Of Unbanked and “Underbanked”

Speaking of banks, as I did on this page a short time ago, there are those who are concerned that too many people in the United States are “unbanked” or “underbanked.”  By the former they seem to mean those who do not use any banking services, particularly who do not have any bank accounts.  By the latter, they mean those who obtain some banking services from businesses that are not banks.  The very existence of the terms, and the way that they are used by those who use them, implies that being “unbanked” or “underbanked” is a bad thing.

I will here disclose that I have worked for banks for nearly 10 years and for all I know may continue to do so for some time into the future.  Whatever bias or color to my views that this condition provides I will nevertheless try to comment from a fair and factual point of view.

My first point, therefore, is that I am not prepared to assert that absolutely everyone should have a bank account.  I can easily envision the value of a bank account for most if not all people, but I concede that they should be allowed to choose for themselves and that it would be terribly wrong to force people into banks.  I acknowledge that there are some alternative providers of financial services who seem to please their customers, and I do not deny that banks can benefit from good competition.  Banks have a long history of drawing upon the ideas and innovations of non-banks, just as non-banks have been eager to try their hand at successful new products and services that banks have pioneered.  Bank customers have benefited the most from that process, as the variety and value of financial products have expanded, and the United States has led the world in the discovery of new and useful financial services.

Having said that, the nation cannot do well without a strong, vibrant, and prosperous banking industry.  Our nation and people grow as we save financial resources and invest them in improvements for the future, whether new homes, new factories, or new ideas of how to do and make things better, faster, and cheaper.  That is a major part of what banks do and are all about. 

Moreover, there are a lot of things we do and a lot of places we go because we know that our ability to pay and get paid—to exchange things we value less for things that we value more (the reason we buy and sell things and use money to do it)—is secure, reliable, accurate, and relatively quick.  That is our payments system, and banks created it and are at the center of it.

Americans also like the idea of becoming wealthier and expect to do so.  If that seems a commonplace to you, recognize that it is not so in all parts of the world, where getting by from day to day is about the most to which people can aspire, for whom poverty is a way of life that they expect to bequeath to their children.  To the extent that this miserable condition is becoming less the case in much of the world, that more people are beginning to believe that they can build and improve their wellbeing for themselves and their posterity, this new-found hope for accumulating wealth is attributable to the dispersion of principles of freedom and prosperity that Americans take for granted but which are new to much of the world.  The global adoption of many American principles of prosperity has been a major contribution of the New World to the Old World and to all mankind.

Now get ready for the bold but true statement:  you cannot get there and stay there without banks and the services that banks provide.  Banks gather wealth, safeguard wealth, allow it to be used efficiently, and apply it to building the future.  That is why governments pay so much attention to banks, and also why it is so harmful when governments try to capture banks and channel their services to the personal gain of themselves and their cronies.  That is also why misguided bank regulations are harmful—even if in subtle but powerful ways—to the nation and its people.

Which brings us back to the agenda of the “unbanked” and the “underbanked.”  In the United States, chief causes for people remaining “unbanked” are regulations that make banking more difficult and services more expensive; cultural barriers for people who come from societies where personal banking is either unknown or where the experience has been one of banks used by local governments to harvest wealth from people to enrich the governing elites and their cronies (much of Latin America, for example); and people who for whatever reason just do not prefer to use banks.  The first cause regulators can solve but have largely been resistant to solving; the second can be overcome by time and experience and is showing signs of that; and the third cause is no more of a problem than people who prefer to rent rather than own their home, to eat eggs without grits, or who do not like the New York Yankees.  I do not have to understand the personal preference to acknowledge it.

The concept of “underbanked” (that government needs to help banks figure out how to serve people who may get some banking services outside of banks) I fear may be a political device to harness American banks to serve the cronies of the “underbanked” advocates.  We have already seen this game with the Community Reinvestment Act (CRA) regulations, adopted ostensibly to ensure that banks lend to their local communities (as if bankers, unlike other businessmen, need government regulation to notice business opportunities right under their own nose).  In practice, CRA has been used to coerce banks into providing loans and even grants to and through poverty advocacy agencies that tend to prosper more than the people whom they claim to be helping.  The folks who fret about the “underbanked” have marvelous formulas and plans for other people’s money to solve problems about which the people to be helped seem little concerned.  I have never heard of any truly “underbanked” people themselves calling for the firm hand of government to get them into the banking system; if they want banking services, they just go and get them. 

