FT217: “If you want to know what it was like living under an absolute monarchy just think of the IRS.” —Old Pithy

Posted by PITHOCRATES - April 11th, 2014

Fundamental Truth

Thomas Jefferson wanted to keep the New Federal Government and Money Apart

Thomas Jefferson did not trust government.  And he didn’t trust moneyed men.  Because when the two come together they cause nothing but trouble.  That’s why he hated and distrusted Alexander Hamilton.  Hamilton wanted a strong central government.  A central bank.  And an economic system favoring merchants and bankers.  With big city moneyed men financing the government in return for special favors.

This is why the nation’s capital isn’t in New York City.  It once was.  But one of the first deals the Hamilton and Jefferson camps made was the relocation of the nation’s capital to a mosquito-infested swamp on the Potomac River.  A long, long way from the moneyed men in New York City.  To try to keep the new federal government and money apart.  To restrict the influence of the moneyed men on the government.  And to prevent the government from having easy access to big money.

Why did Jefferson want to do this?  Well, they fought for their independence from Great Britain.  Which was a constitutional monarchy.  Where some in Parliament were no friends of British America.  And got the king to agree with them rather than the pro-British America faction in Parliament.  Ironically, the Americans got help in their War of Independence from France.  Which had an absolute monarchy.  Whose king ruled with no check on his power.  Both governments were in the big cities.  London.  And Paris.  Where the moneyed men were.  In the big cities.  Allowing these monarchies to do a whole lot of mischief all around the world.  And a fair amount of mischief inside their own countries.  Because the money and the government were in the same city.

Government + Money = Corruption

Great Britain and France were forever at war with each other.  And with other countries.  Requiring a lot of money.  Which they got from the moneyed men.  In return for special privileges that allowed them to get ever richer.  Of course the mischief grew greater as they fought a world war or two.  Requiring ever more money.  Which they got from, of course, taxing the rest of the people.  Even those who could little afford it.  And once this starts, once the government starts accumulating debt, that taxation will only get greater.

This is what Jefferson was worried about.  And why he so distrusted Hamilton.  The Founding Fathers were all gentlemen of the Enlightenment.  Disinterested public servants.  Honorable men who would never take advantage of their position in government for personal gain.  Because for these men honor was everything.  Some even fought duels to protect their honor.  As Hamilton did.  And died.  Washington, Adams, Hamilton, Jefferson, Madison, Jay and Franklin were men of exceptional integrity.  Men who could be trusted.  But here is where Hamilton and Jefferson differed.  Hamilton believed only men like them would ever enter government.  While Jefferson believed that government service would one day attract mostly scoundrels and knaves.

Of course, Jefferson was right.  For as the nation grew so did the size of government.  And the need for great big piles of money.  Which the moneyed men provided.  In exchange for special privileges.  Patronage.  Lucrative government contracts.  Etc.  Big piles of money flowed into Washington.  And favors flowed out from Washington.  With many a politician getting rich in the process of getting rich moneyed men richer.  Politicians who used their position in government for personal gain.  Corrupted politicians.  As government + money = corruption.  Which is why politicians always leave office richer than when they entered office.

Power + Corruption = Tyranny

This is how it started.  As the size of government grew corruption grew.  Just as Jefferson feared.  All that money flowing into Washington corrupted ever more politicians.  Who were not gentlemen of the Enlightenment.  But the scoundrels and knaves Jefferson knew would come.  Who used their position in government for personal gain.  Whose corruption grew so great it exploded federal spending.  So great that taxes from the moneyed men AND the middle class were unable to fund it.  So the taxation grew more aggressive.

The government created by the Founding Fathers had no income taxes.  They funded the few things the new national government did with tariffs for the most part.  People lived from day to day without any fear of the taxman.  The United States even did away with debtors’ prison.  Prison where people were sent who could not pay their debts.  A relic of the 19th century.  Sort of.  For there is one debt people can still go to prison for not paying.  Past-due taxes.  For the IRS can take everything you have and imprison you if you don’t pay your taxes.  And those taxes have grown great as of late.  As the tax code has grown convoluted.  Requiring businesses to hire armies of accountants and lawyers to comply with.  So the government can help the moneyed men who help the government.  In return for special privileges, of course.  Leaving the masses dreading April 15.  As they dread opening any letter from the IRS.

If you want to know what it was like living under an absolute monarchy just think of the IRS.  People fear the IRS.  Just as people feared the arbitrary power of an absolute monarchy.  A king could take your property and lock you away.  Just like the IRS.  And if you spoke out against the monarchy the king could make your life really unpleasant.  Just like the IRS.  During the 2012 election the IRS targeted conservative political groups to stifle their free speech.  Delayed their tax-exempt status approval.  And harassed them with costly tax audits.  And now their tyranny has extended to people in the middle class.  Who unbeknownst to them had a family member owe the federal government.  Years earlier.  Even a generation earlier.  And the IRS is arbitrarily seizing the tax refunds from these debtors’ distant relatives to pay these debts.  Even though they are in no way responsible for these debts.  And the government has no documentation for this debt.  Doesn’t matter.  Because they have the power to do this.  And these people are powerless to stop them.  Just like people living under an absolute monarchy were powerless to stop their king from doing anything to them.  And this is what Jefferson feared.  For after corruption comes tyranny.  For power + corruption = tyranny.  (Just look at every tin-pot dictator that has oppressed his people).  Which is why people fear the IRS.  And the federal government the IRS is beholden to.  Because they have become everything Jefferson feared they would.

