Sharad Karkhanis, who has been attacked in a Professional Staff Congress (PSC)-related law suit, has just released his latest newsletter, Patriot Returns. Karkhanis offers brilliant coverage of David Seidemann's case, about which Candace de Russy and I have blogged. The Chronicle of Higher Education has also covered the case. Karkhanis notes:
"Convinced that the PSC had treated agency-fee payers unfairly, David Seidemann, a Yale educated full professor of Geology at Brooklyn College, has been patient and tenacious in seeking justice. Since 2002, he's amassed voluminous documentation, collected and examined all relevant information and legal precedents, and pursued the PSC with the tenacity and conviction of an irate faculty member. Seidemann sensed that there was some hanky panky going on with his and your hard-earned dollars. The 1% of our gross salary that goes to union dues or agency fees should be spent for our benefit rather than being diverted to further the New Caucasians' political agenda."
Karkhanis asks:
"Our question is, although permissible in the eyes of the law for the union to spend monies to march, parade and shout out loud to bring pressure on the management on behalf of the dues paying members, how germane is it for the PSC to spend dues money on excessive participation in such activities?"
See the entire blog here. The PSC leadership has spent its time on anti-Iraqi War crusades while neglecting its function of representing faculty. Barbara Bowen and her colleagues have failed CUNY's faculty.
Tuesday, April 29, 2008
Are Left-Wing Speculators Causing the Run-Up in Fuel Prices?
A friend who is interested in gold and commodity investing just questioned whether well-heeled left wing or Democratic speculators might be causing a run-up in oil prices as part of a concerted anti-Republican campaign. I wonder if that argument has any merit. Is there an ideological component to the recent run up in oil prices?
Keywords: George Soros, Hollywood, oil prices, speculation, Republican Party, presidential campaign
Keywords: George Soros, Hollywood, oil prices, speculation, Republican Party, presidential campaign
Global Food Crisis Caused By Federal Reserve Bank
In a recent American Thinker post (hat tip Larwyn), JR Dunn is right to be concerned about potential United Nations and governmental interference in the food market, but in his capable discussion of causes of today's food shortages Dunn omits the fundamental cause: economic distortion or malinvestment for more than a decade due to the Federal Reserve Bank's monetary expansion. Those of us who remember the 1970s recall that the Nixon administration's monetary expansion's resultant price inflation was blamed on OPEC and oil prices. Dunn commits a similar fallacy and blames current food shortages on a litany of proximate causes,such as ethanol, which while important are not fundamental. Dunn is right that ethanol is a mistake that causes food shortages, but it is not the only mistake. For the past fifteen years, from America to China, economic resources have been diverted away from commodity and food production toward real estate investment and construction. In China, farmers have been uprooted to build dams and cities. In America, farmers have sold land to real estate developers. This amounts to malinvestment of artificially created credit. Now there are food shortages. The beneficiaries of the monetary expansion primarily have not been oil producing governments but Wall Street, hedge fund managers, real estate developers and the commercial banking system. Those who pay are those who cannot afford food now, those in dire poverty. Warren Buffett, George Soros and the new residents of Greenwich, Connecticut have waxed rich at the expense of those starving to death now.
Food shortages occur only if demand exceeds supply and supply cannot adjust. Several things can increase demand. These include the factors that Dunn enumerates in his blog: ethanol and the like. But in a free economy supply will expand to meet the higher demand. Supply shocks can be handled over a few year period. If this does not happen it is because there are blockages. None of the factors that Dunn enumerates explain the failure of farmers to anticipate or respond to shortages. Yet most economic theory suggests that firms are rational enough to at least approximately do this. What would explain farmers' hyper-irrationality? Distortion or malinvestment.
Worse, Dunn's analysis overlooks increasing prices across a range of commodities, not just food and oil. Gold has more than tripled in price in the past four years. Copper and other construction materials, rubber for instance, have increased since the millenium. The factors that Dunn enumerates do not explain an across-the-board increase in commodity prices. Does ethanol explain a three-fold increase in the price of gold?
Moreover, Dunn's discussion of OPEC omits the force of mistrust. OPEC has found it difficult to act in unison because of what game theorists call the prisoner's dilemma: economic actors find it difficult to act in unison in their own self interest when any one member can make side deals to sabotage collusion. That is why OPEC failed in the 1970s. Today, a broader swath of nations produce oil, so trust will be considerably less than it was then. Higher prices would motivate players to go behind the backs of their collaborators.
Dunn is correct to argue that the relationship between politics and food should be severed. But he omits the fundamental cause of the global food shortage: malinvestment away from commodity production toward real estate and stock market investment. This follows directly from Alan Greenspan's and Ben Bernanke's monetary policy, which is necessarily the cause of all general inflation.
Food shortages occur only if demand exceeds supply and supply cannot adjust. Several things can increase demand. These include the factors that Dunn enumerates in his blog: ethanol and the like. But in a free economy supply will expand to meet the higher demand. Supply shocks can be handled over a few year period. If this does not happen it is because there are blockages. None of the factors that Dunn enumerates explain the failure of farmers to anticipate or respond to shortages. Yet most economic theory suggests that firms are rational enough to at least approximately do this. What would explain farmers' hyper-irrationality? Distortion or malinvestment.
Worse, Dunn's analysis overlooks increasing prices across a range of commodities, not just food and oil. Gold has more than tripled in price in the past four years. Copper and other construction materials, rubber for instance, have increased since the millenium. The factors that Dunn enumerates do not explain an across-the-board increase in commodity prices. Does ethanol explain a three-fold increase in the price of gold?
Moreover, Dunn's discussion of OPEC omits the force of mistrust. OPEC has found it difficult to act in unison because of what game theorists call the prisoner's dilemma: economic actors find it difficult to act in unison in their own self interest when any one member can make side deals to sabotage collusion. That is why OPEC failed in the 1970s. Today, a broader swath of nations produce oil, so trust will be considerably less than it was then. Higher prices would motivate players to go behind the backs of their collaborators.
Dunn is correct to argue that the relationship between politics and food should be severed. But he omits the fundamental cause of the global food shortage: malinvestment away from commodity production toward real estate and stock market investment. This follows directly from Alan Greenspan's and Ben Bernanke's monetary policy, which is necessarily the cause of all general inflation.
Community, Progressivism and the States
Woodrow Wilson advocated states' rights as part of his progressive philosphy. In his book Constitutional Government in the United States, first published in 1908 and still considered a classic in the political science field, Wilson argues for the importance of the states. The model of centralized federal authority was a product of the two Roosevelts, not of Wilson, despite his inadvertent contribution by creating both the income tax and the Federal Reserve Bank. Theodore Roosevelt, the most statist of all of our presidents, argued for integration of government and business. Franklin Roosevelt extended state power in numerous areas, most importantly by abolishing the gold standard.
Despite the twentieth century's centralization of power, Wilson understood the importance of local government to community. Excessive centralizaton overlooks the importance of community and so is anti-democratic. Since the primary thrust of the New Deal was such centralization, it was at odds with the progressive era's emphasis on democracy, or at least Wilson's version of it.
Wilson writes (pp. 50-1):
"Not only are the separate and independent powers of the states based upon real economic and social differences between section and section of an enormous country, differences which necessitate adaptations of law and of administrative policy such as only local authorities acting in real independence can intelligently effect; but the states are our great and permanent contrbiution to constitutional development. I call them a great contribution because they have given to the understandings upon which constitutional government is based an intimacy and detail, an adjustment to local circumstances, a national diversity, an immediate adaptation to the variety of the people themselves, such as a little country may perhaps dispense with but a great continent cannot...They have furnished us with an ideal means of integrating a vast and various population, adapting law to changing and temporary conditions, modulating development and permanently securing each item of progress. They have been an incomparable means of sensitive adjustment between popular thought and governmental method, and may yet afford the world itself the model of federation and liberty it may in God's providence come to seek...Constitutional government can exist only where there is actual community of interest and of purpose, and cannot, if it be also self-government, express the life of any body of people that does not consitute a veritable community. Are the United States a community? In some things yes, in most things no. How impossible it is to generalize about the United States."
Big business has likely pressed for centralization, and it is likely in the interest of big business to have consistent regulation and policy across the states. But big business has exited the nation. Manufacturing has moved to Asia and Mexico. The remaining large firms often do not pay high wages. Do the American people owe a favor to the firms that have not been interested in supporting them? Moreover, the problems that confronted big business in decades past have been modified, reduced and eliminated by technology. The coordination of separate regulatory, accounting and legal systems today is far from the problem that it was in the 1930s and 1940s. Integrated computer systems make compliance across diverse regulatory systems simple. Thus, large firms will suffer little from decentralization. Moreover, given the globalization of business and the eagerness with which firms have entered foreign countries with diverse regulatory systems, it is difficult to understand why adding more diversity will pose much of a problem to them, or given the eagerness with which firms have adjusted to diverse regulatory systems they can properly claim that they are an impediment here in the United States.
Despite the twentieth century's centralization of power, Wilson understood the importance of local government to community. Excessive centralizaton overlooks the importance of community and so is anti-democratic. Since the primary thrust of the New Deal was such centralization, it was at odds with the progressive era's emphasis on democracy, or at least Wilson's version of it.
Wilson writes (pp. 50-1):
"Not only are the separate and independent powers of the states based upon real economic and social differences between section and section of an enormous country, differences which necessitate adaptations of law and of administrative policy such as only local authorities acting in real independence can intelligently effect; but the states are our great and permanent contrbiution to constitutional development. I call them a great contribution because they have given to the understandings upon which constitutional government is based an intimacy and detail, an adjustment to local circumstances, a national diversity, an immediate adaptation to the variety of the people themselves, such as a little country may perhaps dispense with but a great continent cannot...They have furnished us with an ideal means of integrating a vast and various population, adapting law to changing and temporary conditions, modulating development and permanently securing each item of progress. They have been an incomparable means of sensitive adjustment between popular thought and governmental method, and may yet afford the world itself the model of federation and liberty it may in God's providence come to seek...Constitutional government can exist only where there is actual community of interest and of purpose, and cannot, if it be also self-government, express the life of any body of people that does not consitute a veritable community. Are the United States a community? In some things yes, in most things no. How impossible it is to generalize about the United States."
Big business has likely pressed for centralization, and it is likely in the interest of big business to have consistent regulation and policy across the states. But big business has exited the nation. Manufacturing has moved to Asia and Mexico. The remaining large firms often do not pay high wages. Do the American people owe a favor to the firms that have not been interested in supporting them? Moreover, the problems that confronted big business in decades past have been modified, reduced and eliminated by technology. The coordination of separate regulatory, accounting and legal systems today is far from the problem that it was in the 1930s and 1940s. Integrated computer systems make compliance across diverse regulatory systems simple. Thus, large firms will suffer little from decentralization. Moreover, given the globalization of business and the eagerness with which firms have entered foreign countries with diverse regulatory systems, it is difficult to understand why adding more diversity will pose much of a problem to them, or given the eagerness with which firms have adjusted to diverse regulatory systems they can properly claim that they are an impediment here in the United States.
Monday, April 28, 2008
Toward Separate American Communities
Woodrow Wilson argued that America ought to become a community that is united by common belief. However, Wilson did not anticipate the brokerage of special interest coalitions engendered by the expansive state. Instead of a community of interests, the expansion of the welfare state resulted in heightened factionalism to a degree unforeseen by Madison and the founders of the American constitution. The factionalism is in large part economic. The Federal Reserve Bank has served as a redistributive, extractive mechanism by which wealth is taken from workers and savers and redistributed to investment bankers. This is accomplished with the full support and flourish of the New York Times and the mass media in the name of rationalization of credit markets and similar vacuous phrases. The brokerage of coalitions and privilege extends to almost all facets of state and federal government. It is related to the passage of every law. It imbues the very substance of the American system. Under New Deal Progressivism, America has not become, as Wilson envisioned, a community of shared interests, but rather a land where various minorities wage economic war on the majority.
Progressivism entailed an increase in executive power and a reduction in the power of the states. It depended upon the federal government reflecting a popular will. But today, the popular will is fractured not only by economic but also by severe political criteria. The liberalism of Roosevelt has, for many, turned out to be a failure. The states where the New Deal has been taken to its furthest extremes, such as New York, are the dying states. Yet, the mass media cling to the New Deal paradigm as any reactionary clings to his fossilized ideology.
Many Americans have renewed their faith in traditional American values and adopted a conservative position that evolves from twentieth century progressive-liberalism. The conservative position finds that the ideas of the nineteenth century had more substance than the old Progressives thought. It finds that markets are required for flexibility and progress. It also finds that new ideas cannot be adopted by government rooted in special interest privilege.
