can only do that when government pays.  And by government I mean you and me.  With our taxes.  Which we have little choice but to pay.  For we are forced to under penalty of law.  Which can be pretty persuasive in making you pay for stuff you don’t want.  For we wouldn’t normally give away our hard-earned pay for the ridiculous wastes of resources known as government work.  To make the lives of federal workers better than ours.  And speaking of federal workers, what’s that joke?  Question:  What is federal work?  Answer:  Work for the unemployable.  There’s a lot of truth in that.  For a lot of these people couldn’t make it in the private sector.  And if they had to, they would only do so with the utmost bitter resentment.  They’d resent the longer hours.  The huge cut in pay.  The huge cut in benefits.  And the accountability.

You see, in the private sector, failure has consequences.  People get fired.  If a business is losing money because of silly projects they’re pursuing, the board of directors will fire the corporate officers.  If it’s a small business, the owner may lose his or her life savings.  And their house (which is often mortgaged up to the hilt to support their business).  There will be change after failure.  And it will be painful to many.  Unfeeling.  Cold.  But necessary.  But it’s different in government. 

When politicians fail, they reward themselves.  When their policies fail, the politicians simply say they need more time to make those policies work.  And more money.  That’s always the answer.  And they get away with it.  More money.  Keep throwing money at the problem.  No matter what a train wreck their programs turn out to be.  Or what the unintended consequences are.

POLITICIANS LIKE TO tinker.  Often in things they shouldn’t.  Because when they do, bad things often happen.  Those unintended consequences.  For when it comes down to it, they’re not very smart.  They could have graduated from their Ivy League schools at the top of their class, but they often know squat about the things they’re meddling in.  Most of them are lawyers.  And what does a lawyer know about economics?  Foreign policy?  National security?  Bupkis.  But it never stops them. 

And it doesn’t even matter.  Because their motives were honorable.  They acted with the best of intentions.  At least, that’s what they say.  As do their supporters.  And when everything goes to hell in a handbasket, they don’t mind.  Just more problems for government to fix.  More programs.  More staff.  And more money to spend.

Of course, we ultimately pay the price for their actions.  Whether it’s recession, depression or a more dangerous world to live in.  Which is often the case.  More times than not.

EVER WONDER WHY everything is a crisis?  Because a crisis needs urgent action.  By politicians in Washington.  And that urgent action is typically vast new government programs with an exploding federal bureaucracy.  Along with explosive federal spending.  And because it’s a crisis, there’s no time to lose.  If we don’t take immediate action the consequences could be dire.  There’s no time for debate.  For opposition.  To read a bill.  No.  We have to act and we have to act NOW.  Before this crisis gets any worse.

And when things do get worse after we take all that urgent action, you know what they’ll say?  That they were wrong?  Yeah, right.  In some fantasy world maybe.  No.  Instead, they’ll say just imagine how bad things would have been if they didn’t act like they did.  That we should be thankful things are only as bad as they are, for they could have been a whole lot worse if government didn’t act.  Why, they’ll be patting themselves on the back.  While you suffer more.

Hard to fight that logic.  I mean, they can say anything.  If their action takes unemployment to record levels, they can say unemployment would have been twice as high if they didn’t do what they did.  Twice as high would be worse.  But how do they know it would have been twice as high?  How can they prove it?  Well, they don’t have to.  Because you can’t disprove it.  And those who gamble know that a tie goes to the house.  So they’re right.  Because you can’t prove otherwise.  So they act accordingly.  And their supporters go along.  And the answer to the new problems that are worse than the original problems?  You guessed it.  More of the same.  More government programs.  More government spending.  At least, that’s what the historical record shows.

POLITICIANS LOVE FAILURE.  They thrive on it.  It gives them life.  Success, on the other hand, destroys them.  Removes their raison d’être.  Their reason for being.  A prospering nation, after all, doesn’t need government to fix anything.  And that’s no good.  Especially if that’s the business you’re in.  Fixing things.  Fixers need to fix.  But it needs to remain a work in progress.  So there’s still fixing to do.  Always.  And forever.   

And they’ll never let a good crisis go to waste.

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