Friday, December 31, 2010

Legacy Media's Standards Sink Lower: Case of Ezra Klein

 Contrairimairi sent me this video.  Ezra Klein, a guy who works as a reporter for the Washington Post, apparently thought that the Constitution was written over a hundred years ago when it was written over 200 years ago.  The thing that gets me isn't that Ezra Klein is ignorant or that the Washington Post hires ignorant reporters, but rather that anyone bothers to watch a television program on which ignoramuses like Klein appear.

Klein not only lacks basic historical knowledge.  His claim that the Constitution is not binding might come as a surprise to his friends at the American Civil Liberties Union, and, for that matter, Barack Obama, who derives the authority for his criminal administration from that tattered document.  If Mr. Klein and his Progressive comrades think that the central state is going to continue to be taken seriously, perhaps they might consider looking to the Constitution for the few shreds of remaining legitimacy that the sorry-ass government thugs in Washington can claim.

Wednesday, December 29, 2010

Why Participate in the Political Process?

Two economists have discussed why people participate in political processes.  Both books were published in 1970, around when college students were demonstrating at Columbia, Kent State and elsewhere.  The first, Albert O. Hirschman in his book Exit, Voice and Loyalty suggests that there are two alternative methods of expressing dissatisfaction.  Exit is market behavior. If you don't like a pizzeria's pizza, stop going. You exit without voicing disapproval.  In contrast, people often voice complaints.  For instance, my sister was unhappy with her phone service. She complained. When that didn't work she went to the Public Service Commission.  Would she have gone to the Public Service Commission about a pizza?  I doubt it because there is a free market in pizza but a monopoly in her phone service.

Hirschman outlines the times when voice supersedes exit, one of which is monopoly.  Labor theorists have applied this to labor unions.  By establishing elements of monopoly in the workplace, unions have two faces, a monopoly face and a voice face (see What Do Unions Do? by R. Freeman and J. Medoff).  In Hirschman's view, creation of loyalty makes people more likely to use voice rather than exit.  Loyalty is equivalent to what business strategists call differentiation.  If you're loyal you protest because protest costs resources and loyalty increases protest's benefits.

Kenneth E. Boulding's idea with respect to protest hasn't received as much publicity as Hirschman's.  In Economics as a Science  (pp. 82-5) Boulding claims that there are two kinds of discontent, personal and political.   "Personal discontent with a location drives a man to migrate rather than to press for urban renewal.  Personal discontent with existing income drives a man to try new occupations."   Political discontent, in contrast, involves effort to change the political system.

Boulding argues the person with personal discontent is not likely to be politically active and is likely to see political activity as detrimental to his ambition.  In contrast, the politically active person "the revolutionary, the alienated, the dissident, whether of left or right, is apt to be either a middle aged person who has failed in the satisfaction of his personal discontent and become stuck in a location, an occupation or even a marriage from which he cannot escape and which he finds undesirable, or a young person who has found the competitive 'rat race' of the educational and economic establishment too much for him and has decided hat he wil get more satisfaction out of trying to change the system.  It is at least a plausible hypothesis that in social situations where personal discontent is frequently frustrated, economic development is slow and there are rigid class structures and caste structures that prohibit upward mobility, discontent is more likely to take a political form.   On the other hand, it is also true that in rigid and oppressive societies in which political discontent is brutally suppressed and the chances of political change seem poor people get discouraged from political action and tend to express their discontent in private mobility."  

Hirschman's model predicts that those most loyal to the US will protest its decline.  Boulding's model suggests that as opportunity declines protests will be more frequent as more and more Americans face, as I did in New York City in the 1970s and 1980s, declining economic opportunity as the more vibrant firms exit a United States increasingly dominated by privileged special interests and financial institutions.

Understanding Ownership of the Fed

A reader has been communicating with me about the ownership of the Fed. He or she points out that the President and the Congress have the right to appoint the chairman and board of governors of the Fed.  Therefore,  the member banks' subscription to Fed stock does not mean that they own the Fed.  Power, in this view, is the President's, Congress's and the public's.

This argument overlooks the implications of stock ownership.  By definition, ownership of stock in a corporation constitutes ownership of the corporation.  It is true that the President's appointment of the board of governors and the chairman modifies some implications. However, there is another point that is more important. The stock ownership creates a fiduciary relationshipAny corporation must be operated in its owners' interests.  Therefore, calling the member banks' holdings in the Fed "stock" rather than "loans" or "subscription fees" suggests that the framers meant to vest the crucial aspect of ownership in the banks, namely, that the Fed should be operated in their interest and not the public interest.

Bankers work with trusts all the time.  The basic relationship of banks to their depositors is fiduciary. Hence, they instinctively understand what the reader has trouble accepting, that appointment of a trustee on behalf of a beneficiary does not change the beneficiary's underlying ownership. The appoint of a guardian for a minor orphan's assets does not change the orphan's owning the assets.  Likewise, the president's appointment of a Fed chairman does not change the fiduciary relationship the Fed bears to its stockholders, the commercial banks.

Recently, Congress voted down Ron Paul's bill that would have required public audits of the Fed. This is significant evidence that Congress and the public have never believed (to believe that two groups of knuckleheads have any beliefs at all on the subject) that the Fed serves the public interests.  What owner would refuse information about his assets?  One of the fundamental rules about trusts is that the trustee must disclose all relevant information. That Congress does not want the information means that Congress does not think it or the public would benefit from the information.  Hence, Congress and the public do not think that they are the Fed's beneficiaries.

Monday, December 27, 2010

New York and the Legacy Media

In a recent e-mail, Jim Crum uses an excellent moniker for the Democratic Party media: the legacy media.  The phrase is embedded in Jim's important discussion about demographic trends that may undermine the legacy media's influence.  Jim links to a article which notes that the Republican states are growing in population relative to the Democratic states:

"...states that went for Obama saw population declines that will result in fewer electoral votes and states that did not support Obama in 2008 saw their population increase and, as a result, the number of electoral votes they will allocate to a presidential candidate next time.

"The census found the United States population bumped up from approximately 281 million in 2000 to 308,745,538 as of April 1. Regionally, the northeast grew 3.2 percent while the Midwest grew 3.9 percent, the South grew 14.3 percent and the West grew 13.8 percent — making it so states that typically go Republican experienced more growth than predominantly Democratic areas.

"On the Republican side, Texas picked up four seats, Arizona, Georgia, South Carolina, and Utah will gain one seat each while Louisiana loses one thanks to population declines following Hurricane Katrina and Missouri loses one as well. On the Democratic side, New York and Ohio lose two electoral votes each while the Obama-supporting states of Illinois, Iowa, Massachusetts, Michigan, New Jersey, and Pennsylvania lose one and the pro-Obama states Nevada, and Washington gain one and Florida gains two.

"Ultimately, states voting against Obama in 2012 gained six electoral votes while states supporting him in 2008 lost six — a total shift of 12 electoral votes."

Jim contends that one-sided, pro-Obama media coverage will counteract the population trend in the presidential election.  While this may be, I'm not convinced that the Republicans in '12 will do better than they did with John McCain in '08.  McCain would not have been much better than Obama.  As we stand now, the nation is putting band aids on the dike which, Jim notes quoting Edmund Burke, is being eaten away by rats.  Many Republicans are as much rats as Democrats and, besides, the Republican band aids are too small.

