The Free Market Project

Promoting personal freedom & free market economics.

Good Lord, there it is again! From the SOTU:

When it comes to the deficit, we’ve already agreed to more than $2 trillion in cuts and savings. But we need to do more, and that means making choices. Right now, we’re poised to spend nearly $1 trillion more on what was supposed to be a temporary tax break for the wealthiest 2 percent of Americans.

This section of the speech, which also contained the bullschnizzle about Warren Buffet’s secretary, is so easy to debunk it is hardly worth doing. Except that it has to be done because this frickin’ guy is banking on people not understanding the meaning of what he says.

The 2 trillion in cuts? In the future, when nobody is actually held accountable for making them. They are smoke and mirrors. As I said in a post below, I could pass a spending bill that spent a trillion more tomorrow, but also said we will reduce the budget to zero five years from now to more than offset the additional trillion and to actually take a bite out of the debt. The trillion would be spent this year. The president and Congress in five years would be under absolutely no obligation to zero the budget, would not zero the budget, and chances are good that the trillion spent this year would become part of the baseline, so that in five years it would actually be five trillion additional money spent. THAT is Washington math.

But the one that really gets me is: “…we’re poised to spend nearly $1 trillion more on what was supposed to be a temporary tax break for the wealthiest 2 percent of Americans.” You see, by NOT taking more of someone’s money they are “spending”. So who does that money belong to? In Obama’s philosophy it belongs to the government and they are spending it when you get to keep it. EVERYTHING belongs to the government and those elites allow you to keep some of what you earn. This is the philosophical difference maker. It has to be pointed out. Do we have a candidate who is willing and able to say, “Wait a minute. When you say that allowing people to keep the money they earned is ‘spending’ by the government, you are implying that all money rightfully belongs to the state and that the state is ‘spending’ when it lets people keep their earnings. Is that what you believe, Mr. President? Does the government have first claim on all income and property? Does the government own it and simply allows people to keep some of it? That is what you are saying when you call people keeping more of their own money ‘spending.’”

Irritation

No comments

I’m irritated by Democrats. Could somebody please tell me what government is so good at that we should keep growing it?

Is it good at healthcare? Let’s see, Medicare and Medicaid cause all kinds of problems, distort pricing of medical care, are underfunded, and the government itself says there is an amazing amount of fraud in the system. The VA is a mess.

Is it good at delivering benefits? Ever talk to someone getting welfare, foodstamps, or the like? They like the money, but dealing with the system and the forms and the interviews… Not so much. They end up resenting (but being dependent upon) the bureaucrats, and also resenting those of us who earn more than they do. What a wonderful way to live. This is not to mention the number of overlapping bureaucracies and programs that make government incredibly inefficient and wasteful.

Does anyone really enjoy it when regulations negatively effect them? Does anyone like having to go to the government, or work with a bureaucracy to try to get something done?

Dealing with the government sucks. The incentives for bureaucrats are completely different than the incentives in the private sector. Hell, the incentive for government in general is different than the incentive in the private sector. In the private sector a business needs to please YOU to keep you as a customer or to get you as a customer in the first place. Government forces you to comply, and you’re stuck with them so they have no incentive to please you at all. They promise they will at election time, but they don’t in practice because they gain only from following rules, deepening their power, and NOT solving any problems because if they solve a problem they are no longer needed.

I just find it incredibly irritating that people support the party of big government and don’t really seem to consider what a pain in the ass it is to deal with government. Everyone thinks dealing with government is a miserable experience, yet half the population wants to do more of it? Why?

Follow this Link

No comments

Please read my book: The Tamarack Conspiracy. Here is the link to my post about it, which also contains a link to the digital form of the book.

Fairness Again… Sheesh

No comments

I have to admit, I didn’t listen to the SOTU last night. To be honest, I can’t stand to hear Obama speak. His cadences drive me crazy and his content is so divorced from reality that I just get angry. However, I read recaps and printed excerpts.