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President Obama lied about Obamacare because Socialists are Devious

Posted by PITHOCRATES - September 14th, 2013

Week in Review

Politicians lie.  Especially those on the left.  Why?  Because their policies have a record of failure. So when they campaign for office they don’t tell the truth.  Because the people don’t want their taxes to go up.  They don’t want more regulations that might put them out of a job.  They don’t want higher unemployment.  They don’t want more environmental policies to save the world from global warming when the earth hasn’t been warming as predicted.

The people have rejected socialism.  So when the left campaigns for office they don’t use the ‘s’ word these days.  Even though their policies have but one goal.  To turn the United States into a European social democracy.  Despite some of these social democracies moving away from their socialist ways (see Is Rightward Shift In Norway, Australia A Trend? posted 9/10/2013 on Investors).

Elections held in recent days in two modestly populated but economically significant countries show that the global political pendulum may be swinging back toward conservatives.

First came the triumph of Australia’s Liberal (conservative) Party and its socially conservative Catholic leader, Tony Abbott, in national elections last weekend.

That was quickly followed by the surprise victory of the Conservative Party’s Erna Solberg, dubbed “Iron Erna” for her staunch conservatism, in Norway’s national elections.

A mere coincidence? Not likely. Polls show people in most developed countries are fed up. Angry rank-and-file voters are turning away from leftist parties that push welfare spending, higher taxes, increasing debt, more regulation, open-border policies and tight environmental restrictions.

Politically, socialist ideas no longer sell so well.

Which is why politicians on the left lie.  President Obama said if you liked your health insurance plan you could keep it.  Which was a lie to pass Obamacare.  As Obamacare was only a stepping stone to socialized medicine.  And the first step in getting there was to first destroy the private health insurance industry.  And with no private health insurance industry there would be only the government to step in and be the insurer of last resort.  And, voilà, national health care.  A devious way to get there.  But, then again, socialists are devious.  Because they know people don’t want what they’re selling.

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FT147: “The politician that plays with the meaning of words most is the politician that is lying the most.” —Old Pithy

Posted by PITHOCRATES - December 7th, 2012

Fundamental Truth

When you start Playing with the Meaning of Words it’s usually because you’re Trying to Lie

When President Clinton committed perjury when denying having sexual relations with Monica Lewinsky he tried to play with the meaning of words.  Saying it depended on what the meaning of ‘is’ is.  Clinton was a lawyer.  Like most politicians.  Who like to parse their words.  To twist their meanings.  So they can say one thing.  While they mean the complete opposite.  Clinton said he did not have sex with Lewinsky even though he had.  But the words he used could be parsed to both say he did and did not have sex with that woman.  Monica Lewinsky.  Lewinsky’s blue dress with Clinton’s semen on it, though, proved he was lying despite his nimble linguistic gymnastics.  And the House of Representatives impeached Clinton.  But the Senate didn’t have the votes to remove him from office for his perjury.  Nor did he resign as Richard Nixon did after he was caught in his perjury.

In George Orwell’s Nineteen Eighty-Four the oppressive socialist state did the same thing.  Play with the meaning of words.  To make lying easier.  The Ministry of Love was like the Gestapo in Nazi Germany or the Stasi in East Germany.  Institutions that tortured and instilled fear into the people.  Which was for the people’s own good.  For the state loved the people.  At least that’s what the state said while they were torturing and abusing the people.  The Ministry of Plenty was responsible for the empty store shelves and the constant hunger gnawing in the people’s bellies.  The Ministry of Peace waged perpetual war.  And the Ministry of Truth was the state’s propaganda arm in charge of state censorship.  Advancing the state’s lies.  Like Joseph Goebbels did in Nazi Germany.

Words mean things.  And when you start playing with the meaning of words it’s usually because you’re trying to lie.  Trying to advance an unpopular agenda by disguising that agenda in a cloak of disarming words.  You can trust anything coming from the Ministry of Truth as the word ‘truth’ is in its name.  And you have nothing to fear from the secret police as the branch of government they work under is all about love.  And when the state tells you over and over again that it is a moneyed upper-class that is the cause of everything that is wrong in your life you start believing it.  Whether that moneyed upper-class are rich capitalists and bankers.  Or Jews in 1930s Germany.

The Ronald Reagan and George W. Bush Tax Rate Cuts brought in Record Tax Revenues into the Treasury

Liberal democrats like to tax and spend.  They believe in big government.  They like it big like it is in Europe.  Where they have socialism-light.  Social democracy, they call it.  A big, expansive welfare state funded by high tax rates.  When taxes can’t pay for all their spending they borrow money.  When they can’t borrow any more they start printing money.  As a result of this excessive state spending most of Europe is mired in a sovereign debt crisis.  Many nations are so broke that they have no choice but to cut back their spending.  Which is sending people into the streets rioting.