For instance, New Yorkers for Growth forwarded to me John Faso's Op Ed in the New York Post, a Republican newspaper. I met Faso at a fundraiser last spring.  Faso makes some good points but fails to address the underlying cause.  Faso observes that New York is going to lose two congressional seats (I hope my Congressman, Maurice Hinchey, is one of them) because of the census.  As well, he notes that more than one million New Yorkers have exited during the past ten years.  He says that Governor Cuomo (once more that horrible sound) ought to declare a fiscal emergency. He notes that the Tax Foundation ranked New York 50th in hospitality to business.  

I wonder what that does to my students' job prospects...the same students who support regulation 10 to 1.  And there's the rub. New York's problems are so psychologically entrenched that the economic wizardry that Faso proposes will not help.  My students, like the majority of New Yorkers, are brainwashed to believe in socialism.  The population believes that economic goods like health care and housing are rights.  Therefore, anyone who works must be taxed to subsidize anyone who doesn't. New Yorkers will favor that to the maximum extent possible until they learn that there is no such thing as a "positive right."  A right can only exist in nature.  You do not have a right to housing in nature. You have to build housing.  If you dig your spot in a cave, I don't have the right to force you to dig my spot in my cave.  But New Yorkers believe that I do. Therefore, there is no hope for New York until it collapses or until the education system is revamped.

Even many brainwashed ideologues among New Yorkers find that the positive rights theory in which they have been indoctrinated does not work.  Some of those who work leave the ones who don't.  But I suspect they take their socialist ideologies with them and then aim to destroy the states to which they move.  Thus, New York has become a state made up of people who don't work: welfare cheats; Wall Street stock jobbers; lawyers and college professors.  Those who leave aim to destroy the futures of states around the country. New York is a venomous disease.

As far as the legacy media, the value of not consuming it cannot be overstated.  The reason is framing.  A frame is how you conceptualize a situation.  If you listen to the Wall Street-owned legacy media  you are induced to frame issues as they wish.  They do not wish you to frame issues in realistic terms of monetary policy and special interest brokerage. The issues in the United States revolve around these two concerns.  If you believe the news media there is no such thing as a special interest lobby and no such thing as the Federal Reserve Bank. Putting Americans to sleep intellectually is necessary  to manipulate them.

Framing determines how you think and therefore the decisions you make.  The legacy media frames issues in a certain way.  It claims that there is a national consensus, when in fact few Americans have the first idea of what the issues are.  Consuming the legacy media is a sure way to lose track of the real issues.  Why waste your time?

Christina Houston: Obama, You Remind Me of Bela Lugosi

H/t Joe Tuscano

Saturday, December 25, 2010

Ownership of the Federal Reserve Bank

An anonymous poster asked me about the ownership of the Federal Reserve Bank and without doing a lot of research I found an interesting post by Professor Edward Flaherty of the University of Charleston.  Flaherty debunks the claim that foreigners or the Rothschilds control the Fed. That is silly.  But equally silly is Flaherty's claim in the following sentence:

"The New York Federal Reserve district contains over 1,000 member banks, so it is highly unlikely that even the largest and most powerful banks would be able to coerce so many smaller ones to vote in a particular manner. To control the vote of a majority of member banks would mean acquiring a controlling interest in about 500 member banks of the New York district. Such an expenditure would require an outlay in the hundreds of billions of dollars. Surely there is a cheaper path to global domination."

While coercion is a loaded term, Flaherty displays a lack of understanding of basic political and interest group processes.  Typically, democratic processes yield a small number of controlling or influential parties.  Robert Michels first called this process the iron law of oligarchy in a book on political parties (specifically the Socialist Party of Germany, which at the time was considered highly democratic) and it has been examined by Mancur Olson on the public policy level in his book Rise and Decline of Nations.  

While it is silly to claim that the Rothschilds or some cabal of Jewish or British bankers controls the Fed, it is equally silly to claim that the big money center banks do not influence monetary policy.  Since 2008 we have witnessed Goldman Sachs largely dictate national spending policies.  Flaherty's claim that ordinary political processes do not apply and that the large banks lack influence on the nation's monetary policy, given the trillions of dollars just printed and handed to them, is wrong. 

Monetary policy favors the commercial banks and by definition the big commercial banks get the most juice from the Fed's monetary expansion.  That doesn't mean that there's a conspiracy of international bankers, Jewish, British or otherwise, nor does it mean that there is a a conspiracy of big US banks.  It just means that money center banks control a disproportionate share of a monetary system that is designed to subsidize banks in general. The bigger banks benefit more than do the smaller banks, and they do more damage because they tend to be more speculative. The Mexican and Latin American debt crisis; the Hunt silver speculation; Enron; Long Term Capital Management; and the sub-prime crisis as well as the century old merger mania that has reduced American business's creativity are all due to the money center banks.

The banks and financial interests benefit and you lose. That is built into the system that American voters have supported.  If you insist on voting for one of the two major parties every time, you are supporting the system.  Voters have themselves to blame, not a conspiracy. 

If the Constituion Were Drafted Today, What Would Be Americans' Chief Political Value?

If the Constitution were drafted today, I doubt it would look much like the document drafted in  1787.   Back then, the rule of the federal government was limited; just a small tax on whiskey led to an armed revolt in Pennsylvania in 1791; states collected religious taxes; the majority of the elected elite believed in federalism and states' rights; and a large percentage of Americans opposed a central bank.  Today, some of these ideas are being renewed, but Progressivism, socialism and state power have become the dominant values of a nation devoted first and foremost to financial interests and the privileges of Wall Street.

If the Constitution were drafted today, and were it to reflect the average American's beliefs, it would first and foremost require a two party system, with both parties committed to big government and to logrolling of special interests' economic benefiits.  Rights to property would be subjected to the right of the two parties to steal and murder on behalf of the financial and corporate community. All economic transactions would be required to subsidize Americans' greatest goods:  General Motors, Goldman Sachs, George Soros and Paul Pelosi.

Most important among Americans' political values is the prominence of two nearly identical political parties, both strongly committed to theft and violence.  The unlimited rights of eminent domain; government's right to mismanage the nation's wealth; the president's right to wiretap; and the harm that freedom of speech might do to Congress and to corporate interests would be important elements, as would the right of the Supreme Court to compel you to be an atheist and to give your land to inept developers and the two parties.

Thursday, December 23, 2010

Federal Reserve on Ice

I just submitted this column to the Lincoln Eagle, which is scheduled to go online within a few months. Mike Marnell's circulation, currently around 13,000, is close to the Kingston Freeman's daily circulation of around 16,000.  Of course, the Lincoln Eagle only comes out monthly.

