The end of Capitalism and Freedom?

American's please wake up. I know the media has made out like the country is in a depression and it's all Bush's fault and we need 'Change'. I'm not going to argue the merits of that.
But does anger at Bush mean that it's time to dismantle the system we've had for 200 years? Do you want to end free markets and free speech? Do you think that America should become permanently Socialist? Is it time to get rid of 2 party rule and consolidate all power under one party?

I want you to understand that if the democrats win this election, the United States may never be the same. The conventional wisdom is that the pendulum between right and left swings back and forth - though we may swing left, if things get out of hand we'll swing back. But that conventional wisdom may be wrong this time. The democrats are going to make systemic changes to make sure they never lose again. For 30 years we have had divided government. No one party has had 100% power. There have been brief times in the last 60 years when a party has had the Presidency and also majorities in both the House and Senate. But you really need more than a majority in the Senate to create radical change. You need a super majority - 60 of 100 votes. No one has had that since Jimmy Carter had it briefly. That was a disaster for the country. But back then the Democrats did not have a plan to consolidate power permanently. This time out, they do. They are so angry since the Republicans gained the house in 1994. If they gain power back, they plan on making changes that will make it almost impossible for Republicans to ever win again.

Let me explain the changes. Right now elections are usually won 51%-49% or 53%-47%. We have been more or less evenly split for a long time. If the democrats can create a permanent shift of just a few percentage points, it's game over for divided and limited government. The whole founding principle of the US, a government restrained by checks and balances, will be gone. We are about to give total control to one side. I know you may like Obama. But politics is a team sport. I encourage you to read up on what the whole team stands for. And even if you like most of the policies, realize that "absolute power corrupts absolutely". This is why the principle of checks and balances and divided government is so important. Think twice before you let your emotions toss that away because of complaints of the day.

Here's their plan. This is not scare mongering - many of these bills have already passed the House, and only need a few more votes in the Senate. Then Obama would put them over the top. You want change? This will quickly remake the United States into something totally different.

Policies to Consolidate Power

1. Allow illegal aliens in and make them citizens quickly so they can vote for democrats. Years ago immigrants were taught American values and thus they voted for both parties. But now they are bribed with entitlements and kept from joining the debate by failing to teach them English and American History. Thus they are molded into a democrat voting block.
   
2. The "Employee Free Choice Act" - This bill could have been named by George Orwell because it's the opposite of what it says. This bill would enable Union Organizers to do away with secret ballots for unions. So union thugs would know if you voted against them. Nice. You are at work in a non unionized shop. 10 union reps corner you with a petition to unionize. If they get the signatures, the place is unionized. If you didn't sign up with them when they originally asked, they know you are an enemy. This is an attempt to double union membership which will become a huge source of new votes and money for the democrats.
   
3. Make more people dependent on Government - Right now 60% of the taxpayers pay federal income tax and 40% pay $0 in federal income tax. If they can raise the non-tax payers to more than 50% we will have a situation where the majority of voters pay no tax, but instead vote on the amount of taxes that others should pay. This is an irreversible tipping point. Basically every single tax bill that would attempt to correct this would be 'a tax on the poor.' Thus more than half of the electorate would be beholden to democrats in some way.
   
4. Allow the District of Columbia to have representation. The founding fathers barred people in the District of Columbia from having representatives because they understood the city would become swamped with bureaucrats whose only interest would be to enlarge government. And they were right - 90%+ of DC votes go to tax and spend liberals.
   
5. Allow Felons to Vote. It sounds crazy, but they are trying to pass this nationwide already.
   
6. Implement 'The Fairness Doctrine' - another Orwellian-named bill. Basically, this would eliminate talk radio and all media would then be the liberal. Sound Impossible? Though clearly unconstitutional, the Head democrat in the House has described this as her "Top Legislative Agenda" and liberals routinely call into talk radio gloating that their days are numbered.
   
7. Get rid of Home Schooling - They've started this in CA already. Home schoolers are the best educated students in the country, with the highest SAT scores, etc. Thus they are the most well informed and the most conservative. Democrats want to put rules in place that would make Home Schooling illegal. Instead they want to have government run day care so that they can start teaching kids at age 3 about liberal policies. This is what they do in communist countries.
   