I have the haunting suspicion that the “underbanked” advocates would if they could use banks the same way found in the abandoned societies of the “unbanked,” where banking services came through the hands of people who knew better than others and always made sure to get their cut for their benevolence.  That is not really banking, and that is symptomatic of why people flee those lands.  The wealth creation of such captive banks seems to be for someone else.  If it happens in America, where will the people go?

Of Struggling Economies and Finishing the Job

The Obama Administration is having trouble keeping the economy down.  In spite of all the battering that the economy has taken from Obama policies, it keeps showing signs of life—weak, hesitant, surely not robust, but they are there, like the weak patient who wants to get out of bed and shuffle downstairs to sip some chicken soup.  Instead, the Administration, like some 18^th century doctor, wants to try some more blood letting to get the bad humours out of the system. 

People want to do things.  Businessmen have new ideas that they want to have a go at.  Men and women like to build, grow, and develop their lives.  No one needs to tell them to do it.  You just need to get out of the way.  The most productive, the most energetic, the most inspired, the hardest workers will do it best.  We can still remember when the economy was like that, when the news was full of new products, new ventures, new growth, and new jobs.  That is the light America shines to the world and what despots throughout the world hate about the American experiment.

President Obama came to power with a different vision for America, what he thought was a mandate to spread the wealth around, to take from those who succeeded the most in economic activity and growth and find ways in which he and his administration could give it to those who were less productive—or not even productive at all.  In other words, his plan was to tax success and reward failure.  So far, it has worked as designed, even if he has not yet finished with his efforts.  We are getting less of the success and more of the failure.

The trillion dollar “stimulus” plan was a good example.  President Obama and friends hit the economy with a special trillion dollars of new Washington spending that went to support cronies and fund new projects that soon added to the landscape littered with failed businesses.  The “stimulus” plan added to the deficit and became a seemingly permanent part of federal largesse, but it failed to add to the economy.  In fact, it made legitimate businesses compete for funds and customers against those who enjoyed government subsidies.  Hard to do.

The housing market makes up about a quarter of the economy, when you include people who build houses, furnish houses, maintain houses, and so forth.  That market was in full decline as the housing bubble burst in 2007 and kept deflating.  But eventually all the extra air comes out of economic bubbles (if you do not keep pumping new air into them), the crashing market reaches bottom and starts to recover.  The Obama Administration has made sure that it stayed on the bottom a long time.  Normal economic crashes and recoveries look like a “V” on a graph charting their progress.  The housing market under the Obama Administration looks like an “L”.  Note the tiny turn up at the end of the letter.  That is what the Administration’s friends would try to convince us is the recovery.  And they would like to divert our attention from the several thousand pages of new mortgage regulations that will go into effect in the next several months to whack the housing markets again.

Sure, mortgage rates are incredibly low, but that is not a healthy sign.  Have you tried getting a mortgage lately?  The paperwork, already a mountain, has become overwhelming.  And do you think that those rates would be so low if there were a real recovery in demand for houses and mortgages?  There is more (or less):  many people who qualify for mortgages today will have trouble qualifying in the future under the new rules.  The Obama Administration’s new consumer Bureau has been putting off those rules until after the election, but they are promising to issue them by the end of the month.

The summers of 2009, 2010, 2011, and even 2012 were each supposed to be the “Summer of Recovery” with the “green shoots” of new economic activity showing life each spring.  Yet each year those summers saw instead new economic setbacks as the green shoots wilted.  Sometimes the damage came from threats of new tax policies that would raise rates but give “tax breaks” to people who spent their income in ways approved by the Obama Administration and the tax code.

Businesses were threatened with new carbon taxes and other innovative and contorted ways to penalize any use of carbon dioxide, part of the air that we as humans produce with every breath.  Even a Congress with heavy majorities of legislators from President Obama’s own party choked on that idea.  Not to be deterred, the Obama Administration just imposed restrictions by fiat through the Environmental Protection Agency—all part of the war on carbon, which includes the energy industry as its victims.

The business climate remains in turmoil, as waves of new regulation and Obama campaign promises to bail out new favorites in the economy continue changing the rules and make business planning impossible.  Who would take a risk at trying something new when Obamacare and other employee regulations make it hard to know what the expense will be for new hires?  American businesses are sitting on somewhere between one and two trillion dollars in funds, waiting to know when it would be safe to invest them.  Employers are trying to put some of that cash to work, but they are being very cautious in doing so, not what the words “free enterprise” bring to mind.

