Of Congress and Appropriations

Photo by Jomar on Unsplash

Why is Congress not legislating?  Congress is the national legislature.  The Constitution vests Congress with exclusive legislative rights.  Then why will the Members of Congress not legislate? 

Among the exclusive legislative jobs for Congress is to appropriate funds for the operations of government.  This is a regular, annual task.  This must be well understood:  for Congress to fail to fund the operations of the federal government is a dereliction of duty of the highest order.  Nothing prevents the Members from doing that duty, and no one else can do it.

The President cannot legislate, least of all appropriate.  That limitation is firmly placed as a check on executive power.  The President may not write a single word of legislation, he may not appropriate one penny.  If the agencies of government are not funded, it is because Congress has failed to fund them.  No one else can fund them, and no one else can fail to fund them.  Currently, Congress has not done its job for much of the federal government, and the Members of Congress have no excuse, no justification for the failure.

The President can make recommendations to Congress, he can ask for appropriations.  Congress can heed or disregard such recommendations and requests entirely at its discretion.  They have no effect except as Congress chooses.

Some might say, but what about the President’s veto?  Can he not refuse to sign an appropriation, and send the bill back to Congress?  Indeed he can.  He may send it back, but he cannot change it, he cannot add or remove a single word.  Congress can decide whether to change the legislation, do nothing, or vote to override the veto.  Those decisions are entirely in the hands of the legislators.

It is no excuse for legislators to say that they cannot find sufficient agreement whether to override a veto or even to pass a law.  Whose fault is that?  True representative legislatures (not the rubber stamps of communist dictatorships) have always had the difficult job of dealing with disagreement.  That is why we have legislatures with numerous members.  It is expected that there will be varying points of view.  The legislators’ responsibility is to resolve these differences sufficient to pass necessary laws.

Appropriations for government operations are necessary laws.  They are also among the most malleable of questions.  When the consideration is money for government projects, there is a compromise to be found.  We will not pass anything is not an acceptable option.  It is legislative failure.

Presidents may say that they will veto a bill that does not meet certain standards.  That is a President’s prerogative, but the Constitution is careful to make it a surmountable obstacle.  The Members of Congress, working through the legislative process, may either find a sufficient majority to pass a law that the President will not veto or a sufficient unity of view that will allow them to override the veto.  Doing nothing until the President changes his view is dereliction.

Presidents have had vetoes overridden.  Franklin Delano Roosevelt, a Democrat, vetoed 635 Acts of Congress passed by strong majorities of fellow Democrats.  Congress overrode several of those.  Ronald Reagan vetoed 78 Acts of Congress, several of which were overridden. 

Most often, a significant number of Members will sympathize with the President’s view.  That calls for legislative efforts to find a formula reasonable enough that the President does not reasonably veto it.  That is what the national legislature traditionally does and is expected to do.  That is what this Congress has so far failed to do.  That failure is entirely the fault of the Members of Congress.

Of Lessons of History and Preventing Wars

History does not repeat itself, not precisely.  Humans, though, have been doing similar things for thousands of years.  History offers patterns from which we can learn.  That is to say, that there is nothing new that is wholly new. 

There is too much for comfort in the current international situation—and the U.S. response to it—that feels like the 1930s.  The republics of the West, focused inward, struggle with economic traumas and work hard to make them worse in the name of making things better.  National leaders even when aware of storm clouds on the global horizons ignore them if they can, and minimize the dangers if they cannot, applying symbolic but ineffective remedies where action is unavoidable.  Aggressive second rate powers strive for recognition as though first rate powers, conspiring to disrupt the international equilibrium and the peace that rests on it to get what they want.  While potential enemies rapidly rearm, the West disarms in the name of peace, heedless of the wars and conflicts that fill the vacuums of their military retreats.  Again, I am talking about today, not the 1930s, but the parallels are disquieting.