8. Eliminate the teaching of American Values as Eurocentric or hate speech. Probably only 20% of students have read the constitution by the time they graduate HS even though it's only 8 pages long. Expect that number to drop to near zero.
   
9. Liberal Judges - To take over the 3rd branch of the government, leftists judges would be appointed. These judges have a philosophy that says that the constitution is a 'living document' which is open to interpretation based on modern day values. In other words, it means whatever they want it to mean. Therefore it's a meaningless document. They openly dismiss the constitution as a barrier to them implementing whatever policy they want.
   
10. Voter fraud - eliminate requirements that you need an ID to vote, empower and fund groups like Acorn, etc. If you add this voter fraud effort to the increase in union membership, you can see a mechanism by which fair election become increasingly difficult
    
11. Increase Gerrymandering and other inside baseball tricks to increase liberal majorities.
    These policies will tip the scale and make it almost impossible to unseat democrats from power.

Basically, without any check on liberal power, the sky is the limit. Liberals complain the republicans have had too much power. But really this power has been restrained. Just as an example, since Roe v. Wade we've had Nixon, Reagan, Bush 1 & Bush 2. But they never had anywhere near the votes to eliminate abortion. We have divided government with checks and balances. But this election may give ALL the power to 1 side. Then what? You may even want some of these policies. But do you want ALL of these??? Cause that's what you'll get:

Socialist Domestic Policies - The goal is to end capitalism and replace it with socialism, just as Europe has done. Large blocks of the economy will be nationalized. All of these agenda items are supported by most democrats and many have already passed the House. We are about to give them the final Senate votes plus the presidency and then it'll all happen.

1. Socialized Medicine
   
2. Nationalized Energy - Congressional Democrats like Maxine Waters have openly called for a government take over of the oil industry. You can forget nuclear power or any other viable solutions. Gasoline in Europe is $8 a gallon. Prepare for that here and worse.
   
3. Global Warming - The 'Cap & Trade Bill' gives new government bureaucracies the power to regulate any industry that uses energy. In other words, all businesses. This alone is the end of the free market and a trampling of the Constitution. The EPA will now dictate production in all sectors.
   
4. Huge Corporate Taxes in a way that will drive companies to export jobs. This will also drive down stocks and 401K's in an effort to push more people back into dependence on Social Security as their sole retirement vehicle.
   
5. NEW SINCE I WROTE THIS POST JUST YESTERDAY: Do away with 401K's entirely. They want to take your existing savings and push them into the Social Security System. Future contributions would just go to the government as a new 5% tax. This was mentioned in hearings this week and I saw it twice on TV this morning.
   
6. Huge new Welfare Programs and programs to redistribute wealth.
   
7. Subsidies for any and all industries which are political allies.
   
8. Rules that make it hard if not impossible to fire employees (results in fewer people getting hired which is why Europe always has 10-12% unemployment, compared to 5-6% here)
   
9. Trial Lawyers run Amok -
   - New Product Liability lawsuits empowered by liberal judges.
   - Eliminate Statute of Limitations on Workplace Discrimination Suits
   
10. Unionization of Industries
    
11. Reparations for Slavery
    
12. Gay Marriage.
    
13. Speech codes which would label conservative political thought and religious thought as 'hate speech'. These already exist on campuses, in Canada and most of Europe. Any objection to Gay Marriage, affirmative action or most any liberal policy will become hate speech.
    
14. Gun Control
    
15. Federal Funding of pro-liberal art on a huge scale
    
16. End to 'Three Strikes your out' and other pro-victim crime legislation. Back to revolving door for criminals. End capital punishment.
    
17. Ban military recruiting on college campuses
    
18. Constant Harassment of Christians and organized religion. Church Attendance in Europe is down to 5%. I'm an atheist but I fear living in a country with no institutions that talk about right and wrong, good and evil.
    
19. Moral Relativism and Cultural diversity would replace a belief in American Values
    

International Policies - these are all policies which are openly supported by most of the left.

