I've Been Away

Here's why: http://nextyearinzion.blogspot.com/2009/09/summer-of-miracles.html

Conservative Community Organizer

With a community organizer-in-chief as President of the United States, I have been thinking about what assumptions need to be changed in order to keep America vibrant and dynamic.

• First, people need to be disabused of the idea that the Federal Government does everything. Ceding that much power to faceless, unelected bureaucrats kills local contol.
• Second, liberal community organizers like ACORN have one purpose - to obtain federal money to support their cause. A real "community" organization eschews outside control.
  

In Democracy in America, Alexis de Tocqueville pointed out how many things were accomplished by voluntary associations in America. If people think the feds will do everything, they won't get involved.

I am convinced the only way to really change the course of the country is to have real community organizations who don't get funding from Washington. Concerned citizens will be informed and involved.

Equality?

As long as it is possible for differences in outcomes (i.e. there are both rich and poor people in society), there will be winners and losers. People have differing skills, talents, work ethics, education, opportunities, and a little luck. Some people are uncomfortable with inequality, and extreme inequality is bad for society; if only a very few control all the profits, then the standard of living for society at large will be harmed,

The only option other than differences in outcomes is that everyone is poor. So guaranteeing similar results would be bad for society. The main role governments should strive to fill is to make sure there is equality of opportunity. Equality on the front end is actually possible, while equality on the back end is impossible without spreading misery equally.

Equality on the front end means people can obtain education, avoid discrimination, and that the broader economy is growing so that there are ample jobs to replace those displaced by economic “creative destruction.”

Poor People Are Good For The Economy

I had a conversation on a Southwest flight a couple of months ago with a liberal fellow who was an environmental consultant for mass transit (as I remember). He had a few interesting points. One was that he spoke well of Jimmy Carter (specifically about solar panels being put on the White House - which Ronald Reagan removed). I had never heard positive words about Carter before.

His other point was about food stamps. He said the math works out to about $4 a day for food. His complaint was that you can't live off that. If I were quicker with words, I would have said, "Good." I don't want foods stamps or welfare to be too comfortable. Otherwise, people will be satisfied with government largesse.

Poverty and hunger can be a strong motivator. Handouts breed laziness. In fact, handouts likely decrease prosperity for those who receive them. In my international economics textbook, I read that the same phenomenon occurs with government aid. International aid has nothing to do with improving economic growth.

Besides, in the United States people are generous and eager to help those around them. Private initiatives to relieve suffering are more important anyway. And private help, unlike government help, is designed to be temporary; when people no longer need help, they will be able to stand on their own two feet.

My grandpa was a branch president for The Church of Jesus Christ of Latter-day Saints in Dumas, Texas about 45 years ago. He was working with a family facing some economic hard times and was using Church resources to provide work for them so they could earn money. Another member of the branch was employed by the government welfare program, and had the needy family placed on welfare. His reasoning was that if he didn't have enough people on welfare, he would lose funding. Once the family was on welfare, the were not interested in working.

With too much easy money, a generation is raised to believe that they are owed something by society. Nothing could be more dangerous to long-term economic growth than an increasing population not producing anything, but who demands a great deal. So poor people are good for the economy, if, and only if, they are given the motivation to rise from their poverty. In this country, there is plenty of opportunity, so if someone doesn't grab it, it is because they don't try.

What Do Tea Parties Mean?

I heard reports of several of those Tax Day Tea Parties. It sounds like even smaller locations had thousands in attendance. There were certainly hundreds of thousands nationwide who attended. Just one tally of locations had over 134,000 people attending rallies across the country. And just think, ACORN didn't even have to bribe any of the protesters to show up.

Due to work, I was unable to attend the closest tea party, but I was there in spirit. If I was there I might have seen something like this: I have to feel sorry for the reporter. She is likely to become one of the most ridiculed people in the nation.

I think Obama has reawakened an American ideal from the Greatest Generation: hatred of debt. My grandparents were children of the Depression and saved and lived modestly their whole lives. They were not going to take any big trips like Hawaii until "their ship came in." By the time they were both near 80 they had a great retirement fund, but were too old to travel extensively. When my sister and I were both off to college, they moved to Houston to be near more of their grandkids. They paid off their new house in less than 5 years. They were not slaves to debt like most of America seems to be today.