Federal Reserve on Ice

Mitchell Langbert, Ph.D.*

Several readers have commented. No issue is more urgent or of greater importance to you.  It is more important than the price of your car insurance or your annual salary increase.  The issue is simple.  But people find it confusing because they can’t believe it. To use a high school vocabulary word, they are incredulous

The Wall Street-owned Democratic Party media, from NBC to MSNBC to CNN to the Kingston Freeman, do not discuss it.  Congressman Maurice Hinchey recently voted to bury information about it by preventing its audit.  But, yes Virginia, the Federal Reserve Bank (the Fed) is bigger and better than Santa Claus.  It creates money out of thin air. And no, the goods and services of the American economy DO NOT back the Fed-created money.  Nor do the full faith and credit of the American people.  The money you use is Fed-created money printed on paper and notated in banks. Your dollars are backed by…nothing. 

If the international community stops believing in the dollar, it will be worthless.  If the American public loses faith in it, it will be worthless.  The recent rise in the price of gold from $250 an ounce in 2000 to $1400 an ounce recently, nearly a 600 percent increase, is evidence that some investors anticipate a dollar collapse.  This could harm you. If it happens, it will be because of socialist big government, because of the Fed, because of the Democrats and because of the Republicans. The two party system is a one party system that responds in unison to the interests who benefit from the Fed.

In 2005 there were $1.4 trillion in US checking accounts and cash.  Today there are over $2 trillion in Fed-owned deposits.  The Fed increased its own deposits and cash from about $800 billion three years ago to over $2 trillion today.  It did this by creating the dollars it holds out of thin air. And the Fed announced that it is counterfeiting another $600 billion in the near future.

Commercial banks have the power to create still more money, also out of thin air, through lending.  Thus, the money supply might triple within a few years.  That could mean your pension and savings accounts will be worth less. A lot less. Their value will have been diverted to Wall Street and commercial banking interests.  Your congressman, Maurice Hinchey, voted to cover up the Fed’s operations by voting against Ron Paul’s Audit-the-Fed Bill.  No greater subsidy to the super-rich exists, and Congressman Hinchey is on board.  Special interests have no greater means of exploiting you, and Congressman Hinchey has voted to facilitate your exploitation.

The Wall Street-owned media, which is called “liberal” but is better called corporatist or Whig, pretends that the Fed is too complex for you to understand.  Nothing could be further from the truth.  In the 19th century the opposition to the "Fed" came from ordinary working Americans, just like you and me. 

The way the monetary system is set up is easy to understand.  The Federal Reserve Bank, the regulator of the banking system, is a private concern that the banks own.  It is empowered to create money out of thin air.  All greenback dollars, the dollars you hold, are artificial Fed reserves or derived from bank loans based on Fed reserves.  The gold in Fort Knox does not back them. The US public does not back them. The US economy does not back them.  The US government does not back them. Nothing backs them.  

Purchasing Treasury bonds from banks like Citibank, the Fed deposits dollars it creates out of thin air.  The assets it has traditionally chosen are Treasury bonds, but they could purchase other assets.  Dollars are called “Federal Reserve Notes”, which implies that they are debt, but the notes are only redeemable in other Fed Notes.  It is as though you had the right to pay for your house and car with loans that you had the right to repay with further loans and that people were legally required to accept your IOUs, which you only had to repay with further IOUs. If you could do that, you would have a holiday.  Since it is January, it would be a holiday on ice.  Wall Street has been having a holiday on ice since the winter of 1932, at your expense.

The Fed has no incentive to be even-handed or fair. Its owners, large commercial banks, have every incentive to expand the money supply because they benefit from more dollars, which they lend at interest, largely to Wall Street.  More accurately, for every dollar that the Fed creates, the banking system can lend up to $10.  It does this by using Fed-created dollars as loan reserves over and over.  The Fed creates a dollar by purchasing a Treasury bond from a New York City bank.  The bank uses the dollar by lending out 90 cents of the dollar to a borrower.  The borrower deposits the 90 cents in his bank. The borrower’s bank lends out 81 cents, using the same reserves a second time.  The second borrower deposits the 81 cents in his third bank. The third bank lends out 73 cents based on the same reserves to a fourth borrower, etc.  In the end, the banking system can create up to ten times the amount of money that the Fed creates.  In practice, the banking system approximately lends out less than double the Fed deposits.  Recently the Fed massively expanded reserves.  The expansion will not cause innovation, quality improvement or higher productivity.  Inflation will result as it has since the 1930s.

The people who get first dibs on the Fed’s fresh counterfeit benefit most.  These are the following: (1) commercial banks; (2) Wall Street and hedge funds; (3) managers of big business, which has easy credit access; (4) stock and bond holders (5) government (6) defense and other government suppliers; and (7) real estate-related interests.

The people whom the Fed hurts include those who are retired and are on pensions or other fixed incomes; private sector workers not in finance or real estate who live off wages; those who do not rely on welfare or other government programs; those who save; and those who aim to get ahead through innovation rather than asset manipulation or speculation.

The real hourly wage has hardly increased since 1971, when Richard Nixon abolished the gold standard.  In the 19th century and until 1971, when there were elements of the gold standard remaining, it used to increase two percent per year. Now it increases two percent in forty years.  Government’s massive expansion could not have occurred without the Fed.  Hence, greedy government officials, congressmen like Maurice Hinchey, the Wall Street-owned Democratic Party media, government employees and bankers have waxed rich on your dime.

*Mitchell Langbert is associate professor at Brooklyn College. He blogs at

Wednesday, December 22, 2010

Tea Party Commitment Tactics

The Tea Party is showing greater guts and glory than I anticipated.  But we are in the first inning and the score is 4 to 3 in the Republicrats' favor.  We have elected candidates, taken control of the House and stopped the spending bill, but the the Republicrats passed the health care act, buried Ron Paul's audit-the-Fed bill, passed the pork-laden tax bill, and still push for candidates like Rick Lazio.

It is going to be an uphill battle.

One way to view the battle is as a negotiation.  The Tea Party is negotiating with the Republicrats, the two-headed hydra of the Democrats and Lazio Republicans.  This negotiation is win-lose, which implies a negotiation style that experts call "distributive."  It is distributive because the Democrats and the big government Republicans are thieves, and in the prevention of theft the Tea Party deprives the Rick Lazios, the Democratic Party and the interest groups that support them of their stolen wealth.  There is no gain to  the Republicrats from freedom except over many decades.  The six-figure-income school teacher and the eight-figure-income investment banker see little value in liberty because their out-sized, stolen pay checks are far more valuable to them in their ignorance and greed. 

Distributive bargaining requires hard bargaining. It involves bluffs; gambits; opening offers; counter-offers and manipulative tactics. One of the key ploys in distributive negotiation is commitment.  Roy J. Lewicki, David M. Saunders, and Bruce Barry (LSB) write textbooks on negotiation, and Essentials of Negotiation is the smaller version of their book .   They point out that by making a commitment the negotiator signals what the final action will be if negotiations fail.  The other side often views commitments as threats. Commitments can involve if-then statements with a high degree of specificity.  "If the health care act is not repealed, then we will vote for an alternative party," for instance.

Commitments contain the risk of fixing a position that might change with circumstances or additional information. In a political movement, such a situation is common.  Tea Parties need to combine a degree of flexibility with their commitments.  But we are far from worrying about a change in the fundamental circumstances facing the nation.  The United States is in decline because of the federal, state and local governments; the special interests; and the two political parties.  Steps to reverse the decline would include repeal of law and regulation such as the health care act; elimination of the Supreme Court's legislative powers; abolition of various government agencies such as the Departments of Education and Energy; and the abolition of the Fed, which would be the single biggest step toward rationalization of the American economy.