Again, the man talked about some nebulous concept called “fairness.” He doesn’t define it. No Democrat, or any politician for that matter, EVER defines it. We can assume that President Obama’s perspective is that fairness means redistribution. So, those who don’t produce are carried by those who do. How is that fair? If one person takes a risk, works his ass off to build a business and eventually make some money (which he only makes by serving the needs of others… he can’t force them to do business with him, it’s a voluntary exchange based on mutual benefit), it is apparently somehow fair to give a larger chunk of that money to someone who has not taken any risk and has not made themselves more useful to others so that they make their own money. To me, that’s not fair in either direction. It is robbing the productive person of the fruits of their labor. And, it is teaching the unproductive person that they don’t have to do anything for society and yet they’ll be provided for. Is it fair to stunt a person’s growth that way, to tell someone they never have to grow up and contribute?

How about crony capitalism? Is it fair that green energy companies who can’t make it on their own are propped up by government subsidies while there are thousands of people out there with good ideas for products and services but who don’t, unfortunately, have political clout or their product doesn’t have political cache’, so they will not get funded. This is particularly true when government rules and regulations make raising start-up capital more difficult, and when government is creating an environment where individuals and businesses are afraid to invest. Was it fair to screw GM bondholders in favor of the unions?

Is it fair to anyone to have the government piling up debt that we the people are responsible for? Is it fair to keep inept government bureaucracies in place, sucking ever more money out of the taxpayers to support them? Is it fair that the private sector supports the public sector, but the public sector often interferes with the ability of the private sector to do business?

Let’s make Obama and the Democrats define “fairness.” I don’t think most Americans will agree with their definition. Taking from someone who is productive to give to the unproductive is not “fair.” Keep this in mind: In Robin Hood, what Robin was doing was taking the money from the unproductive royals and returning it to the productive peasants. He wasn’t going to the home of the most productive peasants and stealing their wealth to redistribute it to the unproductive peasants. He was anti-government elite. Obama and the Democrats are all about a ruling elite with the power to take anything from anyone and distribute it as they like, which is mostly in the manner that provides them with more power.

UPDATE: Great article by John Hayward at Human Events: Mitt Romney’s Taxes. He goes into this issue of fairness.

1000 Days Without A Budget

2 comments

We must take note of this: It has been 1000 days since Democrats have produced a budget. The Senate, under the leadership of Harry Reid, has literally not even put pen to paper in 1000 days. 365 of those days the Democrats controlled both the Senate and the House.

The lone budget that was passed under Obama contained emergency spending because of the recession. That has become the baseline.

Wait… I misspoke! There was another budget that was signed into law by Obama. The final budget of GW Bush’s term was never presented to him, it was presented to Obama after he was inaugurated and he signed it. Why? In the final two years of President Bush’s term in office, a trend of decline in deficit was reversed when Nancy Pelosi became Speaker of the House and Harry Reid got a larger majority in the Senate. They knew Bush wouldn’t sign the final budget, so they waited until Obama took office and then immediately castigated Bush for increasing spending, just prior to blowing even that spending increase out of the water with their next budget, and then going on the 1000 day budgetless spending binge.

This lack of responsibility alone should cause the ouster of the Obama administration from office, and doom Democrats to a minority position in both houses for the foreseeable future.

Defending Capitalism

2 comments

Three years ago, at the beginning of the Obama administration, I wrote a book called The Tamarack Conspiracy. It’s fiction. In it, the government spending, taxation, redistribution of wealth, and regulation have caused the economy to collapse. Businesses simply can not stay in business. Many little things add up, putting extra weight on business, until they simply can’t bear any more. As one sector begins to collapse, the loss of that sector begins to bring down others. The government tries to compensate, but each attempt to fix the problem puts more burden on the businesses still struggling to stay afloat. Soon, this huge, interconnected, complex economy simply begins to crumble.