People like the reporter above don't get that taxes are not necessarily the problem with the government today. Taxes are still relatively low because of the Bush tax cuts. But they expire soon. And everyone knows that debt must be repaid. The size of government is the problem. If government expands freedom is curtailed. (Some freedom should be curtailed, like the freedom to do dog fighting or steal identities.)

If government grows now, taxes MUST increase in the future. That is the problem. And that is why so many families were at those protests with their children. Parents want to leave America better than they found it, and profligate debt will make that impossible.

The best protest sign in the pictures says:

OBAMA: CHAINS YOU CAN BELIEVE IN

UPDATE: Apparently CNN has taken down the vidoe that makes them look so bad. Here is another version with that same "reporter" discussing things with another protester: That lady is correct, Republicans and Democrats are dirty, and both are to blame for excessive spending.

Apparently I am an Extremist

Just in case anyone from DHS reads my blog, I am no threat to national security. This report is ridiculous. Check out this footnote:

Rightwing extremism in the United States can be broadly divided into those groups, movements, and adherents that are primarily hate-oriented (based on hatred of particular religious, racial or ethnic groups), and those that are mainly antigovernment, rejecting federal authority in favor of state or local authority, or rejecting government authority entirely. It may include groups and individuals that are dedicated to a single issue, such as opposition to abortion or immigration.

So lets get it straight, supporting federalism, opposing abortion, or distrusting broadening federal powers makes you an extremist.

Page 3 has a great line:

Anti-Semitic extremists attribute [recent financial] losses to a deliberate conspiracy conducted by a cabal of Jewish “financial elites.”

This report is so broad it means nothing. The so-called rightwing of this country is constantly accused of Israel-loving. And yet now they are anti-Semites.

Even better is this line on the next page:

Antigovernment conspiracy theories and “end times” prophecies could motivate extremist individuals and groups to stockpile food, ammunition, and weapons.

Now all Mormons are part of the dangerous rightwing movement. The name of the Church has "Latter-day" in it for crying out loud. We have a long tradition of prophecies about the collapse of corrupt government, and have been counseled to stockpile food since the Great Depression. That proves it. We are a threat to the country.

Holy smokes.

Want a little more? Here:

Debates over appropriate immigration levels and enforcement policy generally fall within the realm of protected political speech under the First Amendment, but in some cases, anti-immigration or strident pro-enforcement fervor has been directed against specific groups and has the potential to turn violent.

There goes the First Amendment. I am a little tired of the idea that opposing amnesty makes you anti-immigration or racist. Come here legally and adopt American culture and language and you will be welcomed with open arms. (Oh, and don't just immigrate to fill our welfare roles.) The crimes committed by gangs of illegal immigrants is far more dangerous than anything the rightwing extremist might do. The next section promises to threaten the Second Amendment.

Of course this comes out just in time for the Tax Day Tea Parties tomorrow. Everyone who attends is probably considered a threat by Obama's Administration. The thing is it is a genuine grassroots effort. These things have spontaneously sprung up all across the country. No one person can take credit for this (except perhaps Obama).

The threats of violence need to be taken seriously, but this report is broad enough to label everyone who voted against Obama as a threat to public safety. There is nothing specific enough for law enforcement agencies to act on in this report. Things probably haven't changed a lot, but the safest parts of the country last time I heard tend to be more conservative.

Gay Marriage is No Longer About Gay Marriage

I have come to a realization. The gay marriage debate isn't even about gay marriage. The same is true of other cultural battles going on in the nation today. I don't know when the switch was made. It may have been recently, or I may have just noticed it.

The gay marriage and abortion debate are all about the freedom of religion. In a very real way, those who oppose gay marriage and abortion for religious regions are considered second-class citizens by those in the highest levels of government today.

I have been reading how Obama is working on removing a protection put in place in the last days of the Bush administration. That protection allowed doctors who have moral objections to abortion not to perform that act.

This video is from a group dedicated to defending marriage and highlights a few real examples of the gay marriage debate going much further that gay marriage.