The competition between the forces of conservative progress and the forces of progressive-liberal reaction is bitter. There can be no community of interest in a society where one half of the public hates the values of the other; where progressive-liberals reject the conditions for progress, i.e., markets and the entrepreneurial creative destruction; and where progressive-liberals hold their own country as well as conservatives in contempt. Likewise, it is unfair to those progressive-liberals who would like to be subject to government control; who want the guidance of a powerful executive leader and do not care about the independence of entrepreneurship and self employment to have freedom thrust upon them. It is unfair to ask progressive-liberals who need social and political guidance to think for themselves.
The solution to this dilemma of war of all against all, of economic interest against economic interest, is separation. A separation of state powers to enhance competing models. Through competition the states can serve as laboratories of experiment for both conservative and progressive-liberal ideas. A libertarian state can be juxtaposed to one that is progressive-liberal. Differing ideologies and the mutual contempt in which the advocates of liberty and the advocates of state power hold each other need not be brought into overt conflict. Instead, let them separate. Let them experiment. Let us see which state flourishes: the state that extols private use emininent domain, central banking and government intervention; or that state that dispenses with these institutions, views them as failed and frees entrepreneurial talent from government control. Will the anarchic state or the totalitarian state flourish? It is only through experiment that the answer can be found.
The separation of power into separate states would have advantages beyond the role of experimentation. The brokerage of special interests would be diminished with more local control. Special interest pleading depends in large part on asymmetry of resources and organization costs. As political entitites diminish in scope, the asymmetries become smaller and the advantages of wealth and concentrated power diminish as well. Perhaps progressive-liberalism will perform to a better degree should it cover a smaller geographic expanse. Perhaps European states manage themselves more professionally because of their smaller scale and lesser concomitant corruption.
Progressivism entailed an increase in executive power and a reduction in the power of the states. It depended upon the federal government reflecting a popular will. But today, the popular will is fractured not only by economic but also by severe political criteria. The liberalism of Roosevelt has, for many, turned out to be a failure. The states where the New Deal has been taken to its furthest extremes, such as New York, are the dying states. Yet, the mass media cling to the New Deal paradigm as any reactionary clings to his fossilized ideology.
Many Americans have renewed their faith in traditional American values and adopted a conservative position that evolves from twentieth century progressive-liberalism. The conservative position finds that the ideas of the nineteenth century had more substance than the old Progressives thought. It finds that markets are required for flexibility and progress. It also finds that new ideas cannot be adopted by government rooted in special interest privilege.
The competition between the forces of conservative progress and the forces of progressive-liberal reaction is bitter. There can be no community of interest in a society where one half of the public hates the values of the other; where progressive-liberals reject the conditions for progress, i.e., markets and the entrepreneurial creative destruction; and where progressive-liberals hold their own country as well as conservatives in contempt. Likewise, it is unfair to those progressive-liberals who would like to be subject to government control; who want the guidance of a powerful executive leader and do not care about the independence of entrepreneurship and self employment to have freedom thrust upon them. It is unfair to ask progressive-liberals who need social and political guidance to think for themselves.
The solution to this dilemma of war of all against all, of economic interest against economic interest, is separation. A separation of state powers to enhance competing models. Through competition the states can serve as laboratories of experiment for both conservative and progressive-liberal ideas. A libertarian state can be juxtaposed to one that is progressive-liberal. Differing ideologies and the mutual contempt in which the advocates of liberty and the advocates of state power hold each other need not be brought into overt conflict. Instead, let them separate. Let them experiment. Let us see which state flourishes: the state that extols private use emininent domain, central banking and government intervention; or that state that dispenses with these institutions, views them as failed and frees entrepreneurial talent from government control. Will the anarchic state or the totalitarian state flourish? It is only through experiment that the answer can be found.
The separation of power into separate states would have advantages beyond the role of experimentation. The brokerage of special interests would be diminished with more local control. Special interest pleading depends in large part on asymmetry of resources and organization costs. As political entitites diminish in scope, the asymmetries become smaller and the advantages of wealth and concentrated power diminish as well. Perhaps progressive-liberalism will perform to a better degree should it cover a smaller geographic expanse. Perhaps European states manage themselves more professionally because of their smaller scale and lesser concomitant corruption.
The New York Times on Ben Bernanke, June 20, 1913
The New York Times wrote an article on the McAdoo-Owen-Glass Banking bill, which became the Federal Reserve Act, on June 20, 1913. The Federal Reserve Act was passed in December of that year. The Times wrote:
"Banking and politics would be one. All experience forbids us to assume with any degree of confidence that appointments made by the President and confirmed by the Senate would be made with that careful attention to the need of securing fit and experienced men which the great importance of the banking business and its delicate and easily disturbed relation to the industries of the country so urgently require. We know that our Government is one of the least efficient, most wasteful and loosely conducted of the great business institutions of the country. And into such incompetent hands it is proposed to intrust the control of banking upon which all other business is so intimately dependent. Loans upon the security of farming lands are provided for. Does anybody suppose that the policy of the Federal Reserve Banks or of the Federal Reserve Board would in this particular be determined with entire indifference to the farmer vote? Or that in Congressional or Presidential campaign years the regulation of the discount rate or the determination of banking policy in general would be decided on by minds taking no thought of political ends to be gained? The germinal principle of the bill appears to be distrust of banks and bankers. We may assume that not only financiers and bankers, but business men generally will take sober thought concerning the centralizing features of the bill and the spirit and the policy which have inspired it."
"Banking and politics would be one. All experience forbids us to assume with any degree of confidence that appointments made by the President and confirmed by the Senate would be made with that careful attention to the need of securing fit and experienced men which the great importance of the banking business and its delicate and easily disturbed relation to the industries of the country so urgently require. We know that our Government is one of the least efficient, most wasteful and loosely conducted of the great business institutions of the country. And into such incompetent hands it is proposed to intrust the control of banking upon which all other business is so intimately dependent. Loans upon the security of farming lands are provided for. Does anybody suppose that the policy of the Federal Reserve Banks or of the Federal Reserve Board would in this particular be determined with entire indifference to the farmer vote? Or that in Congressional or Presidential campaign years the regulation of the discount rate or the determination of banking policy in general would be decided on by minds taking no thought of political ends to be gained? The germinal principle of the bill appears to be distrust of banks and bankers. We may assume that not only financiers and bankers, but business men generally will take sober thought concerning the centralizing features of the bill and the spirit and the policy which have inspired it."
Woodrow Wilson's The New Freedom: Hoisted By His Own Petard
Woodrow Wilson, The New Freedom: A Call for the Emancipation of the Generous Energies of a People. Englewood Cliffs, NJ: Prentice-Hall. Classics in History series. 173 pages. $1.95.
Woodrow Wilson was a Mugwump and was, according to Frank E. Leuchtenberg's introduction to this book. an advocate of liberal (libertarian) ideas until he was elected governor of New Jersey. Even then and thereafter much of his rhetoric is couched in the philosophies of individualism and laissez faire. This book is a compilation of articles in a magazine called World's Work that Wilson wrote in 1912 (the original edition was published in 1913) when he was campaigning for president against Theodore Roosevelt (running on the Progressive Party ticket) and William Howard Taft. The Republican vote was divided between Roosevelt and Taft, and Wilson, a Democrat, won.
Unlike the Republican Theodore Roosevelt, who argued for close government regulation and licensure of "trusts", Wilson argued for a loose regulatory regime. Wilson passionately believed in entrepreneurship and the importance of Americans' working for themselves. Arguably, he was more free market and individualist in orientation than any post-New Deal president, including Ronald Reagan. Of the major post-World War II political figures only Barry Goldwater would have been more interested in economic freedom. It is ironic that Wilson inadvertently did as much as any president to stall economic freedom and laissez faire during his administration notably thorugh the installation of the federal income tax as part of the United States Revenue Act of May 1913 and the Federal Reserve Act in December 1913. It is noteworthy that the federal income tax was an addendum to a tariff reduction bill (the Revenue Act of 1913)that reduced tariffs to their lowest levels in more than 50 years. Moreover, the income tax applied to only one percent of the population (those couples earning over $4,000 per year) and had been authorized by the Sixteenth Amendment, also ratified in 1913. The top rate of 7% was payable by those earning over $500,000 per year, which would be equivalent to more than $10 million per year today.
As much as any man's, Wilson's career reflects human inability to foretell the future or to grasp the facts. Wilson saw the trusts (not so much big business as the conglomerate trusts) as a threat to human freedom. He believed that government subsidies to big business, to include tariffs and land grants, permitted inefficient trusts to flourish. Wilson believed that the kind of close regulation of the trusts that Roosevelt advocated in the 1912 election would have resulted in regulatory capture of government by business. He believed that access to credit should be democratized and likely believed that establishment of the Federal Reserve Bank would loosen the control of credit by big business and Wall Street and improve availability of credit to entrepreneurs. He saw progressivism as a way to protect the rights of entrepreneurs and small business. He did not anticipate that special interests would capture Fed policy and he did not anticipate that the Federal Reserve Bank would serve to narrow access to credit ever further.
Although Wilson argues for greater government assertiveness with respect to monopoly and the trusts, he does so in a way that emphasizes the importance of eliminating government intervention on behalf of the trusts and favoritism by government. In his essay "What Is Progress?" he argues that (p.36) "the laws have not kept up with the change of economic circumstances" and that the law had not adjusted to changes in business, but he is not overly aggressive, and somewhat obfuscatory, about the changes that he would have proposed. He argues (p. 40):
"I believe, for one, that you cannot tear up ancient rootages and safely plant the tree of liberty in soil which is not native to it. I believe that the ancient traditions of a people are its ballast...You must knit the new into the old...If I did not believe that to be progressive was to preserve the essentials of our institutions, I for one could not be a progressive."
Wilson's writing illustrates that progressivism was in large part empty of meaning. Roosevelt argued that progressivism meant that there should be centralized control and direction of industry. Wilson argued that progressivism meant the protection of the man on the make from big business and monopoly. Both called themselves "progressives". Wilson opposed tariffs and argued that they interfere with business competition. Roosevelt favored protection and government integration with big business. Wilson, unlike Roosevelt, was no friend to privilege for business, and he criticized Roosevelt for his close link to George W. Perkins, organizer the US Steel and International Harvester trusts (p. 117).
In his essay "The Old Order Changeth" Wilson illustrates the progressives' interest in "the new". Progressivism is the ultimate modernist philosophy. He writes (p. 20):
"We have come upon a very different age from any that preceded us. We have come upon an age when we do not do business in the way in which we used to do business...You know what happens when you are the servant of a corporation. You have in no instance access to the men who are really determining the policy of the corporation...Your individuality is swallowed up in the individuality and purpose of a great organization."
Yet Wilson does not advocate breaking up big business or excessively regulating it. He was as suspicious of government welfare as of employment in big business. He was no New Dealer. Many of the reforms he advocated, such as workers' compensation and disclosure requirements associated with the issuance of financial securities (p.28) were barely more than changes that modernized common law principles rather than being intrusively regulatory. Wilson emphasized bringing "light" to bear on business practice in order to make the economy fairer. But the remedies he proposed were not intrusive to the operation of business. On the other hand, they have not succeeded in his objectives. For as the late 1990s illustrated, unscruplous businesses can find their ways around regulations; and disclosure requirements are not protection against fraud. But having such requirements is not overly burdensome to business and likely encourages stability in the markets.
He argues vigorously for the importance of the entrepreneur and individual enterprise (p.26):
"The originative part of America, the part of America that makes new enterprises, the part into which the ambitious and gifted workingman makes his was up, the class that saves, that plans, that organizes, that presently spreads its enterprises until they have a national scope and character--that middle class is being more and more squeezed out...what alarms me is that they are not originating prosperity. No country can afford to have its prosperity originated by a small controlling class...There has come over the land that un-American set of conditions which enables a small number of men who control the government to get favors from the government; by those favors to exclude their fellows from equal business opportunity; by those favors to extend a network of control..."
Perhaps the most telling paragraph in the book is on page 56:
"For my part, I am very much more afraid of the man who does a bad thing and does not know it is bad than of the man who does a bad thing and knows it is bad; because I think that in public affairs stupidity is more dangerous than knavery, because harder to fight and dislodge."
Wilson established an income tax to compensate for the repeal of tariffs. At the time, he thought the top rate for those making over $10 million in today's dollars was 7%. He established a Federal Reserve Bank thinking that it would democratize credit. Within twenty years the Fed had caused the Great Depression and within 50 years both the Fed and the income tax had become the government's chief tools to suppress individual initiative, to steal from the populace to further the aims of elitist liberals who depend on a monopoly of power, and to suppress entrepreneurship. His legacy was hoisted by Wilson's own petard.