The United States has gotten into unwanted conflicts, especially in the 20^th Century, when adversaries miscalculated our nation’s willingness to sacrifice to defend crucial interests.  Weak-kneed, pusillanimous, or just unwise national executives invited war by giving enemies many reasons to doubt our will and resolve:  unprepared armed forces, verbal warnings enforced with bluster, shirked fulfillment of pledges to help endangered friends.  The Japanese thought that isolationist and poorly armed America would seek a negotiated settlement after Pearl Harbor, the North Koreans were confident that we were too war-weary to defend the South, Saddam Hussein—twice—believed that we would not want to fight a war in the sands of Iraq.  Our responses to frequent goading did little to dissuade them.  Logically following our miscues they each went too far at last.  They all could have been stopped by a determined show of strength early while war remained avoidable, when we could have corrected their calculations at lesser cost to us and to them.

The communist leaders of China are by nature cautious.  You survive the palace intrigues of the Forbidden City by avoiding mistakes, not by making them.  But the Chinese leaders also have big plans, increasingly marked on a global map.  The leaders of the regime in power are the heirs of their founder, Mao, who liked to refer to the United States as a paper tiger.  For a time Nixon and Reagan disabused them of that notion, but they seem to be reconvincing themselves of Mao’s insights.  Where is the recent evidence to the contrary?

At first, Chinese forays were camouflaged by equipping and supporting the adventures of the proxy North Koreans.  Lately, the Chinese military itself has repeatedly hacked into U.S. civilian and military computer systems, with efforts ranging from nuisances to theft of military and technology secrets. The rapidly expanding Chinese navy is now building aircraft carriers, though it has no overseas enemies.  In a related effort, the Chinese are dredging up artificial islands in the South China Sea, a thousand miles from their shores, closer to the Philippines, Malaysia, and Vietnam than to the southern coast of China.  With naval stations and air strips on the islands, the Chinese are asserting a dramatic expansion of territorial waters measured from these militarized sandbars.  Connecting the dots from new island to new island (there are some half dozen or more of these land-creation projects underway), the Chinese navy alleges control of sea lanes and airspace, demanding that planes or ships not pass their theoretical net without Beijing’s permission.  The U.S. has made protests, recently backed up by a reconnaissance plane flying across what has been international waters and free airspace since before and after World War II.  At least for the moment the Chinese only fired words, eight times (according to a CNN story) warning the U.S. plane to stay away.  “This is the Chinese navy.  You go.”

This is a minor disturbance in a major geopolitical struggle.  Busy trade lanes cross the South China Sea.  In the context of Beijing’s acquisition of an offensive, MIRVed nuclear missile arsenal now approaching the size of Russian and U.S. nuclear forces (the U.S. being the only one developing plans to reduce its stockpile), the risks are becoming very high.

China has big domestic problems.  The economy is slowing, if not already in recession.  That will make it even harder for Beijing to keep quiescent a population only half of which has experienced extraction from grinding communist poverty.  An aging population will be difficult for the declining workforce to support in coming years.  And then there is the legacy of China’s one-child policy, more than 100 million males with no possibility of marriage and family.  What to do with those restless men?

Throughout history, China’s biggest dangers have usually been from Chinese, vulnerabilities from the outside attracted only when there was weakness caused by internal struggles.  Might the heirs of Mao seek to distract internal discontent with international adventurism?  A lesson from history is that the more autocratic the regime, the more likely it is to resort to this gambit.

We need a foreign policy that convinces the Chinese leaders how dangerous and unrewarding such moves would be.  That becomes harder to do the more we allow the Chinese to fool themselves that it might be otherwise.   That was a pattern of disaster for Tojo, Hitler, and others—and for us.

Of the Constitution and the Ever-Fresh Idea of Freedom

It seems that the days of trial and testing of our Constitution are not over.  Perhaps they never will be until the Author of the Constitution returns to the earth.  The Obamacare statutes unfold as the time approaches when people will be required to buy government-designed health insurance whether they want it or not.  The Environmental Protection Agency continues to impose on industry rules that Congress refused to pass.  The new financial consumer czar, with no meaningful oversight or accountability, exercises his will to design financial services for all Americans, even though he was put in office by a recess appointment made when the Senate was not in recess (skipping the uncomfortable Senate confirmation process).  There is more, but these examples represent the challenge.