LSB write (I'm keying off pages 46 to 49 of their textbook) that commitments involve finality; specificity; and consequences.  Public statements enhance the commitment's potency.  Tactics to enhance the strength of commitments would include alliances with outside bases (e.g., alliances among various political movements); emphasizing commitment verbally; and making preparations to carry out a threat.  One can visualize two nations in a conflict. Should one begin mobilizing its army, the meaning is clear.  Demonstrations are a form of mobilization.  Civil disobedience is an effective tactic that will move public opinion in the TP's favor and carries enough of a hint of the possibility of further steps to make a point.

The Tea Party needs to continually refresh its commitment to the interests that underlie its positions.  These interests are liberty and the prevention of the sick violence inherent in socialism.

Tuesday, December 21, 2010

Michael C. O'Donnell's Church & State Blog

My colleague on the staff of Kingston, NY's Lincoln Eagle, which is going online soon and is looking for correspondents around the country, including in the Land of Lincoln (hint: Mairi, Jim), Michael C. O'Donnell writes excellent articles each month.  His Website, Church and State, is at  O'Donnell blogs from a libertarian Catholic perspective  On his site, O'Donnell quotes Archbishop Timothy M. Dolan, who likens abortion to slavery, as well as Cardinal Egan, who shows a picture of a 20-week-old fetus that looks suspiciously like a human being.  So much for the abortion-is-not-murder argument.  O'Donnell links to Egan's article:

"Adolf Hitler convinced himself and his subjects that Jews and homosexuals were other than human beings. Joseph Stalin did the same as regards Cossacks and Russian aristocrats. And this despite the fact that Hitler and his subjects had seen both Jews and homosexuals with their own eyes, and Stalin and his subjects had seen both Cossacks and Russian aristocrats with theirs."

Philosophical arguments that posit the morality of abortion are linked to those that posit the morality of murder, as are arguments for socialism.   

O'Donnell argues that "federal, state and local elected officials have lost their moral legitimacy and authority to serve."  That is why I am asking Mr. O'Donnell to be the third member of the Secession Party. Mike Marnell, The Lincoln Eagle's publisherwhich published the SP's manifesto this month, was first, followed by his brother Mark.  I am working on Glenda McGee, but I'm afraid the SP is turning into an Irish mafia.  I'll ask Russell Schindler of Kingston, NY, to join although I'm not sure that totalitarian socialists are interested.  Schindler would make a good attorney for the SP, though.

O'Donnell takes on the looting of the Social Security trust fund and the federal government's inability to maintain a stable money supply. In a recent article in The Lincoln Eagle O'Donnell points out that it is perfectly legal to drive without a license and shows that federal law, which does not require non-commercial licenses, supersedes state laws. According to Marnell, O'Donnell has beaten driving without a license charges ten times in local courts.

Sunday, December 19, 2010

No Tax Compromise and the Demon Democracy

Pamela Odell forwarded this petition to oppose the tax compromise.  The Tea Party's success with the  recent spending bill is a delightful surprise. But it has a long way to go. 

Democracy leads to the increasing power of special interests and so its own implosion. Those adept at manipulating the system, from George Soros to the teachers' unions to commercial banking to the pharmaceutical industry to the auto industry, have economic advantages that ensure their imposition of their ends on the majority of Americans.  Hence, democracy is anti-democratic. Like the demon whiskey, one drink leads to good results but too much leads to a hangover.  As Progressivism has proceeded in excessive indulgence in democracy it has motivated increasing numbers of Americans to join the special interests that dominate society, to participate in the tyrannical minority.  Universities that do not educate; public schools that focus on indoctrination rather than education; an investment community that pockets massive wealth at public expense; a pharmaceutical industry that markets slight variations on snake oil all have a louder voice in a democracy than do "the people."  As a result, pointless government programs and regulations expand; massive amounts of wealth are transferred to Wall Street; the legal system becomes a source of allocating government largess; and America as a nation goes into decline.

When the nation worked on republican principles  it was successful.  Thus, the direct election of senators; the Supreme Court's "living constitution" doctrine; the Federal Reserve Bank; and the erosion of states' rights have contributed to America's decline; to income inequality;  to declining opportunities for America's young people; to the extinguishing of liberty.

There are positive ways to market freedom and republicanism. School vouchers; greater income equality through abolition of the Fed; greater public voice through the "less is more" philosophy of republicanism; and states' rights reformulate failed conservatism.

Saturday, December 18, 2010

Change without Compromise: A Two Pronged Strategy Is Needed

I gave a talk last Monday to the Kingston Rhinebeck Tea Party about the pursuing a two-pronged partisan strategy.  The GOP has not shrunk government in 30 years.  George W. Bush increased it. He also increased tyrannical state power through the Patriot Act, which the Democrats have not repealed.

Early this year I had e-mailed the head of the Kingston Rhinebeck Tea Party, Thomas Santopietro, and suggested to him that the Tea Party would be coopted.  In light of the vote on the corrupt tax bill for which key congressional Tea Party representatives voted yea, Tom asked me to speak to suggest to the group that a Third Party as well as a GOP strategy ought to be kept in the forefront of Tea Partiers minds. I spoke this past Monday night.

A GOP victory with George Bush, George Pataki or Rick Lazio is worse than a Democratic victory.  When free-spending fools like Bush get power the Democrats can claim that he represents freedom.  But tyranny is not freedom and Bush and Lazio do not represent freedom.  If Tea Partiers are loyal to the GOP and support the likes of Lazio, as the GOP establishment did in New York, then the Tea Party will be just another anti-freedom movement.  The only way that the Tea Party can remain a force for freedom is if it keeps an open mind to shelving the two-party system. 

I have been following politics on and off for forty years and I still can't grasp why Americans favor a two-party system.  It has resulted in their being taxed to fifty percent of their incomes to get a garbage government. Garbage at the federal level; garbage at the state level; and garbage at the local level.  Despite the complete failure of the two party system Americans remain much more loyal to it than they do to liberty.

I hold those who favor the two-party system and so support the GOP even when the likes of Bush are elected as more responsible for America's decline than Democrats.  Democrats are ignorant fools. Two-party-system Republicans are sophmoric, i.e., wise fools.  They know enough to support freedom but they support candidates like Bush and Lazio who oppose freedom.

When I gave my talk at the Tea Party several people agreed with me and several people disagreed. One woman claimed that third parties would produce fringe cranks.  She also falsely claimd that the Patriot Act was signed by Bill Clinton.  Doctrinaire Republicans lie and spin just like doctrinaire Democrats.  As well, the woman forgets that the Republican Party started as an alternative party to the Whig Party.

The two-party system has caused America's decline because both parties are responsive to interest groups.  The special interests that are subsidized by the Fed, to include the banking system and Wall Street, the media, government, and much of big business, all contribute heavily to Republicans as well as Democrats.  General Electric (note: I own 200 GE shares) owns NBC and MSNBC, which were among the biggest supporters of Obama.  When Obama was elected the first thing he did was approve the Bush-Paulson bailout. Guess who benefited. GE Capital, of course.