1. End Support for Israel - it always shocks me when American Jews vote for democrats given the left's open calls for us to stop supporting Israel.
   
2. Pull out of Iraq in Defeat
   
3. Allow Terrorists to sue America or allow them access to courts so that we can only prosecute them by giving them all our spying techniques.
   
4. Allow Iran to get the bomb
   
5. Allow the UN to tax the U.S.
   
6. Protectionist Tariffs. Pull out of NAFTA, Stop the Colombian Free Trade agreement, etc.
   
7. Dismantle the U.S. Nuclear arsenal
   
8. Eliminate funding from military weapons research and systems
   

International Crisis that Democrats may not have the backbone to stop or respond to - Europe and much of the world right now has the luxury of being immature. They have us as their big brother fighting their battles. Our presence and strength has deterred global conflicts for 60 years. Without a strong US grounded in the Constitution, western values, loving liberty and ready to fight evil, the world will revert to the way it was for thousands of years before the US came on the scene - constant battles for power. Evil causing pain for large swaths of the world. The powerful grabbing what they want. Here's a sample of how it might start. Ask yourself what would the democrats do in the face of crises such as these:

1. Russia Takes back Eastern Europe
   
2. China Takes back Taiwan
   
3. Venezuela takes over Colombia or Cuba
   
4. Iran bombs Israel
   
5. North Korea invades South Korea
   
6. Taliban Supporters take over Pakistan and it's nuclear Arsenal
   
7. Terrorists Nuke a US City
   

So that's about it. So does your anger at Bush justify turning all branches of government over to the democrats and allowing them to permanently dissolve the two party system, capitalism and free speech?

Please, please pass this along to your friends, especially to those in swing states or states with Senatorial elections. Whether you like Obama or not, you have to decide if you want to pass all power over to one side. McCain would be the most Liberal Republican president ever anyway. Plus Liberals will hold maorities in the congress and the courts. So if you really like liberal policies, you can expect plenty of them. But to toss 100% control to one party is just a scary thing. As I said this is a team sport. Google around and see what democrats really have in store for America. It's not the America that's existed for the last 200 years, that's for sure!

Why I’m Against the Bailout

I want people to really understand this mess. It’s such an instructive lesson to understand how the government works and how the media works. I’m against this bailout bill and I want to explain why.

When there is a crisis you always here people say “I don’t want to know the details, just fix it.” It’s frustrating to hear that because that’s usually when people get scammed. There is more scamming in this bill than anything I’ve seen in a long time. And I’d say that the reporting on this topic is probably the worst reporting I’ve ever seen on a story, and that says a lot. The head lines, the slogans and the sound bites say one thing and reality is the opposite. If the media could be charged with fraud, this would be an open and shut case.

So I hope that you will take the time to read this post and I hope you keep an open mind. I want to go a bit beyond this crisis and hopefully improve the way you see and interpret economics and government. I’m struggling to keep this as short as possible but I feel I have to go into some level of detail. When things are too short we end up with slogans over clear arguments or actual learning.

The big lie is that this crisis was caused by a ‘failure to regulate’ the private sector. That Bush and the republicans are deregulators and they let the private sector run wild. I know that as soon as I mention Bush that some of you are immediately turned off. Bush is to blame for everything or the sitting president is to blame because something happened on his watch. No sitting president is responsible for everything. We have a system of checks and balances and the president is a part of that. But there are trillions of dollars at stake and many players try to move the action. I’m not supporting Bush on this bailout. But he did try many many times to stop this and he was thwarted.

Capitalism is Good

Capitalism is voluntary. Buyer and seller agree on a price and make a transaction. Prices are based on a free assessment by both parties of what something is worth. Prices are the most important thing in economics because they tell us what one thing is worth compared to another. Prices allow us to make the optimum decisions and thus propel the economy to be more and more efficient. Over the last 150 years, economic output has multiplied by 100x per person to the greatest level in history with the US clearly in the lead. Capitalism, which is much criticized these days, is the economic system that is the most free and the most successful. The criticism of capitalism is that not everyone shares equally. The problem with this critique is that all the other systems of government, even those with equality as their central premise, like socialism, don’t actually produce greater equality. In fact, they almost always produce less. So monarchies, theocracies, socialism, communism, feudalism, imperialism – they might talk a good game, but they deliver on equality and worse they don’t lift up the whole economy the way that capitalism does. Even the poorest in the US would not want to go back 100 years and live as an upper middle class person because they’d have to give up their air conditioning, their TV and their lights and phones. So capitalism works.