To Continue the Ongoing Discussion:

A fair response.

My favorite of your links was the one on Wartime Prosperity. I now agree that it was not WWII that got us out of the Depression. It really didn't end until after WWII was over in 1945. It makes sense that war would not increase prosperity. It channels goods and production capacity away from the private sector. The prosperity came after war production capacity was shifted to consumer production.

I read a fantastic book last week called The Venturesome Economy. I will probably put my analysis up on this blog at some point. The author gives some strong arguments on what increases the prosperity of a society.

I actually agree with your points 3, 4, and 5. Just to back up your links in point 5, here is a link from 1999 that predicted some of the recent economic bailouts. The social science research shows that home ownership is generally good for society. So the policy gurus (in both parties) naturally tried to increase home ownership. They assumed correlation equaled causality. In other words, because people who owned their own homes commit fewer crimes they wanted to make it easier for more to own homes.

A more appropriate causality would be certain stabilizing decisions (like a steady job, controlling debt, pursuing education, etc.) are the cause of both low crime and home ownership. Lowering the standards of home ownership did nothing to prevent crime.

The only objection I have is you relying on Media Matters to refute the accusations against Barney Frank. They are at least as partisan as Rush Limbaugh.

I do agree that appropriate regulation would have prevented much of this mess, but the idea that Barney Frank is guiltless is almost laughable.

Here are a couple of videos:

The Budget Nightmare

As an update to this post, I ran across another chart which details projections based on the Obama budget:
America faces tons of problems right now, some of which are George W. Bush's fault, but most of which result directly from criminal actions of Congressional Democrats like Barney Frank and Chris Dodd. The core of the problems result from too much debt. How on earth can more debt solve problems caused by excessive debt?

Update 1: More charts are here.

UPDATE 2: Check this out:

The best line is: "You cannot spend your way out of recession or borrow your way out of debt."

Stealing Elections - Revisited

I have previously worried about illegitimate election results, but this gets worse as time goes by. Now it comes out that Obama's old friends at ACORN will be helping recruit people to conduct the 2010 Census. No conflict of interest there. Oh, wait.

Here are some problems I see with that:

• Political control of the Census will corrupt the results.
  
• ACORN is already heavily invested in voter fraud and Census fraud makes the job easier.
  
• Fake residents will be created, inflating the population of an area with high concentrations of Democrat voters. This will mean Democrat voters can be spread over more congressional districts making a Republican comeback more difficult.
• Opposing ideas will be unable to rise to the surface because of insurmountable (illegitimate) majorities in Congress.
  

Barack Obama's margin of victory in the general election was large enough that voter fraud didn't play a deciding factor in his victory. But his fundraising irregularities may have given him the advantage over Hillary in the primaries.

I have no problem with elections where the guy I didn't like legitimately gets more votes than my guy. I will just try to support a better candidate next time around and hash out the best solutions possible in the arena of ideas in the interim. But I greatly fear a few years down the road when some sleazy candidate is foisted on the public by fraud. There will be no bounds to the harm they could do to the country.

We Get It Wrong Too Often

I was reading another friend's blog and he had a link to this fantastic talk from Mike Rowe, the Dirty Jobs guy.



This got me thinking about my calling at Church. I am the Elders Quorum employment guy. I am supposed to help people find jobs. Which is weird, because I have never looked for one. I have either started my own business or worked with my dad.

In that talk, Mike Rowe mentions that trade schools - for plumbers, electricians, welders, carpenters, etc. - have had dwindling enrollment for years. But I would bet that law schools, MBA programs (like the one I just finished), and other things like that have had more graduates each year for a long time. Mike says we have declared war on work. And he is right.

Last fall, I was at a Steven R. Covey speech for the DFW Chapter of the BYU Management Society. He said something I have never forgotten:

Retirement is an apostate principle invented by Satan.

Said another way, whoever doesn't work is dead. And all kinds of work need to be glorified, not just the glamorous stuff.

There are a lot of smart, educated people in my ward, and I only know of one who is training to be a plumber. The thing is, he may have made a shrewd decision. The infrastructure in this country is in bad shape in a lot of ways. His skills will still be in demand long after those of us with more education have had to switch careers fifteen different times.

