Tuesday, September 30, 2008

The Problem With Third Parties

The problem with a third party is that the whole job description for incumbents of either party is to get reelected. Let me illustrate this in a different way. In the soft drink industry, Coke and Pepsi dominate sales. Their high sales allow for massive advertising campaigns. Other than small regional powers, no one can compete with Coke and Pepsi. They have a rivalry with each other, but they completely destroy any smaller competition.

It is the same for Democrats and Republicans. They want to defeat the other party, but most vital is to eliminate all other competition. That way, there are only two real contenders for each seat. Each election, less than 100 House seats are competitive. That allows massive advertising in a few places. No third party could dream of competing with that.

A third party president would be the quickest way to unify Congress. They would destroy any chances that president would have of accomplishing anything.

I can only think of a few ways to lower the polarization of the House of Representatives. They need to eliminate the gerrymandered districts because they just protect the incumbent. Protecting the incumbent keeps the house full of the fringes of both parties. Anyone trying to run from the middle would be wiped out by the more "ideologically pure" candidates.

Coupled with redistricting could be to lower the number of representatives in the House. That would give larger districts and make them harder to gerrymander.

Mark Steyn on the Bailout

Despite a few convincing arguments for the bailout, implementation will be a bear. For this thing not to cause worse problems 10 years from now is highly improbable. Mark Steyn has an observation about he bailout and political elites telling us of impending crisis.
As a general proposition, when told by unanimous elites that a particular course of action is urgent and necessary to avoid disaster, there's a lot to be said for going fishing.
Just look at the recent results on global temperatures:
The four major agencies tracking Earth’s temperature, including NASA’s Goddard Institute, report that the Earth cooled 0.7 degree Celsius in 2007, the fastest decline in the age of instrumentation, putting us back to where the Earth was in 1930.
Global warming hype was far overblown. It was only useful insofar as people and businesses increased their energy efficiency in cost effective ways.

It is problematic about the bailout that people are declaring with glee that the free markets have failed. This is not a free market failure; it is a failure of government being too generous with other people's money. Had the free markets been allowed to assess risk normally without government intervention, there would have been no subprime or alt-a loans. In turn there would have been no real estate bubble.

Friday, September 26, 2008

Jim DeMint: New Senate Hero

I am now a fan of Jim DeMint. This video lays out the whole subprime debacle in chronological order:

Federal regulations were set up to encourage banks to encourage people to live beyond their means. Debt is killer. "Predatory lending" as Obama's people like to call it now was done in order to meet federal requirements and avoid lawsuits from firms like the one Obama worked at in Chicago.


Wednesday, September 24, 2008

A Case For The Bailout?

I am pretty susceptible to arguments against the federal government bailing out Wall Street. Part of my rationale is that federal regulations are very much to blame for the problems on Wall Street. Investors Business Daily has a pretty good diagnosis of the cause of the current financial crisis here.

Basically, banks were told to lend to uncreditworthy people in order to boost home ownership. As usually happens, when the government subsidizes something, it becomes more expensive and a real estate boom followed. The worst part is that the government's efforts to boost home ownership among certain minority groups didn't work. So the only solution was to throw more money at the problem.

Larry Kudlow, at NRO, has a convincing argument here for the bailout (and keeping Congress's hands out of the pot).
When the assets are worked out over time — as they will be once housing and the economy recover — taxpayers will actually make money on the deal.
This isn't some speculative venture either. It has been done before.
This is similar to the RTC story twenty years ago, when Bill Seidman presided over similar asset sales from bankrupt S&Ls and wound up making money for Uncle Sam and his taxpayers.

Monday, September 22, 2008

Newt Makes a lot of Sense

Here is some of what Newt Gingrich had to say about the current economic mess. Sounds about right to me:
Before D.C. Gets Our Money, It Owes Us Some Answers

Watching Washington rush to throw taxpayer money at Wall Street has been sobering and a little frightening.

We are being told Treasury Secretary Henry Paulson has a plan which will shift $700 billion in obligations from private companies to the taxpayer.

We are being warned that this $700 billion bailout is the only answer to a crisis.

We are being reassured that we can trust Secretary Paulson "because he knows what he is doing".

Congress had better ask a lot of questions before it shifts this much burden to the taxpayer and shifts this much power to a Washington bureaucracy.

Imagine that the political balance of power in Washington were different.

If this were a Democratic administration the Republicans in the House and Senate would be demanding answers and would be organizing for a “no” vote.

If a Democratic administration were proposing this plan, Republicans would realize that having Connecticut Democratic senator Chris Dodd (the largest recipient of political funds from Fannie Mae and Freddie Mac) as chairman of the Banking Committee guarantees that the Obama-Reid-Pelosi-Paulson plan that will emerge will be much worse as legislation than it started out as the Paulson proposal.