Government programs are not voluntary. Governments engage in price fixing. They distort markets. By changing prices, people allocate resources in the wrong direction and things become inefficient. Here’s a quick example. Two people want to build a $200,000 home, one in a suburb and one on the shore. The insurance in the suburbs is $1,000 per year and the one on the shore is $25,000 per year. Is that fair? Yes, because the one on the shore is subject to hurricanes. Price is important in economics because it tells people what to do. In this case it’s saying don’t build on the shore. But people like the shore, build there, try to go without insurance, get wiped away then complain to the government for free relief. In effect, they want the government to charge them $0 per year for hurricane insurance instead of $25,000 per year. This is price fixing. In the short run you want to help anyone that had a disaster. But in the long run it just allows people to misallocate resources and hurts everyone. The people in the suburbs pay for the new home on the shore. And not just one time. Price fixing distorts markets for long periods of time. People rebuild and rebuild and rebuild on the shore, knowing that they can complain and get free insurance. And it’s all a waste of time. Without price fixing, there would be more homes in safe areas and fewer homes in unsafe areas. That’s good. But the government fixes prices. Without the correct price, markets don’t increase efficiency over time anymore. That’s why communist countries are so poor.

Everything the government engages in is price fixing. It’s all non-voluntary. If it were voluntary then people would be doing it already without the government. Therefore all economic activity engaged in by government has a cost – it’s all inefficient. Often wildly so.

The power of government to make things fair is limited. Sound bites and promises make it sound simple, but it’s not. Let me explain one more thing before we go into the current crisis. You can’t just pick winners and loser like they say on TV. It’s a bunch of lies. Here’s an example: “Oil Companies make too much profit. Let’s tax them”. It sounds good on TV, it’s basically a feel good measure. Let’s say Exxon sells oil for $100B and of that $90B goes to OPEC and expenses and Exxon profits $10B. So the government decides that $10B is too much. It’s going to tax $4B to ‘get even’. Does that mean that Exxon now makes only $6B? Nope. They just jack up the price. Whoever NEEDS the deal more, the buyer or the seller, takes the brunt of any tax. Exxon jacks up the prices to $104B they pay $90B to OPEC, take $10B for themselves and give $4B to the government. So they make the same money. It’s just a trick. The consumer losses and the government gains. Exxon stays the same. If the government came along and said they were putting a 4% sales tax on gasoline to charge customers more, you’d realize it right away that they jacked up the price. But because they took the money off the back end rather than the front, and because they talk a good game, it looks like Exxon paid. It’s trick!!!

It’s the same with a lot of these schemes. You the consumer never wins. They are all tricks. “Government is going to help you pay for college education by giving you an extra $4,000 grant”. Great. Notice that the colleges then jack up the price by $4,000. You the consumer didn’t make out. It was a way of paying the colleges off to keep spouting pro-government stuff. Compared to 30 years ago, colleges cost way more than gasoline.

The Founding Fathers knew all of this and thus created a short list of what the government could actually engage in. But the government is now ignoring that and creating mess after mess.

What happened at Fannie Mae and Freddie Mac?

This is being called a banking crisis. That is not really true. This was a welfare program gone wrong. It’s not even fair to say it went wrong really. It’s just that people were denying that this was a welfare program. Really the government was giving out about $100B a year in welfare for the last 10 years. About a $1Trillion in all. But instead of paying for it as they went, they hid the fact that they were giving it away. “We are just lending it, they are going to pay it back”, they said. Well now we realize that it’s not going to be paid back. That is a short and sweet and accurate description of what happened. All of the rest of this blame game, really boils down to that one simple fact.