Woodrow Wilson was a Mugwump and was, according to Frank E. Leuchtenberg's introduction to this book. an advocate of liberal (libertarian) ideas until he was elected governor of New Jersey. Even then and thereafter much of his rhetoric is couched in the philosophies of individualism and laissez faire. This book is a compilation of articles in a magazine called World's Work that Wilson wrote in 1912 (the original edition was published in 1913) when he was campaigning for president against Theodore Roosevelt (running on the Progressive Party ticket) and William Howard Taft. The Republican vote was divided between Roosevelt and Taft, and Wilson, a Democrat, won.
Unlike the Republican Theodore Roosevelt, who argued for close government regulation and licensure of "trusts", Wilson argued for a loose regulatory regime. Wilson passionately believed in entrepreneurship and the importance of Americans' working for themselves. Arguably, he was more free market and individualist in orientation than any post-New Deal president, including Ronald Reagan. Of the major post-World War II political figures only Barry Goldwater would have been more interested in economic freedom. It is ironic that Wilson inadvertently did as much as any president to stall economic freedom and laissez faire during his administration notably thorugh the installation of the federal income tax as part of the United States Revenue Act of May 1913 and the Federal Reserve Act in December 1913. It is noteworthy that the federal income tax was an addendum to a tariff reduction bill (the Revenue Act of 1913)that reduced tariffs to their lowest levels in more than 50 years. Moreover, the income tax applied to only one percent of the population (those couples earning over $4,000 per year) and had been authorized by the Sixteenth Amendment, also ratified in 1913. The top rate of 7% was payable by those earning over $500,000 per year, which would be equivalent to more than $10 million per year today.
As much as any man's, Wilson's career reflects human inability to foretell the future or to grasp the facts. Wilson saw the trusts (not so much big business as the conglomerate trusts) as a threat to human freedom. He believed that government subsidies to big business, to include tariffs and land grants, permitted inefficient trusts to flourish. Wilson believed that the kind of close regulation of the trusts that Roosevelt advocated in the 1912 election would have resulted in regulatory capture of government by business. He believed that access to credit should be democratized and likely believed that establishment of the Federal Reserve Bank would loosen the control of credit by big business and Wall Street and improve availability of credit to entrepreneurs. He saw progressivism as a way to protect the rights of entrepreneurs and small business. He did not anticipate that special interests would capture Fed policy and he did not anticipate that the Federal Reserve Bank would serve to narrow access to credit ever further.
Although Wilson argues for greater government assertiveness with respect to monopoly and the trusts, he does so in a way that emphasizes the importance of eliminating government intervention on behalf of the trusts and favoritism by government. In his essay "What Is Progress?" he argues that (p.36) "the laws have not kept up with the change of economic circumstances" and that the law had not adjusted to changes in business, but he is not overly aggressive, and somewhat obfuscatory, about the changes that he would have proposed. He argues (p. 40):
"I believe, for one, that you cannot tear up ancient rootages and safely plant the tree of liberty in soil which is not native to it. I believe that the ancient traditions of a people are its ballast...You must knit the new into the old...If I did not believe that to be progressive was to preserve the essentials of our institutions, I for one could not be a progressive."
Wilson's writing illustrates that progressivism was in large part empty of meaning. Roosevelt argued that progressivism meant that there should be centralized control and direction of industry. Wilson argued that progressivism meant the protection of the man on the make from big business and monopoly. Both called themselves "progressives". Wilson opposed tariffs and argued that they interfere with business competition. Roosevelt favored protection and government integration with big business. Wilson, unlike Roosevelt, was no friend to privilege for business, and he criticized Roosevelt for his close link to George W. Perkins, organizer the US Steel and International Harvester trusts (p. 117).
In his essay "The Old Order Changeth" Wilson illustrates the progressives' interest in "the new". Progressivism is the ultimate modernist philosophy. He writes (p. 20):
"We have come upon a very different age from any that preceded us. We have come upon an age when we do not do business in the way in which we used to do business...You know what happens when you are the servant of a corporation. You have in no instance access to the men who are really determining the policy of the corporation...Your individuality is swallowed up in the individuality and purpose of a great organization."
Yet Wilson does not advocate breaking up big business or excessively regulating it. He was as suspicious of government welfare as of employment in big business. He was no New Dealer. Many of the reforms he advocated, such as workers' compensation and disclosure requirements associated with the issuance of financial securities (p.28) were barely more than changes that modernized common law principles rather than being intrusively regulatory. Wilson emphasized bringing "light" to bear on business practice in order to make the economy fairer. But the remedies he proposed were not intrusive to the operation of business. On the other hand, they have not succeeded in his objectives. For as the late 1990s illustrated, unscruplous businesses can find their ways around regulations; and disclosure requirements are not protection against fraud. But having such requirements is not overly burdensome to business and likely encourages stability in the markets.
He argues vigorously for the importance of the entrepreneur and individual enterprise (p.26):
"The originative part of America, the part of America that makes new enterprises, the part into which the ambitious and gifted workingman makes his was up, the class that saves, that plans, that organizes, that presently spreads its enterprises until they have a national scope and character--that middle class is being more and more squeezed out...what alarms me is that they are not originating prosperity. No country can afford to have its prosperity originated by a small controlling class...There has come over the land that un-American set of conditions which enables a small number of men who control the government to get favors from the government; by those favors to exclude their fellows from equal business opportunity; by those favors to extend a network of control..."
Perhaps the most telling paragraph in the book is on page 56:
"For my part, I am very much more afraid of the man who does a bad thing and does not know it is bad than of the man who does a bad thing and knows it is bad; because I think that in public affairs stupidity is more dangerous than knavery, because harder to fight and dislodge."
Wilson established an income tax to compensate for the repeal of tariffs. At the time, he thought the top rate for those making over $10 million in today's dollars was 7%. He established a Federal Reserve Bank thinking that it would democratize credit. Within twenty years the Fed had caused the Great Depression and within 50 years both the Fed and the income tax had become the government's chief tools to suppress individual initiative, to steal from the populace to further the aims of elitist liberals who depend on a monopoly of power, and to suppress entrepreneurship. His legacy was hoisted by Wilson's own petard.
Americans Should Be Free to Choose Their Currencies
An economist named James Galbraith was just on Bloomberg television telling viewers that a raise in interest rates would be catastrophic because US borrowers would have to pay higher interest rates to foreign lenders were interest rates to be raised. This is half true. The half that Professor Galbraith omits is that this policy causes resources to be redistributed from the American people and foreign lenders to borrowers, namely Wall Street and big business. In his view, if commercial banks and Wall Street do not get to cheat foreign lenders and the American people (through inflation) then the situation is catastrophic. The only acceptable situation in Professor Galbraith's view is where Wall Street and big business steal from the poor and where borrowers cheat lenders.
Professor Galbraith's short term thinking is precisely why the American people are becoming poorer. If you cheat your lenders then they will not lend to you. If you subsidize borrowers at the expense of productive workers (through inflation) then productive work will disappear. There is nothing catastrophic about asking that dollars that have been borrowed be repaid in dollars that are still worth the same amount. James Galbraith finds this concept to be catastrophic.
The dialogue about the dollar is steeped in deception of the kind that Professor Galbraith offers. But until the twentieth century, Americans did not have to use the increasingly worthless greenbacks (they are not dollars) that the Federal Reserve Bank prints. We did not have to try to grasp the arguments of academic con men, Wall Street cheaters and perpetrators of banking fraud.
It is time to establish a competitive monetary system. Americans should be free to reject the greenback and to establish a true dollar based on criteria established through private contract. Competition with respect to money would reflect democracy and market freedom. Why not have free choice with respect to the money we need to accept? What virtue is there in being forced to accept mismanaged greenbacks? Why can't the states, private banks or private firms issue their own money? Why can't borrowers insist on being paid back in gold as some did in the nineteenth century?
Professor Galbraith's short term thinking is precisely why the American people are becoming poorer. If you cheat your lenders then they will not lend to you. If you subsidize borrowers at the expense of productive workers (through inflation) then productive work will disappear. There is nothing catastrophic about asking that dollars that have been borrowed be repaid in dollars that are still worth the same amount. James Galbraith finds this concept to be catastrophic.
The dialogue about the dollar is steeped in deception of the kind that Professor Galbraith offers. But until the twentieth century, Americans did not have to use the increasingly worthless greenbacks (they are not dollars) that the Federal Reserve Bank prints. We did not have to try to grasp the arguments of academic con men, Wall Street cheaters and perpetrators of banking fraud.
It is time to establish a competitive monetary system. Americans should be free to reject the greenback and to establish a true dollar based on criteria established through private contract. Competition with respect to money would reflect democracy and market freedom. Why not have free choice with respect to the money we need to accept? What virtue is there in being forced to accept mismanaged greenbacks? Why can't the states, private banks or private firms issue their own money? Why can't borrowers insist on being paid back in gold as some did in the nineteenth century?
Cognitive Limits on Progressivism
The limitations of progressivism are illusted in the limitations of progressivism's advocates, such as Peter Levine. Progressivism purports to reform the economy, but progressivism's advocates are not well-schooled in economic problems and constraints. Considerations that need to be integrated in fundamental thinking about society are the unforeseen effects of policy changes; the evolution of technology to render a given set of economic arrangements obsolete in shorter time frames than it takes to implement government reforms that work; the ability of individual employees and entrepreneurs to integrate information more flexibly and intelligently than can experts or central planners; the inability of deliberative processes to anticipate market and technological change; and the inability of deliberators to assess the true costs and benefits of the very changes they propose at the time and place that they propose them. Progressivism assumes unbounded rationality on the part of planners and executives. Yet, planners and executives err more often than they succeed. Progressivism does not anticipate the failure of the firms, technologies, reforms and policies that it proposes, so by definition it results in the institutionalism of antiquated and outdated process, technologies and ideas. There is little that can be new in the ideas that progressives propose; and the reforms that they propose stall progress.
Progressivism aims for contradictory ends and so cannot achieve its purported ends. It aims to increase centralization of authority by enhancing government power. But democracy depends on public participation which in turn depends on decentralization of authority. Progressivism aims for increasing public voice. But it bestows the opportunity for unitary authority on a centralized power. How can such an ideology achieve anything more than tyranny?
Progressivism aims for contradictory ends and so cannot achieve its purported ends. It aims to increase centralization of authority by enhancing government power. But democracy depends on public participation which in turn depends on decentralization of authority. Progressivism aims for increasing public voice. But it bestows the opportunity for unitary authority on a centralized power. How can such an ideology achieve anything more than tyranny?
Sunday, April 27, 2008
Barack Obama Is A Racist and, Worse, a Social Democrat and a Progressive
Howard S. Katz has just written blog that argues that Barack Obama is a racist:
"...Barack Obama is a racist. He sees white people through the prism of hate. He sees them in clichés...So now we know what the election of 2008 is really about. The Democrats may nominate a racial bigot who hates the large majority of the people in the country he is trying to lead. The campaign will be very simple. The Democrats probably won’t come right out and say it, but their position will be, “We hate America...
"I first met these people at Harvard in the late 1950s. The issue has nothing to do with black or white. They hate America because America is the country based on freedom. They are not liberals. Neither are they democrats (with either a lower or upper case “D”).
"The formal name of these people is Social Democrat. This was a movement founded in 1875 in Germany to prevent the ideas of freedom and democracy from advancing across the continent of Europe. In 1912, the Social Democrats took control of Germany and fomented W.W.I. Then another Social Democrat, named Adolph Hitler, fomented W.W. II.
"...This will be the Presidential campaign of 2008. The Democratic position will be, “We hate America.” The Republican position will be mealy-mouthed compromise. And the people of the world run around killing each other over the food which does not exist"
There is little doubt in my mind that Barack Obama represents a fringe element. There is also little doubt that the Democrats who back him, such as George Soros and Warren Buffett, are anti-American bigots.
"...Barack Obama is a racist. He sees white people through the prism of hate. He sees them in clichés...So now we know what the election of 2008 is really about. The Democrats may nominate a racial bigot who hates the large majority of the people in the country he is trying to lead. The campaign will be very simple. The Democrats probably won’t come right out and say it, but their position will be, “We hate America...
"I first met these people at Harvard in the late 1950s. The issue has nothing to do with black or white. They hate America because America is the country based on freedom. They are not liberals. Neither are they democrats (with either a lower or upper case “D”).
"The formal name of these people is Social Democrat. This was a movement founded in 1875 in Germany to prevent the ideas of freedom and democracy from advancing across the continent of Europe. In 1912, the Social Democrats took control of Germany and fomented W.W.I. Then another Social Democrat, named Adolph Hitler, fomented W.W. II.