To be committed to a two party system is to favor the status quo. On the other hand, the GOP is the more redeemable of the two parties.  Hence, I am active in the GOP.  The good news is that the omnibus spending bill has been defeated.  The bad news is that the tax deal, supported by many key Tea Party Republican representatives, included a large quantity of corrupt government spending that approached the Democrats' corrupt stimulus bill.

Daily Caller says of the tax bill:

Charles Krauthamer said it was horrible. Mitt Romney opposed it. Fiscal hawk legislators like Rep. Paul Ryan said it was the best deal they could get. And Coburn, who has railed against every unpaid for expenditure over the last year, kept largely quiet on the deal until the day of the vote when he offered an amendment to cut spending by $160 billion that was defeated, and then voted against the bill along with four other Republicans...Most telling, Tea Party groups founded by less experienced political operatives and based outside Washington – such as Tea Party Patriots and Tea Party Nation – opposed the deal vehemently. But hard line conservative groups in D.C., such as FreedomWorks and Americans for Tax Reform, backed it.

That illustrates why we need a third party.  Compromise between two big government parties is not "moderate." The people in Washington and the state capitals are socialists, fascists and totalitarians. They are not moderates.  The only way that change can occur is through a rethinking of the smug, insipid policies of the past 50 years.  That will require change without compromise.

Thursday, December 16, 2010

Universities Teach Cheating

Recently there was a minor cheating scandal in one of my courses.  I base part of the students' grades on a test. Rather than create my own questions, I use a test bank that the textbook publisher provides.  This facilitates giving of multiple exams, which has become the norm in some colleges (some students are permitted extra time because they have learning disabilities; as well, make-up exams are often required).

One or more of the students obtained the publisher's test bank, possibly by pretending to be a professor, having the publisher send the textbook to the college under a false name, and then figuring out how to pick up the textbook from the locked storage room where packages of this kind are stored. It is likely easy to do since all the student would have to do is ask an unsuspecting professor entering the room to help him or her find a book or to use the copy machine, which is in the same room.

In any case, I noticed that the grades on the exam this semester were unusually high; about one fourth of the class got grades that were normally above the highest grade any student would get. At first I thought the class was exceptionally good, that is, until a student met with me in person and proved that the test bank had been obtained under fraud or stolen and that some students studied by memorizing it.  The proof was that he e-mailed me a copy of the test bank which another student had sold him for $10. I asked him to identify the student, but he would not.  I forgave him that distaste for "ratting".

I spoke about the situation with two colleagues. One said that the situation is unequivocally cheating and that I should tell the administration that this has gone on. Since I have no evidence concerning any specific student it would not be possible to uncover who was at fault without pursuing investigations that I have no power to pursue and that I doubt very much the college administration would be willing to pursue.  Another colleague said that in his view students who review the test bank are doing nothing wrong since SAT questions and New York State regents questions are often available for practice purposes.  But those questions are not stolen or obtained under fraudulent pretense.  Also, those questions are made available to all students whereas in this circumstance some students refused to use the stolen test bank because they viewed doing so as unethical. 

College seems to be contributing to the more general moral decline in American society. The chief impact is on me as I now have to make up by hand something that was once computerized, turning a one hour project into a one day project.  With 15 exams over the next year that translates into a two day project versus a 15 or 20 day project. So much for my research output.

I failed to pursue any sort of redress to the cheaters, and in this I participate in the tendency of universities to increasingly condone cheating.

Monday, December 13, 2010

GOP Torch Song: It's Over

Thomas Santopietro of the Kingston-Rhinebeck Tea Party asked me to give a brief talk at the meeting this evening. My friend Glenda McGee happened to be in my office when he called and she pulled a few articles (here and here) about the GOP's and the Democrats' corrupt tax deal of this past week.  Tom asked me to speak because I had predicted a major let-down for the Tea Party a year ago (Tom had looked at an old e-mail I had sent) and although I did not know any of the details until Glenda pulled the information, the utter mockery with which the GOP is treating the Tea Party comes as no surprise.

My message to the Hudson Valley Tea Partiers is that they need to view a third party as a realistic strategy and to view the GOP as the real threat that the Tea Party faces.  Tea Partiers who advocate for the GOP over the public interest do not belong in the Tea Party.  I say this as a member of my Town's Republican Committee, which has been  decimated by public revulsion at the corrupt Bush administration as well as the transformation of the Catskills into a New York City suburb for super-rich New Yorkers.

Please allow Roy Orbison to convey the message the Tea Party needs to hear. With respect to the big government, special interest driven morons who dominate the GOP, the Tea Party's honeymoon is, or ought to be, over. 

The Time for Compromise Is Past

I have come to the conclusion that participation in the American political process is a waste of time.  Not that it is not important, but that the current system of government has failed and that further participation in it distracts from more important life goals and political ends.  By political ends I mean radical action and potentially the formation of a new political party.  I am reformulating my ends as a political blogger since I no longer believe that participation in the American political system is productive.  Not that I am anti-American, but rather, the American state has failed and needs to be replaced.  The Anti-Federalists must rise again. Getting involved with political debates about Democrats, Republicans and the like is a waste of time. God Bless America, but the federal government needs to be kicked into hell.

Thursday, December 9, 2010

Cost of Vegetables Escalates

H/t Jim Crum. I have nothing to add.
>Looks like a resounding endorsement of our monetary policy to me.
Raw material for our food stocks going up 20% or more, what could possibly go wrong?  Inflation?  Nahhh, Fugetaboutit.

Agricultural & Lumber

 Commodities  Last Price/
CornAs of Dec 09 2010 19:14 GMT. 560.25 0.00 0.00% +52.04%
WheatAs of Dec 09 2010 19:09 GMT. 748.25 0.00 0.00% +45.15%
SoybeansAs of Dec 09 2010 19:34 GMT. 1,281.50 0.00 0.00% +24.78%
Soybean MealAs of Dec 09 2010 19:14 GMT. 339.9 0.00 0.00% +8.25%
CocoaAs of Dec 09 2010 16:41 GMT. 1,990 -18.00 -0.90% -9.75%
Coffee (Robusta)As of Dec 09 2010 17:29 GMT. 1,920 +39.00 +2.07% +39.64%
Coffee (Arabica)As of Dec 09 2010 17:34 GMT. 204.45 +0.20 +0.10% +44.59%
White SugarAs of Dec 09 2010 17:29 GMT. 728.00 -4.40 -0.60% +21.33%
CottonAs of Dec 09 2010 19:14 GMT. 135.95 +4.00 +3.03% +82.75%
Orange JuiceAs of Dec 09 2010 18:59 GMT. 162.55 -3.45 -2.08% +28.04%
CattleAs of Dec 09 2010 20:28 GMT. 101.90 +0.10 +0.10% +28.50%
Feeder CattleAs of Dec 09 2010 20:00 GMT. 117.90 -0.175 -0.15% +29.85%
Frozen Pork BelliesAs of Dec 09 2010 18:38 GMT. 104.50 0.00 0.00% +25.45%
Lean HogsAs of Dec 09 2010 20:38 GMT. 69.45 +0.025 +0.04% +9.28%
LumberAs of Dec 09 2010 20:37 GMT. 269.50 0.00 0.00% +24.83%

Thursday, December 2, 2010

The Devil’s in the Details: the Family and Medical Leave Act and the Accounting Workplace

I write a monthly column for the American Institute of Certified Public Accountants. The following is my latest submission.

