Obamacare is even less Consumer-Friendly than Cable/Television/Telephone Television

Posted by PITHOCRATES - April 17th, 2014

Week in Review

Currently there are no market forces in health care.  Which is why health care costs are so high.  When buyers and sellers meet they always agree on a price that makes them both feel like winners.  Just watch an episode of one of those pawn shop shows.  The seller wants a higher price.  The buyer wants to pay a lower price.  As they move towards each other they arrive at a price that makes them both happy.  The seller gets an amount of money he values more than the thing he’s selling.  And the buyer is getting something he values more than the money he’s paying for it.  Making them both feel like winners.

It’s not like this in health care.  Because there is a third party between the buyer and seller.  Either an insurance company.  Or the government.  Just like there is a third party between networks’ programming content and the consumer.  The cable/satellite/phone company (see Why Your Cable Bill Keeps Going Up by Evan Weiner posted 4/12/2014 on The Daily Beast).

The television networks and the television carriers, whether it’s through cable, satellite or phone lines, carriers seeming are always fighting these days over the cost of programming and what rights’ fees should be. The rights’ fee is what a television carrier pays for a networks programming. The carrier then passes that cost along to consumers and tacks on an additional fee because they too feel the need to be compensated for bringing the program into a home.

The injured party is the subscribers who have little course to affect the talks unless they decide to drop their provider for another, and there is no guarantee switching to another provider will end TV blackouts…

Thanks to the 1984 Cable TV Act, cable subscribers have really no say in what they want for their needs. The cable carrier was allowed to establish tiers of services. The consumer could take a local, basic tier alone or basic and basic extended but would have no choice in what they wanted to buy and were forced to take whatever the multiple system operative wants to give them or they opt out of having cable TV. The same apparently holds true for satellite TV and the phone companies.

Cable/satellite/telephone television is like Obamacare.  As consumers can’t keep the programming they liked and wanted to keep.  As it is for Obamacare.  Where people who had health insurance they liked and wanted to keep could not keep it.  Instead, a third party, the government, forced them to buy a tier of health insurance they did not want.  Only they do not have the option to opt out of Obamacare.  Because buying health insurance is mandatory.  Unlike cable/satellite/telephone television.  For as much as we may hate our cable/satellite/telephone companies at least we don’t have to buy from them under penalty of law.

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Rent Control reduces the Amount of Affordable Housing

Posted by PITHOCRATES - April 15th, 2014

Week in Review

Living in New York City is expensive.  High taxes.  And high property values.  But people want to live in the city.  And will pay very high rents to do so.  Which landlords can charge because there are people willing to pay them.  It’s the basic law of supply and demand.  It’s the same reason why beachfront property is so expensive.  There’s so little of it and so many people want to live there.  So the property goes to the highest bidder.  Which is why some of the richest movie and television stars own the best of these properties.  Because they are willing to pay the highest price.

Of course that’s all right for the rich.  But what about the poor and middle class?  Who can’t afford to live like rich movie and television stars?  Well, there has long been a cry for affordable housing for the less affluent.  And price controls.  To keep rents affordable for those of more modest means.  There have been various forms of rent control in New York City.  To make housing more available to the less affluent.  Which actually reduced the number of apartments available to them.  How, you may ask.  Well, when it comes to rent there are two parties.  A buyer and a seller.  We know why buyers are buying.  They want a place to live.  But why do sellers want to rent out apartments?  To make a profit.  And because rent control made it more difficult to make a profit landlords went elsewhere to make a profit.  Thus reducing the number of rental units available.

New York City still has rent-controlled apartments.  And people desperately want to live in them because rent everywhere else (at market prices) is so expensive.  So there are often battles between rent-control tenants and landlords who want to rent at market prices.  Like this (see Brooklyn landlords illegally harassed, targeted rent-stabilized tenants: suit by Erik Badia, Ginger Adams Otis posted 4/15/2014 on the Daily News).

The landlords targeted longstanding black tenants who lived in rent-stabilized apartments, the suit contends.