"...This will be the Presidential campaign of 2008. The Democratic position will be, “We hate America.” The Republican position will be mealy-mouthed compromise. And the people of the world run around killing each other over the food which does not exist"
There is little doubt in my mind that Barack Obama represents a fringe element. There is also little doubt that the Democrats who back him, such as George Soros and Warren Buffett, are anti-American bigots.
Barack Obama and the Republicans
Following three decades of Republican complicity with leftist occupation of our educational system, these spring chickens are coming home to vote for Barack Obama.Lance Fairchok of American Thinker has an excellent blog (hat tip Larwyn) about Barack Obama's advisors. Barack Obama is not just a befuddling liar. Most twenty-first century politicians can be so described. What distinguishes Mr. Obama is his close association with a catalog of extremists, to include his pastor, Jeremiah Wright, who is obsessed with identity politics, and William Ayers, a founder of the Weathermen in the 1960s.
As I have previously blogged, the close association between Obama and the identity politics fringe of the Democratic party is important because he will select high level staffers from among his extremist catalog. Fairchok performs a public service by pointing out that Obama is:
-supported Daniel Ortega in Nicaragua
-associated with Frank Marshall Davis who is in turn associated with the Communist Party USA
-has hired Sam Graham Nelson, a writer for Socialist Viewpoint, to run an Obama blog
None of this surprises. If you catalogued the staff members of the Democratic Party state assemblies around the country, or catalogued the leadership of various education departments around the country, you would find similar kinds of economic illiterates in important government jobs.
The problem is with the Republican Party as much as the Democratic. I attended a meeting of a Department of Education accrediting agency several years ago and was dismayed to find the Bush administration's Department of Education dominated by the very kind of extremists who would look to a Bill Ayers for guidance. Rather than terminate the Department of Education as any competent conservative would, three Republican presidents, Reagan, Bush I and Bush II, have used it as a patronage plumb and have permitted left wingers to dominate its culture.
Rather than insist that colleges teach more than the left wing version of social science, Republicans have remained mostly indifferent to the occupation of our universities by extremist kooks like Ayers.
Rather than appoint Diane Ravitch to an important policy position, the Republicans have remained silent as left wing indoctrination occurs in elementary schools around the country, specifically to include New York's. I am intimately familiar with New York's because I teach in a public New York university, and if you have any doubt that large numbers of New York City elementary school students have been brainwashed in stupid, Marxist lies rather than educated please allow me to quell your doubts.
The Republicans have remained silent while the left has occupied our cultural institutions. Instead of complaining, the Republicans have viewed the left wing imperialism as a foundation to expand patronage opportunities.
With Barack Obama, the chickens are coming home to roost. America's public has NOT been educated in the founding principles. The concept of limited government is alien to most American school children. The concepts of self reliance and individualism on which progress depends have been neglected. America's young believe that the way to succeed in life is to steal. As a result, they flock to the likes of Barack Obama and Hillary Clinton.
By its indifference to the domination of our political institutions by left wing thugs and criminals the Republican Party has fostered the situation.
Eliot Spitzer and the Progressive-liberals
There is a distinct parallel between the short career of Eliot Spitzer and the history of progressive-liberalism. Eliot Spitzer claimed to be for morality and to hate money laundering, but instead he was philandering with hookers and engaging in money laundering. The progressive-liberals claim to be interested in helping the poor, but instead they harm the poor in the interests of their professions, universities, banks and business. Like progressive-liberals in general, Eliot Spitzer did the direct opposite of what he claimed to be doing. He did it, as progressive-liberals do it, for self-aggrandizement and personal gain.
One Problem the Republicans Need to Address
Please press the downward arrowhead on the right of the toolbar and the "+" in the dropdown menu to make the chart larger.
One problem that Republicans need to address is declining American household income. According to the Census Bureau real household income declined between 2000 and 2003. The reason is inflation. Flat and declining real family incomes have been characteristic of the American economy since Richard M. Nixon finally abolished the gold standard for foreign dollar holders in 1971. Nixon's decision was very much in the tradition of New Deal progressive liberalism and followed FDR's earlier abolition of the domestic gold standard in the 1930s.
Under George W. Bush and earlier the Repulicans have followed a progressive-liberal inflationary strategy. The Fed has created new dollars, transferring wealth to real estate developers, bankers and Wall Street (to include hedge fund managers, Warren Buffett and George Soros). In the late 19th century increasing real household income was coupled with low profits and non-increasing stock market valuations. The business community did not like this situation and claimed that there were depressions in every decade, in the 1870s, 1880s and 1890s. But real incomes were increasing throughout the post Civil War period despite massive immigration, and in 1913 real wages were considerably higher than they were 20, 30 or 50 years earlier. In 1913, the Wilson administration established the Federal Reserve Bank.
Since World War II stock market valuations have soared while real household incomes have remained flat. During the past ten years the American public has borrowed more extensively than at any point in history, cloaking its impoverishment through debt. Productive workers have been punished through the income tax and creeping inflation while speculators and borrowers have been rewarded by seeing their loan values diminished through inflation.
A nation that rewards speculators and punishes producers will not remain wealthy forever.
The American people have been slow to realize that they are poorer than before and that personal wealth has not grown as it had before President Nixon abolished the gold standard in 1971 and before the Wilson administration established the Fed in 1913. Notice that both Wilson and Nixon claimed to be for limited government.
However, the public has begun to realize that something is wrong. Unfortunately, George W. Bush has behaved as a progressive-liberal and argued for increasing Fed activism.
The choice between the two major parties is: 1. Party (a) inflation. 2. Party (b) inflation. Both parties advocate inflation and so aim to impoverish America. Perhaps it is time for Republicans to wake up and shed the pro-government platform of Bush, Huckabee, Reagan and Nixon that has led to declining household income and massive private and public indebtedness.
One problem that Republicans need to address is declining American household income. According to the Census Bureau real household income declined between 2000 and 2003. The reason is inflation. Flat and declining real family incomes have been characteristic of the American economy since Richard M. Nixon finally abolished the gold standard for foreign dollar holders in 1971. Nixon's decision was very much in the tradition of New Deal progressive liberalism and followed FDR's earlier abolition of the domestic gold standard in the 1930s.
Under George W. Bush and earlier the Repulicans have followed a progressive-liberal inflationary strategy. The Fed has created new dollars, transferring wealth to real estate developers, bankers and Wall Street (to include hedge fund managers, Warren Buffett and George Soros). In the late 19th century increasing real household income was coupled with low profits and non-increasing stock market valuations. The business community did not like this situation and claimed that there were depressions in every decade, in the 1870s, 1880s and 1890s. But real incomes were increasing throughout the post Civil War period despite massive immigration, and in 1913 real wages were considerably higher than they were 20, 30 or 50 years earlier. In 1913, the Wilson administration established the Federal Reserve Bank.
Since World War II stock market valuations have soared while real household incomes have remained flat. During the past ten years the American public has borrowed more extensively than at any point in history, cloaking its impoverishment through debt. Productive workers have been punished through the income tax and creeping inflation while speculators and borrowers have been rewarded by seeing their loan values diminished through inflation.
A nation that rewards speculators and punishes producers will not remain wealthy forever.
The American people have been slow to realize that they are poorer than before and that personal wealth has not grown as it had before President Nixon abolished the gold standard in 1971 and before the Wilson administration established the Fed in 1913. Notice that both Wilson and Nixon claimed to be for limited government.
However, the public has begun to realize that something is wrong. Unfortunately, George W. Bush has behaved as a progressive-liberal and argued for increasing Fed activism.
The choice between the two major parties is: 1. Party (a) inflation. 2. Party (b) inflation. Both parties advocate inflation and so aim to impoverish America. Perhaps it is time for Republicans to wake up and shed the pro-government platform of Bush, Huckabee, Reagan and Nixon that has led to declining household income and massive private and public indebtedness.
Friday, April 25, 2008
Man-Eating Progressive Zombies Run Wild in New York
The 2007 sci fi film I am Legend is a remake of two earlier films, The Omega Man (1971) and The Last Man on Earth (1964). According to Wikipedia, the films are based on Richard Matheson's novel, I Am Legend, which is about the last man in LA.
This movie is about the last man in New York, and I have been pondering the reason for the change of venue.
This movie is about the last man in New York, and I have been pondering the reason for the change of venue.
The reason is that the film is about progressivism, and New York offers a better venue to dissect progressivism than any other state. It was the home or birthplace of several of the founders of progressivism, to include Herbert Croly and Theodore Roosevelt, as well as their New Deal acolytes, to include as Al Smith, Franklin D. Roosevelt and Francis Perkins (Perkins was born in Boston but attended Columbia and subsequently made her career in New York before becoming Secretary of Labor under FDR).
I am Legend's plot is that a new treatment for cancer causes a virus that wipes out 90 percent of the the human race and turns the remaining 9% into a species of man-eating zombies. About one percent of the population is immune to the virus, but most of those who are immune (except for Robert Neville) have been eaten by the zombies. The story focuses on Robert Neville (Will Smith) who has remained in New York to attempt to find a cure for the virus. Unfortunately, his efforts have been unsuccessful. He is able to avoid the zombies but he is accidentally exposed, leading to a climactic battle between Smith, armed with an M-4 machine gun, and hundreds of zombies.
I am Legend is clearly a movie about progressive-liberalism. The experiment that killed the human race was federally funded. The zombies look suspiciously like New York's progressives.
I am Legend's plot is that a new treatment for cancer causes a virus that wipes out 90 percent of the the human race and turns the remaining 9% into a species of man-eating zombies. About one percent of the population is immune to the virus, but most of those who are immune (except for Robert Neville) have been eaten by the zombies. The story focuses on Robert Neville (Will Smith) who has remained in New York to attempt to find a cure for the virus. Unfortunately, his efforts have been unsuccessful. He is able to avoid the zombies but he is accidentally exposed, leading to a climactic battle between Smith, armed with an M-4 machine gun, and hundreds of zombies.
I am Legend is clearly a movie about progressive-liberalism. The experiment that killed the human race was federally funded. The zombies look suspiciously like New York's progressives.
Progressive-liberalism claims that the poor should eat the rich, but really aims for the rich to eat the poor. Somebody eats somebody. How many human beings have been murdered through socialist or left wing ideology? The zombies' hive pattern is clearly a reflection of progressivism.
Moreover, the left has long behaved as a mindless horde of zombies whose policies destroy all who do not fit its politically correct mold. The left aims to establish a zombie-like world where all disagreement is suppressed and all human instincts eradicated.
Smith is the lone conservative in a city of progressives who are trying to eat him alive. I know because I have lived in New York. What better example than Mayor Michael Bloomberg? Can you seriously argue that he is not a zombie?
While New York's population base exits almost as fast as depicted in I am Legend, this film fairly depicts progressive New York. At the end, a surviving character moves to Vermont. A zombie who looks suspiciously like Bernie Sanders awaits.
While New York's population base exits almost as fast as depicted in I am Legend, this film fairly depicts progressive New York. At the end, a surviving character moves to Vermont. A zombie who looks suspiciously like Bernie Sanders awaits.
Wednesday, April 23, 2008
Calvin Coolidge on Delegation
"In the discharge of the duties of the office (of the presidency) there is one rule of action more important than all others. It consists in never doing anything that some else can do for you. Like many other good rules it is proven by its exceptions. But it indicates a course that should be very strictly followed in order to prevent being so entirely devoted to trifling details that there will be little opportunity to give the necessary consideration to policies of larger importance."
---Calvin Coolidge, The Autobiography of Calvin Coolidge, p. 196.
---Calvin Coolidge, The Autobiography of Calvin Coolidge, p. 196.
Tuesday, April 22, 2008
Both Parties Are Committed to The Problem
The Republicans favor inflation. The Democrats favor more inflation. The Republicans favor policies that create food shortages. The Democrats favor policies that create greater food shortages. The Greenspan Fed stimulated demand for real estate, and farmers sold their land to real estate developers. Now we have food shortages. Banks took the counterfeit Fed money and lent it to people who couldn't pay it back, transferring it to the real estate developers. Now the Republicans favor printing more money to subsidize the banks who lent it to the people who can't pay it back. The Democrats favor printing more money to directly subsidize the people who can't pay it back. Neither party questions the importance of printing money to steal from productive Americans and subsidize banks, real estate developers and real estate investors. Neither party questions that land was diverted from farming to real estate development. Now, we have food shortages, and neither party can offer an intelligent solution.
No politician wants to addres the underlying problem because they are deeply committed to the perpetuation of said problem. Both parties favor distortion of the market place by stimulating demand. The Democrats aim to stimulate demand for real estate by transferring funds from the working class to the real estate owning class and in the process keeping land away from optimal use, i.e., farming. The Republicans aim to stimulate demand for investment banks by transferring funds from productive Americans to inept investors, also making sure that productive use of wealth does not occur.