The Devil’s in the Details: the Family and Medical Leave Act and the Accounting Workplace

Mitchell Langbert, Ph.D.

With October’s unemployment rate at 9.6% and Russia and China claiming that they are going to drop the dollar as their currency of choice, one of the laws that may wound job creation deserves a fresh look.  The Family and Medical Leave Act (FMLA), passed on February 5, 1993, may at first glance seem to do little harm to efficiency but, at a second glance, it may.  A fast-paced unionized service firm like Southwest Airlines and a manufacturer like Hallmark Cards have protested the law, while the AFL-CIO stoutly defends it.  In academia, social workers argue that FMLA ought to be expanded and economists claim that the law’s employment and productivity effects are potentially beneficial.   But social workers and economists do not focus on regulatory complexity. There has been a suspiciously heavy FMLA litigation docket for a law with supposedly benign effects on productivity.  And with respect to regulatory costs, the devil is often in the details, even if the devilish details do not concern sociologists and economists.  

Andrew E. Scharlach and Blanche Grosswald of the University of California published a 1997 summary of the social work implications of FMLA in the Social Service Review.[1] Scharlach and Grosswald note that FMLA requires businesses with 50 or more employees to provide 12 weeks of leave for personal or family disability or the birth or adoption of a child. The leave may be unpaid but health insurance must be continued. The employee’s or an equivalent job must be held until he or she returns.  Records must be kept and notices must be posted.  They argue that the law should be expanded because it does not cover firms with fewer than 50 employees and because Swedish and other European employers offer more generous leave policies. 

According to Uric Dufrene and G. Richard French of Indiana University Southeast, roughly 80% of accounting firms in their Indiana-based sample have fewer than ten employees.[2] Since FMLA excludes firms with fewer than 50 employees, most accounting firms need not comply with it at all, although if Scharlach and Grosswald have their way all accounting firms will be added to the law’s purview.

DOL Regulations

On January 16, 2009 the Department of Labor (DOL) published new FMLA regulations.   According to DOL’s Website[3] employees can use leave for any period of incapacity such as periodic part-day visits to physicians and brief episodes of incapacity.  The regulations define “serious health condition” as involving continuing treatment, which in turn means, according to DOL:

 “(A) period of incapacity of more than three consecutive…days plus treatment by a health care provider twice, or once with a continuing regimen of treatment.”  

As well, pregnancy, serious chronic health conditions, and incapacity for which treatment is ineffective are eligible for FMLA leave. The regulations are complex but vague, a recipe for inefficiency and workplace disruption.

To be eligible for FMLA leave employees must work 1250 hours for the prior 12 months at a location where there are at least 50 employees.  But the 12 months do not need to be consecutive.  Breaks in service count if the prior employment was at least seven years prior to the leave, with the exception of military service.  Again, the DOL adds complexity that is bound to confuse. 

The regulations require that employers must post a notice explaining FMLA and include a similar notice in employment manuals, or provide the information to new employees if there is no employment manual.  The notice must tell the employee whether paid leave will be applied toward FMLA leave. Employers must notify employees whether leave will be considered FMLA leave within five days of learning of the employee’s intent to take a leave. 

The employer must inform the employee of the number of hours, days or weeks that will be applied toward his or her FMLA entitlement.  Failure to notify an employee that their leave counts as FMLA leave can increase the employee’s entitlement.  If a leave can be foreseen employees are supposed to give 30 days notice, but verbal notice as soon as practicable is all that is required when circumstances change.  To apply for FMLA leave the employee just needs to inform the employer about the leave and its timing.

Employees must follow the employer’s call-in procedures as well as provide “sufficient information,” some of the parameters of which the regulations describe in detail. Employees need not file a written application for the leave.  A verbal notification to the supervisor is all that is required. 

Employers can require certification of the serious condition. In fact, the regulations establish four certification forms, namely, for an employee’s illness, a family member’s illness, the need for a qualifying leave and the health condition of an eligible service man or woman.  In verifying the employee’s information on the forms, the employee’s supervisor is not permitted to contact the health care provider directly. Rather, the supervisor must use a go-between such as a human resource professional when following up a certification.  Employers can require recertification every 30 days or after the initially certified period of leave if greater. After the leave employers can require fitness for duty certification. 

Employers can require that employees use up paid leave, including vacation and sick days and employees can choose to do so if the employer doesn’t require them to do so.


In a 2005 article in the Journal of Corporation Law, which preceded the 2009 DOL regulations, Kenza Bemis Nelson[4] notes that there has been considerable litigation surrounding FMLA provisions, particularly the definition of serious health conditions and the employee notice requirements.  Looking at the Eighth Circuit, which covers the western strip of states going north from Arkansas to North Dakota, Nelson discusses cases such as Caldwell v. Holland of Texas, which mandated that a three-year old’s earache count as a serious health condition.  Quoting Nelson:

“(T)he Eighth Circuit offered a sharp warning to employers who are tempted to discharge employees when FMLA might be involved…The court held that an employer cannot avoid liability for firing an employee who took leave for a situation later found to qualify under the FLMA” (emphasis added).

As the law becomes murky and unknowable, costs of compliance rise and inefficiency is enhanced.

In the case of Rankin v. Seagate Technologies the Eighth Circuit held that FLMA can cover minor illnesses such as flu as serious health conditions.  In the case of Spangler v. Federal Home Loan Bank of Des Moines Spangler was repeatedly absent because of depression.  On one occasion she simply told a co-worker that she was taking off because of depression.  She failed to comply with the firm’s call-in procedures and was fired.

The Eighth Circuit held that by telling a co-worker that she was taking off there was sufficient notice even though this violated the firm’s call-in procedures (which DOL says can be required). The failure of the federal courts to pay attention to regulatory requirements is nothing new.  I noticed this repeatedly in a review of ERISA cases that I did in the early 1990s.[5]

Chamber of Commerce Protests

The US Chamber of Commerce devotes a page of its Website to its claim that FMLA has led to workplace abuse. Written before the DOL regulations, the Chamber argues that the definition of “chronic serious health condition” needs to be clarified and that the requirement for tracking of leaves of as little as six minutes ought to be eliminated.   The DOL’s 2009 regulations did not revise the definition, leaving the prospects for extensive litigation and lawyers’ fees bright, nor did it change the partial day leave requirements.

In a 1997 testimony linked to the Chamber site, Hallmark Cards states that its paid leave costs increased by 35 percent from 1993 to 1996 following the passage of FMLA and that employees have abused the Act by claiming that absences for other reasons were FMLA absences.  The firm quotes employees who say that FMLA is being abused by a small minority of shirkers.  In contrast, Ellen Bravo of the AFL-CIO says that FMLA should be expanded and that ten minute breaks ought to count as FMLA leaves of absence.  Indubitably, the AFL-CIO expects further bailouts.