This is where the U.S. is heading.  Most people who understand economic fundamentals know this.  And vote against going further down this European road.  But there are a lot of people who don’t understand economic fundamentals.  They listen to their Ministry of Truth.  The Democrats, the public schools, college professors, mainstream media and the entertainment establishment.  Who all lean left.  And who all say the only problem we have is a moneyed upper-class who aren’t paying their fair share.  Though the top 10% of income earners pay about 70% of all federal income taxes.  Something the state doesn’t mention when they say they aren’t paying their fair share.  So the people don’t know that they pay 70% of all federal income taxes.  And they are more willing to believe their Ministry of Truth.

The public schools, college professors, mainstream media and the entertainment establishment do their part, too.  By revising history.  They note the deficits of Ronald Reagan in the Eighties.  And blame those deficits on the Reagan tax rate cuts.  But what they don’t tell the people is that after those cuts in tax rates the amount of tax revenue (money coming to Washington from taxpayers) nearly doubled.  President Obama and his Ministry of Truth blame all of our economic woes on George W. Bush’s tax rate cuts.  But what they don’t tell the people is that the treasury collected a record high in tax revenue under George W. Bush.  Proving that cuts in the tax rates did not cause any fiscal harm.  It was the greater increases in spending that caused all of the harm.

Democrats want to Raise Taxes on Everyone because they are Tax and Spend Liberal Democrats

Under baseline budgeting increases in spending amounts are automatic.  Every year they go up.  And they never go down.  So when the politicians decry proposed draconian spending cuts there are no real cuts in spending per se.  What they are proposing to cut is the rate at which to increase spending.  Say, instead of an automatic 7% spending increase they will only increase spending 5%.  Spending will increase 5%.  But those in government call it a 2% spending cut.  Which is why despite all of the spending cuts ever enacted (and there hasn’t been a lot of them) the federal debt has never gotten any smaller.

So an increase in spending can be a spending cut.  But the Orwellian doublespeak doesn’t stop there.  Those on the Left call tax cuts increases in government spending.  (Interestingly, the only kind of spending the government can never afford.)  Here’s why.  Excessive spending causes deficits.  And if they cut tax rates they believe less money will flow into the treasury.  Thus increasing the size of the deficit.  Ergo, spending and tax cuts are the same because both increase the deficit.  Of course that’s a fallacy.  As proven by Reagan and Bush.  Who actually increased tax revenues by cutting tax rates.  How?  Lower tax rates encourages more economic activity.  More people are working and paying taxes.  Resulting in a higher tax revenue overall.

Currently President Obama and his Ministry of Truth are saying that the Republicans are fighting against a middle class tax cut to give the richest 2% a tax cut.  Which isn’t exactly true.  There are no tax cuts on the table.  The George W. Bush tax cuts are expiring.  If they expire everyone’s taxes will go up.  The president wants to extend these tax cuts.  But only for the middle class.  Unfortunately, there are many small business owners whose business earnings flow to their personal tax returns.  Which puts them into the richest 2%.  But most of that money never comes out of their business.  They may be taxed as rich people.  But they live middle class lives.  Because they reinvest their earnings into their business.  To buy new equipment.  To expand their business.  And to hire new people.  This is why Republicans don’t want to raise taxes on these small business owners.  For it’s these small business owners who provide the majority of jobs in the economy.  And increasing their taxes will only hurt the economic recovery.

The Republicans offered to increase tax revenues by revising the tax code to eliminate certain deductions.  Providing the amount of revenue the president was asking for.  But the president refused.  For he wants those increases in the tax rates.  To complete the revision of history by ‘righting the wrongs’ of the Reagan and the Bush administrations.  To further the lie about the Reagan and Bush tax cuts.  But there’s another reason.  The amount of revenue he’s asking for now (whether it’s from eliminating deductions or increasing tax rates) won’t make a dent in the deficit.  Or the debt.  The only way they will be able to do that is by increasing taxes on the middle class.  Which will be a lot easier to do after they raised taxes on the rich.  Which is what they want to do.  Raise taxes on everyone.  Because they are tax and spend liberal Democrats.  But as most people don’t vote for people that want to raise their taxes, they lie.  And play with the meaning of words.  As liars do.  And the politician that plays with the meaning of words most is the politician that is lying the most.

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Our Favorite Athletes are Part of the 1% and try to Minimize the Taxes they pay just like those on Wall Street

Posted by PITHOCRATES - March 25th, 2012

Week in Review

Don’t think high taxes influences behavior?  Of course, no one cares about the evil 1%.  Those greedy Wall Street types that don’t pay their fair share of taxes.  But you know who else is in that greedy 1%?  Your favorite athletes.  And guess what?  They want to hold on to their earnings just like those greedy Wall Street types (see Professional Athletes’ Big-League Tax Bills by Jay MacDonald posted 3/15/2012 on Yahoo! Finance).