No politician wants to addres the underlying problem because they are deeply committed to the perpetuation of said problem. Both parties favor distortion of the market place by stimulating demand. The Democrats aim to stimulate demand for real estate by transferring funds from the working class to the real estate owning class and in the process keeping land away from optimal use, i.e., farming. The Republicans aim to stimulate demand for investment banks by transferring funds from productive Americans to inept investors, also making sure that productive use of wealth does not occur.
The Autobiography of Calvin Coolidge
Calvin Coolidge. The Autobiography of Calvin Coolidge. New York: Cosmopolitan Book Corporation, 1929. 247 pages.
Calvin Coolidge grew up in Plymouth, an old fashioned, rural town in Vermont. The town was mostly Republican. Coolidge's father was a justice of the peace and held several other government posts that led to his collecting taxes. Coolidge writes (p. 26):
"As I went about with my father when he collected taxes, I knew that when taxes were laid some one had to work to earn the money to pay them. I saw that a public debt was a burden on all the people in a community, and while it was necessary to meet the needs of a disaster it cost much in interest and ought to be retired as soon as possible."
While at Amherst College, he favored Benjamin Harrison over Grover Cleveland in 1892. Cleveland was the Mugwumps' candidate and more committed to limited government than was Harrison. Harrison was a mainstream Republican. However, Coolidge was an advocate of the gold standard early in life. While he was studying for the bar exam in 1896:
"When I was home that summer I took part in a small neighborhood debate in which I supported the gold standard. The study I put on this subject well repaid me. Of course, Northhampton went handsomely for McKinley."
In 1909 Coolidge was elected Mayor of Northampton, Massachusetts (p. 101):
"Our city had always been fairly well governed and had no great problems. Taxes had been increasing. I was able to reduce them some and pay part of the debt, so that I left the net obligations chargeable to taxes at about $100,000. The salaries of teachers were increased."
Coolidge writes that early in his tenure in the Massachusetts state senate (p. 102):
"I...secured the appointment of a commission that resulted in the passage of a mother's aid or maternity bill...and I was made chairman of a recess committee to secure better transportation for rural communities in the wester part of the Commonwealth.
(p. 103) "...the Boston Democrats came to be my friends and were a great help to me in later times...
"...My committee reported a bill transforming the Railroad Commission into a Public Service Commission, with a provision intending to define and limit the borrowing powers of railroads which we passed after a long struggle and debate...The bill came out for our trolley roads in Western Massachusetts and was adopted..."
He goes on to suggest that he differed from the more radical Progressives in tone (p. 106-8):
"It appeared to me in January 1914 that a spirit of radicalism prevailed which unless checked was likely to prove very destructive. It had been encouraged by the opposition and by a large faction of my own party...It consisted of the claim in general that in some way the government was to be blamed because everybody was not prosperous, because it was necessary to work for a living, and because our written constitutions, the legislatures and the courts protected the rights of private owners especially in relation to large aggregations of property...The previous session had been overwhelmed with a record number of bills introduced, many of them in an attempt to help the employee by impairing the property of the employer. Though anxious to improve the condition of our wage earners, I believed this doctrine would soon destroy business and deprive them of a livelihood. What was needed was a restoration of confidence in our institutions and in each other, on whcih economic progress might rest...In taking the chair as President of the Senate I therefore made a short address, which I had carefully fully prepared, appealing to the conservative spirit of the people. I argued that the government could not relieve us from toil, that large concerns are necessary for progress in which capital and labor all have a common interest, and I defended representative government and the integrity of the courts."
When the state Republican Committee chose him as chairman (p. 109-110):
"I drew a conservative platform, pitched in the same key, pointing out the great mass of legislation our party had placed on the statute books for the benefit of the wage earners and the welfare of the people, but declaring for the strict and unimpaired maintenance of our present social, economic and political institutions."
As President of the Massachusetts Senate (p. 110):
"I wanted to cut down the volume of legislation. In this progress was made. The Blue Book of acts and Resolves for 1913 had 1,763 pages...for 1915 only 1,230, which was a very wholesome reduction of more than thirty percent. People were coming to see that they must depend on themselves rather than on legislation for success."
While Coolidge had many conservative impulses he also had many progressive ideas. He mentions that in his inaugural speech as governor of Massachusetts in January 1919 (p., 125):
"I dwelt on the need of promoting the public health, education, and the opportunity for employment at fair wages in accordance with the right of the people to be well born, well reared, well educated, well employed and well paid. I also stressed the necessity of keeping government expenses as well as possible... "
Thus, Coolidge adapted the language of progressivism to a somewhat self-contradictory model whereby he would give the people progressive government while not spending for it.
Coolidge helped stop a police strike in Boston which received national attention. He reinstated Police Commissioner Edwin U. Curtis (who had been supplanted by the Mayor). Samuel Gompers, head of the AFL attacked Coolidge for removing union policemen, but Coolidge refused. He said (p. 134):
"There is no right to strike against the public safety by any body, any time, any where."
As governor, Coolidge signed a law limiting the work week for women and minors to 48 hours. He vetoed a bill permitting the sale of beer (during Prohibition).
The police strike brought Coolidge national attention and he won the nomination to vice president.
His instincts were conservative based on his basic rural New England education (p. 153):
"I contended that the only sure method of relieving this distress was for the country to follow the advice of Benjamin Franklin and begin to work and save. Our productive capacity is sufficient to maintain us all in a state of prosperity if we give sufficient attention to thrift and industry."
He adds (p. 182):
"Wealth comes from industry and from the hard experience of human toil. To dissipate it in waste and extravagance is disloyalty to humanity. This is by no means a doctrine of parsimony. Both men and nations should live in accordance with their means and devote their substance not only to productive industry but to the creation of the various forms of beauty and the pursuit of culture which give adornments to the art of life.
"When I became President it was perfectly apparent that the key by which the way could be opened to national progress was constructive economy. Only by the use of that policy could the high rates of taxation, which were retarding our development and prosperity, be diminished and the enormous burden of our public debt be reduced."
Despite his small government conservatism, he was no libertarian. He notes that as vice-president (p. 180):
"I had seen a large amount of government business. Peace had been made with the Central Powers, the tariff revised, the budget system adopted, taxation reduced, large payments made on the national debt, the Veterans' Bureau organized, important farm legislation passed, public expenditures greatly decreased..."
Coolidge remarks on Jefferson (p. 214):
"(A)ny one who had as many ideas as Jefferson was bound to find that some of them would not work. But this does not detract from the wisdom of his faith in the people and his constant insistence that they be left to manage their own affairs. His opposition to bureaucracy will bear careful analysis, and the country could stand a great deal more of its application. The trouble with us is that we talk about Jefferson but do not follow him. In his theory that the people should manage their government, and not be managed by it, he was everlastingly right."
On political parties Coolidge supports the two-party system (p. 230):
"The last twenty years have witnessed a decline in party spirit and a distinct weakening in party loyalty. While an independnet attitude on the part of the citizen is not without a certain public advantage, yet is is necessary under our form of government to have political parties. Unless some one is a partisan, no one can be an independent. The Congress is organized entirely in accordance with party policy. The arties appeal to the voters in behalf of their platforms. The people make their choice on those issues. Unless those who are elected on the same party platform associate themselves together to carry out its provisions, the election becomes a mockery...It is the business of the President as party leader to do the best he can to see that the declared party platform purposes are translated into legislative and administrative action."
Was Calvin Coolidge a conservative? I think on balance the answer is "yes", unlike his Republican predecessors Roosevelt and Taft and his Republican successor Hoover. But Coolidge's conservatism was an accidental one. It resulted from his mainstream American upbringing. The conservatives of the 1910's did not see the need to educate the public about conservative ideas in the way that the Progressives saw the need to educate the public about Progressivism. There was no unified movement, only the broader cultural inheritance. Coolidge was an un-selfconscious conservative and in that he was a weak conservative. The reason is that Progressivism was a conscious, organized movement with intellectual underpinnings and self conscious vigor. In order to present a real conservative response, Coolidge would have had to have perceived the need for a parallel kind of organiztion that could proactively reinvent American culture along conservative lines, not just respond to the initiatives of the Progressives and cut taxes when they went a little too far. This was not a robust conservatism because it did not replenish the roots of American culture and economy. Rather, it was a tepid reaction to the Progressives, who never gave up. This weak response characterizes the Republican Party even now. The unwillingness to undo the Democratic progressive program reflects a tepidness and failure of inventiveness. Conservatism is not acceptance of the Democratic initiatives. But this is all the Republicans have had to offer since Coolidge.
Calvin Coolidge grew up in Plymouth, an old fashioned, rural town in Vermont. The town was mostly Republican. Coolidge's father was a justice of the peace and held several other government posts that led to his collecting taxes. Coolidge writes (p. 26):
"As I went about with my father when he collected taxes, I knew that when taxes were laid some one had to work to earn the money to pay them. I saw that a public debt was a burden on all the people in a community, and while it was necessary to meet the needs of a disaster it cost much in interest and ought to be retired as soon as possible."
While at Amherst College, he favored Benjamin Harrison over Grover Cleveland in 1892. Cleveland was the Mugwumps' candidate and more committed to limited government than was Harrison. Harrison was a mainstream Republican. However, Coolidge was an advocate of the gold standard early in life. While he was studying for the bar exam in 1896:
"When I was home that summer I took part in a small neighborhood debate in which I supported the gold standard. The study I put on this subject well repaid me. Of course, Northhampton went handsomely for McKinley."
In 1909 Coolidge was elected Mayor of Northampton, Massachusetts (p. 101):
"Our city had always been fairly well governed and had no great problems. Taxes had been increasing. I was able to reduce them some and pay part of the debt, so that I left the net obligations chargeable to taxes at about $100,000. The salaries of teachers were increased."
Coolidge writes that early in his tenure in the Massachusetts state senate (p. 102):
"I...secured the appointment of a commission that resulted in the passage of a mother's aid or maternity bill...and I was made chairman of a recess committee to secure better transportation for rural communities in the wester part of the Commonwealth.
(p. 103) "...the Boston Democrats came to be my friends and were a great help to me in later times...
"...My committee reported a bill transforming the Railroad Commission into a Public Service Commission, with a provision intending to define and limit the borrowing powers of railroads which we passed after a long struggle and debate...The bill came out for our trolley roads in Western Massachusetts and was adopted..."
He goes on to suggest that he differed from the more radical Progressives in tone (p. 106-8):
"It appeared to me in January 1914 that a spirit of radicalism prevailed which unless checked was likely to prove very destructive. It had been encouraged by the opposition and by a large faction of my own party...It consisted of the claim in general that in some way the government was to be blamed because everybody was not prosperous, because it was necessary to work for a living, and because our written constitutions, the legislatures and the courts protected the rights of private owners especially in relation to large aggregations of property...The previous session had been overwhelmed with a record number of bills introduced, many of them in an attempt to help the employee by impairing the property of the employer. Though anxious to improve the condition of our wage earners, I believed this doctrine would soon destroy business and deprive them of a livelihood. What was needed was a restoration of confidence in our institutions and in each other, on whcih economic progress might rest...In taking the chair as President of the Senate I therefore made a short address, which I had carefully fully prepared, appealing to the conservative spirit of the people. I argued that the government could not relieve us from toil, that large concerns are necessary for progress in which capital and labor all have a common interest, and I defended representative government and the integrity of the courts."
When the state Republican Committee chose him as chairman (p. 109-110):
"I drew a conservative platform, pitched in the same key, pointing out the great mass of legislation our party had placed on the statute books for the benefit of the wage earners and the welfare of the people, but declaring for the strict and unimpaired maintenance of our present social, economic and political institutions."
As President of the Massachusetts Senate (p. 110):
"I wanted to cut down the volume of legislation. In this progress was made. The Blue Book of acts and Resolves for 1913 had 1,763 pages...for 1915 only 1,230, which was a very wholesome reduction of more than thirty percent. People were coming to see that they must depend on themselves rather than on legislation for success."
While Coolidge had many conservative impulses he also had many progressive ideas. He mentions that in his inaugural speech as governor of Massachusetts in January 1919 (p., 125):
"I dwelt on the need of promoting the public health, education, and the opportunity for employment at fair wages in accordance with the right of the people to be well born, well reared, well educated, well employed and well paid. I also stressed the necessity of keeping government expenses as well as possible... "
Thus, Coolidge adapted the language of progressivism to a somewhat self-contradictory model whereby he would give the people progressive government while not spending for it.
Coolidge helped stop a police strike in Boston which received national attention. He reinstated Police Commissioner Edwin U. Curtis (who had been supplanted by the Mayor). Samuel Gompers, head of the AFL attacked Coolidge for removing union policemen, but Coolidge refused. He said (p. 134):
"There is no right to strike against the public safety by any body, any time, any where."