Here’s how it worked: The government wanted to increase home ownership. Like with the example of the homes in a hurricane area, the government increased owners vs. renters by artificially reducing the real price of a mortgage. It used to be that when you went to Bank X and bought a mortgage, you owed Bank X money for 30 years. Mortgages, like any loan, have a risk that the borrower will not repay. Banks charge high prices for high risk. The government wanted to reduce the prices banks charge, so they reduced the bank’s risk. Congress set up a ‘Government Sponsored Enterprise’ (GSE) called Fannie Mae. Fannie Mae bought a lot of mortgages from banks. Once the bank sells out, their risk is gone. So since they can sell out early and drop their risk, they can drop their prices. Fannie Mae, and another similar company called Freddie Mac, were owned in part by the government. They issued stock, like they were a private company, but the government owned most of it and everyone understood that these were basically branches of the government. If they ever went bankrupt, the government would pay up. So they were really government agencies, despite appearances.

For decades the system worked ok. There was price fixing but it was very mild. Fannie Mae owned maybe 15-20% of the mortgages. Prices were maybe ½ a percentage point lower than fair market. Banks still had a lot of risk so they made loans to customers who demonstrated an ability to pay the loans.

So what happened? In the late 1990’s things began to change dramatically. First, banks were being accused of racism. Banks were accused of ‘redlining’ – not making loans in bad neighborhoods or to minorities. Banks replied by saying that customers that met the normal criteria were issued loans. Banks wanted 10-20% down in equity, proof of income, etc. Basic stuff they got for any loan. If they lowered their standards they would increase their risk and lose money.

So here’s what happened. The government gave the banks a carrot and a stick. The carrot: don’t worry about the risk. You issue the loans at the retail bank, hold it for a very short time, then Fannie Mae or Freddie Mac will buy it from you. The stick: if you don’t lend money to minorities, congress is going to harass you endlessly. Lawsuits, bad publicity, more regulations, etc.

So the myth is that the banks were unregulated by government. The truth is that the banks were told by the Government: RUN WILD OR WE’LL SUE YOU.

And run wild they did. For the banks this was a no-brain decision. They started to reduce their standards. They allowed 0% down. They rolled closing costs into the loans. They gave introductory interest rates. They approved people for loans way outside their price range. Homesellers made out because instead of one person qualifying to buy the house, 3 or 4 sellers would show up with approved bank loans and bid up the price. No matter how bad the deal, Fannie Mae and Freddie Mac bought it all up. They held at one point 60-70% of all subprime loans. Plus they allowed the banks to sell them to others, such as foreigners, with A ratings on them. They encouraged fraud. The CEO’s of Fannie Mae and Freddie Mac wrote themselves huge bonus checks in the $90M range for doing such a good job of promoting home ownership. Meanwhile they were really buying up complete junk.

So now the banks have crashed. Fannie Mae and Freddie Mac crashed but lot of other banks were holding bad loans too. The bailout would have the government buy up all the loans they foisted on everyone. The bankers are saying “hey, you told us to do this so you should make good on that. Yeah, my CEO made $30M last year. But we had 5 profitable business divisions and the one that lost big and wiped all that out was this junk you made us do.” And to be honest, they’ve got a point.

But I still don’t support bailing them out. Bailing them out just props up prices again. They’ll expect it again next time. Also, I don’t want the government buying up even more mortgages. Where in the constitution does it give the government the power to be in the mortgage business? It doesn’t. They got into it, screwed it all up, now want even more power to fix it. No way, no how. I’m against it. The bill says that one purpose of the package is to stabilize home prices. That’s price fixing. Why should prices be artificially high? Yeah, people are upset about the value of their homes. I’m upset. I’ve been trying to sell my house for a year and it’s not worth shit anymore. But so what? Why favor the seller over the buyer. What about first time home buyers? Why not let the prices fall and let first time home buyers get a deal? Get the government out of it. Government price fixing creates long term inefficiencies because it has us allocate our time and resources to the wrong effort. In Atlanta they made 58,000 homes last year instead of the usual 40,000. A total misallocation of time and money. More and more people trained to be in construction. And now all the builders are out of jobs. All that training wasted. There’s a glut of houses that will last years.