Economic Devilry

In an elegant 1997 article in the Journal of Economic Perspectives, Christopher Ruhm[6] argues that the effects of FMLA might be minimal because of the law’s limited requirements and that it might even contribute to increasing efficiency because firms may contract with the median worker and so overlook the needs of employees who benefit from leaves.  Hallmark Cards, in contrast, argues that there are neighborhood or externality effects that Scharlach and Grosswald and Ruhm themselves overlook. As Freidrich Hayek pointed out in his 1945 American Economic Review article “Use of Knowledge in Society” central planners (and by implication regulators) lack the information needed to intelligently manage a complex economy from the center.    

The details of execution and management are too often assumed away by economists and sociologists.  But the Devil, and his leave of absence, is in the details.

[1] Scharlach, Andrew E. and Grosswald. B.  1997.  Social Service Review 71:3, 335-359
[2]Dufrene, U. and French, G. Richard.  December 2, 2010. “An Investigation of the CPA Firm Industry Across Indiana Metropolitan Areas.” Retrieved from
[3] US Department of Labor. “Frequently Asked Questions and Answers About the Revisions to the Family and Medical Leave Act, January 16, 2009.” Retrieved December 2, 2010.
[4]Nelson, Kenza Bemis. 2004.  “Employer Difficulty in FMLA Implementation: A Look at Eighth Circuit Interpretation of “Serious Health Condition” and “Employee Notice Requirements.” 30 J. Corp. L. 609
[5] Langbert, Mitchell. 1991.  Firm Compliance and Employee Voice under the Retirement Income Security Act of 1974.  Doctoral Dissertation. Columbia University Graduate School of Business.
[6] Chirstopher Ruhm. 1997. “The Family and Medical Leave Act,” Journal of Economic Perspectives, 11:3, 175-86

Wednesday, December 1, 2010

Managing Your Life in a Declining America

China's and Russia's announcement that they will use the ruble or the yuan to trade bi-laterally seems to have struck financial blogs, but few others, as important.  Market Watch writes in an understated tone:

>China and Russia will stop using the U.S. dollar to settle bilateral trade and instead use the ruble or the yuan, though the move is not meant to signal a challenge to the dollar, according to reports Wednesday. China's Premier Wen Jiabao and Russian President Vladamir Putin made reference to the new currency trade pact late Tuesday, following meetings in St. Petersburg that also saw the signing of bilateral trade and energy-cooperation agreements, according to a report in the state-run China Daily. "About trade settlement, we have decided to use our own currencies," Putin told reporters, according to the report. Earlier this week, China added the ruble to the list of currencies that can be traded against the yuan on its domestic exchange.

I searched the words "China Russia trade dollar" on Google and got 238,000 hits, but the leading hits were all financial blogs.  Moreover, the ostriches have proven eager to bury their heads in the central Asian sand.  Tyler Durden notes that Russia and China made a similar bi-lateral statement more than a year ago and nothing changed then.  Also, the dollar has risen since the announcement.

But the dollar has risen since the announcements of numerous momentous decisions that will depreciate it, such as the bailouts and the massive expansion of the monetary base in 2008. Wall Street's short-term faith in the dollar has over-ridden longer term logic since 2008. Unless the Fed decides to reverse its policies of the past ten years there is little reason to believe short term market fluctuations.  Of course, as investors we need to consider such fluctuations.     

It would seem that a decision to drop a long standing business practice will require adjustment. It would also seem that along with the dollar habit Russia and China may be concerned with US power.  How long did the abolitionist movement in the US continue before slavery ended?  Even in 1776 Jefferson wanted to include more aggressive statements against slavery than the Southern delegates to the Continental Congress allowed in the Declaration of Independence . If it took 86 years to abolish slavery, might it take a few years for the Russians and Chinese to switch to an alternative currency?  By the time they and other global players make the decision the markets will have digested the information. At that point dollars will be worth a small fraction of what they are worth today.  Hence, the head-in-the-sand response may prove to be insufficient.

There are several possible outcome scenarios to long term dollar depreciation and American economic decline.  First, the Fed's monetary expansion could work for another round. The economy will grow in a valid way, jobs will be created and the public will become wealthier.  The nation's jobs picture would improve and there would be little inflation. I don't think that will happen. The  Fed has not been successful in stimulating sound economic growth. Although the past twenty years saw considerable economic activity, most of it involved the creation of unstable, low-end retail jobs.  The high unemployment of today results from the economic illusion for which the Fed has been responsible.  The Fed not only creates illusion but also transfers a wealth to Wall Street and corporate interests as well as to privileged workers in government, construction and big business. The past 10 years have seen a massive increase in privilege to the wealthy because of Republicrat policies. But until recently the illusion has been sufficient to keep Americans happy. Blissful ignorance might continue despite the Tea Party.  If the Fed's monetary policies work, then the stock market will shoot up. I don't think that will happen in the long term, but I do think that there will be short to medium term strength in the stock market, say into 2011. After that, all bets are off. 

The second possible outcome will be that the Fed's policy works but causes significantly higher inflation. This would happen if  the commercial banks convert all of the money reserves the Fed  has created into loans. That would stimulate a high degree of unproductive economic activity similar to the sub-prime building of the last decade. Economists will say that the economy has recovered, but Americans will become poorer. If you recall the seventies, then you have a sense of what higher inflation feels like. But the inflation this time around may be worse.  This is the scenario I think will occur.

The third scenario is that the banks will not lend a multiple of the reserves that have been created and instead contract their loans. That would result in deflation.  The markets have been afraid of this scenario but it would turn out better for the average American (except for the unemployed).  Stocks and bonds would decline as would non-monetary commodities.  Gold and silver both seem to behave today as monetary commodities.  Hence, they may do as well in this scenario as under inflation.  However, agriculture, DBA would not. As well, the stock market will probably fall as profits and consumer demand decline along with the availability of money.  There will be high unemployment but the government will become increasingly paralyzed.  I do not think this will occur because there will be too much pressure on the money center banks and the Fed to purchase US debt. Even if the banks do not lend to the public, the Fed will continue to monetize the federal debt, and government will continue to spend in value-destroying ways, resulting in inflation or dollar depreciation.

A fourth scenario would be total economic breakdown.  This might occur if there is disruption to the power grid through terrorism or some other disaster and the government lacks the resources or competence to respond, a kind of global or national Hurricane Katrina.  I know people who fear this but usually what goes wrong is what you don't expect, not what you do expect.  If you have a year's supply of dry food in your pantry I personally wouldn't call you crazy but I don't believe you will need it. At present I do not have any dry food, silver bars or firearms.  But having a rifle and an ample supply of junk silver (pre 1960 coins or one ounce silver bars) might be a good idea. You likely would never need that stuff but if you have five thousand dollars to invest in an insurance policy, you might consider those steps.

It seems to me that at this point cash is still safe, although the days of cash may be drawing to a close.  Gold and silver are highly speculative because of investment or speculative demand, but their persistent rise suggests that a broader-based demand for gold-as-money is motivating the price increases.  I have about ten percent of my portfolio in commodities and I am going to allow the percentage to increase for quite a while, purchasing some additional amounts.  I am also taking care of whatever home improvements I can afford, and if I inherit an additional $100 grand will buy myself a Boxster S.  I aim to invest in what I know or plan to know.