As governor, Coolidge signed a law limiting the work week for women and minors to 48 hours. He vetoed a bill permitting the sale of beer (during Prohibition).
The police strike brought Coolidge national attention and he won the nomination to vice president.
His instincts were conservative based on his basic rural New England education (p. 153):
"I contended that the only sure method of relieving this distress was for the country to follow the advice of Benjamin Franklin and begin to work and save. Our productive capacity is sufficient to maintain us all in a state of prosperity if we give sufficient attention to thrift and industry."
He adds (p. 182):
"Wealth comes from industry and from the hard experience of human toil. To dissipate it in waste and extravagance is disloyalty to humanity. This is by no means a doctrine of parsimony. Both men and nations should live in accordance with their means and devote their substance not only to productive industry but to the creation of the various forms of beauty and the pursuit of culture which give adornments to the art of life.
"When I became President it was perfectly apparent that the key by which the way could be opened to national progress was constructive economy. Only by the use of that policy could the high rates of taxation, which were retarding our development and prosperity, be diminished and the enormous burden of our public debt be reduced."
Despite his small government conservatism, he was no libertarian. He notes that as vice-president (p. 180):
"I had seen a large amount of government business. Peace had been made with the Central Powers, the tariff revised, the budget system adopted, taxation reduced, large payments made on the national debt, the Veterans' Bureau organized, important farm legislation passed, public expenditures greatly decreased..."
Coolidge remarks on Jefferson (p. 214):
"(A)ny one who had as many ideas as Jefferson was bound to find that some of them would not work. But this does not detract from the wisdom of his faith in the people and his constant insistence that they be left to manage their own affairs. His opposition to bureaucracy will bear careful analysis, and the country could stand a great deal more of its application. The trouble with us is that we talk about Jefferson but do not follow him. In his theory that the people should manage their government, and not be managed by it, he was everlastingly right."
On political parties Coolidge supports the two-party system (p. 230):
"The last twenty years have witnessed a decline in party spirit and a distinct weakening in party loyalty. While an independnet attitude on the part of the citizen is not without a certain public advantage, yet is is necessary under our form of government to have political parties. Unless some one is a partisan, no one can be an independent. The Congress is organized entirely in accordance with party policy. The arties appeal to the voters in behalf of their platforms. The people make their choice on those issues. Unless those who are elected on the same party platform associate themselves together to carry out its provisions, the election becomes a mockery...It is the business of the President as party leader to do the best he can to see that the declared party platform purposes are translated into legislative and administrative action."
Was Calvin Coolidge a conservative? I think on balance the answer is "yes", unlike his Republican predecessors Roosevelt and Taft and his Republican successor Hoover. But Coolidge's conservatism was an accidental one. It resulted from his mainstream American upbringing. The conservatives of the 1910's did not see the need to educate the public about conservative ideas in the way that the Progressives saw the need to educate the public about Progressivism. There was no unified movement, only the broader cultural inheritance. Coolidge was an un-selfconscious conservative and in that he was a weak conservative. The reason is that Progressivism was a conscious, organized movement with intellectual underpinnings and self conscious vigor. In order to present a real conservative response, Coolidge would have had to have perceived the need for a parallel kind of organiztion that could proactively reinvent American culture along conservative lines, not just respond to the initiatives of the Progressives and cut taxes when they went a little too far. This was not a robust conservatism because it did not replenish the roots of American culture and economy. Rather, it was a tepid reaction to the Progressives, who never gave up. This weak response characterizes the Republican Party even now. The unwillingness to undo the Democratic progressive program reflects a tepidness and failure of inventiveness. Conservatism is not acceptance of the Democratic initiatives. But this is all the Republicans have had to offer since Coolidge.
Fed and Financial Community Cause Global Food Shortage
Gaius of Blue Crab Boulevard has posted a blog about a New York Sun article concerning food riots. The current global food shortages are a symptom of Alan Greenspan's and Ben Bernanke's excessive liquidity policies. As Howard S. Katz has pointed out in his blog, the banking system in the United States and globally has lent counterfeit Fed money (or excess liquidity) about which the financial community has been ecstatic for the past three decades (calling it stabilization of the credit markets, priming the pump, reducing unemployment, ending recession, stopping depression) to build homes that no one could pay for. At the same time, too little investment was made in commodities. Thus, the sub-prime crisis and the current global shortage of food are direct products of the banking system's lending practices and the Fed's expansion of the money supply since 1981. Ludwig von Mises, the Austrian economist, called this process malinvestment. For the past 25 years the Fed printed money and stimulated home building. Too many homes were built and sold to people who could not pay for them. Too little investment went into expansion of food and commodity production. The sub-prime crisis of today results from the mistakes that the banking community made in response to the hot Fed money that Greenspan and Bernanke have been creating under four presidents, Reagan, Bush, Clinton and Bush II.
The Bush administration's solution to the malinvestment of the past three decades has been...more malinvestment. The Bear Stearns bailout, the current loose monetary policies of the Bernanake Fed and further government transfers to banks to prevent defaults from incompetently made loans keep real estate prices high and continue the massive malinvestment that has occurred in the housing sector.
From an investment standpoint, it is clear that commodities will be hot for the next few years as rising interest rates freeze out new investment in commodities (see Howard S. Katz's blog for more on what he calls the "commodity pendulum"). From a moral standpoint, the American public should be ashamed of itself for allowing this orgy of self indulgence among the various players in the financial community; for allowing transfer of wealth from people who need to eat to wealthy stock investors and hedge fund managers; and for allowing the incompetence and mismanagement that the economics establishment and the Fed have demonstrated.
To quote Gaius:
"The New York Sun reports on a trend that is not at all pretty. In some areas of the country, rice, flour and cooking oil are in such short supply that retailers are limiting the amount people can purchase. This is happening right here in the United States.
The curbs and shortages are being tracked with concern by survivalists who view the phenomenon as a harbinger of more serious trouble to come. "
The Bush administration's solution to the malinvestment of the past three decades has been...more malinvestment. The Bear Stearns bailout, the current loose monetary policies of the Bernanake Fed and further government transfers to banks to prevent defaults from incompetently made loans keep real estate prices high and continue the massive malinvestment that has occurred in the housing sector.
From an investment standpoint, it is clear that commodities will be hot for the next few years as rising interest rates freeze out new investment in commodities (see Howard S. Katz's blog for more on what he calls the "commodity pendulum"). From a moral standpoint, the American public should be ashamed of itself for allowing this orgy of self indulgence among the various players in the financial community; for allowing transfer of wealth from people who need to eat to wealthy stock investors and hedge fund managers; and for allowing the incompetence and mismanagement that the economics establishment and the Fed have demonstrated.
To quote Gaius:
"The New York Sun reports on a trend that is not at all pretty. In some areas of the country, rice, flour and cooking oil are in such short supply that retailers are limiting the amount people can purchase. This is happening right here in the United States.
The curbs and shortages are being tracked with concern by survivalists who view the phenomenon as a harbinger of more serious trouble to come. "
Sunday, April 20, 2008
Media and Democracy
Does public distrust of the media threaten democracy or does the media's failure to report and analyze the news in a balanced way fail the public and democracy? Larwyn just forwarded a post from Jammiewearingfool who comments on a New York Times editorial:
"Get a load of this pap:
"'It might seem a bit self-flagellating for the editorial board of the New York Times to bemoan the collapse of Americans’ trust in the press over the last 30 years. But it seems that the media’s fall from grace is undermining democracy.'
"Oh my. Now because people aren't getting their marching orders from this socialist rag, the bumpkins in flyover country may not vote the way the elitist snobs in Manhattan want them to."
As I mentioned in class the other day, it would be instructive to compare the New York Times's, Fortune's and Business Week's coverage of both Enron and Wal*mart during the years 1997 to 2000. Were the Times and the business press suspicious of the payment of an $80 million bonus to Rebecca Marks for building a $1 billion power plant in Dabhol, India that never opened? Or was Paul Krugman busily collecting $50,000 in fees each year from Enron and so managed to overlook this story? While virtually none of the media questioned the Dabhol plant or any of the other long litany of incompetent investments that Enron had made, and were telling the public that breaches of fiduciary duty meant that Enron was the most creative firm in America, how did the Times and Fortune describe Wal*Mart, which has consistently helped the poor by creating consumer surplus?
Rather than bemoan the public's mistrust, perhaps the New York Times should explain.
"Get a load of this pap:
"'It might seem a bit self-flagellating for the editorial board of the New York Times to bemoan the collapse of Americans’ trust in the press over the last 30 years. But it seems that the media’s fall from grace is undermining democracy.'
"Oh my. Now because people aren't getting their marching orders from this socialist rag, the bumpkins in flyover country may not vote the way the elitist snobs in Manhattan want them to."
As I mentioned in class the other day, it would be instructive to compare the New York Times's, Fortune's and Business Week's coverage of both Enron and Wal*mart during the years 1997 to 2000. Were the Times and the business press suspicious of the payment of an $80 million bonus to Rebecca Marks for building a $1 billion power plant in Dabhol, India that never opened? Or was Paul Krugman busily collecting $50,000 in fees each year from Enron and so managed to overlook this story? While virtually none of the media questioned the Dabhol plant or any of the other long litany of incompetent investments that Enron had made, and were telling the public that breaches of fiduciary duty meant that Enron was the most creative firm in America, how did the Times and Fortune describe Wal*Mart, which has consistently helped the poor by creating consumer surplus?
Rather than bemoan the public's mistrust, perhaps the New York Times should explain.
Bob Barr Is Gunnin' For John McCain
Newsmax just released this report:
Former Republican Rep. Bob Barr is seen as the Libertarian Party’s most likely presidential candidate — and he could wind up torpedoing John McCain’s White House hopes.
“Given the recent fundraising prowess of a kindred spirit — Ron Paul's campaign for the Republican nomination siphoned up $35 million, mostly off the Internet — libertarians are feeling their oats,” political analyst George F. Will writes in Newsweek.
“Come November, Barr conceivably could be to John McCain what Ralph Nader was to Al Gore in 2000 — ruinous.”
“Given the recent fundraising prowess of a kindred spirit — Ron Paul's campaign for the Republican nomination siphoned up $35 million, mostly off the Internet — libertarians are feeling their oats,” political analyst George F. Will writes in Newsweek.
“Come November, Barr conceivably could be to John McCain what Ralph Nader was to Al Gore in 2000 — ruinous.”
I am not a huge fan of Bab Barr on a personal level (he reminds me of a meaner Elmer Fudd) but I respect his candidacy on the Libertarian ticket should he decide to run. I am of two minds about it. On the one hand, if he increases the probability of a Democratic win in November 08, that will have been unfortunate (although understandable given the Republicans' big-government turn under the Bush administration). On the other hand, if he pushes John McCain a little bit further in the libertarian direction without deflecting McCain's win in November, God bless him.
Saturday, April 19, 2008
Inflation News
According to Moneynews.com on April 15:
"Inflation at the wholesale level soared in March at nearly triple the rate that had been expected as the costs of energy and food both climbed rapidly.
"The Labor Department reported Tuesday that wholesale prices rose by 1.1 percent last month, the second largest increase in the past 33 years, exceeded only by a 2.6 percent rise last November. Analysts had been expecting a much more moderate 0.4 percent rise in wholesale prices for the month."
At the same time, Money News reports that there are fewer new millionaires because of the "economic slump". The classic tactic (that goes back to the late nineteenth century) of arguing for inflation, which increases profits and stock market values but hurts people on fixed incomes and the productive poor (i.e., inflation redistributes money from the working poor and pensioners to the wealthy) is to argue that inflation will reduce unemployment. Of course, pro-inflation progressives never mention that besides reducing unemployment inflation gets elderly people to eat cat food and the working poor to give up necessities.
Increasingly, the news media don't bother to lie or color the story as they have in the past. In the 1970s, if you can recall, the media and academia argued that oil prices caused inflation and in the 1960s they argued that unions caused inflation. Today, MoneyNews.com more or less says that millionaires are hurt because there's not enough inflation:
"The continuing global economic turmoil is taking its toll on the wealthy — as fewer new millionaires are being minted....
Is this the end of the American dream? Or just a bit of a nightmare? Probably the latter, economists are telling MoneyNews, as the problems in the stock market are limiting the growth of the portfolios of professionals and executives and entrepreneurs for now. "
Where is Jim Cramer now that we really need him? I want to break into the seven figures myself. We need more old people on cat food and evicted from their homes because they can't afford the property taxes; and we need more families depriving their children of milk so people like me can become millionaires. Absolutely.
"Inflation at the wholesale level soared in March at nearly triple the rate that had been expected as the costs of energy and food both climbed rapidly.