If this were a Democratic proposal, Republicans would remember that the Democrats wrote a grotesque housing bailout bill this summer that paid off their left-wing allies with taxpayer money, which despite its price tag of $300 billion has apparently failed as of last week, and could expect even more damage in this bill.

But because this gigantic power shift to Washington and this avalanche of taxpayer money is being proposed by a Republican administration, the normal conservative voices have been silent or confused.

It’s time to end the silence and clear up the confusion.

Congress has an obligation to protect the taxpayer.

Congress has an obligation to limit the executive branch to the rule of law.

Congress has an obligation to perform oversight.

Congress was designed by the Founding Fathers to move slowly, precisely to avoid the sudden panic of a one-week solution that becomes a 20-year mess.

There are four major questions that have to be answered before Congress adopts a new $700 billion burden for the American taxpayer. On each of these questions, I believe Congress’s answer will be “no” if it slows down long enough to examine the facts.

Question One: Is the current financial crisis the only crisis affecting the economy?

Answer: There are actually multiple crises hurting the economy.

There is an immediate crisis of liquidity on Wall Street.

There is a longer time crisis of a bad energy policy transferring $700 billion a year to foreign countries (so foreign sovereign capital funds are now using our energy payments to buy our companies).

There is a longer term crisis of Sarbanes-Oxley (the last "crisis"-inspired congressional disaster) crippling entrepreneurial start ups, driving public companies private, driving smart business people off public boards, and driving offerings from New York to London.

There is a long term crisis of a high corporate tax rate driving business out of the United States.

No solution to the immediate liquidity crisis should further cripple the American economy for the long run. Instead, the liquidity solution should be designed to strengthen the economy for competition in the world market.

Question Two: Is a big bureaucracy solution the only answer?

Answer: There is a non-bureaucratic solution that would stop the liquidity crisis almost overnight and do it using private capital rather than taxpayer money.

Four reform steps will have capital flowing with no government bureaucracy and no taxpayer burden.

First, suspend the mark-to-market rule which is insanely driving companies to unnecessary bankruptcy. If short selling can be suspended on 799 stocks (an arbitrary number and a warning of the rule by bureaucrats which is coming under the Paulson plan), the mark-to-market rule can be suspended for six months and then replaced with a more accurate three year rolling average mark-to-market.

Second, repeal Sarbanes-Oxley. It failed with Freddy Mac. It failed with Fannie Mae. It failed with Bear Stearns. It failed with Lehman Brothers. It failed with AIG. It is crippling our entrepreneurial economy. I spent three days this week in Silicon Valley. Everyone agreed Sarbanes-Oxley was crippling the economy. One firm told me they would bring more than 20 companies public in the next year if the law was repealed. Its Sarbanes-Oxley’s $3 million per startup annual accounting fee that is keeping these companies private.

Third, match our competitors in China and Singapore by going to a zero capital gains tax. Private capital will flood into Wall Street with zero capital gains and it will come at no cost to the taxpayer. Even if you believe in a static analytical model in which lower capital gains taxes mean lower revenues for the Treasury, a zero capital gains tax costs much less than the Paulson plan. And if you believe in a historic model (as I do), a zero capital gains tax would lead to a dramatic increase in federal revenue through a larger, more competitive and more prosperous economy.

Fourth, immediately pass an “all of the above” energy plan designed to bring home $500 billion of the $700 billion a year we are sending overseas. With that much energy income the American economy would boom and government revenues would grow.

Question Three: Will the Paulson plan be implemented with transparency and oversight?

Answer: Implementation of the Paulson plan is going to be a mess. It is going to be a great opportunity for lobbyists and lawyers to make a lot of money. Who are the financial magicians Paulson is going to hire? Are they from Wall Street? If they’re from Wall Street, aren't they the very people we are saving? And doesn’t that mean that we’re using the taxpayers’ money to hire people to save their friends with even more taxpayer money? Won't this inevitably lead to crony capitalism? Who is going to do oversight? How much transparency is there going to be? We still haven't seen the report which led to bailing out Fannie Mae and Freddie Mac. It is "secret". Is our $700 billion going to be spent in "secret" too? In practical terms, will a bill be written in public so people can analyze it? Or will it be written in a closed room by the very people who have been collecting money from the institutions they are now going to use our money to bail out?

Question Four: In two months we will have an election and then there will be a new administration. Is this plan something we want to trust to a post-Paulson Treasury?

Answer: We don’t know who will inherit this plan.

The balance of power on election day will shift to either McCain or Obama. Who will they pick for Treasury Secretary? What will their allies want done? We are about to give the next administration a level of detailed control over big companies on a scale even FDR did not exercise during the Great Depression. Is this really wise?

For these reasons I hope Congress will slow down and have an open debate.

And in the course of that debate, I hope someone will introduce an economic recovery act that makes America a better place to grow jobs. I hope the details will be made public before the vote.

For more details on my action plan for getting the American economy back on track and building long-term economic prosperity, you can read this message recorded yesterday to American Solutions members.

