The hypocrisy of hope and change
Last November, President Obama stood before an audience and said government needs to be “responsive to the needs of people, not the needs of special interests.” He added, “That is probably the biggest piece of business that remains unfinished.”
He made these remarks, The New York Times reports, before a $17,900-a-plate fundraising dinner at the home of Dwight and Antoinette C. Bush, two heavy contributors to his reelection. But according to the Times, that wasn’t Antoinette Bush’s only contact with Obama. Six months earlier, she had visited the White House, bringing with her a “top entertainment industry lobbyist.” This was when a big brouhaha was erupting between that industry and Internet companies over online piracy.
The visit of a big political contributor and an industry lobbyist to the White House may not normally raise eyebrows, but this is the Obama White House. The Times notes,
Although Mr. Obama has made a point of not accepting contributions from registered lobbyists, a review of campaign donations and White House visitor logs shows that special interests have had little trouble making themselves heard. Many of the president’s biggest donors, while not lobbyists, took lobbyists with them to the White House, while others performed essentially the same function on their visits. …
[T]he regular appearance of big donors inside the White House underscores how political contributions continue to lubricate many of the interactions between officials and their guests, if for no other reason than that donors view the money as useful for getting a foot in the door.
Welcome to Obama’s new world. It looks a lot like the old.
And this is not the only way it resembles politics as usual.
Like his predecessors, Obama has been a good friend to big companies, especially banks. Take Bank of America. BoA is what you’d expect of a financial institution coddled by government subsidies and privilege: inefficient, corrupt (unjustly foreclosing on homeowners), and a frequent corporate-welfare recipient.
Rolling Stone contributing editor Matt Taibbi reports that when BoA needs help, Obama is there. Taibbi writes that BoA is
a de facto ward of the state that depends heavily upon public support to stay in business. In fact, without the continued generosity of us taxpayers, and the extraordinary indulgence of our regulators and elected officials, this company long ago would have been swallowed up by scandal, mismanagement, prosecution and litigation, and gone out of business. It would have been liquidated and its component parts sold off, perhaps into a series of smaller regional businesses that would have more respect for the law, and be more responsive to their customers.
But Bank of America hasn’t gone out of business, for the simple reason that our government has decided to make it the poster child for the “Too Big To Fail” concept.
Who can we thank? In part, President Barack Obama, who’s planning to run a populist reelection campaign pitting the wealthy and well-connected against the rest of us. Hypocrisy lives—even in Obama’s allegedly post-political world.
According to Taibbi,
Bank of America … is perhaps the biggest welfare dependent in American history, with the $45 billion in bailout money and the $118 billion in state guarantees it’s received since 2008 representing just the crest of a veritable mountain of federal bailout support, most of it doled out by the Obama administration.
Revealingly, BoA soothed nervous creditors last year by shifting $73 trillion in derivatives to the part of the bank covered by federal deposit insurance—aka the taxpayers.
Good economists are awkward people
It's difficult to be a good economist and simultaneously be perceived as compassionate. To be a good economist, one has to deal with reality. To appear compassionate, often one has to avoid unpleasant questions, use "caring" terminology and view reality as optional.
Affordable housing and health care costs are terms with considerable emotional appeal that politicians exploit but have absolutely no useful meaning or analytical worth. For example, can anyone tell me in actual dollars and cents the price of an affordable car, house or myomectomy? It's probably more pleasant to pretend that there is universal agreement about what is or is not affordable.
If you think my criticism of affordability is unpleasant, you'll hate my vision of harm. A good economist recognizes that harm is not a one-way street; it's reciprocal. For example, if I own a lot and erect a house in front of your house and block your view of a beautiful scene, I've harmed you; however, if I am prevented from building my house in front of yours, I'm harmed. Whose harm is more important? You say, "Williams, you can't tell." You can stop me from harming you by persuading some government thugs to stop me from building. It's the same thing with smoking. If I smoke a cigarette, you're harmed — or at least bothered. If I'm prevented from smoking a cigarette, I'm harmed by reduced pleasure. Whose harm is more important? Again, you can't tell. But as in the building example, the person who is harmed can use government thugs to have things his way.