The government, naturally, can not blame their own policies. They need demons. The rich (the business owners) are blamed. Politicians are unable to see that the same people they are demonizing, the same people they are now going to bleed dry, are also the only people who can rescue the economy. The government hatches plans to manage the economy, but without dynamic interactions and the processing of all the information necessary to make the economy really thrive (“the invisible hand”), all the government can really produce is a fiction–an appearance of an economy, not a real economy.

A group of entrepreneurs is sick of being demonized and bled of their ideas and their assets. They are unwilling to live as government cronies, and unwilling to live in a situation where there is no longer personal and economic freedom, there is only dependence and government dictates. They conspire to defy the government. They will try to beat the collapse and the increased power of government to dictate allowable income, wealth, and even movement to get out and try to rescue free market capitalism, and the hope of the world.

The story is told from the perspective of Sean Murphy, the son of one of the conspirators. Sean was fascinated by his Marxist college professor and, like so many people, had thought that all of the good plans of the government would make the world a better place. He is stunned to see the result of all of the wonderful government plans. He begins to see that his father was right all along.

Naturally, the larger, more powerful government produces corruption. Bureaucrats utilize increased government power to increase their personal power. A thuggish bureaucrat sees ruling over companies and taking down the conspiracy as his way to consolidate his power. Sean finds himself working to protect his father and the fellow conspirators from this thug, while at the same time learning what motivates the conspirators to take such a risk. What is it that they believe that makes them willing to risk their money, their freedom, and even their lives?

When I wrote the book (as I said, it was at the very beginning of the Obama administration) I thought I was writing fiction. Now we have out of control spending without even the nicety of producing a budget, massive subsidies for political cronies which makes it look increasingly like a command economy is taking shape, a huge jump in regulation and the power of regulatory agencies, and demonization of the rich (the 1%) and on capitalism itself on an unprecedented scale. Did I write fiction, or simply a forecast?

I specifically wrote it in the spirit of Atlas Shrugged. People will even recognize the homage to Atlas Shrugged. However, I wanted it to be short and easily digestible. There is a lot of philosophy in it, but there is also humor. I wrote it before there was a Tea Party, but I wrote it for the believers in free market capitalism and small government that would become the Tea Party. I also wrote it for those who are the moderates, who need to learn why those of us who believe in small government and robust capitalism believe the way we do.

The book is now available in an inexpensive digital form at Amazon (for the Kindle), Barnes and Noble (for the Nook), and at Smashwords (for the iPad, the computer, and other e-readers). I’ve priced it at only $3.99. Less than four bucks for a book that will validate your beliefs and entertain you, and will also present the case for capitalism and small government to your friends and family members who need to understand the direction we’re headed if we don’t change course soon.

Thriving On Economic Ignorance

No comments

I want to bring two seemingly unrelated things together today under one umbrella. Unfortunately, that umbrella is: economic ignorance. I’ve stated multiple times in the past, even though it should completely go without saying at this point, that President Obama is economically illiterate. He has absolutely no clue how wealth is created, how jobs are created, or even the relationship between wealth creation and government revenues. What is driving me crazy, since that is old news, is the reliance of the Democrat party (and sometimes of Republican candidates for president) on the economic ignorance of the American people.

Item one: Obama denies the permit for the Keystone XL pipeline.

The pipeline would create jobs. The pipeline would bring reliable energy into the country from a friendly nation. The pipeline is the most studied pipeline in history with the conclusion that it would not be an environmental threat. The oil, if not piped to the USA will be shipped to China. This is what we call a “no brainer.” Denying the permit was stupid. But the White House’s explanation is even more stupid, and false, relying on economic ignorance to try to make a point at all. What did they say?

[T]he idea, as some in Washington have tried to suggest, that building a pipeline is the ultimate answer to the question of American energy security and job creation is nothing more than a pipe dream. The truth is that just two of the Administration’s programs – the DOE Loan Guarantee Program and the EPA’s Mercury and Air Toxics Standards – will create more than 10 times the amount of jobs generated by the Keystone XL pipeline, which will only generate a few thousand temporary jobs.