The Obama Administration and its apologists call the recent unemployment report “good.”  The unemployment rate went up, above the level when President Obama came to office; 5 million people are long-term unemployed, up by 200,000 from the month before; and the economy has 4.4 million fewer jobs than at the peak of its last growing period before Obama took office.  The excitement apparently comes from the net increase of 171,000 jobs in the past month, above the experts’ predictions of 125,000.  Watchers have learned to lower their expectations for this administration, so that they greet with cheers any signs of life above their reduced standards.  Maybe for President Obama that continued anemic performance is good, but America can do better.  America has done better, much better.  We cannot afford to lower our vision. 

Our future and the future of our children and grandchildren must not be crippled by looking at 2% economic growth as being “good” or even acceptable.  If we want a better future for our children and grandchildren, in fact if people my age want a secure retirement, we need to get back to an America where 4% annual growth or better is the norm.  The social welfare state is expensive, not the least of which being the cost it exacts from the future to pay for the promises of today.

Fortunately, the economy still refuses to die, in spite of all the beating that it has received at the hands of the Obama Administration, but the economy is not well.  Let’s not give the Obama team another four years to try to finish it off.

Of Business Losses and Government Help

In recent days JPMorgan Chase bank announced that it suffered $2 billion in trading losses, and Washington is all a-twitter.  You would think that a government that runs deficits of one and a half trillion dollars would hardly notice any event of $2 billion, but the chattering classes who think that they should have some role in running everything are all chattering about it and how it clearly demonstrates the need for more regulation, i.e. more need for them to be involved in running private businesses.

Mind you, JPMC’s $2 billion loss is a lot of money to you and me, but this does not particularly affect you and me.  JPMC suffered the loss, and given the size of the bank and its earnings (it usually makes somewhere in excess of $4 billion each quarter) it will little affect its bottom line.  JPMC is not asking anyone else to cover its losses, other than its own shareholders, and they will not feel it much if the bank continues to be as well run as it has been.

Ah, but perhaps you are thinking that JPMC got some of that TARP money so involved in the financial panic.  That is true, JPMC was one of the banks whose arms were twisted hard by Treasury Secretary Paulson to take a forced government investment.  Those TARP investments spooked regular, private sector investors, who immediately ran for the sidelines, and the financial crisis was on, propelled (as most are) by bad government efforts to “fix” things.  JPMC did not want the money or need the money and in a few months paid it all back—with substantial interest—as quickly as Congress and the regulators would allow them to.  It reminds me of the elderly gentlemen who finally yielded to family cajoling to take a ride in a stunt plane.  Afterward he thanked the pilot for the two rides, his first and his last.  TARP was such a bad deal for those who received the investments (except for the couple of financial firms that might really have wanted it), that I do not think that any would want a second ride, perhaps not even again at gunpoint.

The recent loss by JPMC, in any event, was one well covered by the bank’s earnings in other of its many lines of business.  Curiously, I do not hear the chattering classes get exercised when each quarter Fannie Mae or Freddie Mac announces several more billions of dollars of losses, losses that they do ask for the Treasury Department to make whole.  Maybe that is because the regulators already run Fannie and Freddie.  Actually, there was a little bit of noise in the past few days when Fannie Mae announced that it had actually turned a profit for the last quarter, the first time in years.

One thing that disturbs me in all of the Washington humbuzzah over JPMC’s trading loss is the implicit notion that there is something wrong about a business losing money on an investment, something wrong enough to call forth a government role.  It seems to me that losses are just as much a sign of a normal market as gains are, that healthy markets have a good share of both.  Nobody seemed to lose money during the housing bubble, no matter what they did, but that was hardly a sign of a healthy market place.

What markets do when they are allowed to is reward good business decisions and punish bad ones, with gains and losses providing some of the most effective means of helping businessmen and their investors understand truly which is which.  JPMC made some bad business decisions and lost money, and the counterparties to those trades made good ones and earned money.  What role can government play in all of that other than to mess it up?

To get government involved in this process rests upon at least two preposterous notions.  First, it suggests that it is somehow the role of government to make sure that businesses do not lose money, otherwise, why all the fuss?  That, of course, was the Soviet business model that did so much to create modern Russia.  Second, and following on the first mistaken notion, it supposes that government officials will know better how to avoid business losses.  Anyone really believe that?  Share with me your examples, and I will pass them on to the Federal budget planners.

Of American Prosperity and Failing Villages

The Internet has been a boon for small businesses.  No longer is the market of the small business limited to the local community.  The Internet—together with an efficient system for making payments— allows customers to find the business and do business from near and far.
 
