This Week in Government Failure

Cato has a great blog series called "This Week in Government Failure"

Capitalism has failure too, but its kind of failure actually benefits society. Winners and losers frequently trade spots, and more often than not, the loser is stronger than when they started. It's kind of hard to say that about people in politics, or economic systems that make it difficult for the winners and losers to have rematches.

Opposition to Obama is NOT Racist

Jimmy Carter, Lawrence O'Donnell, Janeane Garofalo and Keith Olbermann better pray to God (or Government) that there's never a conservative black president, because we're saving these clips!

Just because racists oppose Obama, does not make the opposition racist. Many conservatives were afraid of Obama's presidency, not because of the man's skin color, but people of the same skin color labeling conservatives and their opposition racist. If Hillary was elected and did the same things, the racist people and signs would be replaced by sexist people and signs. And if a black or female conservative would be elected, there would be racist and sexist signs as well. Perhaps not as many, but Democrats definitely have racist past. Sen. Byrd (D) was in the KKK the party supported slavery. Many claim that Democrats passed the Civil Rights Act, but a higher percentage of Republican congressmen voted for it than Democratic congressmen, In both houses!

If you like your health insurance...

"If you like your doctor, you can keep your doctor. If you like your health care plan, you can keep [it]...."

Umm, what if I lose my job? What if I can't afford my private insurance for a month, and decide to get it back again? What if my employer drops my benefit package?

YOU CAN'T KEEP THEM!

It's the best chance for reform because you're the biggest Lefty since FDR. Only your idea reform simply makes people more dependent on politicians to solve basic problems, like how much health care do I need. You think you know better than I do.

NO. NO. NO, you don't know how much health care I need! You are not all-knowing and "the chosen one". Let me decide instead of taking away my choices in your so-called "exchange".

Sorry Mr President. This plan makes no sense. You CANNOT lower costs AND expand coverage. That is IMPOSSIBLE.

You can EASILY fix a big portion of the problem by:

1. Expanding competition. If I just want catastrophic insurance out of state, I should be able to buy that.

2. End the employer based insurance system. Why the hell is my health care tied to my job when I can freely shop for food, transportation, energy, shelter without my boss being involved.

These two things would lower costs and frustration. You could also address the uninsured problem by expanding and simplifying Medicaid. Those who FREELY choose not to have insurance should be expected to repay every single cent of the cost it takes to save them, OR GO TO JAIL. They are stealing from the hospital. Most could easily afford a $50 per month catastrophic insurance plan, and that should be encouraged.

We need change. Just not the drastic change that's designed to buy votes, cost us dearly and accomplish very little.

Buy American: Geeks go Mercantilist

As a gadget geek, I spend a lot of time at the popular blogs Gizmodo and Engadget. The vast majority of posts on those sites happen to be apolitical. Which cell phone is the latest and greatest seems to be the only topic that can stir up controversy. But the recent economic downturn has everyone thinking dollars and cents, and (sadly) using very little common sense.

Gizmodo's "Question of the Day" asks Would You Pay More To Have Your Gadgets Made In The US? and so far, according to the polling, 65% of respondents say yes in some degree. In the comments, you can see the level of thinking that goes into this poll response:

To be honest, I wouldn't mind all of our products being made in the US. In fact, I'd like to see outsourcing come to an end

And

Yes I would. Spending more money on American product = more jobs = better economy = I'm richer = not minding to pay more.

Anybody who's taken Econ 101, or even knows a modicum of Chinese history can see the glaring fallacy of these statements. The Chinese were THE most advanced civilization UNTIL they became closed off to the outside world in the 15th century. To put it simply, there is only one thing all modern economists agree on and that is the mutually wealth producing benefits of international trade and openness. First popularized by Adam Smith in the 18th century and then expounded upon by David Ricardo, international free trade policies have brought wealth and prosperity to billions of people previously bound to poverty by the caste-like qualities of mercantilism. Even the Chinese get that now and are benefitting, despite their government's horrible humanitarian policies.

You don't even need to think about countries or history trying to understand free trade. Behind sleeping, thinking and breathing, trade is the most common activity that humans engage in, and for good reason. When you take a job, and are working at that job, you are engaging in a mutually beneficial trade: your labor for the employers money. If you were not better off, you would not be working. If the company were not better you, they would not pay you. You are both better off than before the job offer was accepted. When you shop, even before you get to the register, you have traded your some of your free time comparing deals in order to get the most benefit for your money, and the store STILL makes a profit! Although, it's smaller than the one they make off the impulse buyer.