Under the inspiration of God, the Founders established the Constitution to protect, preserve, and indeed promote the rights of all to life, liberty, and the pursuit of happiness.  That is the legitimate purpose of government, as the Founders inscribed in the Declaration of Independence, considering it self-evident,

That to secure these Rights, Governments are instituted among Men, deriving their just powers from the Consent of the Governed,

that whenever any Form of Government becomes destructive of these Ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its Foundation on such Principles, and organizing its Powers in such Form, as to them shall seem most likely to effect their Safety and Happiness.

In this effort the Founders twice abolished and instituted new basic forms of government.  The first was to throw off their allegiance to the Crown of England and control by his Parliament.  The second was to exchange the loose and ineffective Articles of Confederation with the new Constitution.

The Constitution was and remains a revolutionary document.  With footings based solidly on the indestructible rights and worth of the individual members of the society, it was unlike anything anywhere on the earth at the time.  At the core of the Constitution, and affecting all of its members, are the overriding and animating principles of life, liberty, and the pursuit of happiness, constantly at war with and destructive of all forms of tyranny. 

Among the first fruits of the Constitution was the Bill of Rights, the first 10 amendments, all so wholly consistent with the Constitution that the only objection raised to them was that they were redundant to the basic text that they amended.  Maybe they were redundant, but time has proven the wisdom of spelling out these powerful and important rights of the individual.

They were soon challenged.  Once in government it is natural and expected that government leaders would become progressively intolerant of criticism and opposition.  Government “of the people” does not make government automatically friendly to the people and tolerant of their freedoms.  We see it today, every day.  In 1798 the Federalist Party leaders in government passed the Alien and Sedition Acts, inimical to the Constitution, in significant part to silence opposition voices from the new Democratic-Republican Party.  The Acts sought to declare criticism of public figures to be libelous, punishable by fines and imprisonment.  Under these unconstitutional statutes newspapermen were arrested and their newspapers stopped, among other outrages to liberty.    

Fortunately, the Constitution was not impotent to throw off this new effort to impose an old tyranny on the nation.  Thomas Jefferson led a popular revolt through the elections of 1800 to expel the Federalists from office, repeal these statutes, and launch a renewed spirit of governing focused on individual rights and liberties.

In succeeding years the inconsistency of human slavery with the principles of the Constitution grew increasingly acute, until in 1861 the leadership of most of the slave-holding states concluded that it would be impossible to maintain their “peculiar institution” if they remained governed by the Constitution.  They understood that they could maintain slavery or observe the Constitution, but not both.  Eventually, the spirit of freedom at the core of the Constitution would work to end slavery, by operation of the very constitutional system. 

Since the Union created by the Constitution would not allow the states to leave peacefully and take their slaves with them, the southern leadership invoked rebellion as the only way out.  Theirs, however, was a rebellion to invoke and support tyranny, and it failed.  The revolutionary American Constitution and the people on whom it rested won yet one more victory for freedom.  As Abraham Lincoln perceived, the war of the rebellion was a test of “whether that nation, or any nation so conceived and so dedicated, can long endure.”

That nation, conceived in constitutional liberty, did endure that test, but the tests never end.  There are ever those who believe that they have the privilege, the calling, the right, or even the duty, to impose their will and judgment on others in ways destructive of life, liberty, and the pursuit of happiness. 

Not every assault on freedom and the Constitution fails. There have been too many that have succeeded.  So far the Constitution and the people who uphold it have withstood these assaults, even if at great cost.  The Supreme Court’s outrageous Dred Scott decision and the foolish Kansas-Nebraska Act were last gasp efforts to perpetuate the tyranny of slavery, but in the end they sparked the birth of the Republican Party and fed the Civil War that removed slavery and extended the reach of the principles of the Declaration and Constitution.

Today as a nation we face the sputtering final efforts of the Franklin Roosevelt legacy to enthrone government as the source of solution to people’s problems—and to buy popularity with government-laundered largesse confiscated from a dwindling pool of taxpayers.  That is a hoary practice of kings and Caesars that buys time but no lasting success.  The money always runs out before the promises do. 