The plaintiffs pay anywhere from $600 to $1,400 a month for 52 three-bedroom units in the three buildings, according to the lawsuit…

The group claims the landlords, who bought the buildings in 2009, have neglected to do repairs in black-occupied units…

Approximately 15 new tenants have moved in since then, paying market rents as a high as $2,500, the plaintiffs claim…

Pilgrim, who pays a stabilized $950 rent for his apartment, said he has talked to new tenants who had told him they are paying more than double that rate…

“How can you go from paying $687 a month to $2,500 a month? They’re also taking advantage of these young kids,” Bell said.

The tenant sees the landlord as being greedy.  While the landlord sees that apartment being rented 72.5% below what it could be renting for.  If the roles were reversed the tenant would probably do the same thing.  Because people want to make money.  And people want to be rich.  That’s why they buy lotto tickets.  And try to make it in movies and television.  To be rich and famous.  They don’t buy properties to see how little money they can make with them.  They buy them to see how much money they can make with them.  Movie stars would never put their mansions up for sale at 72.5% below what other rich people would pay for them.  Just as a middle class homeowner would never sell her home for 72.5% below what someone would pay for it.

The law of supply and demand bring buyers and sellers together at a price they both agree on.  Making both parties happy.  When laws interfere with market prices (such as rent control) both parties are seldom happy.  Buyers tend to be happier.  But because sellers are so unhappy they stop selling.  Thus reducing the number of apartments available to rent.  Which is why rent control doesn’t work.  It actually reduces the amount of affordable housing.  So that only a very lucky few can enjoy life in a rent-control apartment.

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Property Rights and Contracts

Posted by PITHOCRATES - March 26th, 2012

Economics 101

We put a lot of Money and Time into Maintaining Property we Own so we can Enjoy it Exclusively

Have you ever bought the Brooklyn Bridge?  I hope not.  For if you have someone probably conned you.  Unless you bought it from the New York City Department of Transportation (DOT).  Because they currently own the Brooklyn Bridge.  And are the only ones who can sell it.  But the last I checked they weren’t selling.  So I doubt they sold it to you.  If you are about to enter into negotiations to buy the Brooklyn Bridge I suggest you do a title search first.  To verify that the seller in fact owns the property.  Has the right to sell the property.  And that the seller is selling the property ‘free and clear’.  To make sure you don’t have to pay any outstanding construction bills for work completed on the bridge that the DOT didn’t pay.  Then and only then should you buy your bridge.  So you can enjoy the pride of bridge ownership.  While charging tolls.  And getting rich.

This illustrates a central point about buying and selling things.  Property rights.  Which lets us buy things.  And sell them.  For to sell something we must first own it.  And to buy something we must know that we can own it.  Because if we’re not sure we can own it we’re not going to exchange our hard-earned money for it.  And once we own something we’re going to use it however we wish to use it.  At least that’s what we expect to do.  If we buy a house with a pool in the yard we’re going to want to use that pool exclusively.  Because we paid for it.  And keep it clean.  By maintaining the pool filters and pumps.  Adding chlorine.  Vacuuming the bottom.  We’re going to put a lot of money and time into maintaining that pool so we can enjoy it.  Our little tropical paradise in our own backyard.  But we’re not going to do all of that if just anyone can walk into our yard and use our pool whenever they damn well please.  For if that were the case we wouldn’t spend the time and money in the first place.  We’d look for a pool we could use for free.  Like everyone else who thought they could walk into our yard and use our pool whenever they damn well please.

Or would we?  Let’s say someone in your neighborhood just moved in.  They put in a nice in-the-ground pool.  Spent a fortune on it.  Kept it pristine.  And used it exclusively.  They were happy.  Until the subprime mortgage crisis hit.  And all of a sudden they owed far more on their mortgage than the house was worth.  So one night they just disappeared.  And let the bank have the house.  Once you notice their house is empty you think about that pool.  And decide what could it hurt if you went over for a swim?  You go there.  Notice they left the pumps and filters on.  And the pool is still pretty clean.  So you enjoy a swim or two.  Others find out.  And go over for a swim.  A lot of them.  The pool is crowded.  And not so clean anymore.  No one is skimming the garbage out of it.  Or maintaining the chlorine level.  Some of the kids are even peeing in the pool instead of getting out of it.  Soon the pool begins to smell bad.  Algae is growing.  The filters plug up.  With the water flow blocked the pumps strain and trip the circuit breaker.  Stopping the pumps.  And the filtering.  The crud they filtered out backs up into the pool.  Soon the water turns a greenish gray.  And looks more like a stagnant pond where dead fish float on the surface than the pristine tropical paradise it once was.

