What should the role of government be?

The Occupy Wall Street protests taking place across the country reflect a growing populist anger among Americans. The protesters have every right to be angry, but their anger is misdirected. In many ways, so are their solutions.

These protests seem to reflect a widespread perception that many of the problems were created by unbridled free markets. Many people believe a pure free market would lead to enslavement by mega corporations and this can only be prevented by regulations and government oversight. Those are false, though pervasive myths. Free-market capitalism didn’t create these problems. We really don't even have free markets. But if we did, corporations would have less power, not more.

Think about it. Businesses can't force anyone to do anything against their will. In a free market, every interaction between consumers and businesses would be voluntary - on both sides. While that would mean some businesses might not strictly comply with the Americans with Disabilities Act, it would also mean others would spring up to cater to the disabled. Also, bankers couldn't extract multi-million dollar bonuses and multi-trillion dollar bailouts from the public. Electric companies couldn't steal people's property to install power lines over it.

Corporations can't take your money. They can't take your land. They can't force you to buy or advertise what they sell. They don't have any power over individuals.

But the government does. And it's for sale.

Corporations lobby for government policies that force taxpayers to subsidize their profits. Corporations bribe public officials to craft a regulatory environment that works to their benefit. Oppressive regulations disproportionately burden smaller competitors while harming consumers. Corporate interests convince government officials to buy their products with money taken from taxpayers.

But these problems extend far beyond big business. Any number of special interests groups, whether based on race, age, gender, political ideology, or occupation, do the same thing. Trying to take money out of politics only treats a symptom of the underlying disease. The real solution is taking power away from the government.

Our system of government is basically an unending battle between groups of people fighting over the power to control each other.

It's pretty barbaric, when you think about it. But this dark side of democracy isn't a secret. The founders knew about it, which is why they chose not to give us one. Instead, they gave us a constitutional republic based on principles of natural rights and limited government. It's time we return to it.

Gingrich is a fraud

During last week's debate, Newt Gingrich was asked what he had done to earn the $300,000 Freddie Mac had given him. Gingrich claimed Freddie Mac paid him as a "historian" who warned the company about the coming housing disaster. He claimed to have warned "this is a bubble ... this is impossible."

His explanation was so transparently preposterous I actually broke out laughing. It's not just a lie. It's almost the opposite of the truth.

In reality, it was Ron Paul who spent years fighting Fannie Mae, Freddie Mac, and the other GSEs. Paul correctly pointed out that they create moral hazards that inevitably lead to malinvenstment. Paul specifically called out Fannie and Freddie's role in creating the housing bubble at least as far back as 2003, years before most people suspected anything was wrong. He warned Fannie and Freddie would fail when the bubble inevitably burst, and would dump huge losses on the taxpayers. Ron Paul's only compensation for saying these things was the satisfaction of telling Americans the truth, even though they didn't want to hear it.

Freddie and Fannie have always been popular with Democrats, but faced some opposition from Republicans (like Paul) who realized their inherent problems. To fix this, Freddie Mac hired several high-profile Republicans to lobby other Republicans on their behalf. Gingrich was actually paid at least $1.5 million to do so.

Now Gingrich is taking credit for what Ron Paul said, even though he was paid millions of dollars to convince other Republicans that guys like Ron Paul didn't know what they were talking about.

That's Gingrich.


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Perspective

"Why the US was downgraded...


U.S. Tax revenue: $2,170,000,000,000
Fed budget: $3,820,000,000,000
New debt: $ 1,650,000,000,000
National debt: $14,271,000,000,000
Recent budget cut: $ 38,500,000,000

Let's remove 8 zeros and pretend it's a household budget:

Annual family income: $21,700.
Money the family spent: $38,200.
New debt on the credit card: $16,500.
Outstanding balance on the credit card: $142,710
Total budget cuts: $385."

Scott Barber, at the Daily Paul

High Crimes

An American law enforcement officer is dead. So are at least a couple hundred Mexicans. It looks like the American government is to blame.

Why? It looks more and more certain that high-ranking American officials allowed Mexican drug cartels to buy thousands of military-grade weapons.  And not by mistake or incompetence. The media frequently refers to the Fast & Furious gun-running operation as a "botched" program, but that's inaccurate. The only thing "botched" was the coverup.

The plan actually worked as designed. The federal government ordered American gun dealers to sell thousands of guns to the most violent and dangerous criminals in the Western Hemisphere in violation of American law. Then the government intentionally allowed these guns go over the border into Mexico in violation of Mexican and international law. Then the government waited for the guns to show up at crime scenes. Well, they did - after being used to murder at least a couple hundred people.