Behind every sports star who’s hauling down the big bucks is a keen-eyed certified public accountant quick-stepping through a maze of state and local income taxes imposed on nonresident athletes, commonly known as the “jock tax.”

Professional sports players get taxed by pretty much every city and state in which they play, says Ryan Losi, CPA and executive vice president of Piascik & Associates, a Glen Allen, Va., accounting firm that represents more than 70 professional athletes.

“NFL players typically file in 10 to 12 jurisdictions. NBA is somewhere between 16 and 20. MLB is somewhere between 20 and 26, and the NHL is between 14 and 16,” says Losi.

Professional sports players are great big cash piñatas to these city and states that chronically over spend.  They all want a piece of these guys.  To make sure they pay their ‘fair share’ of taxes.  While they can before some career-ending injury puts an end to this gravy train.  But because these players could lose millions in future career earnings because of a career-ending injury, they want to keep their money.  For they may never be able to get another job.  Sure, some may move into the front office.  Some may move on to coaching.  But few will earn the kind of money they did during their short careers.  So they want to keep as much as they earn.  To take care of their wife and kids.  And have enough for their retirements.  Which can be rather long for these worn out and injured bodies.  So they just don’t sit by passively while every taxing authority is shaking them down for everything they’re worth.

The lion’s share of most players’ income, their salary, is taxed in the city and state where the team is based. But income from other sources, including endorsements, personal appearances, dividends and interest income, is taxed in their state of residence.

This is the reason New York Giants quarterback and Super Bowl MVP Eli Manning lives in Hoboken, N.J., instead of in the Big Apple. It’s simple arithmetic, says Raiola.

“If he were a resident of New York, he’d pay 8.97 percent New York state tax and another 3.78 percent New York City tax on top of that, not only on his wage income but also his endorsements and investment interest,” he says. “In New Jersey, he only pays 8.97 percent…”

Taxes — or the lack of them — may also have had something to do with NBA all-star and 2010 free agent LeBron James’ choice to play for the Miami Heat instead of the New York Knicks. Losi points to Florida’s lack of a state income tax.

“That may have been one of the factors that led LeBron to choose Florida versus New York,” says Losi. “Ten percent of his first contract was going to be the difference. For him, it was an extra 5 (percent to) 9 percent difference in tax. That’s real money.”

New York City may be the greatest city in the world but the rich pay an enormous amount of taxes to live there.  So many chose not to.  In fact, a lot of athletes chose where they live and raise their families based on their total tax burden.

Professional golfers, tennis players and other athletes who compete on the world stage often leave a third or more of their earnings in the local coffers.

“Whenever they play in foreign countries, they have to pay taxes in that jurisdiction, and the tax liability is much bigger than the 5 (percent) to 10 percent state tax. It’s usually in the 30 (percent) to 40 percent bracket,” says Losi. “Usually it’s withheld in their prize money, and they can file a nonresident return if they think they might have a refund coming.”

Because the United States is one of the few countries that taxes all personal income regardless of source, some pro sports stars who compete internationally actually have a financial disincentive to make their home in America.

“If they’re (not U.S. citizens or green card holders) and they’re not planning to stay here more than 183 days out of the year, from a tax perspective it absolutely makes sense to not live in the U.S.,” says Losi. “All the foreign golfers who come here to play, if they want all of their foreign prize money and endorsement money to be taxed, all they have to do is hang out here for 183 days.”

Being an athlete competing at the level that makes them millionaires is not an easy life.  While others look forward to weekends, holidays and vacations to kick back and relax and recharge their batteries with copious amounts of alcohol and enormous quantities of fattening foods these athletes don’t.  They often work on weekends and holidays.  And when they’re not working they’re practicing.  Where their practice is often more intense than their competition.  This is their life.  This is how they become elite athletes.  And their reward?  To be whacked open like a cash piñatas by the taxing authorities so the politicians they serve can take their money and spend it to buy votes for the next election.  And forcing them to choose where to live based on who will penalized them the least for being really good at something.

This is not a meritocracy.  Where we reward people for achievement.  This is out of control government spending to maintain a privileged class.  Politicians.  And government workers.  Who live and feed off of taxes.  To fund their class warfare that makes these privileged few secure in their class.

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Independent (ĭn’dĭ-pĕn’dənt), n., One that is independent, especially a voter, officeholder, or political candidate who is not committed to a political party.

Posted by PITHOCRATES - November 24th, 2011

Politics 101

Independents have no Political Philosophy and can be Swayed by a Candidate’s Charisma or Populist Issue

Independents have little interest in politics.  They don’t follow the issues.  Have no philosophical basis to form a political belief.  And have no political beliefs.  As demonstrated by their voting for both Republicans.  And Democrats.  Showing that they can easily vote for and against the same fundamental beliefs.

Independents don’t understand what a party platform is.  The philosophical basis for a political party.  The things the party believes in.  And tries to advance.  In the United States there are 2 major political parties.  The Republicans.  And the Democrats.  Who stand for very different things.