I am thinking at the moment of the used and rare book trade, although I have frequented other lines of small businesses via the Internet, including finding hard-to-get plumbing parts.  I love to walk into a book store, especially a used book store, and more often than not I leave with a new acquisition or two in hand.  I recall not very long ago buying a set of the debates surrounding the ratification of the Constitution.  As the bookseller rang up my purchase he asked whether I had found what I was looking for.  I told him no, that I had found what I was not looking for.  That is the way it usually is for me and a book store, the surprise and wonder of it, the discovery of things of which I had not before been aware or did not know were available to me.

It is a problem that there are not that many small bookshops around, maybe at most one in a town, two or three in a city.  I understand that it is a tough business.  You have to be willing to let musty old volumes sit around on your shelves for a long time, and those books are costing money while they sit there.

The Internet helps solve that.  You can search for a title or an author and find perhaps several sources of the book, long out of print, in bookshops scattered around the country, in towns and villages where you may have never been and would be unlikely to visit.

I have remarked how much I loved a couple of readers we used in grade school.  I could not even remember the names of the books or their authors, but I cherished them for the enthusiasm that they taught me for economic growth and development in America.  I learned a lot more than reading from those books.  I learned that America was a growing and developing country, always becoming more, richer, grander, harnessing the optimism of its people who came from many places but found in America a place where there was joy in the hard work of the present because you owned the results of what you did and what you did was build a more prosperous future that you passed on to your children and their children, who built on it in their turn.

Through the Internet I discovered that the books were written by Mabel O’Donnell, entitled Singing Wheels and Engine Whistles.  They told of the fictitious town of Hastings Mills built in the early nineteenth century on an Illinois prairie, a town that grew to become the prosperous city of Hastings by the early twentieth century.

The town and characters were a literary fiction, but they captured the real spirit and efforts of what happened all over America at that time.  Elsewhere I have quoted a passage from the first book, Singing Wheels, in which the founder of the town, then numbering but a few dozen cabins occupied by hardworking people with dreams, shared with his son the dream of how the town would grow, transforming the surrounding prairie into prosperous farms and the town into the prosperous center that would serve them all.

In the second book, Engine Whistles, the grandson of that founder is chatting with a train engineer about what made the town into a thriving city of 12,000 inhabitants, and growing.  The engineer proudly tells the boy, Tom, that it was the railroad that put Hastings on the map, and the vision of the men—including his grandfather— who brought the railroad to Hastings.  At first Tom agrees, but on second thought Tom argues that there was more to it than that.

“A railroad doesn’t make a town,” he said with a thoughtful look in his blue eyes.  “The railroad didn’t make Hastings.  My grandfather did.”

“Come, now, lad,” boomed engineer Bill, a note of amused disagreement in his voice.

“Yes, he did, too!” insisted Tom, hurrying on and allowing no time for argument.  “He came west in a covered wagon when there wasn’t even one cabin in the valley of the Big Turtle.  He knew it was a good place for a town, and so he built a lumber mill.  Then he cut down trees and sawed lumber so that other people could build homes, too.  He’s the one who made the town!” (Mabel O’Donnell, Engine Whistles, p.37, 38)

As a child growing up in south Florida, I saw that story playing out around me, as each year new homes, businesses, churches, highways and much else were built.  Economic development was the way of life.  When I was a teenager my family moved to western New York, to a much older village, much like Hastings, built in the early nineteenth century by men of vision, a village that thrived into a bustling business, industrial and even cultural center of some 10,000 people. 

But I arrived in the village’s twilight.  It still numbered 10,000 people and still retained something of its old spirit, with several manufacturing and business establishments and even a college.  By the time I and my schoolmates left—and it seemed that most of us did leave—the college had folded up, as had all but one of the manufacturing firms and many of the businesses.  I understand that the biggest employer now is the local hospital system, a close second being the ugly sum of the various state and local government agencies.  People were very happy to get a new state prison built nearby.  The heavy taxation and regulations emanating from Albany made business too expensive and leached away the village’s future.  Just recently, driven by tax burden, the remaining inhabitants of the village voted to give up their village charter.

A different story, that one, but one that has its echoes in too many places.  I wonder whether that was the America that the Dutch, Germans, Italians, Irish and others who built the village had in mind for their descendants. 

I am very glad that I found Mabel O’Donnell’s books through the Internet and was able to buy them and read them again.  You will have to get your own copies, though, as I am passing mine on down to my grandchildren.