How many times have we heard that "if it will save just one human life, it's worth it" or that "human life is priceless"? Both are nonsense statements. If either statement were true, we'd see lower speed limits, bans on auto racing and fewer airplanes in the sky. We can always be safer than we are. For example, cars could be produced such that occupants could survive unscathed in a 50-mph head-on collision, but how many of us could buy such a car? Don't get me wrong; I might think my life is priceless, but I don't view yours in the same light. I admire Greta Garbo's objectivity about her life. She said, "I'm a completely worthless woman, and no man should risk his life for me."
Speaking of worthlessness, I'd be worthless as an adviser to either the White House or Congress because if they asked me what they should do to get the economy going, I'd answer, "Do nothing!" Let's look at it. Between 1787 and 1930, our nation suffered both mild and severe economic downturns. There was no intervention to stimulate the economy, but the economy always recovered.
During the 1930s, there were massive interventions, starting with President Herbert Hoover and later with President Franklin D. Roosevelt. Their actions turned what would have been a sharp three- or four-year economic downturn into a 10-year affair. In 1930, when Hoover began to "fix" the economy, unemployment was 6 percent. FDR did even more to "fix" the economy. As a result, unemployment remained in double digits throughout the decade and reached 20 percent in 1939. President Roosevelt blamed the high unemployment on his predecessor. Presidential blaming of predecessors is a practice that continues to this day.
You say, "Williams, the White House and Congress should do something." The track record of doing nothing is pretty good compared with doing something. None of our economic downturns in the century and a half prior to 1930 lasted as long as the Great Depression.
It would be political suicide for a politician to follow my counsel — and for good reason. Americans have been miseducated into thinking that Roosevelt's New Deal saved our economy. That miseducation extends to most academics, including economists, at our universities, who are arrogant enough to believe that it's possible for a few people in Washington to have the information and knowledge necessary to manage the economic lives of 313 million people. Good economists recognize our limitations, making us not nice people to be around.
Another Day, Another Administration Witch Hunt
So many imaginary villains and so little time
This week, President Barack Obama is taking the fight to "oil speculators" and "market manipulation" (nee "free enterprise"), demanding that traders put up more money for transactions and government ratchet up enforcement and monitoring. "None of these will bring gas prices down overnight," Obama helpfully explained in his news conference. "But they will prevent market manipulation and help protect consumers."
No, they won't. They'd probably hurt consumers, and they would doubtlessly raise the cost of doing business. So for a few hundred words, let's treat populist agitation as if it were earnest policy.
Let's start by being thankful for oil speculation—no matter what the motivation of those involved might be. To begin with, speculation allows companies with exposure to fluctuating commodity prices to hedge against rising costs by locking in. Sometimes the bet pays off; other times it doesn't. But risk and profit are not yet crimes.
Oil speculation also offers consumers and investors information about the future that can help them make informed long-term decisions. Speculators trade commodities based on the information available in the marketplace. They reflect reality; they don't create it.
But sometimes, unfortunate as it is, prices will rise. "Gouging," the close scaremongering cousin of "speculation," helps persuade consumers not to use what they don't need. It incentivizes to modify behavior—our driving habits or the size of our cars. We conserve more when prices are higher, so we avoid shortages, and producers intensify their production. (Funny how Democrats get this concept when writing energy policy designed to artificially spike fossil fuel prices.)
The president surely understands, as well. He knows that a fungible commodity's price is driven by demand and geopolitical events beyond the control of speculators or, for the most part, Washington. There are billions of people in China, India and elsewhere who are new consumers of oil—and they are better off for it. We are better off for it.
Or put it this way: Natural gas prices are trading so cheaply that it's no longer profitable to drill for most companies. According to Businessweek, there are only 624 operating drills in the United States, the fewest since April 2002. So I guess natural gas speculators forgot to manipulate the world market this month. Or do oil manipulators only work part time? Confusing.
Where, after all, is the president's evidence that oil speculation is driving up oil prices? The White House "Fact Sheet" on the matter offers plenty of solutions to a problem it hasn't even proved exists. Why are we going to spend another $52 million—and who-knows-what in political witch hunt trials—on a theory that plays on assumptions and flourishes in the progressive blogosphere?
Obviously, much of this is driven by political realities and accusations by Republicans that the president isn't doing enough to curb rising oil prices. George W. Bush also talked about manipulation nonsense, and I'm sure it's gone on forever.
So it's also worth noting that Washington, regrettably enough, already has the power to enact the counterproductive regulations the president is asking for. Nothing needs to be passed. It was only last year when Obama formed a special task force designed to find manipulation in the oil market and to ferret out incidents of gas gouging.