Yet at elections the Independents form that great center of the electorate that tends to decide elections.  So both Republicans and Democrats try to woo them.  Because they both feel they have an equal chance.  Even though they couldn’t be more different in their political philosophy.  Because Independents have no political philosophy.  And can be swayed by a candidate’s charisma.  Or a populist issue.

There are no Independent Conventions to Nominate Independent Candidates because Independents Stand for Nothing

Democrats are for active government and income redistribution via high taxes.  Republicans are for limited government and low taxes.  The Independents are neither Republicans nor Democrats.  And that’s the extent of their party platform.

There are few Independents in politics.  Often a politician will run as an Independent after they lose the primary election for their own party.  Sort of like having a temper tantrum.  They weren’t a good enough Republican or Democrat to win the support of Republican or Democrat voters in the primary election.  So they stamp their feet and whine, “I’ll run as an Independent then in the general election.”  Where they stand a good chance of winning.  Because there are a lot of people out there who don’t vote according to any political philosophy.  Like they do during the primaries.  The Independents.

There are no party caucuses for Independents.  No Independent debates.  No Independent primary elections.  No Independent conventions to nominate an Independent candidate.  Because Independents stand for nothing.  For they are the disengaged.  The uninformed.  And out of touch.  They only think about politics at election time.  And then base their vote on how they feel at that time.  Choosing their candidate by who charms them the most.  Or stands for the populist issue they are most familiar with.

Independents eschew Republicans and Democrats yet Vote Republican or Democrat in the End

Independents eschew Republicans and Democrats.  They’re above them.  They study the issues.  And make informed decisions.  They don’t just vote the party line.  Or so they say.  But they often do.  Vote the party line.  By voting either Republican or Democrat in the end.  Often without a clue of the consequences of their vote.

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LESSONS LEARNED #78: “It’s a dishonest politician that sneaks sneaky legislation into a bill.” -Old Pithy

Posted by PITHOCRATES - August 11th, 2011

The Obama Stimulus Bill was mostly Democrat Pork and Earmarks

The American Recovery and Reinvestment Act of 2009 was a huge stimulus bill to create jobs.  And put people back to work.  It cost about $800 billion.  And it didn’t work.  Some say it didn’t work because it wasn’t big enough.  Others say it didn’t work because it wasn’t stimulus but rather a 40-year Democrat wish list of pet projects.  Which the Democrats could finally enact having control of the House, the Senate and the White House for the first time in a long time.  And they took control of this bill.  As Nancy Pelosi said, “We won the election. We wrote the bill.”

So what’s in the bill?  Well, President Obama said it would contain no pork.  No earmarks.  Just spending that would create ‘or save’ jobs.  Like infrastructure projects.  Rebuilding America’s roads and bridges.  But according to the Wall Street Journal, “Some $30 billion, or less than 5% of the spending in the bill, is for fixing bridges or other highway projects.”  They further note that of all the spending in the bill little would actually create jobs.  About “12 cents of every $1…even many of these projects aren’t likely to help the economy immediately.”

Take high-speed rail, for example.  The Washington Post noted the bill included “$8 billion for high-speed rail projects, for example, including money that could benefit a controversial proposal for a magnetic-levitation rail line between Disneyland, in California, and Las Vegas…”  One thing about big rail projects, they don’t stimulate.  Building railroads takes a long, long time.  The higher the speed, the longer the time.  Because high-speed trains have more costly infrastructure.  And dedicated track.  With no grade crossings.  And before you build anything you have to do environmental impact studies.  Then survey the entire route.  Then, once you have a proposed route, you can begin the engineering.  It could be years before any ground is broken. 

If any ground is broken.  Because currently high-speed rail is all pie in the sky.  Only two lines to date operate at a profit.  One in Japan (Tokyo to Osaka line).  The other in France (Paris to Lyon line).  All others require government subsidies in one form or another.  Because these are costly to build.  And costly to maintain.  So this is stimulus that won’t stimulate.  But it will set the stage for greater future government spending.  Making it more pork than stimulus.  Snuck into the bill by the Senate.  When the House bill went to the Senate.  For their turn to steal from the treasury.

Only Schools with Union Teachers did well in Stimulus Bill

The stimulus bill also included $90 billion for the Department of Education.  But language in the bill restricted the use of that money.  Quoting from the Wall Street Journal, “the House declares on page 257 that “No recipient . . . shall use such funds to provide financial assistance to students to attend private elementary or secondary schools.””

In other words, only schools with union teachers may use this money.  Dues-paying union teachers.  And the teachers unions support Democrat candidates.  Which makes this not quite stimulus.  But politics.  Profitable politics at that.  As some of this stimulus money will make it back to Democrat coffers thanks to those union dues.