"The Labor Department reported Tuesday that wholesale prices rose by 1.1 percent last month, the second largest increase in the past 33 years, exceeded only by a 2.6 percent rise last November. Analysts had been expecting a much more moderate 0.4 percent rise in wholesale prices for the month."
At the same time, Money News reports that there are fewer new millionaires because of the "economic slump". The classic tactic (that goes back to the late nineteenth century) of arguing for inflation, which increases profits and stock market values but hurts people on fixed incomes and the productive poor (i.e., inflation redistributes money from the working poor and pensioners to the wealthy) is to argue that inflation will reduce unemployment. Of course, pro-inflation progressives never mention that besides reducing unemployment inflation gets elderly people to eat cat food and the working poor to give up necessities.
Increasingly, the news media don't bother to lie or color the story as they have in the past. In the 1970s, if you can recall, the media and academia argued that oil prices caused inflation and in the 1960s they argued that unions caused inflation. Today, MoneyNews.com more or less says that millionaires are hurt because there's not enough inflation:
"The continuing global economic turmoil is taking its toll on the wealthy — as fewer new millionaires are being minted....
Is this the end of the American dream? Or just a bit of a nightmare? Probably the latter, economists are telling MoneyNews, as the problems in the stock market are limiting the growth of the portfolios of professionals and executives and entrepreneurs for now. "
Where is Jim Cramer now that we really need him? I want to break into the seven figures myself. We need more old people on cat food and evicted from their homes because they can't afford the property taxes; and we need more families depriving their children of milk so people like me can become millionaires. Absolutely.
Thursday, April 17, 2008
Chronicle of Higher Ed on Seidemann Case
I sent out a small press release concerning David Seidemann's victory in district court against the leadership of the Professional Staff Congress (PSC). Reporter David Glenn of the Chronicle of Higher Education called to thank me for the information and the story ran today (paid access). The article is accurate and even handed. David Glenn's reporting is excellent.
In addition to sending out the press release I had invited Barbara Bowen, Nancy Romer, Steve London, Stanley Aronowitz and several other members of PSC's administration office to comment on my last blog on the recent ruling, but none has responded.
The article points out that Dorothee Benz, a union employee, claims that
"the 'vast majority' of the disputed spending has been allocated to lobbying campaigns to encourage state and local governments to provide financial support to the university, not on political causes that have nothing to do with professors' wages or benefits."
However, this is misleading for two reasons. First, there have been considerable "soft money" activities by the union leadership involving Iraqi War protests, demonstrations and conferences. The leadership is paid salaries to participate in these activities. To be fair, agency dues payments should be reduced by the proportion that salaries for the union leadership's time spent on such political activites bears to the union's total budget. Second, lobbying typically involves political as well as wage and benefit concerns, as Professor Seidemann points out in the article.
An additional concern is that the union has used CUNY facilities to send e-mails and used CUNY facilities to conduct meetings of a political nature. Since CUNY is a section 501(c)(3) organization, the repeated use of CUNY facilities to further the Professional Staff Congress's political goals is inappropriate and likely a breach of the tax code's requirements for charitable and educational institutions (that is, that they not be used for political purposes).
The article quotes Christopher M. Callagy, a union attorney, as saying that the union's chief political efforts are in Albany. This is a lie. The union leadership has repeatedly notified faculty of Iraqi War protests, and used their time and union resources for such protests.
Moreover, the article points out that even Albany lobbying is not considered a collective bargaining expense:
"Mr. Seidemann pointed out in an interview on Wednesday. 'Lobbying for an increased budget for education—that is a political act,' Mr. Seidemann said. ['']There may be people who think education should be supported by property taxes or should be supported totally by tuition.' Mr. Seidemann said that...he distrusts the union's management and wants to give it as little financial support as possible. "
The article adds that Professor Seidemann is continuing with a further complaint. He is asking the judge to require that the union file its financial data online on a specific date. No more Enron-style financials for the Professional Staff Congress.
Professor Seidemann has performed an important social service, and he deserves an award. However, I would argue that his case does not go far enough. The case of Lehnert v. Ferris Faculty Association on which Judge Lois Bloom relies in the Seidemann case assumes that agency payers may be free riders because they receive union benefits but do not contribute to the costs of negotiation. But the PSC has won no benefits for its membership. Rather, because of the PSC's incompetent negotiation stance, silly demonstrations, and adverserial approach, the union has managed to diminish faculty wages and benefits. An equitable rendering of the Lehnert decision ought to be that where unions reduce wages, agency payers should be reimbursed for their losses because of the union's incompetence. Perhaps the next step ought to be to try this case under equity principles.
In addition to sending out the press release I had invited Barbara Bowen, Nancy Romer, Steve London, Stanley Aronowitz and several other members of PSC's administration office to comment on my last blog on the recent ruling, but none has responded.
The article points out that Dorothee Benz, a union employee, claims that
"the 'vast majority' of the disputed spending has been allocated to lobbying campaigns to encourage state and local governments to provide financial support to the university, not on political causes that have nothing to do with professors' wages or benefits."
However, this is misleading for two reasons. First, there have been considerable "soft money" activities by the union leadership involving Iraqi War protests, demonstrations and conferences. The leadership is paid salaries to participate in these activities. To be fair, agency dues payments should be reduced by the proportion that salaries for the union leadership's time spent on such political activites bears to the union's total budget. Second, lobbying typically involves political as well as wage and benefit concerns, as Professor Seidemann points out in the article.
An additional concern is that the union has used CUNY facilities to send e-mails and used CUNY facilities to conduct meetings of a political nature. Since CUNY is a section 501(c)(3) organization, the repeated use of CUNY facilities to further the Professional Staff Congress's political goals is inappropriate and likely a breach of the tax code's requirements for charitable and educational institutions (that is, that they not be used for political purposes).
The article quotes Christopher M. Callagy, a union attorney, as saying that the union's chief political efforts are in Albany. This is a lie. The union leadership has repeatedly notified faculty of Iraqi War protests, and used their time and union resources for such protests.
Moreover, the article points out that even Albany lobbying is not considered a collective bargaining expense:
"Mr. Seidemann pointed out in an interview on Wednesday. 'Lobbying for an increased budget for education—that is a political act,' Mr. Seidemann said. ['']There may be people who think education should be supported by property taxes or should be supported totally by tuition.' Mr. Seidemann said that...he distrusts the union's management and wants to give it as little financial support as possible. "
The article adds that Professor Seidemann is continuing with a further complaint. He is asking the judge to require that the union file its financial data online on a specific date. No more Enron-style financials for the Professional Staff Congress.
Professor Seidemann has performed an important social service, and he deserves an award. However, I would argue that his case does not go far enough. The case of Lehnert v. Ferris Faculty Association on which Judge Lois Bloom relies in the Seidemann case assumes that agency payers may be free riders because they receive union benefits but do not contribute to the costs of negotiation. But the PSC has won no benefits for its membership. Rather, because of the PSC's incompetent negotiation stance, silly demonstrations, and adverserial approach, the union has managed to diminish faculty wages and benefits. An equitable rendering of the Lehnert decision ought to be that where unions reduce wages, agency payers should be reimbursed for their losses because of the union's incompetence. Perhaps the next step ought to be to try this case under equity principles.
John W. Dean's Warren G. Harding
John W. Dean. Warren G. Harding. New York: Henry Holt and Co., 2004. 202 pages.
"In late 1911 and early 1912 Harding and the Star* had railed at the progressive movement within the Republican Party, which Harding believed was based on personalities, not principles. Harding was not opposed to progressive ideas, such as voter initiatives, recall of elected officials, referendums on ballot issues, corporate trust busting and resource conservation. But he found the progressives' 'unreasonable antipathy to Taft' baseless, and TR's talk about fighting against special interests for the common man 'claptrap'...To Harding Roosevelt was a traitor..."
When Harding ran for Senator from Ohio in 1914 Taft endorsed him, but he was not ideologically committed to either the conservative or progressive ideology. Dean writes (p. 36) "the audience could hear what they wanted". As a junior US Senator Harding was asked to be keynote speaker at the 1916 Republican Presidential convention because "Republicans wanted to heal the division between the progressive and conservative factions of the party, and Harding held the respect of both elements, in spite of his earlier disapproval and chastisement of the progressives who had bolted to the Bull Moose Party in 1912."
The one area where Harding significantly differed from the Democrats was that he favored protectionism while the Democrats opposed it. Harding (p. 32) opposed free trade and believed that Woodrow Wilson's low tariff policy would result in a depression. The two chief differences between Harding and Wilson were that Harding was more statist in that he favored protectionism and that he was less supportive of the League of Nations than was Wilson. In a speech before the Senate (p. 49) which Dean argues was preliminary to his presidential campaign, Harding argued that he could not sign the League of Nations treaty unless an article were added relieving the US from defending other countries without the approval of Congress as required by the Constitution. Harding said to the Senate (p. 49):
"A Senator may be as jealous of his constitutional duty as the President is jealous of an international concoction, especially if we cling to the substance as wll as the form of representative democracy."
*Harding's business was that he was owner and editor of the Marion Star.
The reason that John W. Dean was interested enough in Warren G. Harding to write a biography becomes obvious at the end of the book. Just as Dean was involved in the Watergate scandal, Harding is (Dean argues unfairly) remembered for the "teapot dome scandal" that reached the public eye immediately following his death 2 1/2 years into his administration. Harding's death led to the appointment of Vice President Calvin Coolidge to the presidency in August 1923.
Warren G. Harding was certainly a supporter of progressivism. However, he split with Theodore Roosevelt because Roosevelt was disloyal to the Republican Party by running against Taft on the Progressive Party or Bull Moose Party (so-called because Roosevelt had said that he was "fit as a bull moose"). The conservatives and progressives within the Republican Party were at odds, but Harding was hardly a conservative. According to Dean:
"In late 1911 and early 1912 Harding and the Star* had railed at the progressive movement within the Republican Party, which Harding believed was based on personalities, not principles. Harding was not opposed to progressive ideas, such as voter initiatives, recall of elected officials, referendums on ballot issues, corporate trust busting and resource conservation. But he found the progressives' 'unreasonable antipathy to Taft' baseless, and TR's talk about fighting against special interests for the common man 'claptrap'...To Harding Roosevelt was a traitor..."
When Harding ran for Senator from Ohio in 1914 Taft endorsed him, but he was not ideologically committed to either the conservative or progressive ideology. Dean writes (p. 36) "the audience could hear what they wanted". As a junior US Senator Harding was asked to be keynote speaker at the 1916 Republican Presidential convention because "Republicans wanted to heal the division between the progressive and conservative factions of the party, and Harding held the respect of both elements, in spite of his earlier disapproval and chastisement of the progressives who had bolted to the Bull Moose Party in 1912."
The one area where Harding significantly differed from the Democrats was that he favored protectionism while the Democrats opposed it. Harding (p. 32) opposed free trade and believed that Woodrow Wilson's low tariff policy would result in a depression. The two chief differences between Harding and Wilson were that Harding was more statist in that he favored protectionism and that he was less supportive of the League of Nations than was Wilson. In a speech before the Senate (p. 49) which Dean argues was preliminary to his presidential campaign, Harding argued that he could not sign the League of Nations treaty unless an article were added relieving the US from defending other countries without the approval of Congress as required by the Constitution. Harding said to the Senate (p. 49):
"A Senator may be as jealous of his constitutional duty as the President is jealous of an international concoction, especially if we cling to the substance as wll as the form of representative democracy."
The New York media (p. 67) opposed Harding's candidacy because the Times, the Post, the World, the New Republic and the Nation perceived him as a second rate conservative. But Harding was not a Mugwump (he was too young) and was not at all influenced by the laissez faire ideas of the late 19th century, to include Sumner's and Godkin's. Nevertheless, the Nation wrote that Harding was an (quoted on p. 67):
"amiable, faithful, obedient errand boy for the Old Guard politicians and the business interests they serve...In truth he is a dummy, an animated automaton, a marionette that moves when the strings are pulled."
Thus, the pattern of the left wing progressives calling the right wing progressives "old guard" is established by the Harding candidacy (it was more likely a product of the Taft-Roosevelt fight). But Harding did NOT reflect the laissez faire views of Sumner and was less linked to east coast business interests than was Roosevelt. Thus, by 1920 the left had established a pattern of slandering right-wing progressives. But true advocates of small government were already virtually non-existent except as a fringe of the Republican Party.
Harding's campaign hired Albert D. Lasker of the Lord and Thomas advertising and public relations firm in Chicago. It may have been the first to introduce advertising and PR techniques that are commonly used today.
Harding was not a particularly ideological candidate. William McAdoo described a typical Harding campaign speech as (quoted on p. 73):
"an army of pompous phrases moving over the landscape in search of an idea. Sometimes these meandering words actually capture a straggling thought and bear it, triumphantly, a prisoner in their midst, until it died of servitude and over work."