This is the consequence of this fraud. And the fraud continues. The news you see on this story is a fraud. Right now the news is all spin. But if “the news” is what really happened, then let’s look at the hearings in congress that have been held for the last 5 years on this mess. Thank god for YouTube:

http://www.youtube.com/watch?v=_MGT_cSi7Rs

Who is to blame?

Up until now I’ve tried to keep this fairly non-political. The media is trying to dump this on ‘the Bush economy’. It’s a fraudulent charge and they know it. Let me state it clearly. This was a scam run by democrats. Virtually every person involved was a Democrat. It was not “Republicans who want to deregulate business” that is to blame. It was democrats that wanted to give out welfare. In the House it was Barney Frank, in the Senate Chris Dodd. They blocked all measures to stop Fannie Mae because they wanted to support ‘affordable housing’ - affordable to the beneficiaries - at the expense, of course, to the tax payers. The heads of Fannie Mae were Franklin Raines and Jim Johnson. They are just like Ken Lay of Enron. They inflated fake profits so they could write themselves bonuses. Raines was recently indicted and forced to give millions back but he still made out. Obama has both of them working on his campaign. Jim Johnson was the head guy vetting Obama’s VP selection. These were not minor players on the campaign. What about Obama? Obama’s Community Organizer days were spent with Acorn, a group that was charging banks with Red-lining and threatening to sue them if they didn’t make these loans. Obama himself was legal council on several such cases. That’s what community organizers do, in case you were wondering since no one ever says.

Frankly there’s hardly a Republican around to blame on this, unless you fault them for failing to stop Democrats. If there were Republicans to blame, don't you think you'd see specific charges or hearing on this or press rantings? They just claim a generic 'Bush Economy' but they don't give any details. Why? Bush tried to stop it from 2001 on. McCain was a co-sponsor of bill 3 years ago to stop it. But even when Republicans ran the congress the Democrats had enough votes in the Senate to block any common sense restraint. The charge of racism is also enough to cower many Republicans.

Listen to these two clips. It’s the same Democrat, Barney Frank. Listen to what he said 5 years ago vs what he says now . Ask yourself if he’s lying. He says he tried to get the banks to stop subprime lending in 1994 but then the republicans took over congress and he couldn’t stop them from deregulating. Then as soon as he came back to head the committee when the democrats came into power in 2007, he put in place regulators. He knows that he can lie cause people don’t like details. I worry about this myself. I worry that few people have read down this far. You don’t have to be in charge of congress to BLOCK reform. The minority can block anything in the Senate. From 1998 to 2006, even in the minority, Frank and the Democrats blocked all effort to stop subprime lending. They were for it, the republicans were against it. But republicans could not make the change without a few democratic votes and they got none. Frank wanted no regulation because he didn’t want these welfare loans to stop. It was that simple. And any republican who pushed too hard was tarred with racism, etc. Now we have a bail out signed by Bush, but otherwise passed with mostly democrat votes, spearheaded by the same Barney Frank.

What's in this Bill?

I doesn't provide more regulation. I doesn't tighten lending standards so that we return to 20% down or normal income requirements. So what does it do? The bill allows the people that caused this whole screw up - the government, to take near total control of the mortgage industry.
It's more pork.

I'm against this bailout because I don't want to nationalize the mortgage industry. We are already pretty close to nationalizing the health care system. They would LOVE to nationalize the energy industry (as Democrat Maxine Waters threatened recently). We have government run schools. Is this what built America? Listen to the enemies that democrats complain about. Walmart that brings you products at low prices is an enemy. The oil companies that heat your home are enemies. The drug companies that make medicines to keep you well are enemies. Banks that lend you money to buy a house are ‘predatory’. Do you see a pattern here?

The economy of the US is fundamentally strong because technology is progressing. In 10 years the internet will be faster, medicine better, and robots starting to help out with our daily lives. So it's not time to panic about the economy. But anything the government touches gets worse. This bailout will not improve the economic growth of this country. I will post up soon on a plan that would double our long term growth from 3% to 6%. As you can guess, it mostly involves removing government from the economy. Liberty is the engine of America.