According to Certification Map, education received some $90 billion in stimulus money.  And their website breaks down the spending:

  • $44.5 billion in aid to local school districts to prevent layoffs and cutbacks, with flexibility to use the funds for school modernization and repair (State Equalization Fund)
  • $15.6 billion to increase Pell Grants from $4,731 to $5,350
  • $13 billion for low-income public school children
  • $12.2 billion for IDEA special education
  • $2.1 billion for Head Start
  • $2 billion for childcare services
  • $650 million for educational technology
  • $300 million for increased teacher salaries
  • $250 million for states to analyze student performance
  • $200 million to support working college students
  • $70 million for the education of homeless children

For a bill not containing any pork or earmarks these look a lot like pork and earmarks.  I mean, they sure ain’t ‘shovel-ready let’s rebuild the infrastructure jobs’ like we were led to believe.  Sure, they may ‘invest in our future’ so we may ‘win the future’, but it doesn’t create jobs like a stimulus bill is supposed to do. 

This isn’t stimulus.  These are just Democrat pet projects.  Added to the bill in a moment of crisis.  To take advantage of the crisis.  To get the things they’ve been unable to get during the normal legislative process.

Never let a Serious Crisis go to Waste when Writing a Stimulus Bill

When you look at the bill this is what most of it is.  Just a bunch of Democrat pet projects.  Passed when they still had control of both houses of Congress and the White House.  And a delicious crisis.  For as Rahm Emanuel said, “Never let a serious crisis go to waste.  What I mean by that is it’s an opportunity to do things you couldn’t do before.” 

Sure, they’ve always hidden things in bills before.  But rarely does $800 billion of free spending come along.  They weren’t going to attach this pork to a bill.  This pork was the bill.  And it included a little bit of everything.  Including green energy.  Green Chip Stocks list this spending on their website:

  • $2.5 billion for energy efficiency and renewable energy research
  • $1 billion energy efficiency programs including energy-efficient appliances and trucks and buses that run on alternative fuel
  • $4.5 billion to boost the energy efficiency of federal buildings
  • $6.3 billion for energy efficiency and conservation grants
  • $5 billion to weatherize old buildings
  • $2.3 billion in tax credits for energy efficiency technology manufacturers

Last time I looked ‘research’ was not a ‘shovel ready’ project.  Neither are alternative fuel programs.  Or federal renovation projects.  Or the government granting process.  (It takes forever and a day for construction projects to start when there is federal money involved.)  And tax credits only help a few people work so they can build things that won’t sell at market prices.

Again, not stimulus.  But pork.  Earmarks.  Despite everything they told us. They weren’t going to create jobs and fix the economy.  They were settling their political accounts.

Democrats took Advantage of a Crisis to sneak Pet Projects into Law

This shameless Democrat spending spree (remember what Nancy Pelosi said – “We won the election. We wrote the bill”) helped to push the deficit into record territory.  Which caused S&P to downgrade our credit.  All because the Democrats took advantage of a crisis to sneak a lot of their pet projects into law.

It just goes to show you that you shouldn’t trust politicians.  And, based on the American Recovery and Reinvestment Act of 2009, you should especially not trust Democrats.  For they are quite sneaky.  And often don’t do as they say.  For the stimulus bill wasn’t going to have any pork or earmarks.  But in reality about 88% of the bill was nothing but pork and earmarks.  Which is a lot more than none.

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FUNDAMENTAL TRUTH #78: “It’s a dishonest politician that sneaks sneaky legislation into a bill.” -Old Pithy

Posted by PITHOCRATES - August 9th, 2011

The Devil is in the Details and the Sneakiness is in the Fine Print

You know what they say.  Buyer beware.  Because they’re out to get you with their sneaky advertising.  Which you need to read closely.  Because the devil is in the details.  And the sneakiness is in the fine print.  That print that no one reads.  Like credit cards that send you those checks. 

They may offer 0% interest for six months when you write yourself a check for $5,000.  Wow.  Sounds great.  But if you don’t pay that off in that 6 month period look out.  Through the miracle of compound interest, that $5,000 debt will grow.  And that growing starts the moment you cash that check.  Because in the fine print the credit card company notes that after the 6-month period they will begin charging interest at 27.24% APR.  Starting on day one of the 6-month period.

People may wonder how credit cards can make any money if they don’t charge interest.  Well that’s the secret of the zero-interest offers.  They don’t expect you to pay it off within in that 6-month period.  And the second that 6-month period ends they book $720.84 of interest income on that $5,000 they loaned you.  That’s a short-term loan that yields 14.42%.  And there ain’t any 6-month investment out there that can match this yield.  But it doesn’t end there.  The yields on the credit card loan will continue to grow.  If you owe that $5,000 for 1 year, that yield rises to 30.91%.  And instead of owing $5,000 you now owe $6,545.59.

A zero-interest offer seems to be good to be true.  That’s because they are too good to be true.  Which you’ll see when you read the fine print.  If you read the fine print.

You have to be Sneaky to get People to Agree to Things that will Hurt Them in the Long Run

Now it’s obvious why they do this.  Be sneaky.  Because they can make a lot of money by doing this.  And the more people that take them up on these zero-interest offers the more money they can make.  So they put the things that would sour most people on using these checks in the fine print.   In hopes few will read it.  And few do.