In the 1930s, the Church Welfare Program was instituted:

to set up, insofar as possible, a system under which the curse of idleness would be done away with, the evils of the dole abolished, and independence, industry, thrift, and self-respect be once more established amongst our people. The aim of the Church is to help people to help themselves. Work is to be re-enthroned as a ruling principle in the lives of our Church membership.” (Conference Report, October 1936, p. 3; see link here.)

This is partially a self-indictment, but everyone today wants to be a big wig; they want to be CEOs, big lawyers, or have political power so they can be rich and famous and then they won't have to work. CEOs, lawyers, and politicians have a role, but it is secondary. They (we) need to have a broader view of what their self interest is.

Joseph Smith put it (approximately) this way:

Self-aggrandizement is a true principle. But it can only be exercised on one plan or principle: that you seek to lift others first.

If today's cultural vanguard in business, politics, or the media acted on that principle, they would be far more wealthy than they are now.

(Cross-posted at my other blog.)

Is There A Difference Between Republican and Democrat Presidents?

I was reading a friend's blog and he made the argument that the national debt goes up under Republicans and decreases under Democrats. He also notes that the raw debt numbers are not as informative as a comparison of debt to GDP would be. Well, I ran across that chart today and thought I would post it:
This chart tells more of the story. Newt Gingrich's Contract With America brought down the deficit under the Clinton years, making his budgets pretty successful and George W. Bush is not the bogeyman the Left makes him out to be. Bush responded to the 2001 recession with some deficit spending and then by 2006 was bringing it back down as a percentage of GDP. Only the financial meltdown brought the deficit back up.

Now Barack Obama has dwarfed anything Bush ever did. And it only took him two months. Bush's people consulted with Obama's people in the bailouts, so Bush doesn't bear complete blame for that debacle. As the article above points out:

In 2010, Obama envisions a reduction in the deficit to $1.17 trillion. He also assumes a 3.4 percent increase in GDP between 2009 and 2010, which would mean that the deficit as a share of GDP would decline to 8 percent. That's a very optimistic forecast that actually weakens the foundation of the budget document itself.

There is nothing new or responsible about Obama's budget.

Just For A Smile

I saw a shirt from ThoseShirts.com, and thought I would share it:

Real Stimulus, cont'd

A friend responded to this post by saying:

there's only two ways out of this: kick start spending (the gov't is the only one with deep enough pockets to do that now) or drastically revalue assets. if we did the latter, almost every bank in america would fail.

I wanted to respond here and elaborate so my thoughts didn't get lost in the comments section.

The government is the only single payer with deep enough pockets, but that is the problem. I don't want one payer. I want 150,000,000 individual wage earners out there spending money. 70% of the economy is private individuals spending money. Isn't it better to give more power to the 70% than the 30%?

Having a FICA holiday for a year is the fastest and cheapest way to kick start the economy. I would get more than $700 a month to spend, save, or invest.

And the other thing is that there is tons of cash out there in the economy. No one is willing to spend it until the government has one plan and sticks to it.

As long as there is massive uncertainty about what Geithner and Obama will do (it's not like they even know what they are doing - every time either one opens their mouth about the economy the Dow Jones loses 300 points) everyone with cash is going to sit on it.

Just imagine if people making more money than me are behind on their mortgage and they get to keep more of their wages. They will catch up on their mortgage. Those who have no debt will be free to save or invest as they see fit.

That is the only fair and just way to do this. Otherwise, the wise stewards are bailing out the unwise steward and we just dig a deeper hole. Nobody wants to pay someone else's mortgage.

Real Stimulus

The more I read about Obama and his spending, the more hopeless I am about the future of economic growth in this country. I had a real estate class last semester and one guest speaker said he would work through the first part of the year until he reached the 70% tax bracket. Once he got there, he would sit around all day and play cards.

He said, "I am not going to work for a 30 cent dollar." If Obama keeps up his spending, we will be back there soon. I will go fishing before I work for a 50 cent dollar. Economic growth will only come when the most productive have a reason to work their tails off all year. And I don't want to be lectured by Joe Biden that it's my patriotic duty to pay more taxes.