The question that remains for us and for our Constitution is how well will we as a people, and our Constitution as a system of government, weather the demise of the New Deal system.  Acute test of freedom approaches again, if not already here, when we will determine whether our “nation so conceived and so dedicated, can long endure.”  I have confidence that it will, and—in the words of Lincoln—that the American people will decide “that this nation, under God, shall have a new birth of freedom,” as it has in all of its greatest tests so far.

Of the American Revolution and the Counterrevolution

One of the comments that I have heard following this year’s national election is that it did not settle much.  Barack Obama was president before the election and he will now be president for another term.  The Democrats held a small majority in the Senate before the election, and they will have a small majority in the Senate afterwards.  The Republicans controlled the House of Representatives before the election, and they will control the House in the next Congress.

I acknowledge the point and the extent of its validity, but I am careful not to overvalue it.  This time was different, if not yet different enough. 

The reigning governing system is nearing its end.  Barack Obama and his companions embody in the 21^st Century the old wizening counterrevolution in America begun by Franklin Delano Roosevelt, now well into its senility.  The FDR counterrevolution has been the prevailing doctrine of governing in the United States since the (aptly named) Depression.  Even Republican presidents—with the exception to some degree of President Reagan—have governed within the terms and context of the FDR counter-American revolution, rarely taking issue with its basic theme of government as the ultimate source of solution to people's problems.

I like the analogy that Senator Phil Gramm used to offer in illustration of how Republicans get co-opted into the FDR approach.  Imagine, he would say, a great big piece of paper blown by the wind getting caught on the top of the dome of the U.S. Capitol, blocking out all sunlight below.  The typical solution from the Democrats would be to create an artificial sun inside of the dome to illuminate the room.  The typical Republican response has been to argue for a smaller artificial sun, one involving the private sector.  The real solution—seldom mentioned—is to remove the big piece of paper.

Today, the great piece of paper to be removed is the fundamental contradiction that lies at the heart of the FDR welfare state:  robbing Peter to pay for Paul’s votes.  For over 70 years Democrats and Republicans alike have been bidding against each other to gain Paul’s support, until the day is at last in sight when there will not be enough left to take from Peter to honor the promises to Paul.  The looming national fiscal crisis in over-promised Social Security, Medicare, and a host of government give-away programs is at last acknowledged by the public, even if its full import remains for most hard to grasp as real.  Still, more and more people suspect that all this has about played out.

Against much public vilification by the media propagandists, some are challenging the FDR counterrevolution, getting outside of the context of the tired debate that for decades characterized the contest between Democrats and Republicans.  They are explaining that government cannot create wealth, and redistributing wealth destroys it.  Defeating Barack Obama and his FDR policies this year would have been an important milestone, because more than any other recent president Obama fully embodied the FDR approach to governing, and more than any other presidency its abuses have been apparent.  At the same time, more than any time in the past 70 years political leaders and would-be political leaders have been challenging the FDR counterrevolution.  Mitt Romney chose one of those leaders, Paul Ryan, to be the Republican candidate for vice president.

In the event, we fell short, but we made progress.  As I said, this time was different.  To begin with, President Obama’s margin of victory was materially smaller than four years ago, 50%-48% of the vote in 2012, while in 2008 it was 53%-46%.  Similar narrowed margins were the pattern in the various states.  Moreover, notably few other Democrats were able to sail to electoral victory in Obama’s wake.  In 2008 along with President Obama 7 more Democrat Senators were elected and 20 more members of the House of Representatives.  Four years later it looks like Democrats will pick up only 2 Senate seats and 4 seats in the House.  In all respects, a very narrow victory.  Mitt Romney came close to being elected president, a point that media propagandists have been busily trying to bury in their efforts to make it feel like Obama won in a landslide with a mandate to continue on with his policies of impoverishment.

What the election has not changed are those policies.  President Obama’s economic program is just as much a failure today as it was before the election.  The vote on November 6 did not make it any better.  Neither have the problems changed, except that they continue to grow.  With each day, the federal deficit and federal debt deepen and America’s ability to manage that debt declines.  Each day brings us nearer to the day when we as a nation will be unable to pay that debt.  Economic performance as a nation remains weak and wobbly, while Administration apologists preach that weak is the new normal for the United States of America.