It's really starting to look like the Attorney General perjured himself when testifying to Congress about this. That's a big deal. But perjury is small potatoes compared to what appears to have happened. With Congressmen throwing around phrases like "accessory to murder" in an election year, things are going to get ugly.

If true, this is worse than Whitewater, Iran/Contra, Monica Lewinsky, or Watergate. Way worse. If average citizens did this, they would be sent to prison for life. If the Attorney General, Secretary of State, or even the President did this, they shouldn't be treated differently. These guys aren't above the law.  We're taking about knowingly facilitating murder. With taxpayer dollars, no less.

If a foreign country did this to us, we'd declare it a state sponsor of terror. We'd institute trade embargoes and economic sanctions in a heartbeat. Hell, we'd probably invade.

Only 5 more weekdays to go.

The U.S. Postal Service lost $8.5 billion last year. It's on pace to do even worse this year, losing $3 billion last quarter alone. The Obama administration has proposed ending Saturday delivery as a way to close the financial gap. Notably, his plan does not consider any layoffs. Why? If we reduce the delivery schedule nearly 20%, won't labor needs decrease as well? If Wal-Mart was closed every Sunday, it wouldn't need as many employees, right? Then again, Wal-Mart is not a unionized bureaucracy with a federally guaranteed monopoly on the service it provides.

This plan won't fix the Postal Service any more than when Regan "fixed" Social Security in the early 1980s, although they're based on the same principle - charging more while delivering less. In fairness to Obama's propsal, we don't have a mandate that at least 15% of everyone's email must be sent through the Postal Service. Yet.

I understand that delivering mail on Saturdays is inefficient. Delivering the mail any day is inefficient. And don't forget, the delivery schedule has already been chopped in half - the mail used to come twice daily. Even if the Postal Service somehow overcame those inefficiencies, it is still doomed to failure. Federal law requires the Postal Service to deliver mail to everyone regardless of origin or destination. Sending mail from Middle of Nowhere Alaska to Florida obviously costs more than sending it across town. But the Postal Service is prohibited by law from charging a different price to do so. That doesn't make sense and guarantees inefficiency. It has the same flaw as requiring medical insurance providers to provide coverage to everyone for the same rate regardless of age or medical condition.

And what about the fuel? The Postal Service has the largest passenger vehicle fleet on the world. Liberals should be fuming over the carbon footprint. Conservatives should be furious about the gas.

The U.S. Postal Service should be abolished. The vast majority of mail I personally receive is unsolicited advertising. I'm not alone. Almost everything else could and would be delivered differently if the Postal Service disappeared. FedEx and UPS could still ship packages and vital documents more efficiently. They already do. Much of the non-vital paper mail would shift to online delivery. The junk would either shift online or cease completely.

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Location:No mail delivery on Saturdays? Well, it's a start.

Conservatives can usually see the unintended, negative consequences that come from government meddling in the economy.  Some of them also see the negative, unintended consequences that come from bombing and laying siege to foreign nations most people think can't fight back.

The Educational-Industrial Complex

This AP article should make people rethink college and how it's funded.  For example:


 - A human development and family services major in his junior year at Colorado State realizes he will owe about $125,000 when he graduates.  In order to pay of the debt, he's joining the military so he has a guaranteed job to pay off his loans.

Who would pay over $125,000 for a human development and family services degree from Colorado State? Well, this guy did, and he's not alone.  And that's just the portion for which taxpayers are responsible if he defaults.  It doesn't include the federal subsidies, his out of pocket costs, his work study, etc.  He doesn't need that degree to get a job in the military, and probably won't be using a human development degree while he's there.  Why not quit college now and enlist, instead of racking up two more years of out of state tuition?

- Two years ago, 30% of California's higher education cost was paid for by federal stimulus funds, and now they are facing huge shortfalls.

Despite the fact that these funds were temporary, California (and many other states) refused to make the necessary adjustments to deal with reality.  Were they counting on federal bailouts forever?

- Dan Hurley, an executive for the American Association of State Colleges and Universities claims it will be the hardest year on record for cash-strapped colleges.

Mind-boggling.  Colleges are selling a product - education.  