The biggest problem with Obama's spending is that it will never go away. Bureaucracy is the only thing humans have ever created that borders in immortality.

The government's appetite for our money is insatiable. The worst parts of Obama's spending is that most will be spent after the recession is over and that none of it will stimulate job growth.

It has become clear that the cheapest and most temporary way to stimulate the economy would have been to collect no FICA taxes this year.

If there were no FICA withholdings from any American worker this year, they would automatically stimulate the economy. They would save, pay off debt, pay for their mortgages, and go out and buy new stuff.

I have already had over $1500 of my money withheld. Which means my employer has paid another $1500 to the federal government. That $3000 is most of a month of my salary. If construction slows down too much in Texas, that is the difference between keeping my job and getting fired.

Jonah Goldberg has this analogy for the "savings" in Obama's dishonest budget:

Try this with your boss sometime. First, go buy a Mercedes on the company credit card. Then tell him that you saved money because you were planning on buying a Lear Jet — two years after your mandatory retirement age. Then ask him for an attaboy, or even a raise. See what he says. I dare you.

Read Goldberg's whole article.

Tax the Rich?

Just as a matter of practicality, not raising taxes for someone making under $250,000 isn't really fair. In the places I am willing to live, that kind of money makes for an amazing lifestyle. In parts of California, New York, and Massachusetts, $250,000 is as bad as living below the poverty line. Cost of living determines everything.

Those who are rich as Obama defines it will flee states with high taxes. California, the state we are all supposed to emulate because of its progressive environmental standards and high government regulations, leads the nation in tax paying households leaving for other states. Same thing for Europe. I look at their economy for the past decade and can't understand why we want to copy them.

I have lost half of my IRA. Luckily I was in school and haven't put much in yet, but that is staggering. I have met people who have had to un-retire because they don't have enough savings anymore. And yet, with all this need out there, Obama only cares to advance his agenda - the same things he would have done if the economy were rip-roaring.

The thing about this recession is that it has people clamoring for something to be done. And something should be done, but this bailout stuff is the opposite of help.

The Other Problem with "Changing Momentum"

In supply chain, there is a phenomenon called the bullwhip effect. Basically, when a company is short on inventory, they order a whole bunch to make up for the shortage irrespective of the amount in route. When the previous order arrives and the new order also arrives, they will have more inventory than they have space for.

Now the company has mountains of inventory and they don't make any orders for a long time. Which means their suppliers have nothing to do for a while. Suddenly, the main company runs out of inventory and they have to place a huge order to their supplier who can't meet the order immediately.

That is the problem with having economic decisions made by political figures who only have a 2, 4, or 6 year time horizon. They make decisions that will help them get reelected, but that are not ideal for encouraging long-term prosperity.

In economics, there is an ideal rate of economic growth. For the US and other mature economies, that rate is about 2.5% to 3.5%. They call that range "Goldilocks" because it is not too hot and not too cold.

There may be some short term gains from all this massive government spending, but once the bullwhip effect reaches the money supply, there will be inflation, people's savings will be harmed, and massive tax hikes will be placed on the rich (who are the only ones who pay taxes anyways).

The Problem with Bushonmics aka Obamanomics

I make no distinction between the way Bush and Obama have handled the economic uncertainty since last fall. They have had the same problem. They have no freaking clue what to do other than throw spaghetti at the wall and hope something sticks. The bank bailout at the end of Bush's term was just a random number plucked out of the air that sounded big enough to do something to help. Obama's pork-laden stimulus bill is no different. They are just copying the "bold experimentation" of the FDR years.

There is a problem with that approach. There is no certainty or consistency in the market. Obama complained last night that banks are not lending money to get businesses going again. There is a reason for that. If I run a bank, and know that the government is heaving loads of cash out the treasury doors, I am not going to lend a penny. Why?

I don't want to lose my money. If I make a loan to a company that gets bailed out, I probably will never see the money again. And Obama will say it is my patriotic duty not to seek redress. I know people who are stepping in where banks won't and making business loans at confiscatory interest rates and earning good money. Provide a service; collect a fee.