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 Bubbles and Treasury Debt

Over the last decade our economy has been buffeted by what appears to be an accelerating series of economic bubbles. It is more than coincidence that this has occurred while government interference in the economy has increased.

That is not to deny that free markets are fully capable of producing economic bubbles, as market participants miscalculate investment risks and rewards and copy-cat each other as they do so. These market participants, however, if left to their own devices will also pay the price for their mistakes. Knowledge that they are at risk acts as a moderator and corrector, limiting the degree of risk investors are willing to take in the first place (and the willingness of lenders to provide money to support the bubble), and leaving the way clear for other investors to come in and pick up the debris (at a profit) when the bubble bursts.

When government is involved non-economic factors are inserted into the calculation of risk, and they affect who pays for the risk. With the existence of federally-supported mortgage guaranties, investors paid very little attention to whether mortgage lenders verified the ability of borrowers to make payments. A government guaranty always means that risks will be undervalued and that someone else (usually the taxpayer) gets to pick up the tab for the miscalculation.

It is neither exaggeration nor hyperbole to recognize that for more than a year the government has been handing out guaranties at a rate never before seen in the history of mankind. That is to say, that mountains of financial risk miscalculations have been made and are being made every day, and the unavoidable consequences are accumulating.

Perhaps the most dangerous miscalculations are those involving the debt issued by the U.S. Treasury. Investors are mistakenly acting as if there is no risk in placing their money in Treasury securities. These investors overlook the risk that buying Treasury securities--with an effective interest rate of 4 one-hundredths of one percent (the rate last week for 1-month Treasuries)--puts investors at risk if interest rates rise even a little bit and exposes the investors to even mild inflation.

Inflation is unlikely to remain mild. Along with all those government guaranties there has been a mountainous accumulation of new money provided by the federal government. All that money has to go somewhere. Right now it is awaiting some slight shock to send it avalanching down on the economy. Much of that money is for the moment being hoarded by investors and businesses afraid to spend it or put it to work while economic prospects remain unsettled and policymakers keep confusing the markets with one economic policy, regulation, restriction, or plan after another. No one wants to play the game while the referees are adjusting the rules.

So the government money makers keep pushing more money out to fund investment even while they toy with new disincentives to investment. People park the money instead in bank deposits (which are growing at record levels) and Treasuries (driving Treasury interest rates down to almost nothing).

That will not continue. At some point, the willingness of investors to hold dollars in accounts earning practically nothing will have played out. They will get their fill of Treasury securities. Foreign investors are already there, in recent weeks reducing their holdings of U.S. Treasury debt. Treasury interest rates will have to rise to attract investors, but as Treasury interest rates rise those who invested in Treasuries at very low interest rates will be on the losing side of their investment. They will start unloading their Treasury investments, further driving Treasury prices down and interest rates up, causing even more losses to those who invested in recent months in the Treasury bubble.

The spiral will be hard to stop, particularly as the Administration will be desperately trying to borrow more money, unheard of new amounts of money, to fund their planned multi-trillion dollar deficits. Interest rates will have to go up very high very fast in order to fund that voracious new appetite of the government for debt. The high interest rates will choke off many new sparks of economic recovery, leaving a lot of money around chasing after fewer goods and services for sale.

The Treasury bubble will likely end in a race that we have not seen for more than a quarter century. The race will be on for which will go higher, inflation or interest rates.

Of Panic and Complacency

First of all, do not panic. Second, do not take it easy.

This is in line with another piece of advice I came across a few years ago (attributed to Austrian statesman, Clemens von Metternich): “Let us not consider ourselves victorious until the day after the battle, nor defeated until four days later.” Well, it has been more than four days since the November elections, and I believe that it is safe to say that the Republicans were defeated.

There are other things, however, that are not safe to say. It is not safe to say that the Democrats won an overwhelming victory. In fact, their margin of victory was fairly narrow, less than 7% separating the Republican and Democrat candidates for President, a number that only looks large when compared with closer recent Presidential races. Senator Obama’s percentage of victory was a little less than George Bush’s (the father) over Michael Dukakis, 6.7% versus 7.8%. The Democrats also picked up significant gains in their numbers in the Senate and House of Representatives, but in both cases they fell short of the overwhelming victories for which they had hoped. The results of the election were neither overwhelming nor underwhelming—just whelming.

It is also not safe to say that President-elect Obama and the Democrats do not mean to do what they said they wanted to do during the election. They plan to raise taxes. These higher taxes will be felt by everyone, but they will fall most heavily on businessmen and entrepreneurs, exactly the people whose efforts we need to restore economic growth. So as Obama and his team work to spread the wealth around, there will be less of it to spread, and less and less as time goes by. There are many other like-minded plans of the change team arriving in January.