We can trace most Pollution and Environmental Damage back to the Tragedy of the Commons

Economists call this the Tragedy of the Commons.  Which is what happens when we poorly define our property rights.  In our example the pool was clean and enjoyable when someone owned the pool.  When no one owned the pool (after the previous owners abandoned it) the pool became dirty and no longer enjoyable.  Why?  Because when we own something we have an incentive to take care of it.  For our long-term enjoyment.  When no one owns it no one has an incentive to take care of it.  Some may try but others will continue to pollute.  Because they don’t own it.  And have no incentive to spend the time and money to keep it clean.  Especially when others are still polluting.  So no one tries to keep the pool clean.  They’ll enjoy it while they can.  And when the pollution gets so bad they will move on and find something else to enjoy. 

We can trace most pollution and environmental damage back to the Tragedy of the Commons.  If you love the beach so much that you buy a house on it you will keep your beach clean.  You’re not going to litter it with cigarette butts, empty bottles, food wrappers, used condoms, etc.  A public beach, on the other hand, is a different story.  Just as people will take their trash to a public field to dump it.  Because they don’t own that land and have no incentive NOT to pollute it.  And it’s cheaper than taking their trash to the private landfill that charges a fee.  Who helps to keep America beautiful by burying our trash.  And when the landfill is full someone else will buy it and make a beautiful golf course out of it.  Or something else.  As long as someone owns it something nice will happen with that land.  To maintain the value of that land to the landowner.

When you own something it has value to you.  Such as a logging company cutting down trees on land they own.  Because this land has value they will not over-log it.  And when they cut down trees they will plant new seedlings.  So the land continues to have value.  Because they will be able to cut down these seedlings after they grow into trees.  Or the future owner of that land will be able to.  Who will buy that land because it has value.  Whereas there is no incentive for a private logger working on public land NOT to over-log it.  Or to plant seedlings.  Because they don’t own that land.  Anything they don’t cut down some other logging company will.  And without any property rights to that land they won’t plant any seedlings.  Because nothing will prevent anyone else from cutting these down once they grow into trees.

Well Defined Property Rights allow Buyers and Sellers to Enter into Contracts with one Another

To do all of this buying and selling we need well defined property rights.  Clearly spelling out what the seller owns.  And what exactly the buyer is buying.  For example, a logging company buying a tree farm may want to drill an exploratory well to see if there is oil or natural gas under that land.  So he or she will want to make sure that the terms of the sale include all mineral rights.  Paying additional for these rights if necessary.  Or getting the tree farm at a lower price than other comparable tree farms because the seller wants to retain the mineral rights.

Well defined property rights allow buyers and sellers to enter into contracts with one another.  Contracts clearly state the terms of sale and any other special provisions.  Such as the seller retaining his or her right to have his or her pick of one tree anywhere on that land once a year in the month of December.  As long as buyer and seller freely enter into these agreements they expect each other to honor the terms of the contract.  And only when both parties honor the terms of the contract does the ownership of property transfer from one party to another.

Property has value.  Even the Brooklyn Bridge.  And well defined property rights protect that value.  Because the DOT owns that bridge they spend money to maintain that bridge.  A well-maintained bridge provides value for those who want to cross the East River.  Currently the various taxes they pay to the city and state make their way to the DOT.  To pay for that maintenance.  But if the city of New York found itself in serious financial trouble they could sell the Brooklyn Bridge.  To a private person.  Who wants to put up toll booths on the bridge.  The city gets a large sum of money to help with their financial trouble.  And the new private owner gets a revenue stream in the form of tolls.  And the city of New York will, of course, screw those crossing the East River.  Because they’ll now have to pay a toll to cross the Brooklyn Bridge.  But they won’t get any of their taxes back.  Because governments rarely if ever cut their taxes.  The city and the private person do well because they both have well defined property rights.  And a contract.  The people using the bridge don’t.  They had no contract with the city that clearly stated the terms for their use of that bridge.  And will continue to pay the taxes that paid their crossing fees.  As well as the new tolls.  Which is business as usual.  Because government always screws the taxpayers.  Who are always at a disadvantage when it comes to property rights and contracts when dealing with the government.  For government has the power to break contracts and take property.  Unlike private persons entering into contracts.  Who only transfer the ownership of property by mutual consent.