You see, you have to be sneaky to get people to agree to things that will hurt them in the long run.  You just can’t be honest.  They can’t tell you that this loan will cost you nothing at 11:59 PM on the last day of the 6-month period.  And that it will cost you $720.84 one minute later.  Worse, your minimum monthly payment will jump about $125 as they calculate this loan into your payment.  And compound interest will make that credit card balance swell like a beached whale to the point that you’ll never be able to pay it off. 

You’ll lose sleep as your minimum monthly payments grow.  You’ll struggle to get that balance to go down.  Of course it never will.  And the more those minimum payments grow the less money you have for groceries and gas.  So then you’ll start paying less than the minimum due so you can put food on the table and drive to work.  Then the collection calls start.  It’ll get to the point that your stomach turns every time you hear the phone ring.

So you can see why they put this kind of stuff into the fine print.  I mean, if they advertise that they are going to ruin your life, are you going to use one of those checks?  Probably not.

The Founding Fathers hated Democracy with a Passion

So you really have to be sneaky and devious to get people to voluntarily destroy their lives.  And speaking of politics, politicians are the worst.  For a credit card company may try to get as much money from you as possible.  But that’s just business.  And they don’t swear oaths to protect you.

Thomas Jefferson hated bankers and merchants.  Partly because he was forever in debt.  But mostly because they can buy themselves favors.  And the seller of favors is, of course, government.  Jefferson was a well read man.  He knew history.  And he saw how combining money and government led to bad things.  Corruption.  Patronage.  Privilege.  War.  Money gave government power to do its worse.  And allowed a ruling minority to oppress the people for personal gain.  Now even though America was founded on the principle that all men are created equal, Jefferson knew that money could, and would, change that.  This is one of the reasons why the nation’s capital was located on a swamp a long, long way from the nation’s financial center.  New York.

This is also a reason why the nation is a republic.  And not a democracy.  We have representative government.  Not direct participation.  For the Founding Fathers hated democracy with a passion.  Why?  Because all democracies fail.  Once the people learn they can vote themselves whatever they want.  That’s why the Founding Fathers put enlightened/educated representatives between the treasury and the people.  Who will be rational and logical.  And not give in to base desires.

But the Founding Fathers were a special breed.  Who came along at just the right time and place.  And they created something perfect as far as governments go.  But as they passed from memory, the ways of the Old World became hard to resist. 

You have to let Others Steal from the Treasury if You want to Steal from the Treasury

As the nation grew so did its tax base.  More people meant more tax revenue.  First through import tariffs.  Then the income tax.  And other various taxes.  A little bit of tax from a huge population meant a lot of money for politicians to play with.  And play they did.  With the power to control these vast sums of money, they played God.  Just as Jefferson warned.  Money and government created a ruling minority.  Or a Ruling Class.  Much like the Founding Fathers fought so long and hard to end in the New World.

Of course, people won’t willingly support a Ruling Class that oppresses them.  So they have to be sneaky.  And hide much of what they do from the general public.  By burying it deep in pages of legislation.  Pork barrel spending we call it.  To get a part of the population to support you by promising them free stuff.  Then you honor that pledge by attaching a rider to a bill to house and feed orphans, for example.  When the final bill gets passed into law not only do we house and feed orphans (which everyone supports), but we also shower select constituencies with federal dollars for their help in getting out the vote during the last election (which only those select constituencies support).

Of course you know how this plays out.  If you oppose the excess spending in this bill you hate orphans.  And who wants to be labeled an orphan hater?  Probably not many.  But chances are few will oppose it.  Because to get pork you have to give pork.  You have to let others steal from the treasury if you want to steal from the treasury.  And this is why representatives and senators vote to pass thousand page bills without reading them.  They know they’re full of shameless pork barrel spending.   But as long as they include their pork they don’t care.

Short-Term Gratification with Long-Term Consequences

Politicians are a lot like those credit card companies.  Promising great short-term gratification.  With long-term consequences that will be a bitch.  They both want our money.  The credit card companies want us to go on a spending orgy so they can book fat profits on the interest they charge us.  Politicians just want to go on a spending orgy with our money.

So who’s worse?  The politicians, of course.  They’re supposed to be looking out for us.  Besides, when the credit card companies are screwing us, at least we get to enjoy the ride before the crash.  Taxpayers don’t.  Because their money typically goes to people who don’t pay income taxes.  So they don’t get to enjoy the ride.  They just suffer the crash.

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FUNDAMENTAL TRUTH # 50: “What do the great entrepreneurs have in common with politicians? Not a whole hell of a lot.” -Old Pithy

Posted by PITHOCRATES - January 25th, 2011

A Mathematician, an Engineer and a Beautiful Woman

Stop me if you heard this one.  A mathematician and an engineer are at one end of a long room.  At the other end is a bed.  On the bed is a beautiful, naked woman.  She also happens to be a brainiac.  And someone who enjoys a bit of fun.  If you know what I mean.

She offers to get intimate with the guy who can solve this riddle.   Cross the room in a series of moves.  Each move shall be one half of the distance between them and her.  Be the first to do that and reach her and she’ll make all of your dreams come true.