Governing will prove even more difficult for President Obama.  At least now he can truthfully blame the previous administration, the Obama first term administration.  He spent those years avoiding the most significant problems, pushing them off until after November 6, 2012, while creating new ones with his healthcare, regulatory, energy, and environmental policies.  The problems are a gathering storm.  There is not enough money left to run the welfare state, and the willingness of investors—foreign and domestic—to lend Uncle Sam money to pay for it is four years closer to an end. 

Foreign policy does not look very good either.  National weakness, economic or military, is provocative.  It encourages those who mean us harm.  Iran is heading toward crisis, without a comprehensible U.S. policy to deal with an unstable violent regime approaching the production stage of a nuclear arsenal.  The unanswered, mishandled, and covered up failures against the terrorist attack on the U.S. mission in Benghazi, Libya, will invite others.  With dread we await the realization of what President Obama meant when he told the Russians that he would have more “flexibility” after the election.

I acknowledge and applaud those who worked so hard to bring an end to a misrule that now will continue to inflict hardship on the nation and the people.  We came close to turning back the FDR counter-American Revolution in its naked manifestation.  We all need to keep on working for something a lot better, to restore the American revolution of 1776.  We are gaining ground.

Of Government Collusion and Market Discipline

There is a lot of noise and confusion about what caused the recent financial panic. The Obama Administration believes that the basic problem is that markets do not work right, people are too dumb to choose for themselves, and that regulatory agencies were not able or were unwilling to keep up with bank shenanigans. Their solution: more of the same, that is, create a variety of new government agencies and bureaus that have the authority to dictate and control any part of or player in the financial system, including control of financial customers large and small (look in the mirror for the definition of financial customer). This neglects the fact that government agencies were the most blameworthy in the recent financial panic. In fact, it is impossible to have a long, sustained economic recession or depression without government policies causing it. (I will save for another day how the policies of the Federal Reserve and the Franklin Roosevelt administration made sure that an economic downturn became a depression lasting for a decade.)

Let me address the first of these points in the Obama administration’s justification for taking over the financial system. First of all let us consider the markets. It is true that the markets did not perform right. That was because government rules, structures, and programs did not allow the markets to perform right. The government guarantees bank deposits, so depositors do not care very much how safe or sound a bank is. Government-sponsored enterprises (GSEs), like Fannie Mae and Freddie Mac, bundle up mortgages into securities that investors assume have little or no risk. The Securities and Exchange Commission (SEC) approves and controls the small number of credit rating agencies, and investors believe that these agencies are right when they give to a particular company or investment their highest credit rating (such as AAA), a rating that is thought to present little or no risk. The SEC has protected these agencies from competition and from market discipline for their errors while providing little in the way of regulatory discipline.

With those and other government protections in place the appearance of risk just about disappeared from the mortgage markets. Different investors have different appetites for risk. It was not the people hungry for high risk returns that fueled the housing bubble. Many of those with the weakest appetite for risk, seeking the safest investments, were drawn to the mortgage markets. In this government-manufactured atmosphere of little or no risk, many mortgage firms, increasingly non-bank mortgage firms, made it more and more possible for people to buy houses that they could not afford. Once the mortgage firm made the mortgage, regardless of the ability of the borrower to repay, the firm sold the mortgage to the GSEs, who sold it on to investors who poured trillions of dollars into what they thought was a safe haven. Then the mortgage firm went on to make more mortgages. Investors were shielded from asking whether the mortgages were any good, that is, whether the person buying the house could actually afford it.

That mispricing of the risk pulled more and more money into mortgages and real estate, driving prices up and up, pulling in more and more investors as the prices rose, until it was impossible to put one more Jack on the house of cards without it tumbling down. People panicked when “safe” investments turned out to be risky. Then the government started panicking, bailing out some firms and not others, changing the rules almost weekly, demanding hundreds of billions of dollars from taxpayers in order to pick financial winners and losers. Investors, not knowing where the government would turn next, panicked some more.