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Prices, Scarcity and Value

Posted by PITHOCRATES - December 12th, 2011

Economics 101

“Economics is the Study of the Use of Scarce Resources which have Alternative Uses”

Agriculture advances gave us food surpluses.  Food surpluses gave us a division of labor.  The division of labor gave us trade.  Money made that trade more efficient.  Religion and the Rule of Law allowed great gatherings of people to live and work together in urban settings.  Free trade let us maximize this economic output and elevated our standard of living.  And free labor sustained economic growth by increasing the number of people making economic exchanges.  Of course, we need something else to facilitate these economic exchanges.  Prices.

British economist Lionel Robbins defined economics as the “study of the use of scarce resources which have alternative uses.”  Resources are the things we buy.  Or they make up the things we buy.  We can use these resources to make many different things.  For example, we can eat corn as a food.  It can be an ingredient in food.  We can make it into a sweetener.  We can use it to make bourbon whiskey.  We can even use it to make fuel to burn in our cars.   So corn has many alternative uses.

Depending on the corn harvest corn can be abundant.  Or scarce.  We can have a lot of it.  Or if there was a drought we may not have so much of it.  For another example of scarcity you can consider a concert.  Whether it is for your favorite band or a Broadway show, ticket prices for that show will vary.  The pair of tickets that are front row center are the most coveted.  And typically end up with a service or a scalper.  Thousands of people may be able to enjoy the show.  But only two can sit front row center.  These two tickets are very scarce.  And if you ever bought a pair of these tickets you know how expensive these tickets can be.

We Agree to Economic Exchanges when both Buyer and Seller Agree on the Value which is Communicated by Price

Those tickets are expensive because they are scarce.  The price of these tickets tells us this.  There are more seats available that are not as good.  And they cost less.  Because there are so many of these ‘cheap’ seats pretty much anyone can buy them.  Unlike the front-row center seats.  The scarcer something is, then, the greater its value.  And the more expensive it is.

Something becomes scarcer when the alternative uses for it grows.  For example, we now use corn to make ethanol to fuel our cars.  Leaving less available for food.  So food prices rise.  Because with this new use for corn the users in the food industry have to compete with each other to buy the smaller amount of remaining corn.  Corn, then, became scarcer when we added another use for it.  And more expensive.

We determine the price we are willing to pay for something based on the value it has to us.  In every economic exchange both buyer and seller assign a value.  Of what the buyer is willing to pay.  And what the seller is willing to accept.  We communicate this information with prices.  And we agree to make the economic exchange when both buyer and seller agree on the value of what they’re exchanging.  By agreeing on a sales price.

‘High’ Prices make sure Scarce Resources that have Alternative Uses are Always Available for those Alternative Uses

In this way prices automatically ration limited resources that have alternative uses.  And directs these limited resources to where their use is valued most.   By automatically flowing to the highest bidder.  This is the hallmark of capitalism.  And why you can walk into any American supermarket and be overwhelmed by the choices available.  But when you interfere with prices you have shortages.  And rationing by government bureaucrats.  Such as the gas lines during the Seventies.  When price controls made gas cheap to buy.  But it was almost impossible to find any to buy.  Because that cheap price for a scarce resource (made scarce by the Arab oil embargo) allowed people to buy it up until there was no more left.  Had we allowed the price to rise we would have bought less gas.  Guaranteeing there would be gas available for those who needed it most.  And who were willing to pay the higher price.

During the height of the Cold War when Soviet defectors came to the United States the American supermarket astonished them.  They never saw anything like it behind the Iron Curtain.  For communism didn’t use prices to manage their resources.  Bureaucrats managed their resources.  Their decisions filled stores with things no one wanted to buy.  And made people stand in line for hours to buy their ration of soap or toilet paper.  Things these defectors could fill a shopping cart with on any day of the week in any American supermarket.  And have money left over to buy so much more.  Thanks to capitalism.