Think about this:

1)   This product has never been in higher demand

2)   The price of this product has increased dramatically and consistently for decades

3)   This product receives enormous government subsidies at the local, state, and federal levels

4)   Many colleges pay few, if any, taxes on their operations

5)   Colleges are supported by charitable donations

6)   The federal government co-signs a blank check for any potential customers for their products

There is not a single private industry with such favorable conditions.  The medical industry, military industry, and housing industry are the closest.  But even they pay taxes and aren't supported by charity. 

Yet colleges claim they've never had it harder. We need to ask why.

The problem with deficits...

Margaret Thatcher famously stated that "the problem with socialism is that eventually you run out of other people's money." Ever since, conservatives have parroted her observation with smug approval. Conservatives also sneer at socialist ideology that assumes people can legitimately vote themselves the right to someone else's money. Despite their indignation, most of these so-called conservatives should be recognized for the hypocrites they are.

Redistributivist government programs, by design, forcibly seize property from some people in order to give it to others. Conservatives recognize that this is inherently unfair and counterproductive. But most people fail to recognize that every last dollar of deficit spending does the exact same thing.

Deficit spending is not an alternative to higher taxation. Deficit spending is higher taxation. It's also inherently socialist.

Our national debt represents things Americans previously wanted but were unwilling to pay for. Unfortunately, deficits are more politically palatable than higher taxes. As a result, Americans have chosen to use deficit spending to force future generations to pay for their current desires - without their consent. Americans spent staggering amounts of "other people's money" on unnecessary and counteproductive warfare and welfare - foreign, domestic ... even corporate. Now we have hundreds of trillions of dollars in unfunded liabilities and debt to show for it. This debt represents the biggest examples of both taxation without representation and involuntary wealth redistribution in the history of the world.

Americans have always known that somehow, someday, someone will have to pay off our debt. The "somehow" will be higher taxes, inflation, and a lower standard of living. "Someday" is coming soon. But more Americans are starting to realize that "someone" is no longer the vague abstraction it was to past generations.

It is us.

My thoughts on the debt limit

At the moment, there is a lot of panic regarding whether or not to raise the statutory $14.2 trillion federal debt limit. This debt limit is a toothless, artificial, self-imposed cap that Congress can (and almost invariably does) increase any time it wants. This limit can be described as “borrowing limit” that Congress imposes on the federal government.

This limit is analogous to a person promising himself that he will never weigh more than 200 pounds, but who nonetheless gains weight after eating too much and exercising too little. When he approaches 200 pounds, rather than changing his bad habits, he simply changes his goal to never weighing more than 210 pounds, then 220, 240, and so on. Unless something changes, he will eventually weigh 500 pounds.

While I’m concerned about the “borrowing limit,” my concern is based on the much more serious threat posed by another debt limit looming over our country. Every credit transaction requires both a creditor and a debtor, and a debtor cannot borrow money without a creditor willing to loan it to him. When creditors become concerned about a party’s ability to repay their debt, creditors demand higher interest rates to compensate for higher degree of risk they assume by lending money. If a party’s financial condition becomes bad enough that they cannot pay off their debts, they have reached the “lending limit” at which creditors will no longer loan them money.

Unlike the $14.2 trillion borrowing limit, America’s “lending limit” will not be self-imposed. Rather, it will be imposed on us by our creditors when they are no longer willing to lend us any more money. At that point, the only way Congress will be able to raise that limit is by restoring confidence that the debt will be paid off. Doing so would require massive reductions in our deficit. Greece, Spain, Ireland, Britain, Italy, etc. are dealing with this to varying degrees right now. Our turn will come.

I support spending cuts to reduce our debt, because I believe higher taxes would make this problem worse, not better. Others disagree, and want higher taxes. Even if people disagree as to the amount, everyone should understand that some amount is too much, whether it is $14.3 trillion, $30 trillion, $100 trillion, or $1.5 (whatever comes after trillion). The national debt has been increasing every single year for decades. Unless something changes, we will hit the second limit.

Cutting back will be hard. I understand that, and don't like it. But the longer we wait to address our debt, the worse it will be when we finally do.


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The Debt Ceiling Controversy

A lot of people are threatening the end of the world if Congress doesn't raise the debt ceiling. But there's an important question that should be asked.

By how much?

If it's so damn important, why haven't we heard anything specific about how much they want to raise it? Also, if $14 trillion isn't enough, what will be? $30 trillion? $100 trillion? For how long?

The Paul Ryan plan is by far the most aggressive budget plan that's getting any serious attention, and it's going nowhere. But even the "drastic" Ryan plan will take 30 years to balance the budget, even using ridiculous assumptions that "exclude interest." How long will it take to actually pay down the principal? What if interest rates go back up toward historical averages? What if they went up to the level they were at when I was born?