It was government interference in the market that failed, not the markets. Without all of the government camouflage, investors would have insisted on knowing that the mortgage borrowers could afford their houses before funding loans to buy them. Ask yourself this: would we have had the whole housing blow up if people who could not afford to buy houses were not given mortgages? Yet the Obama Administration, even today, is tripping over itself to find new ways to guarantee new mortgages, in many cases especially for people who cannot afford their houses. Where have all the subprime mortgages gone? They have gone to the Federal Housing Administration (FHA), where they have a government guaranty. (Watch what happens to the FHA house of cards in the coming months.) When will they every learn? Oh, when will they ever learn?

Giving more power to the kind of government agencies that helped create these problems hardly seems like the sensible answer. That is what the Obama Administration proposes, though. Instead of controlling the markets with more government interference and masking of risk, more bailouts for firms that should be allowed to fail, more power for some new government bureau to pick winners and losers and to tell people which financial products they can and cannot have, we should be exposing financial players more to market discipline. We should make it harder to hide risk and easier for investors to recognize the risks and allow the markets to charge higher prices for higher risks and lower prices for lower risks.

Market discipline has always been the quickest and surest regulator. It rewards the efficient provider of what the buyers in the market want, and it punishes the incompetent. Very importantly today, the market is stingy about bailouts.

Of Wet Wood and Government Jobs Programs

At best, it is like putting wet wood on a fire: the wet wood may eventually burn, but it takes as much or more energy from the fire to dry the wood out enough for it to be flammable. In the meantime, it creates a lot of smoke and hissing and fizzing, and you run a real risk of subduing the fire if not stifling it entirely. This is what government job creating programs are like.

Outside of very narrow exceptions government itself does not create jobs. It shifts jobs. That is because outside of its basic purpose of enacting and maintaining laws and providing for the common defense, government does not provide a new good or service that the private sector cannot do better. The chief reason why the private sector does better is that private activity is governed by market mechanisms. People can say no to your good or service if they do not want or like it and go to the business that does a better job. So people who stay in business are under constant pressure to do better in their business, or they eventually see their business decline or even disappear. Government is not subject to such a demanding disciplinarian. If you do not like the process for getting a driver’s license, where else are you going to go?

At least someone wants the driver’s license, and the program of screening out unqualified drivers—however imperfect it may be—is a service that people want. Very often, government job creation programs put people to work doing things that we would be better off not having done.

One of my favorite examples is the Roosevelt Administration’s Depression era jobs program, paying people to plant kudzu all over the South. They did that for years, until they realized that kudzu is an uncontrollable pest plant that grows and spreads and smothers every other plant and tree around it and is very hard to get rid of. It is sort of a metaphor for government jobs programs.

An additional problem with government jobs programs is that the government has to pay for them. Where does the government get its money? It gets it from the people who already have jobs. Those people will no longer have that money to spend at the store or for remodeling the house or going on a vacation or gaining an education or the million other things that people do with their money to put other people to work. You might call all of that private sector spending the people’s jobs programs. To get $50,000 to put people to work on a government jobs program you have to take at least $50,000 away from the people’s jobs programs. In practice, you usually have to take several times more than $50,000 away from the people’s jobs programs, because the government programs are run so inefficiently.

So when the government announces that its new jobs program is “creating” 100,000 new jobs, it does not report the 200,000 jobs that were displaced to pay for those new jobs. When you see those government jobs announcements, remember the wet wood on the fire and ask how much energy is being lost to make that new log burn?

Of Recovery and Renewed Recession

The economic developments up to this early stage of the new year have reaffirmed the resilience of the American banking industry. After more than a year of recession, bank earnings are rebounding. Non-bank financial firms have dramatically declined or disappeared. Government bailout programs have come and gone in rapid succession doing little better than stimulating panic and sowing confusion among customers and investors—and wasting taxpayer funds. The vast majority of banks have survived all of that.

The early recovery of the banking industry this Spring was publicly interrupted by a set of phony stress tests, subjecting banks to evaluation under hypothetical future conditions that not even the Treasury officials who imposed the tests believed to be realistic. That is, they could not be expected to believe in the hypothetical conditions of the tests, since the conditions assumed that the Obama economic program not only would not work but would actually make things worse. For example, the hypothetical stress tests asked banks how they would do if loan losses became worse than at the deepest point in the Great Depression. We all must believe that the Treasury has better hopes than that for its own economic programs.