Prices are relative.  Prices that may seem high serve a purpose.  They make sure scarce resources that have alternative uses are always available for those alternative uses.  Yes, the prices may be ‘high’ from time to time.  But these high prices guarantee these scarce resources will always be available to buy.  Unlike a low price.  Which, if too low, it will make a scarce item unavailable.  At any price.  Such as gasoline in the Seventies.

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LESSONS LEARNED #27: “Yes, it’s the economy, but the economy is not JUST monetary policy, stupid.” -Old Pithy

Posted by PITHOCRATES - August 19th, 2010

WHAT GAVE BIRTH to the Federal Reserve System and our current monetary policy?  The Panic of 1907.  Without going into the details, there was a liquidity crisis.  The Knickerbocker Trust tried to corner the market in copper.  But someone else dumped copper on the market which dropped the price.  The trust failed.  Because of the money involved, a lot of banks, too, failed.  Depositors, scared, created bank runs.  As banks failed, the money supply contracted.  Businesses failed.  The stock market crashed (losing 50% of its value).  And all of this happened during an economic recession.

So, in 1913, Congress passed the Federal Reserve Act, creating the Federal Reserve System (the Fed).  This was, basically, a central bank.  It was to be a bank to the banks.  A lender of last resort.  It would inject liquidity into the economy during a liquidity crisis.  Thus ending forever panics like that in 1907.  And making the business cycle (the boom – bust economic cycles) a thing of the past.

The Fed has three basic monetary tools.  How they use these either increases or decreases the money supply.  And increases or decreases interest rates.

They can change reserve requirements for banks.  The more reserves banks must hold the less they can lend.  The less they need to hold the more they can lend.  When they lend more, they increase the money supply.  When they lend less, they decrease the money supply.  The more they lend the easier it is to get a loan.  This decreases interest rates (i.e., lowers the ‘price’ of money).  The less they lend the harder it is to get a loan.  This increases interest rates (i.e., raises the ‘price’ of money). 

The Fed ‘manages’ the money supply and the interest rates in two other ways.  They buy and sell U.S. Treasury securities.  And they adjust the discount rate they charge member banks to borrow from them.  Each of these actions either increases or decreases the money supply and/or raises or lowers interest rates.  The idea is to make money easier to borrow when the economy is slow.  This is supposed to make it easier for businesses to expand production and hire people.  If the economy is overheating and there is a risk of inflation, they take the opposite action.  They make it more difficult to borrow money.  Which increases the cost of doing business.  Which slows the economy.  Lays people off.  Which avoids inflation.

The problem with this is the invisible hand that Adam Smith talked about.  In a laissez-faire economy, no one person or one group controls anything.  Instead, millions upon millions of people interact with each other.  They make millions upon millions of decisions.  These are informed decisions in a free market.  At the heart of each decision is a buyer and a seller.  And they mutually agree in this decision making process.  The buyer pays at least as much as the seller wants.  The seller sells for at least as little as the buyer wants.  If they didn’t, they would not conclude their sales transaction.  When we multiply this basic transaction by the millions upon millions of people in the market place, we arrive at that invisible hand.  Everyone looking out for their own self-interest guides the economy as a whole.  The bad decisions of a few have no affect on the economy as a whole.

Now replace the invisible hand with government and what do you get?  A managed economy.  And that’s what the Fed does.  It manages the economy.  It takes the power of those millions upon millions of decisions and places them into the hands of a very few.  And, there, a few bad decisions can have a devastating impact upon the economy.

TO PAY FOR World War I, Woodrow Wilson and his Progressives heavily taxed the American people.  The war left America with a huge debt.  And in a recession.  During the 1920 election, the Democrats ran on a platform of continued high taxation to pay down the debt.  Andrew Mellon, though, had done a study of the rich in relation to those high taxes.  He found the higher the tax, the more the rich invested outside the country.  Instead of building factories and employing people, they took their money to places less punishing to capital.