There are countless examples of how free trade has made all involved parties better off. So why does everyone hate their job, hate buying from Chinese companies and companies that outsource, but continue to work at their "lousy" job, shop at Wal-Mart and buy iPods? Because the alternatives suck even more. It would be nice to be Kobe Bryant and get paid millions to do something you love, or be a millionaire's son and not have to work at all, AND have plenty of money NOT to shop at Wal Mart, or spend X dollars more on a 100% American made iPod. But we don't have those alternatives available. No, the alternatives we have involve changing careers (and usually taking a reduction in pay), studying harder for some certification, working less or not working at all, and shopping at more expensive stores. Some people make these sacrifices, because to them, it enriches their lives. Happiness cannot be bought in a store or haggled over. The price (what you give up for it) is unique for everyone.

The human spirit craves change AND security at the same time. That's what makes us so antsy; so fickle; and so creative. We want to improve our financial situation without losing everything we've worked so hard for, even though we're not entirely satisfied with the fruit of that labor. So improving means saving the most money via prudent trading and security means complaining about everyone else who does that, especially corporations like Apple.

So to all those who favor buying American, I ask this: why wouldn't you also favor buying local; just within your city? What makes Detroit so special that you wouldn't try to start a car company locally as to benefit your community, or even a bike company? Why would you buy anything out of state that could be produced in your state? Because you share something with Americans all across the country, but not people in a different country? How do you know you share something with them? You've never even met them! Why not let people you've never met before compete for your hard earned dollar, regardless of geographical or political affiliation?

Because your friendly local politician or labor leader convinced you that it's okay to discriminate based on the nationality of the workers who made the product that you wish to buy. But it's not okay, like racial favoritism isn't okay. Protectionism is affirmative action for American companies who don't like to compete for your hard earned dollar. It also gives bureaucrats job security because they get money simply because foreigners want to sell goods here. (How dare they!)

I have a new slogan: Instead of Buying American, Just Buy What-You-Can. Buy the opposite of what others think you should buy, just to spite them.

Or just join the herd and be P.C.. It's a free country!

Obama: Get the country back on track! Here's how:

1. Remove loopholes and boost tax revenue by enacting a Flat Tax.

2. Reevaluate the War on Terror and the ineffective offensives in Afghanistan and Pakistan. Our allies will only pick up the slack if they are forced to.

3. Improve education by allowing schools and teachers to compete.

4. Improve health care by allowing hospitals, insurers, drug companies and doctors to compete.

5. Improve government services by eliminating the influence of special interests groups.

6. Legalize and tax drugs.

Moral Hazard: Bailouts and Regulation

Since the beginning of this economic crisis, there has been a steady demand for more control and regulation of banks and financial institutions in order to protect retirement accounts and the economy as a whole (jobs). That reaction is engrained in our nation's history as government regulation has only increased in response to banking and accounting scandals and asset bubbles. Not once has it decreased. Yet, after one year of dramatic government intervention, it is all too clear that our financial system remains as fragile as it was a century ago, despite the creation of countless government agencies whose mission is to protect and strengthen that system.

Some deregulation did take place in the 1980s and 1990s, but the only policies that could be tied to the current crisis have only exacerbated the fallout of the housing bubble, such as the 1998 bipartisan Gramm-Leach-Bliley Financial Services Modernization Act, which relaxed Glass Steagall provisions (leading to more securitization a la Freddie and Fannie) and exempted financial products such as CDSs. There are some like, Paul Krugman, who claim the act was instrumental in the crisis, but they cannot explain how the original laws would have saved Freddie and Fannie, who wasn't affected at all by the GLBA, and why European banks, which never had anything like Glass Steagall, did not suffer the same problems. The amount of financial regulation since 1907 dwarfs the recent deregulation, which at the very least helped financial institutions stay in business as they were acquired by healthier banks.

It is a widely held view that the asset bubble--fueled by cheap loans (artificially low interest rates) and easy credit, both for borrowers (think low/no doc loans) and investors (think bogus triple-A ratings)--had to pop sometime. There had never been a bubble like that in human history, and low interest rates only encouraged consumption, which meant that MBS investors lacked adequate capital in chasing these diminishing returns. But that didn't stop them.