The Madness of a Lost Society

The video's description of Americans is demeaning but accurate. The fears it expresses are premature but also accurate.  Perhaps worse than the average American's capitulation to Progressivism's depredations are the greedy stupidity of global elites. Enjoy. 

Tuesday, November 23, 2010

The Secession Party

The Secession Party

Mitchell Langbert, Ph.D.*

The United States of America has become too large and needs to be broken in two. As well, New York and other states that have an urban-rural split ought to be split. The nation has become too large to manage, as today’s Congress attests. This would be so even if ideological differences did not divide the nation and the states. The nation should be broken up into a red nation and a blue nation and New York should be broken up into upstate and downstate.

The Secession Party would aim to dissolve the union, undoing the work of Abraham Lincoln and reasserting the aims of the anti-Federalists, who opposed the scope and extent of federal power that came to pass under Washington.

When the United States was established in 1789, there were approximately four million Americans and 65 members of the House of Representatives. That is 60,000 Americans for every Representative. Today the nation’s population is 310 million and there are 435 members of the House of Representatives, 713,000 Americans for every Representative. Only special interests and financial donors have full access to Representatives. Increasing the number of Representatives would be administratively difficult because a House as representative as it was in 1789 would have 4,800 Representatives.

Historical Precedent

One nation in western history has been equal to the United States in terms of its power: Rome. By the late third century Emperor Diocletian established a rule of four, whereby two senior and two junior co-emperors oversaw a quarter of the Roman Empire each. He also began a shift of power from Rome to other cities. Ultimately, Byzantium, later named Constantinople, survived the western Roman Empire by nearly one thousand years. Diocletian could not have anticipated that quartering the Empire would allow part of it to survive. I claim that halving the United States into free and social democratic halves would allow the free half to survive as the social democratic half sinks into a dark age.

American Decentralization

The forces that encouraged Diocletian to think in terms of decentralization are at play here. Management theorists recognize that there are limits to rationality. The way to run a large firm is to break it into operating divisions. Likewise, the Founding Fathers or Federalists, including Alexander Hamilton and James Madison, believed that the federal government needed to be combined with decentralized states. Under the Constitution the states are responsible for much administration. Part of the reason is that the states are better able to represent their citizens. Large scale leads to complexity which makes management and representation difficult from the center. The federal government suffers from centralization without representation.

The Civil War began an assertion of federal power that has escalated past the point of diminishing returns. The Civil War’s cause, prevention of the expansion of the “slave power” was just. But a side effect of the Civil War was squelching of important aspects of states’ authority. It was not and is not clear that states do not have the right to secede or to nullify their participation in the union.

Progressivism a Form of Insanity

Recently, I had a discussion with an attorney who believes that regulation is desirable. I pointed out to him that workers’ compensation does not work. He agreed. I pointed out that the Employee Retirement Income Security Act of 1974 (ERISA) has not worked well. He did not know much about it, but he was willing to agree. I pointed out that the Sherman Anti-Trust Act, which was meant to limit monopoly, has had the effect of expanding the size and power of big business. I pointed out that the Federal Reserve Bank has massively subsidized the wealthy at the expense of the poor. I pointed out that Social Security turned out to be a wealth transfer vehicle from the 21st century’s workers to the 20th century’s retirees. He offered no meaningful counter-arguments, only to say that the sub-prime crisis was due to the repeal of the Glass-Steagall Act. But he could not explain how, after 75 years of securities regulation Wall Street is more destructive than it was in the 1920s.

Despite the long list of regulatory failures, the left-wing attorney believes that regulation must be increased. He suffers from a religious mania with which it is impossible to argue.

A recent study found that about two or three percent of government agencies are ever terminated. In contrast, 80 percent of businesses fail within their first five years. People who believe that government programs, no matter how destructive, cannot be terminated are incapable of rational discussion.

Since there is no common ground between those of us who believe in freedom and those who believe in socialism, there is no longer common ground required for a single nation. The United States was founded on a belief in freedom. But half the nation believes in the slavery of social democracy, in tyranny of the majority. The union is no longer tenable.

Large Scale Has Advantages

Large scale has advantages. These include the ability to support a strong military and to permit large scale economic activity. However, there are limits to these kinds of advantages, and there is no reason why independent units cannot permit large scale economic activity across borders.

The advantages of large scale have limits as do the advantages of small scale. There needs to be balance. But under the influence of New Deal Democrats and Rockefeller Republicans the nation has discarded the notion that small scale offers any advantages. When government employees are paid 40 percent more than private sector employees, it is just in the centralizers’ opinions. When private sector firms innovate, it is greed and must be regulated. No degree of centralization is sufficient for America’s big government mono-maniacs.

Party System Committed to Large Scale

Left-wing Democrats and the Rockefeller Republicans claim to hate each other. But both favor large scale. The Democrats have ritualized regulation. The Republicans have ritualized big business. The fact is that big business would not exist without big government, and vice-versa. Just as regulation has repeatedly failed even as the Democrats mindlessly chant its mantra, so has big business repeatedly failed as the Republicans chant its mantra.

Need for a Pro-Secession Party

The election of Barack H. Obama has proven that American democracy no longer functions. The nation is too large to represent its citizens. Smaller units are needed now. The two party system is too corrupt to permit the decentralizing impulse. A new, pro-secession movement needs to energize America.

*Mitchell Langbert is associate professor of business at Brooklyn College. He blogs at

Brooklyn College Student Named Rhodes Scholar

I received this e-mail from Brooklyn College Provost and Vice President for Academic Affairs William A. Tramontano

Dear Faculty, Students and Staff,

On behalf of President Karen Gould and the entire campus community, I am extremely pleased to announce that Zujaja Tauqeer has been selected as a 2011 Rhodes Scholar. Rhodes Scholarships are considered the oldest and most renowned award for international study available to American college graduates. The scholarship provides expenses for two to three years of study at the University of Oxford in England.

Tauqeer, a member of the Macaulay Honors College, is a history major who minors in political science and participates in the Coordinated B.A.-M.D. Program with SUNY Downstate College of Medicine. She is the third Brooklyn College student to be chosen as a Rhodes Scholar—a feat accomplished by only one other CUNY institution.

According to the faculty, her brilliance is evident both in and out of the classroom. She has overcome significant personal hardship in the pursuit of higher education, and I cannot imagine a more worthy recipient of the Rhodes award. Obtaining her master’s degree in the history of medicine at Oxford University before returning to her medical studies at SUNY Downstate will undoubtedly make her an even finer physician.

 I am also grateful to all the members of the college community, especially the staff of the Scholarships Office, who spent many hours assisting Tauqeer with the process.

In addition to her scholarly work, Tauqeer volunteers with the Brooklyn College Emergency Medical Squad, the New York State Office of Mental Retardation and Developmental Disabilities, and the Sunset Park Family Health Center.

Please join me in congratulating Zujaja Tauqeer and wishing her luck in her future endeavors. 
William A. Tramontano
Provost and Vice President for Academic Affairs