It is rare when Washington gives a topic what it deserves. But the Oil and Gas Price Fraud Working Group has given the American people exactly what the topic deserves: zip.
Thank you, Argentina
You can always count on Argentina for abject lessons on how not to run a country. That’s always been painful for its citizens but useful for the rest of us to see how hair-brained, populist schemes just don’t work.
This week, President Cristina Fernandez de Kirchner announced the seizure of Spanish oil company Repsol’s stake in Argentine oil company YPF to give the government 51% control. Spain is outraged and has recalled its ambassador. The Argentine navy has been diverted from the Falklands and is now steaming towards the Canary Islands.
Ms Fernandez justified her move on the grounds that YPF has failed to invest sufficiently to prevent Argentina from importing ever greater quantities of fuel. The fact that Argentine oil reserves have been dwindling means the sector needs greater and increasingly sophisticated investment to reach more complex structures, just like in the North Sea. Expropriation isn’t going to attract that kind of high-risk investment.
Once in state hands, odds are high that YPF will be used by the government for other purposes, just like Venezuela’s PDVSA. It was no surprise that Hugo Chavez cheered the news from Ms Fernandez. Perhaps he hopes she can show PDVSA how to increase daily oil production which has fallen by 7% in the past five years.
The YPF seizure continues Argentina’s cavalier attitude towards other people’s money shown back in 2008 when Ms Fernandez grabbed some $24 billion of private pension funds and used central bank reserves to meet debt payments. More recently, the country has been in a spat with the IMF over the quality of its statistics. Argentina claims inflation is running at somewhere between 5% and 11% but private independent estimates put the number at somewhere around 25%. The Economist is refusing to publish official Argentine inflation data.
Disrespect for the law and wilful distortion of the facts are no way to manage an economy. Productive investment requires assurance that monies invested will be paid back and that investment decisions are based on reliable data.
Like many floundering politicians, Ms Fernandez confuses ownership with productivity. This is especially so when it comes to natural resources as if the mere existence of oil within a set of borders is wealth in itself. But wealth comes from finding, extracting, processing, shipping and selling the commodity, just like any other product. America, Canada, Britain, Australia and others benefit from the exploitation of their natural resources by private companies operating within clearly understood legal arrangements, not from state ownership of the entire production process and certainly not from expropriation.
With her latest move, Ms Fernandez continues the long, sad tradition of Argentina failing to live up to its potential. At least the rest of us get real-world case studies of bad policy-making.
It's important to know when to quit: "Forty-one years into a repeat of a prior failed experiment in controlling human behavior through asinine and ridiculous laws (alcohol), our 'War On Drugs' has long since become what many have called a 'war on people'. And, some people more than others. Now, decades later, with well over $1 TRILLION spent to literally no avail (unless you actually think making a country with 5% of the world’s population having 25% of the world’s prison population -- over a third of them non-violent drug possessors or users -- a sign of success)"
Rich bashing is unjust and vicious: "The casual manner in which President Obama proposes that various progressive tax measures be implemented against the so called rich -- ones who earn more than two million a year -- is indicative of just how deep seated and widespread is the prejudice against wealthy people in the United States of America. This is the country that had been hailed as the leader of the free world, as substantially capitalist, as mostly enjoying a free market place, etc. It seems however that the team now in charge of administering the laws and public policies of the country hasn’t a clue as to what human freedom or liberty really means."
Vatican orders crackdown on US nun association: "The Vatican orthodoxy watchdog announced Wednesday a full-scale overhaul of the largest umbrella group for nuns in the United States, accusing the group of taking positions that undermine Roman Catholic teaching on the priesthood and homosexuality while promoting 'certain radical feminist themes incompatible with the Catholic faith.' An American archbishop was appointed to oversee reform of the Leadership Conference of Women Religious, which will include rewriting the group's statutes, reviewing all its plans and programs -- including approving speakers -- and ensuring the organization properly follows Catholic prayer and ritual."
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The Big Lie of the late 20th century was that Nazism was Rightist. It was in fact typical of the Leftism of its day. It was only to the Right of Stalin's Communism. The very word "Nazi" is a German abbreviation for "National Socialist" (Nationalsozialist) and the full name of Hitler's political party (translated) was "The National Socialist German Workers' Party" (In German: Nationalsozialistische Deutsche Arbeiterpartei)