Even against those unrealistic measures the banking industry came off well. Despite the fear mongering of short sellers, the obtuseness of accounting standard setters, and the vivisection experiments of policymakers, the bank panic is over and the industry is poised for economic recovery.

The sky ahead, however, is not blue and cloudless. There are three major dangers on the horizon that could play havoc with the economy, the banking industry not excepted. The good news is, that all three are subject to government action. The bad news is that government leaders are showing little sign of even recognizing the dangers, let alone taking action to avoid them.

The three dangers are ballooning inflation, rising interest rates, and increased taxes. The three are related. Any one on its own could stifle recovery.

The Federal Reserve has pumped more than a trillion dollars into the economy, increasing the money supply dramatically. With fewer goods and services to buy with all that extra money we would be in a major inflation now if most people and businesses were not instead hoarding the money. Once coffers and savings accounts get full and people and businesses start spending again inflation can be avoided only if the Federal Reserve can mop up all that extra money and do so precisely as it comes gushing out into the economy. Success with such a delicate maneuver may not be impossible, but it would be astonishing.

The chief baggage from Federal Reserve efforts to reduce excess money supply is higher interest rates. High interest rates are both a tool for encouraging people to save their money rather than spend it, as well as a reflection that the program is succeeding in pulling money out of the system. But high interest rates also depress the economy, making business investment (think new machines and buildings) and consumer purchases (including houses and cars) more expensive.

Complicating this nearly impossible task for the Federal Reserve is the problem that the trillion dollar overspending by the Federal Government—well on its way to more than two trillion dollars—will be demanding hundreds of billions of dollars in borrowing from the public just when the Federal Reserve may be wanting to reduce the money supply. Foreigners are showing reluctance to lend to the Treasury, so domestic savers will have to choose more and more among spending their money, lending it to business, or lending it to the Federal Government.

Treasury debt auctions have already been soft. Interest rates are creeping up to keep Treasury debt attractive. The Federal Reserve may soon be stepping in to buy Treasury debt to keep the auctions from collapsing. If the Federal Reserve did so, it would be pushing more dollars into the economy just when it needed to pull them back to hold off inflation. The Federal Reserve would be in a no-win situation, and so would the rest of the country.

We could overcome both inflationary and interest rate risks to the economy by dramatically reducing taxes, particularly taxes on capital gains—making investment and new business activity more attractive by letting people keep more of what they earn. Instead, the Obama administration is proposing a host of major new taxes. Some are hidden as part of new environmental and health care programs. Others are more overt, such as plans to raise taxes on businesses and the wealthy, the very sources of job creation and investment.

The Franklin Roosevelt administration well earned the condemnation of history by taking a deep economic recession and making it last for a decade—encouraging enemies of freedom all around the world. President Obama would do well to avoid that example.

Of Elections and Consequences

Elections have consequences, real, life-affecting consequences. One of the more unfortunate aspects of the mass media attitude toward elections is their approach to them as if they were some kind of game. The running score that they keep of the latest polls, their up-to-date electoral college count, the fixation on who “won” the latest debate, all demonstrate a sentiment that the election is some kind of sporting event, where we all root for one side or another, and when the game is won and the season is over we all go back to business as usual. That is not only wrong, it is dangerous.

After the election in November is over, it will not be back to business as usual. America’s standard of living, our economic welfare, our health, safety, and national security will all be affected. Electing Jimmy Carter meant economic and social malaise, it meant the loss of allies in several parts of the world, it meant civil war in Central America and the rise to power of the Ayatollahs in Iran. It meant a toxic economic brew of high unemployment, high inflation, and high interest rates. It meant increased crime in our cities. It meant an underpaid and undersupplied military, with Navy ships coming into harbor trading ammunition with those leaving port because there was not enough ammunition to go around.

Barack Obama is not quite as good or experienced as Jimmy Carter. His leading economic proposal is a whopping tax in the face of an economic downturn. Presidents Hoover and Roosevelt tried that in the 1930s, which turned a recession into the Great Depression. And Obama lies about his tax increase. He lies that it would not affect 95% of the population. The severe recession that it would cause will affect everyone, even the non-tax payers who are promised a tax cut by Obama.