Why didn't it? The investors purchased an insurance policy from Congress, unbeknownst to taxpayers. But the deal was too good to be true, for Congress, that is. For a nominal amount of campaign contributions, the bankers were able to get stinking rich, knowing all along the risks were being mitigated. The extent of the S&L Crisis of the 80s was a direct consequence of deposit insurance, and eventually cost taxpayers $200 billion, while many kept their profits of their risky practices. Only a handful went to jail. A decade later, the creditors of the Long Term Capital hedge fund, (the names might be familiar to you: Bear Stearns, Merrill Lynch and Lehman Brothers) were bailed out by the Federal Reserve. Over the years, as sort of a quid pro quo, those same companies donated heavily to candidates of both parties, just in case more of their investments should tank. It's no small wonder that two of the three were recently deemed "too big to fail".

These competing forces are actually anti-competitive and destructive. The regulators try to prevent bad behavior while the elected officials are financially compelled to make it all better should the behavior result in trouble. This is analogous to the life of a typical teenager who has a set of rules and responsibilities (regulations), but also enjoys a big safety net in the form of loving parents and free rent (the full faith and credit of the U.S. government). If the rules are broken, the lawn isn't mowed, no biggie, at least the teen won't be kicked out of the house. And most kids get to come home from juvenile hall. This codependent family dynamic apparently has weaved itself to every corner of industry and the bureaucrats who regulate it.

So with the same incentive structure, albeit more regulation and more bailouts, why would we expect different behavior, both on the part of careless investors and corrupt politicians? The pattern shows that problem isn't the undesirable actions that we regulate against, it's the current set of actors and incentives that lead to the undesirable actions that regulation can't keep up with. We need to change the incentives if we expect a different result. Our elected leaders are just as addicted to power as big corporations are addicted to money. This codependent relationship is a destructive monopoly that costs taxpayers and investors huge sums of hard earned money, and only by letting them both fail, will the destruction stop.

Tea Time

Growing up in a conservative family, the extent of my government protest was limited to a 1 page fax to my representative opposing Clinton's tax increases. And since then it's been limited to letters to the editor and blog posts. I've never picked up a sign or attended any political rallies. Crowds frighten me because the average IQ drops about 30 points when people get together and emotional appeal takes center stage: typical mob mentality that just gets peoples attention without any kind of coherent message. The G-20 protest/riots are a good example.

Republicans and their rallies are no exception to this rule. Their one size fits all platform of social+fiscal conservatism attracts people who like to expand the government in the name of national security while refusing to do anything about the incompetence in everything else the government does, so long as social issues like drugs and gay marriage are sufficiently fought against. That kind of mob mentality has turned off many small efficient government proponents like myself.

So when a bunch of my fellow Americans, regardless of political affiliation, decided to rally together in the name of a single cause, over-taxation, I definitely took notice. So have many in the media.

Today, the reasonable, and totally non-partisan "economist" Paul Krugman had this to say about Tea Parties:

One way to get a good sense of the current state of the G.O.P., and also to see how little has really changed, is to look at the “tea parties” that have been held in a number of places already, and will be held across the country on Wednesday. These parties — antitaxation demonstrations that are supposed to evoke the memory of the Boston Tea Party and the American Revolution — have been the subject of considerable mockery, and rightly so.

The G.O.P. has as much to do with overtaxation as the Democrats. Krugman conveniently forgets that the poor showing for Republicans the last two elections has a lot to do with their embarrassing abandonment of small government principles under George W. Bush. A lot of Democrats justify their increase of government spending because Republicans were no better under Bush.

Republicans typically act like Democrats when they have power and Libertarians when they're out of power. But acting like our Founding Fathers in protest of an out of control tax and spend, spend, spend regime? Now that's something new. And that's why I plan on attending my local tea party.

Critics of the Tea Parties think that if anyone protests big government or tax increases, then it must just be the work of bitter Republicans in response to the election. But how come they've never taken to the streets before? Why is it not obvious that certain policies of this administration AND the last one are so unpopular and go against everything this country was founded on?

If you believe government is out of control, that they work for us, not the other way around, it's time to send them a message. Please vote on the poll to the left if you plan on attending a tea party. And please let us know about your tea party experiences in the comments section below.