Since September the stock market has been in free fall. The major reason for this is uncertainty. No one, not even Obama, knows what Obama will do. As a business leader, my responsibility is to make the best decisions I can with all the information I can gather. There is no telling what load of manure this Congress will drop next, and until these issues are resolved, I can't invest in anything.

This uncertainty keeps private investors out of the stock market and keeps businesses from investing in new equipment which will improve their operations. Millions (of people and dollars) will stay on the sidelines until there is a resolution. I personally will not invest if the government will be taking over my business. Until I know my investment won't be confiscated, I will keep my money where it will be 100% safe, even if inflation costs me some value.

Two More Things on the Stimulus

I would love to see a little more about this, but land speculation has brought down banks forever. Church history makes that clear. The Kirtland Bank fell along with hundreds of other banks in the 1830s.

Adams Smith was right: http://tinyurl.com/c9jyoj

The most important thing is that most debt never stimulates anything. Debt only limits future growth. That is why the Church talks about only borrowing for an education and a home. All other purposes of debt are dangerous. If I borrow money for a TV, I temporarily stimulate the economy, but later resources that could have bought other stuff is instead eaten up by interest payments.

Changing Momentum?

I have been pondering the comments from a friend about the economy. He basically argues that there is a massive downward momentum and the government is the only institution which can change the momentum. I have been uncomfortable about the analysis but couldn't quite decide why (other than the obvious that I don't trust government spending).

The real issue is that there was a bubble and it needed to burst. In recent history, there was a tech stock bubble, a crude oil bubble, a food price bubble (corn, wheat, rice, etc.), a farm land price bubble (this is related to the food bubble), and a housing bubble. I may have missed some, but those are the big ones.

A bubble specifically means that an item is inaccurately valued by the market and it increases in value. Those investors trying to ride the next wave buy, buy, buy. The increase in buyers drives up the price. Prices are determined by the expectations of future gains. Everyone bought houses because they could get cheap money and the value was appreciating.

Whenever there is a bubble, there must be a correction. That is because the market learned that it had made wrong assumptions about the value of the future earnings from an asset. Any attempt to prevent the correction will prolong the downturn.

Looking specifically at the housing bubble, there were several contributing factors.

• Cheap money from abnormally low interest rates (the Fed was fighting inflation without watching other things),
• An increase in the supply of buyers (they were attracted to the quick profits),
• Separating loan origination from the risk of loan default (liar loans came from mortgage agents being paid ONLY for signing up a person for a loan, not their ability to pay it back - people didn't have their income verified),
• Government over-regulation that forced banks to loan money to those they knew wouldn't pay them back (home ownership is viewed as a good thing for society, so they used Fannie Mae, Freddie Mack, and the Community Reinvestment Act to get people in homes their credit worthiness and income didn't justify),
• Congress accepting massive political contributions from the institutions they "regulated" (Chris Dodd, Barney Frank, and others - yeah, no conflict of interest there),
• Financial institutions packaging mortgage-backed-securities as high quality investment vehicles for hedge funds (banks had no way to value the liar loans and the securities only work in a perpetually appreciating housing market - oh, and by the way, there are credit card backed securities too. If the recession is long enough and income decreases enough, people will default on credit card payments just like their mortgages. Then all those financial instruments will have to be written off the balance sheets, too.)

All of that to say that the decrease in asset values is necessary at this point. Government bailouts are just propping up the inaccurate values and prolonging the bubble. The real issue in my view is a debt bubble. And debt makes us slaves to our creditors. This bubble has to burst. Consumers need to live within their means, and government needs to stop borrowing from future generations to buy votes now.

The money to pay for corporate bailouts is either borrowed or printed out of thin air. The obvious problem of this new money is that inflation is next. The last time we had high taxes and inflation was not a time of economic growth in this country.

Every time one of these asset pricing bubbles has burst, economic prosperity was on the other side. The time to bail out this economy would have been about 5 years ago. Now it is too late. This needs to run its course so the world can get back to work.

UPDATE: I added a link above to a New York Times article predicting the bailout of Fannie Mae from back in 1999.