Well, the mathematician sits down with paper and pencil and starts scribbling.  He proves mathematically that is impossible to ever reach the beautiful woman.  Because by moving half of the distance each time, there will always be a remaining distance to cover.  Therefore, he concludes, it’s impossible.  He looks up to tell her this.  And when he does he sees the engineer lying up in bed with her.  Smoking a cigarette.

Entrepreneurs Like to Think outside the Box

So what happened?  Well, while being theoretically impossible to reach her, the engineer could get close enough for a bit of fun.  And did.  It’s an old joke.  With many variations.  And depending on who’s telling it the loser is sometimes a physicist.  Or even the engineer.  Of course, some may say it’s the beautiful woman that losers in all cases.  Because smoking hot women don’t hang out with math and engineering geeks.  Until they get rich enough to buy them things, that is.  But I digress.

Entrepreneurs and politicians are a lot like mathematicians and engineers.  At least in this joke (and I apologize to mathematicians everywhere who are offended.  But you shouldn’t feel bad.  I’m sure if you could have been engineers you would have).  Nothing is ever easy for a politician.  Like the mathematician, they feel that they must over analyze everything.  Get a lot of bureaucrats involved. Layers and layers of oversight and control.  Hoops to jump through.  Exhaust every possibility to get to the ‘best’ solution.  Even if it takes weeks.  Months.  Years.  Time is never of the essence.  They have forever.  And they take forever.  No matter the costs.

Entrepreneurs don’t work this way.  They have an idea.  And want to act.  They hate waiting.  Time is money.  They hate bureaucracy.  Because time is money.  And they have an easier way to determine what the best solution is.  Sales.  Those who have the greatest sales have the best solution.  Because thus speaks the market.  So they keep thinking.  Keep creating.  Keep coming up with good ideas.  They see what the market is demanding.  Or what it will demand.  Once they show that market the wonderful new thing they’ve created.  Sales proved the Sony Walkman a success.  And sales proved the Apple iPod a success.  Why?  Because Sony and Apple are a couple of companies that like to think outside the box.  And create things people aren’t even demanding yet.  And you gotta admit that that’s some pretty damn good thinking.

Politicians Fear what’s Outside the Box

Politicians, on the other hand, fear what’s outside the box.  They want to stay inside the box.  They like it there.  It’s snug.  Familiar.  Dark.  Orderly.  No surprises.  No new things to have to think about.  Or worry about.  Like all that uncertainty in an uncontrolled free market.  Yeech.  They don’t like that.  Or understand it. For when it comes to the economy, these progressives are ‘conservative’.  They want to build on the governmental bureaucracy of the past.  The bureaucracy they know.  And love.  It may not have worked.  But so what?  It’s just so cozy.  And makes a [deleted expletive]-load of federal jobs.

Of course, this expanding bureaucracy doesn’t give us anything new.  Anything innovative.  Anything that we’re yearning for.  Or anything we will yearn for once we learn about that next great thing.  Because they don’t create anything.  Other than obstacles to those who do.  Once someone comes up with an idea, though, they’ll then want to take that idea and over think it.  Manage it.  Regulate it.  Tax it.  Because an entrepreneur may come up with a great idea.  But a politician knows best how to use that idea.  Or so they believe.

Of course, when you think of the great inventions, you never think of a politician.  To prove this, tell me who you think of when I mention some famous inventions.  The telephone?  (Alexander Graham Bell).  AC power distribution?  (Nikola Tesla).  An affordable automobile?  (Henry Ford).  The light bulb?  (Thomas Edison).  An efficient steam engine?  (James Watt).  Notice anything about all of these inventors?  That’s right.  They don’t have a ‘Senator’ or ‘Congress Person’ in front of their name.  But Senators and Congress people have been regulating and taxing these great inventions ever since.

Can’t see the Nude Woman on the Bed

An entrepreneur, like an engineer, doesn’t get lost in the theoretical.  They see possibilities.  And they act.  Politicians, like mathematicians, like to crunch numbers.  Prove things can’t be done.  And then call for blue ribbon panels or commissions to further analyze things.  Entrepreneurs are positive, can-do people.  While politicians are negative, can’t-do people.  They can’t see the forest for the trees.  Or the nude woman on the bed.

Politicians can’t not interfere with people.  An entrepreneur can’t stand being interfered with.  He or she is too busy creating stuff.  They’re not sitting around waiting for something to happen.  They’re leading the way.  While the politicians are nipping at their heels.  Trying to catch up with them.  Just so they can slow them down.

Our future is like the nude woman on the bed.  The entrepreneurs know how to get to her.  And will.  If left alone to do what they do best.  To think.  And create great things.  Make the world a better place.  But the politicians haven’t a clue.  They covet the nude woman.  But they can’t get to her.  Because she’s somewhere outside the box.  Smart.  Complex.  Something new.  Waiting to be discovered.  And when her riddle is solved, it won’t be a politician smoking a cigarette in bed with her.  It’ll be an entrepreneur.

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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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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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