Warren G. Harding won the 1920 election.  And he appointed Andrew Mellon his Treasury secretary.  Never since Alexander Hamilton had a Treasury secretary understood capitalism as well.  The Harding administration cut tax rates and the amount of tax money paid by the ‘rich’ more than doubled.  Economic activity flourished.  Businesses expanded and added jobs.  The nation modernized with the latest technologies (electric power and appliances, radio, cars, aviation, etc.).  One of the best economies ever.  Until the Fed got involved.

The Fed looked at this economic activity and saw speculation.  So they contracted the money supply.  This made it hard for business to expand to meet the growing demand.  When money is less readily available, you begin to stockpile what you have.  You add to that pile by selling liquid securities to build a bigger cash cushion to get you through tight monetary times.

Of course, the economy is NOT just monetary policy.  Those businesses were looking at other things the government was doing.  The Smoot-Hartley tariff was in committee.  Across the board tariff increases and import restrictions create uncertainty.  Business does not like uncertainty.  So they increase their liquidity.  To prepare for the worse.  Then the stock market crashed.  Then it got worse. 

It is at this time that the liquidity crisis became critical.  Depositors lost faith.  Bank runs followed.  But there just was not enough money available.  Banks began to fail.  Time for the Fed to step in and take action.  Per the Federal Reserve Act of 1913.  But they did nothing.  For a long while.  Then they took action.  And made matters worse.  They raised interest rates.  In response to England going off the gold standard (to prop up the dollar).  Exactly the wrong thing to do in a deflationary spiral.  This took a bad recession to the Great Depression.  The 1930s would become a lost decade.

When FDR took office, he tried to fix things with some Keynesian spending.  But nothing worked.  High taxes along with high government spending sucked life out of the private sector.  This unprecedented growth in government filled business with uncertainty.  They had no idea what was coming next.  So they hunkered down.  And prepared to weather more bad times.  It took a world war to end the Great Depression.  And only because the government abandoned much of its controls and let business do what they do best.  Pure, unfettered capitalism.  American industry came to life.  It built the war material to first win World War II.  Then it rebuilt the war torn countries after the war.

DURING THE 1980s, in Japan, government was partnering with business.  It was mercantilism at its best.  Japan Inc.  The economy boomed.  And blew great big bubbles.  The Keynesians in America held up the Japanese model as the new direction for America.  An American presidential candidate said we must partner government with business, too.  For only a fool could not see the success of the Japanese example.  Japan was growing rich.  And buying up American landmarks (including Rockefeller Center in New York).  National Lampoon magazine welcomed us to the 90s with a picture of a Japanese CEO at his desk.  He was the CEO of the United States of America, a wholly owned subsidiary of the Honda Motor Company.  The Japanese were taking over the world.  And we were stupid not to follow their lead.

But there was no invisible hand in Japan.  It was the hand of Japan Inc.  It was Japan Inc. that pursued economic policies that it thought best.  Not the millions upon millions of ordinary Japanese citizens.  Well, Japan Inc. thought wrong. 

There was collusion between Japanese businesses.  And collusion between Japanese businesses and government.  And corruption.  This greatly inflated the Japanese stock market.  And those great big bubbles finally burst.  The powerful Japan Inc. of the 1980s that caused fear and trembling was gone.  Replaced by a Japan in a deflationary spiral in the 1990s.  Or, as the Japanese call it, their lost decade.  This once great Asian Tiger was now an older tiger with a bit of a limp.   And the economy limped along for a decade or two.  It was still number 3 in the world, but it wasn’t what it used to be.  You don’t see magazine covers talking about it owning other nations any more.  (In 2010, China took over that #3 spot.  But China is a managed economy.   Will it suffer Japan’s fate?  Time will tell.)

The Japanese monetary authorities tried to fix the economy.  Interest rates were zero for about a decade.  In other words, if you wanted to borrow, it was easy.  And free.  But it didn’t help.  That huge economic expansion wasn’t real.  Business and government, in collusion, inflated and propped it up.  It gave them inflated capacity.  And prices.  And you don’t solve that problem by making it easier for businesses to borrow money to expand capacity and create jobs.  That’s the last thing they need.  What they need to do is to get out of the business of managing business.  Create a business-friendly climate.  Based on free-market principles.  Not mercantilism.  And let that invisible hand work its wonders.