This is a very important week for the integrity of the Congress.

This is a very important week for the future of America.

If Washington wants our money, then it owes us some answers.

Tuesday, September 16, 2008

The Perfect Storm

What an interesting time to live in. I just had Hurricane Ike skirt near me. My neck of the woods just got a little rain and wind. As far as power outages go, the counties all around mine were hit harder. I was very fortunate. It is not far to places that were devastated.

I am inclined to pay the "What if?" game. What if world events combined into the perfect storm? Here is my list off the top of my head, in no particular order, of big problems:

- Mortgage crisis - this thing is just getting started. There are mortgages not as bad as the sub-primes that have not gone sour yet. Lots of mortgages were granted to people who didn't verify their income (or exaggerated their income). Just wait.

- All credit dries up and there is nothing left to stimulate the economy until the mortgage crisis is cleaned up.

- All the sovereign wealth funds and foreign investors lose trust in the US economy and stop investing here. That hurts the economy.

- Pakistan - Musharraf is gone and crazies may be have closer ties to the power (and nukes).

- Iran - Mahmoud Ahmidenijad is nuts.

- Venezuela - Chavez is also nuts.

- Russia, loaded with petro-wealth, is looking to become a bear again. With a dying population, they know they need to make a move now to regain old power.

- The US Dollar weakens because the American consumer has nothing extra for anything other than oil.

- Food shortages caused by commodity price inflation.

- Disease running rampant across Africa and other places.

Now, what if all these things blew up - literally and figuratively - at once? I think John McCain, Sarah Palin, Barack Obama, and Joe Biden should all be sent to the loony bin and tested for insanity for seeking the Presidency and Vice-Presidency. No wonder so few actually want that job. It is entirely possible that things will work out well in the end (if the time horizon is long enough, it always works out). I could just be worried because I graduate soon and need to find my way through murky water.

I have my preference on the winner of the next election, but I pray that God helps whoever wins to use the power of the Presidency well. We can't afford to have a president chasing windmills.

Wednesday, September 10, 2008

This From My Favorite Writer

OK, at least one of my favorites, Jay Nordlinger:

Loved something a senior politician told us in Minnesota: It’s hard to run against the Democrats. Because they’re the party that proposes to give people free stuff. And it’s very, very hard to run against people promising free stuff. You have to say, “We, by contrast, will give you the opportunity to make your own way, while keeping a net under you lest you fall too far.”

A Fascinating Article

Camille Pagila has written a fascinating article about Sarah Palin as McCain's VP pick. She may be the most honest liberal writer I have read.

My favorite excerpt:
It is nonsensical and counterproductive for Democrats to imagine that pro-life values can be defeated by maliciously destroying their proponents. And it is equally foolish to expect that feminism must for all time be inextricably wed to the pro-choice agenda. There is plenty of room in modern thought for a pro-life feminism -- one in fact that would have far more appeal to third-world cultures where motherhood is still honored and where the Western model of the hard-driving, self-absorbed career woman is less admired.
From the rest of the article, it is apparent that I would agree with Camille Pagila on very little in the political world. But (as least in this one article) she seems like the kind of opponent where you can state policy preferences, disagree, and let the people decide.

Thursday, September 04, 2008

Obama's Speech Last Week

I figured I would listen to Obama's speech from the DNC last week. I knew it would make me crazy.

A few thoughts: Obama says privatizing Social Security is gambling your retirement. That is ridiculous. People of my generation will never see Social Security unless it gets privatized. The real gamble is to think there will be any Social Security to support retirement at all. No thanks. I am not going to rely on the government for my retirement.

Obama cites the fundamental belief that "I am my brother's keeper." Sounds nice, but the government is notoriously poor at helping anyone. The more that is left in private citizens' hands, the more generous they are. As Reagan said, "The most frightening words in the English language are, 'I'm from the government, and I am here to help.'"

Obama thinks we can end dependency on foreign oil in 10 years. I will call a big BS on that. It will take 20 to 25 years to pull that off. The technology is not even close to viable.

I like the idea of going through the federal budget and slashing programs. The problem with Obama is the people he keeps near him who will influence what he slashes. I bet it will not be deep enough.

Kudos to Obama about what he said about parenthood and fatherhood.

"If you don't have a record to run on, you paint your opponent as someone to run from." Sounds like what Obama's supporters do to McCain and Palin.

Obama correctly chides Republicans about the deficit and spending, but the problem is that they have been acting like Democrats. Obama's proposals will do nothing but expand government and raise taxes on corporations. I wonder what they will do under a higher tax burden. Oh, wait. They will move overseas, raise prices, and cut their workforce.

"Republicans who never thought they would pick up a Democrat ballot, but did." Thank you Operation Chaos. Hehehe.

Overall, a well delivered speech, but I still have no idea what Obama has actually accomplished. He talks a lot about change, but I have no clue about his ability to deliver on it. Besides that, the change he talks about sounds pretty scary.