Dean observes (p. 77) that Harding's victory over Democratic candidate Jim Cox in 1920 may have been as much a rejection of Wilson as a vote for Harding. As well (p. 77):
"Harding biographer Andrew Sinclair attributes the victory to Harding's ability to give voice to the dream of the rural past by the promise of returning to normal times..."
There was no ideology or rejection of Progressivism. Just a mood change.
After election, Harding appointed Henry C. Wallace secretary of agriculture (p.85):
"Harding knew he would have to take political flack for selecting Wallace, because his liberal leanings were offensive to the right wing of the party, but the president-elect understood that the party's progessives would support Wallace."
Dean adds (p. 86):
"Harding was impressed with young Hoover and wanted him in his cabinet, but Republican elders and conservatives objected...Harding experienced more internal party squabbling and opposition to Hoover than any of his choices. Notwithstanding old guard opposition that he was too liberal, too ambitious, too international in his views, not to mention too publicly popular, Harding offered Hoover the Deoartment of Commerce or the Department of the Interior."
Wilson did not leave the country in good shape (p. 94). In his inaugural address (p. 96) he stated that the U.S. would not join the League of Nations but would have an activist and interventionist foreign policy. He criticized businesses that profited from the war. He said (p. 96):
"Our most dangerous tendency is to expect too much of government and at the same time do for it too little."
That is hardly the view of an advocate of small government or laissez faire.
On April 12, 1921 Harding (p. 100):
"addressed a joint session of Congress concerning the policies, plans and matters he believed the Congress should undertake...Harding's normalcy was not a call to turn back the clock but rather...he was calling for onward, normal way...He called on Congress to cut government expenditures by creating a Bureau of teh Budget, he urged revising the federal tax laws including the abolition of the excess profits tax, and he requested that Congress enact emergency tariffs followed in six months with more comprehensive revisions...he called for a new immigration law; he raised the need to deal with emerging transportation problems (railroads, highways as well as the new civil and military aviation); he asked Congress to regulate the new technology of radio and transcontinental cable communications; and he called for establishing a merchant marine. No request surprised and confounded his conservative colleagues more than his recommendation that they create a department of public welfare that would be responsible for 'education, public health, sanitation, conditions of workers in industry, child welfare, proper amusement and recreation, the elimination of social vices.'"
On May 27, 1921 Harding signed an emergency tariff measure and in July 1921 the House passed a bill that increased tariffs across the board. In September 1922 Harding signed the Fordney McComber Act which reflected a hodgepodge of special interests. The result, though, was that other countries responded with high tariffs, hurting American agriculture (p. 105).
In 1921 Harding's Budget Accounting Act created the Bureau of the Budget and the General Accounting Office. Harding did favor tax cuts (P. 106). However, he also supported (p. 112) a host of government interventions concerning agriculture such as the Grain Futures Act which regulated speculation on commodities and the Packers and Stockyard Act insuring fair practices on the part of the meat packing industry.
Dean quotes Schapsmeier's and Schapsmeier's "Disharmony in the Harding Cabinet" on p. 113:
"[t]he amount of progressive-type legislation during [Harding's brief presidency] was not duplicated until the New Deal."
Harding also advocated an activist fiscal policy more than a decade before the election of Franklin D. Roosevelt. Dean writes (p. 115):
"[he prodded] state and local governments to commence public works projects that would provide employment. The president took similar action at the federal level, ordering all his cabinet secretaries to look for federal projects that could be started sooner rather than later...Harding's pump priming was contrary to hi philosophy of using federal funds to solve the unemployment problem..."
Harding also tried to unravel the racism that was prevalent during and characteristic of Woodrow Wilson's administration (p. 124). "Wilson had removed Republicans and blacks from appointed positions, replaced them with white Democrats and then locked them into the system by extending civil service protections.
In 1922 (p. 137) Harding:
"called for the end of child labor, by consitutional amendment if necessary. His message...pleaed Congress, the New York Times and even such progressive journals as the Literary Digest."
It is evident that Harding was hardly a conservative. Following on the heels of William H. Taft, he was probably slightly to Taft's left and to Theodore Roosevelt's right. He was a blend of conservatism and progressivism, hardly to the right of Woodrow Wilson. Following the left wing presidency of Roosevelt and the mildly conservative but progressive presidency of Taft, Harding was very much in the tradition of Republican progressivism and was certainly no advocate of laissez faire or free market ideas. He was a low-tax progressive.
*Harding's business was that he was owner and editor of the Marion Star.
Wednesday, April 16, 2008
Bravo Hillary!
Larwyn just forwarded a Hugh Hewitt post about the Hotline's Blogometer's coverage of the ongoing fight between Obama and Clinton. The Blogometer notes that Ariana Huffington complains that "John McCain should go on vacation, Hillary Clinton is doing his job for him."
Yay!
Yay!
David Seidemann Slam Dunks Barbara Bowen in Law Suit
David Seidemann just e-mailed me that he has defeated the Professional Staff Congress's (PSC), CUNY's faculty union, in a federal court law suit, Seidemann v. Bowen, in federal district court. This case is of national importance because it establishes standards of disclosure for agency fee bargaining units. An agency fee arrangement occurs where the union agreement compels non-members to pay dues even though they elect not to belong to the union. Agency arrangements differ from union shops in that under agency arrangements members are permitted to refuse membership in the union (unlike union shops), but they are compelled to pay dues nevertheless. CUNY has an agency shop. A number of faculty, myself included, do not belong to the union but are compelled to pay dues. Professor Seidemann's law suit concerned the PSC's failure to accurately disclose the portion of dues that the PSC devotes to political contributions unrelated to the PSC's collective bargaining and higher education activities.
The PSC is an unusually ineffectual union that has failed to win wage increases one half of what New York City's modestly paid teachers (in comparison with teachers in neighboring municipalities and suburbs) have won. The teachers won 16 percent over three years and the PSC won six percent over three years for CUNY's faculty. The PSC has repeatedly refused to represent faculty in grievances. At the same time, the PSC has served as a conduit for political contributions to various extremist causes. Before Sharad Karkhanis's and David Seidemann's protests, the PSC was sending Iraqi War literature to the CUNY faculty almost daily, even as it failed to represent faculty in collective bargaining and grievances.
According to Professor Seidemann, the federal court ruled by summary judgment* that:
1) the PSC violates the First Amendment rights of agency fee payers because it fails to provide them with sufficient information to gauge the propriety of the union's agency fee expenditures;
2) the PSC unlawfully charged objecting non-members for some of the union's political activities by inaccurately characterizing them as contract-related activities. Among the activities that the PSC improperly claimed were contract-related was a forum on an anti-war resolution. The PSC also improperly charged fee payers for public rallies, picket lines, concerts, letter-writing campaigns - all political activities - under the category "office supplies". (How does one confuse a paper clip with a picket line?)
3) Further, the District Court enforced a ruling in Professor Seidemann's case made by the Second Circuit in August 2007 that held as unconstitutional the PSC's requirement that non-members annually renew their objections to political expenditures. (The Second Circuit ruling applies to all public unions in New York, Vermont, and Connecticut.)
*The Court finds that plaintiff is entitled to a declaratory judgment that defendants' notice to fee payers for the years at issue violated plaintiff's rights under the First Amendment. Plaintiff is entitled to injunctive relief and defendants are enjoined and prohibited from requiring nonmembers to file an annual objection or to identify the percentage of the agency fees in dispute in order to file an objection. Defendants shall send plaintiff and all nonmembers a notice that complies with Hudson and the Second Circuit's Mandate as set forth herein. Defendants shall provide the financial [*37] information necessary for fee payers to gauge the propriety of the agency fees, either by mail or by posting on the union's website, at least thirty days prior to the start of the fee payer objection period. The financial information PSC provides to fee payers shall set forth the basis for the allocation of both the chargeable and non-chargeable expenses.
The PSC is an unusually ineffectual union that has failed to win wage increases one half of what New York City's modestly paid teachers (in comparison with teachers in neighboring municipalities and suburbs) have won. The teachers won 16 percent over three years and the PSC won six percent over three years for CUNY's faculty. The PSC has repeatedly refused to represent faculty in grievances. At the same time, the PSC has served as a conduit for political contributions to various extremist causes. Before Sharad Karkhanis's and David Seidemann's protests, the PSC was sending Iraqi War literature to the CUNY faculty almost daily, even as it failed to represent faculty in collective bargaining and grievances.
According to Professor Seidemann, the federal court ruled by summary judgment* that:
1) the PSC violates the First Amendment rights of agency fee payers because it fails to provide them with sufficient information to gauge the propriety of the union's agency fee expenditures;
2) the PSC unlawfully charged objecting non-members for some of the union's political activities by inaccurately characterizing them as contract-related activities. Among the activities that the PSC improperly claimed were contract-related was a forum on an anti-war resolution. The PSC also improperly charged fee payers for public rallies, picket lines, concerts, letter-writing campaigns - all political activities - under the category "office supplies". (How does one confuse a paper clip with a picket line?)
3) Further, the District Court enforced a ruling in Professor Seidemann's case made by the Second Circuit in August 2007 that held as unconstitutional the PSC's requirement that non-members annually renew their objections to political expenditures. (The Second Circuit ruling applies to all public unions in New York, Vermont, and Connecticut.)
*The Court finds that plaintiff is entitled to a declaratory judgment that defendants' notice to fee payers for the years at issue violated plaintiff's rights under the First Amendment. Plaintiff is entitled to injunctive relief and defendants are enjoined and prohibited from requiring nonmembers to file an annual objection or to identify the percentage of the agency fees in dispute in order to file an objection. Defendants shall send plaintiff and all nonmembers a notice that complies with Hudson and the Second Circuit's Mandate as set forth herein. Defendants shall provide the financial [*37] information necessary for fee payers to gauge the propriety of the agency fees, either by mail or by posting on the union's website, at least thirty days prior to the start of the fee payer objection period. The financial information PSC provides to fee payers shall set forth the basis for the allocation of both the chargeable and non-chargeable expenses.
Tuesday, April 15, 2008
John McCain on April 15th
The McCain campaign just sent around the following e-mail:
"Today, April 15th, marks the deadline when all Americans must file their income taxes. While many of us are aggravated and displeased when we see exactly how much of our hard-earned money goes to the federal government - if one of my Democratic opponents is elected in November, you can be certain your tax rate will increase across the board.
"When we elect our next president in November, we will make a clear statement about the direction we want to take our economy and our tax system. As I have said before, this election will present Americans with a clear choice between my vision for our country and that of my Democratic opponents.
"I believe today, as I have always believed, in small government, fiscal discipline and low taxes. I believe that tax cuts work best when accompanied by lower spending. And I make the promise to you that if elected president, I plan to make the present tax cuts permanent, lower corporate rates from 35% to 25% and end the Alternative Minimum Tax, which will affect millions of middle class families."
Yay!
"Today, April 15th, marks the deadline when all Americans must file their income taxes. While many of us are aggravated and displeased when we see exactly how much of our hard-earned money goes to the federal government - if one of my Democratic opponents is elected in November, you can be certain your tax rate will increase across the board.
"When we elect our next president in November, we will make a clear statement about the direction we want to take our economy and our tax system. As I have said before, this election will present Americans with a clear choice between my vision for our country and that of my Democratic opponents.
"I believe today, as I have always believed, in small government, fiscal discipline and low taxes. I believe that tax cuts work best when accompanied by lower spending. And I make the promise to you that if elected president, I plan to make the present tax cuts permanent, lower corporate rates from 35% to 25% and end the Alternative Minimum Tax, which will affect millions of middle class families."
Yay!
Monday, April 14, 2008
The Relative Returns to Higher Education
The value and importance of higher education depends on its returns relative to the investment market. The inflationary, low interest rate regime of the past quarter century has increased returns to investment in stock and real estate markets and diminished returns to education. Monetary policy has done so because inflation reduces the present value of future earnings from labor. Real wages have increased slowly while the stock market valuation has increased rapidly. That is, low interest rates increase the value of stock and real estate investments but reduce the present value of future earnings. A prospective student who invested in the stock market instead of education during the post World War II era probably would have made the right financial decision. (He or she would have made the right intellectual decision as well.) Because inflation reduces the present value of future earnings but increases returns on stock and real estate, financially smart families invest in stocks rather than in education. Intellectually smart families home school. But the mania for higher education exploded at the very time the financial (and intellectual) value of higher education was diminished. It is a case of "buying at the top".
The NewsMediaJournal and JB Williams Are Right
Larwyn just forwarded an excellent post from JB Williams of NewsMediaJournal.US about the importance of supporting John McCain this year. The table in Williams's article is excellent and says it all. See Williams's article here.
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