Obama’s plan for a camouflaged government take over of health care will mean that health services will be provided with the same efficiency of the U.S. Postal Service. That means that sick people will have reduced access to medical services. It means that incentives to develop new medicines and new treatments will melt away. If government runs health care, as Obama wants, that means that political muscle will determine health care priorities rather than patient demand setting the priorities.

Obama’s foreign policies are right out of the Jimmy Carter briefing book. That means betrayal of our friends, appeasement of our enemies, and adventurous use of the military in places and causes that mean little to the national security of the United States. It means preparation always for some other war but inadequate commitment to fight the war we are in (he's eager to send more troops into Afghanistan, but unwilling to win the war in Iraq). It means further design of the next weapons system, but never deployment of it, a return to starving our military of what it needs to do the job with least loss of life and maximum success. It means that the most important issues for the Obama military will be social engineering of the armed forces rather than a focus on their increased effectiveness and efficiency.

Voting in a republic like the United States is a serious matter. It is not a game. It means far more than bragging rights over whether our team won the World Series. It means that we are responsible for our electoral choices, with a full understanding that the people we elect will mean a difference in our lives and the lives of our families. It is a truism that people get the government they deserve. I firmly hope and believe that the American people deserve better than Obama. I know that my children do.

Of Con Artists and Presidential Candidates

There is something disturbing about Barack Obama. I have been trying to put words to it. It is not merely that I disagree with him on his political prescriptions. There are many people, across the political spectrum, with whom I disagree on political policies and programs, even those for whom I used to work. With only a relative handful of them, however, have I sensed the same disquiet that I feel with regard to this year’s Democrat nominee for President.

After the recent presidential debate between Obama and Republican candidate John McCain I found the right words. Obama is a con artist. Fundamentally, he is acting in a deceptive way to get something from you. He wants you to believe that he has your best interests at heart so that he can get from you your precious vote. He pretends to be what he is not, because if you understood what he is all about, you would not vote for him.

Take, for example, his tax policies. Barack Obama promises a tax cut for 95% of the population. He is offering you a financial incentive for your vote. He is offering to buy your vote. He does not tell you that many of those people for whom he promises a tax cut do not pay any federal income taxes. A tax cut to people who do not pay taxes is just a government hand out. And he usually tries to hide the fact that this hand out to people who do not pay taxes is coming from you. We should not be so willing to believe that you can tax just 5% of the people in order to give a tax break to the other 95%—especially if many of the 95% do not pay any income taxes. You cannot get there, even if you try to take all of the money of the “rich,” and once that is gone what do you do for the next act?

If you own your own business, chances are very high that your business is taxed like an individual and that the revenues for that business will be classified as the “rich” that Obama says he thinks need to pay more taxes. Or perhaps you have some investments in the stock market—half of all Americans do. When those rich companies pay the new Obama taxes, that money comes out of the hides of the companies’ shareholders. Moreover, raising taxes into the teeth of an economic decline is a certain recipe for accelerating the decline. That is what Hoover did, and what Franklin Roosevelt did in order to make an economic recession last for a whole decade (eventually history should recognize that FDR was the worst president of the 20th Century—even if he could talk a good game).

A second example follows directly from the tax example. After he is finished talking about tax cuts (on people who do not pay taxes), Obama starts his litany of very expensive new government spending programs. The price tag for these comes to some $800 billion, give or take a hundred billion dollars. Each program is carefully designed to buy votes. Not only do his tax cuts not work as real tax cuts—taken by themselves—they cannot possibly work in the face of $800 billion of new federal spending.

The third example is really the most prominent. Barack Obama says that this is all “change.” He says you should vote for change, because he thinks that you want change and that his promise for change will get you to give him your vote. If you believe that major tax increases and massive new government spending programs are change, maybe he will succeed in getting many votes. But maybe people will say that they have heard that formula before, and whenever it is applied the nation always becomes poorer.

Barack Obama looks good, talks smooth, promises everything. If he loses this race for President, maybe he could try his hand selling used cars.