Using public money to provide subsidies to alternative energy companies (like Solyndra) will create jobs. Sustainable jobs will be created… so long as more money is sucked out of the private economy and given to crony companies that are unable to compete in the marketplace without government intervention. This is insanity. They never take into account what might happen if the money the government is spending to create a market that doesn’t exist was left in the private sector where it could be invested in companies that produce something wanted and needed by the public.

The other part, about the EPA, is talking (as far as I can tell) about creating jobs for bureaucrats (who produce NOTHING, but cost plenty). Those standards actually close power plants. People work at power plants. People with businesses that get their power from those power plants rely on inexpensive energy from those power plants and if the cost of energy goes up due to plant closure, their businesses and the jobs those businesses provide are threatened. What kind of idiot thinks either hiring more government workers or increasing the cost of energy can result in job creation?

Item Two: Mitt Romney. (FYI… I have still not decided who I support from the Republican side for president. I’m not in the Mitt camp.)

First Mitt is taken to task for his work at Bain Capital. Bain did two things: it invested in start-ups and, significantly, it invested in struggling companies (companies that were failing) and tried to turn them around. In the course of turning them around, people lost their jobs. Guess what! If the companies failed outright (which is the direction they were headed) everybody would’ve lost their jobs. To act as if everything would’ve been hunky dory but for the greed of Bain Capital and Mitt Romney is ludicrous. (Read this post from Power Line about one of the companies for which Romney has been chastised to learn the truth of what happened.)

Now there’s a story that seeks to demonize Mitt because some of his personal holdings, and some of Bain’s are in the Cayman Islands–a tax haven!!!! It isn’t until the end of the article, the beginning of which tries to make it seem as though there are tax avoidance shenanigans galore on Romney’s part, where it says:

Romney campaign officials and those at Bain Capital tell ABC News that the purpose of setting up those accounts in the Cayman Islands is to help attract money from foreign investors, and that the accounts provide no tax advantage to American investors like Romney. Romney, the campaign said, has paid all U.S. taxes on income derived from those investments.

“The tax consequences to the Romneys are the very same whether the fund is domiciled here or another country,” a campaign official said in response to questions. …

Bain officials called the decision to locate some funds offshore routine, and a benefit only to foreign investors who do not want to be subjected to U.S. taxes.

Tax experts agree that Romney remains subject to American taxes.

The article preys on people’s ignorance about tax havens, then leaves the part that completely exonerates the behavior until the end. The story could easily be: Mitt Romney pays his taxes.

The thing ignored is that tax laws in the USA cause foreign investors to AVOID bringing money into the country. To attract investment from foreigners companies like Bain have to set up accounts in the Caymans. THAT should be the story. We want foreign money in our banks. That money gets used as loans to American companies and as investment in American companies. Instead, counting on the ignorance of the American people, the story is a non-story using the words “tax haven”, to make people believe that Romney is avoiding taxes when the same story discloses at the end that he is not.

This is disgusting. The leftists and the statists can only thrive if the people don’t understand economics.

UPDATE: Great article by Ann Coulter on the attack on Romney’s Bain work regarding Ampad (a paper company).

My question to Democrats is: “Why do you trust government?” What makes Democrats think that government is pure and above reproach? Why would they want more power in the hands of bureaucrats and politicians? Corruption is a term used to describe abuse of power and influence by government officials. Why do you suppose we need a particular word to describe something like that? It is not because corruption is so rare, it’s because it’s commonplace.

Further, why would government (politicians and bureaucrats), whose incentives are so very different from the incentives of the private sector–where you make money by actually producing something wanted and needed by others, where you must serve your customers in order to succeed, be more trustworthy than people in the private sector. For example, in the private sector more people being more successful means bigger markets (more potential customers), so private sector actors want success and a healthy economy; by contrast, government gains power when people are unsuccessful and become dependent on government, thereby giving politicians a constituency to pander to and bureaucrats a reason for keeping their jobs.