MONETARY POLICY CAN do a lot of things.  Most of them bad.  Because it concentrates far too much power in too few hands.  The consequences of the mistakes of those making policy can be devastating.  And too tempting to those who want to use those powers for political reasons.  As we can see by Keynesian ‘stimulus’ spending that ends up as pork barrel spending.  The empirical data for that spending has shown that it stimulates only those who are in good standing with the powers that be.  Never the economy.

Sound money is important.  The money supply needs to keep pace with economic expansion.  If it doesn’t, a tight money supply will slow or halt economic activity.  But we have to use monetary policy for that purpose only.  We cannot use it to offset bad fiscal policy that is anti-business.  For if the government creates an anti-business environment, no amount of cheap money will encourage risk takers to take risks in a highly risky and uncertain environment.  Decades were lost trying.

No, you don’t stimulate with monetary policy.  You stimulate with fiscal policy.  There is empirical evidence that this works.  The Mellon tax cuts of the Harding administration created nearly a decade of strong economic growth.  The tax cuts of JFK were on pace to create similar growth until his assassination.  LBJ’s policies were in the opposite direction, thus ending the economic recovery of the JFK administration.  Ronald Reagan’s tax cuts produced economic growth through two decades. 

THE EVIDENCE IS there.  If you look at it.  Of course, a good Keynesian won’t.  Because it’s about political power for them.  Always has been.  Always will be.  And we should never forget this.

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FUNDAMENTAL TRUTH #24: “You cannot lobby a politician unless he or she is for sale.” -Old Pithy

Posted by PITHOCRATES - July 27th, 2010

IT’S A PROFESSION as old as time.  Politics.  Prostitution, too.

Hooker:  Hey, baby, you got girlfriend Vietnam?

Joker:    Not just this minute.

Hooker:  Well, baby, me so horny. Me so horny. Me love you long time. You party?

Joker:    Yeah, we might party. How much?

Hooker:  Fifteen dolla.

Joker:    Fifteen dollars for both of us?

Hooker:  No. Each you fifteen dolla. Me love you long time. Me so horny.

Joker:    Fifteen dollar too boo-coo. Five dollars each.

Hooker:  Me suckee-suckee. Me love you too much.

Joker:    Five dollars is all my mom allows me to spend.

Hooker:  Okay! Ten dolla each.

Joker:    What do we get for ten dollars?

Hooker:  Every’ting you want.

Joker:    Everything?

Hooker:  Every’ting.

Joker:    Well, old buddy, feel like spending some of your hard-earned money?

(From the movie Full Metal Jacket, 1987.)

In the above scene from Full Metal Jacket, Private Joker (reporter for Stars and Stripes) and Private Rafterman (photographer for Stars and Stripes) are sitting at a table outside a cafe in Da Nang.  Minding their own business.  The hooker walks up to them.  She initiates the conversation.  She tells them that for a fee she’ll have sex with them.

Please note that it is the service provider that approached the two privates.  They did not go up to random women, offering them money in exchange for sex.  Why?  Because not all women are for sale.  They know this.  It would be a waste of their time to ask random women.   And it would be rather offensive to the laywoman in the street.  Now, Marines may be killers.  But they’re polite to the indigenous population.

When you’re selling favors, the onus is on the seller to find the buyers.  They have to put the word out that they are for sale (ultra-miniskirt, low-cut tops, high heels, heavy makeup, stand on a corner, flash their ‘wares’, etc.).  Or find someone who will broker these sales for them.  A pimp, if you will.  Or a brothel madam.  Or, mamasan, as she is called in Southeast Asia.  A prostitute must initiate the process with the ‘john’ (Hey, baby, you got girlfriend Vietnam?).  Or she goes to a place where other prostitutes ply their trade to a receptive clientele (such as a brothel).

A prostitute is often a victim of circumstance.  Few women seek this life.  They’re not shopping one day when a man walks up to them and says, “Wow.  I find you beautiful and would like to pay you to have sex with me.”   To which she replies, “okay” and leaves one life to start another.  It doesn’t happen like that.   Often it is some misfortune that forces them into the business.  And once there they have but one thing of value that they can sell for subsistence; a young attractive body.  For a limited time.