Elected with the embarrassingly undisguised support of the mass media, the new leadership will continue to rely upon the media, this time to hype the “mandate” from the voters and to try to cower the remaining Republicans in town into timidity. The early effect of this can be seen in the hushed conversations of “people in the know” trying to convince themselves that Obama is really more moderate than he appears, that he will try to “govern from the center.” Maybe that will be true, but there is nothing either in Obama’s brief but clear far left voting record or his statements during the election to support the theory.

There remains powerful virtue in the Constitution (which the President-elect considers to be a flawed document), in which we can take comfort. The founding fathers wisely diffused power, because they were rightly afraid of what concentrated political power would do to individual liberty. While it is frustrating to new politicians in Washington, there is not a lot that one man can do—for good or ill—in our system of government, and that should be more of a source of solace than of worry.

We need not buy into the slogans that we should rise above partisan politics (which usually means that the other party should keep quiet and become politely ineffective) in order to wish the new President and the congressional leadership well so long as they propose to do good. Neither do we need be devotees of political parties in order to speak up when policies are proposed that will make things bad. In the land of “We the People,” it is our job not to be complacent. It is our job to remind the authorities in government who they work for. Otherwise, as we approach the holiday season in 2009, things will be much worse than they are already today.

Of Signs and Deception

A well-known principle of propaganda is that if you are going to tell a lie, the bigger the lie the more believable it will be. Most people are so trusting that they do not want to believe in the enormity of a big lie. They do not want to believe that someone can intentionally say something appallingly false. Rather than disbelieve the liar, they will want to disbelieve the person who exposes the lie.

One of the biggest of lies is asserting something to be exactly the opposite of what it is. Such is the warmonger who claims to be the leading pacifist, the thief who claims to be the victim of theft—and accuses the real victim of being the criminal—or the bigoted radical who accuses opponents of intolerance.

In recent travels on the streets, roads, and highways I notice at this time of the year the beautiful Fall foliage—and the many political campaign signs. While for some there might be a distaste for seeing these, I feel to rejoice in the signs as evidence of a vigorous system of subjecting our political leaders to public vote.

Having said that, I do draw the line at the steady growth of the mega-yard and curb signs, the five-foot by eight-foot broadsides. So, already inclined to dislike such construction-size boards, I have been particularly disturbed to see what appears to be a planned series of Obama-Biden signs advocating policies that these two Washington insiders have long worked hard to oppose.

I have noticed three in this series. There may be others. The ones that I have seen show the names of the two candidates, followed by a motto reading something like, “Better Schools,” “Lower Taxes,” and “Energy Independence.”

If facts matter, and I believe that they still do (even if they are optional in the mass media), such messages on the signs of these two politicians should be jarring to the honest in heart. The political record of Obama and Biden are unequivocal on these three issues. They both have strongly and consistently opposed school reform, supporting doing more of the same old stuff that has been steadily undermining the quality of government-run schools since the 1960s.

Both have been leading advocates for raising taxes and opposing tax cuts. Even in the current campaign they advocate new tax hikes. They try to disguise their intentions with the assertion that their proposals supposedly would reduce taxes on 95% of Americans (including the 40% who pay little or no income taxes), while raising them on the rest. Either they failed with the simple math, or they hope that voters cannot or will not be able to apply simple math, but you cannot get enough taxes out of 5% to pay for genuine tax cuts for 95%. In fact, their proposals are just another camouflage for the old tried and failed policies of tax and spend. Not only does that always put more power into the hands of the politicos who take and then redistribute, but it is a highly dangerous thing to do in the teeth of an economic downturn. Taxes fall on income and investment, and whatever you tax you get less of. Now is not the time for less income and investment.

And as for energy independence, both Obama and Biden support programs that will yield little and have yielded very little new energy—at very high expense in government subsidies—while staunchly opposing expanded use of the energy resources that are abundant in the United States, particularly oil, coal, and nuclear energy. Independence seems to me to increase reliance on your own resources. Obama and Biden are consistent supporters of policies that keep U.S. energy resources under lock and key.

This should not be surprising from two candidates who campaign on change while advocating the oldest political formula in the history of government, that government knows best, that decisions about spending, whether for health, education, or job creation, are best made by power brokers in the halls of Washington power centers, rather than by families in their homes. Calling that change may be the biggest lie of all.