Listen as you watch this short video, to the question Milton Friedman asks (ht to Power Line which also posted this video today):

Milton Friedman On Greed

 

Mitt at Bain

No comments

People are criticizing Mitt Romney for his work at Bain Capital. It seems that people lost their jobs after Mitt came.

What did Mitt come to do? Bain was in the business of buying troubled companies, turning them around (if possible) and reselling them at a profit. A profit to whom? A profit to investors in Bain Capital. Also, since we are talking about a troubled company that has been turned around, it is also at a profit to every person who retained their job, every person who had a stake in the company that was turned around, and everyone who that company served in some way.

We are not talking about coming in and ruining perfectly healthy companies and making off with a profit. You see, that’s not possible. If a company is ruined after you come in, you don’t walk out with more money, you walk out with less. Apparently Democrats and leftists don’t understand this simple concept: A company (unlike a government bureaucracy) only continues to exist if customers for their goods and/or services are willing to buy those goods and services for more money than it costs to produce those goods and services. A profit must be made or the company fails.

Sometimes a company is in trouble because its workforce is not productive enough. In other words, the people producing the goods and services are adding more cost to the goods and services than customers are willing to pay for the goods and services. In this case, the company must become leaner, lowering its costs in order to survive. People often lose their jobs when this is the case. If a company has 100 employees and it can not pay them and make a profit at the same time (better stated, it loses money as a result of paying them all), it has two choices: 1) Go out of business, costing 100 people their jobs; or 2) Figure out a way to increase productivity utilizing fewer people, in which case 20 or maybe even 50 people lose their jobs, but, 80 or 50 keep their jobs.

Sometimes companies can’t be salvaged. For one reason or another, there is just no way to make necessary adjustments to the business in order to make it profitable. This could be because other technology has caused the product to become obsolete. This could be because legacy costs (pensions, etc.–ask Hostess!) are a burden that simply adds too much cost to the product. There are a lot of reasons that some companies aren’t salvageable. In that case, the best one can do is to shut it down, and sell off whatever assets you can so that investors don’t walk away empty handed. There are times when the assets are worth more than the operations.

What Mitt Romney did at Bain was to rescue failing companies. Sometimes he failed. But every success, even if it was costly to some (those laid off) was a win for many others. It was not like he was going in to ruin successful companies. He was going in to save failing companies. And he did so most of the time. His work at Bain was a net success (hugely so) not only for investors in Bain, but also for those impacted by every company he was able to turn around and make successful.

Oh… And he did it with private money, smarts, and hard work. He didn’t do it by utilizing government money (taxpayer money) or garnering favors (like unions and cronies do) to have government subsidize a business that should fail.

Mitt’s work at Bain should be celebrated. It should be emulated. Democrats and the left, who live in a world where the job is somehow unrelated to the success of the company–a result of thinking like a government employee–don’t understand this. Republicans had better understand it. They’d also be better off if they were able to explain it.

Here’s a good article on the same subject by John Hayward at Human Events.

UPDATE: Here’s a great article at Power Line about one of the companies that Bain bought and sold. The complaint is that jobs were lost (150 lost their jobs in Gaffney, SC). In the meantime, the company was saved, merged, became profitable, was sold, and now employs many hundreds of people… just not in Gaffney. The business was FAILING when Bain bought it. ALL jobs would have been lost. The corpse of the company would not have merged, became profitable, gotten sold, and now employ hundreds of people. It is disgraceful that people are using this example of Mitt “profiteering”.

Future Cut: the myth

No comments

Here’s a refrain that should send chills down the American peoples’ collective spines: “While the tax increases were real, Congress never delivered on the spending cuts.” (From Steven Hayward’s post This, That, and the Other Thing at Powerline.)

We need to understand, the taxes are always NOW, and spending cuts are always pushed to some future time when the Congress that passes them can’t force the new Congress to make them. It’s a charade. It is, to be blunt, a LIE that we should not let our elected representatives get away with. Yet, thinking back, all of the spending cuts during the last three years have been of this “future” variety. That’s how you get trillion dollar deficits.