THEY WEREN’T PERFECT.  The Founding Fathers had their faults.  They knew the evils of a strong central government.  And they knew the dangers of a weak central government.  John Adams wanted to build ‘wooden walls’ (i.e., a navy) to protect America.  Jefferson opposed standing armies and expensive navies.  Washington was a nationalist.  Hamilton, too.  Madison and Jefferson were more states’ rights men.  Hamilton was a capitalist and wanted a national bank.  Jefferson hated capitalism, banks, cities and Hamilton.  It was a rocky start.  They had different views about what America should be.  But the administrations of the Founding Fathers (Washington, Adams, Jefferson, Madison and Munroe) were for the most part honest.  There was partisan fighting, but political corruption was still gestating.   Our first Democratic administration would give it real life.

Government was growing.  There were more federal jobs to hand out.  And with property ownership no longer a requirement to vote, more and more voters had no skin in the game.  People were now voting to have a say in how to spend other people’s money.  You put the two together and you get political patronage and spoils.  Those who help to ‘get out the vote’ to get Democrats elected were rewarded with federal jobs.  The more you helped the better the job.  And when Andrew Jackson won the election in 1828, federal job seekers overran Washington.

It may have started with the Democrats, but soon everyone was using the spoils of an election victory to repay their most loyal supporters.  And government continued to grow.  Back then, it was just politics.  Egregious, but just politics.  Patronage and spoils turned into graft and kickbacks.  And the bigger government got, the more money poured into and out of Washington.

Soon, congressmen, senators and presidents steered legislation and/or policy in exchange for sweetheart mortgage deals, vacation junkets, campaign contributions, legal defense funds, retirement of campaign debt, libraries, etc.  They were now offering services for a fee.  And for a lot more than subsistence.  During a limited time.  Due to the circumstance of holding public office.  Now, they’re not saying “me love you long time,” but they are taking money and someone is getting screwed.  And it’s a pretty sweet deal.  The prostitute has to earn her money the hard way.  She has to put out.  A politician, on the other hand, doesn’t.  They get rich the easy way.  While the public takes it up the pooper.

PEOPLE HATE LOBBYISTS.  They hate their influence.  They hate Big Pharma, Big Agra, Big Oil, Big Finance and the other ‘Bigs’ that lobby Big Government.  But these ‘johns’ only exist because politicians are more than willing (and make it known) that they are for sale.  You gotta pay to play in Washington. 

Are we to believe that politicians are as pure as the wind-driven snow until a lobbyist corrupts them?  Yeah, right.   If you believe that be wary of anyone trying to sell you a bridge.  It’s a game.  And they write the rules.  And if you don’t play nice, they can make it pretty unpleasant for you.  Anti-business legislation, justice department probes, attorney general investigations, public attacks by administration officials, etc.  Nasty things for a business.  And costly.  Often the cost of avoiding these (i.e., playing the game) is a cheaper option.  The business that does not lobby, then, may find themselves under assault by Big Government or at a disadvantage against their competitors who do.  So they enter the fray, hedging their bets by throwing large sums of money on both sides of the aisle. 

And even though the Republican Party is supposed to be the party of Big Business, have you seen who Big Business often contributes to?  More times than not they’re in bed with the Democrats.  Who did General Electric endorse in the 2008 election?  Obama.  Why?  You tell me.  For I have no idea.  They make MRIs.  And electricity-generating windmills.  I’m not sure how they could benefit by an administration that was going to reform health care and promote green energy.  It just baffles the mind.

THE CORRUPTION CONTAGION knows no party lines.  Unabashed greed is universal.  Especially with other people’s money.  Washington has become what the Founding Fathers feared.  Big, powerful and awash in cash.  Even during record deficits.  The days of disinterested public service are long gone.  Getting to Washington has become the objective.  Not what you do when you get there.  Because if you make it to Washington, you leave it rich.  And live comfortably ever after.

And now I must apologize to prostitutes everywhere.  For they truly earn their money.  It is unfair and unjust to compare them to politicians.  And the ultimate injustice is the fact that politicians enjoy their services.  One of the perks of being in Washington.  High-priced call girls at your beckoned call.  Paid for, of course, by others.

www.PITHOCRATES.com

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