Do people really think we can keep borrowing indefinitely? Do they think we can get away with never paying it off?

Why more regulation is not the answer

Many people associate pure free-market capitalism with a complete lack of regulation. This is not the case. Regulation is the primary reason free-market capitalism works so well. But in a capitalist system, the regulations are market-based instead of based on politically motivated bureaucrats telling people what they can and can't do.

Under capitalism, people act in their own self-interest and pursue profits. That's a good thing. Profits are a signal that an entrepreneur is doing something productive by creating something worth more than the sum of its parts. If someone can produce a good or service for a cost below what people are willing to pay for it, he makes a profit, and in doing so, creates wealth, prosperity, and a higher standard of living for everyone. Some people try to create goods or services, but in doing so lose money. Those people create a whole that is worth less than the sum of its parts. The market will force them to either increase efficiency or quality. If not, they will be forced out of business or purchased by a competitor who's doing a better job of meeting the public's desires.

Bailouts, government guarantees, subsidies, and all other methods of socializing private risk undermine the regulation imposed by free-market forces. These things artificially encourage people to take risks they would have otherwise avoided. For example, if someone else is paying your bar tab, you're probably going to drink more than you otherwise would. This is an example of a phenomenon called "moral hazard." When the risk side of the risk/reward calculation is removed, you're no longer in the realm of free-market capitalism and moving closer to totalitarianism and fascism.

The bank bailouts are a good example of this. So were the bailouts of the GM and Chrysler unions. The FDIC is even a huge example of moral hazard.For example, people pay practically no attention to the financial condition or solvency of their banks. After all, why would they? They're FDIC insured! In other words, no one cares if their deposits are in a bank that is over-leveraged because if it fails, the FDIC will bail out the depositors. Without the FDIC, people might pay a little more attention to the financial condition of their banks. Banks would probably compete based on financial security, as opposed to free toasters, interest rates, and how quickly they can rubber stamp a home equity loan to finance a boat. Because Fed policy has been setting interest rates at damn near zero for way too long, the only way banks can make money involves lots of leverage. That dynamic is a huge part of our current mess.

And while getting rid of the FDIC sounds terribly drastic, it is essentially insurance paid for by the banks. There's no good reason why this couldn't be done through private insurance.

There are a lot of people who think that we just need smarter regulations implemented by smarter and incorruptible regulators. But we're just as likely to end up with Tim Geithner as Sheila Beir. We're a hell of a lot more likely to get Geithner than God. I've never understood why government regulators are expected to be any smarter or less corrupt than private ones. Who's going to regulate them?

Along the lines of my last post

Brother, can you spare $20.12?

There is a candidate running in the Republican Presidential Primary who…

…has never voted for a tax increase

…has never voted for an unbalanced budget

…is the only candidate to have been endorsed by Ronald Reagan

…has been married to the same woman for over 50 years

…is pro-life, and not just based on political expediency

…is pro-life, even when it comes to foreign men, women, and children

…is the only guy running with any military experience

…had enough principle to strongly oppose the Iraq War from the beginning, despite its overwhelming popularity at the time

...had enough principle to strongly oppose the Iraq War from the VERY beginning (Desert Storm), despite its overwhelming popularity at the time

…had the understanding to realize that our involvement in Iraq would turn into the mess that most people realize it to be today

…correctly predicted the financial crisis, when our president, Wall Street, Treasury Secretary, and Federal Reserve Chairman had no clue it was coming

…correctly predicted the housing crisis, when the above people claimed it could not happen

…opposed the TARP, banking, auto, etc. bailouts the above people came up with in repose to the disaster it created

…correctly predicted the above schemes would not help reduce unemployment, but would lead to higher prices and make the problems worse

...correctly predicted a whole lot of stuff

…has never supported socialized medicine, and understands that the economics behind Medicare and Social Security will dramatically and unfairly hurt younger generations

...understands that the economics behind our foreign policy and militarism are making us less secure, and will also dramatically and unfairly hurt younger generations

He's trying to raise a little money today. Send him a few bucks, if you can.

Speaking of Ron Paul hit pieces...

Michael Medved vomited up this intellectually dishonest and shallow smear.

A sample:

"The only possible argument for [believing the federal government lacks constitutional authority to ban drugs] would involve a sweeping expansion of the fictitious 'right to privacy'—a whole-cloth invention of the Warren Court that conservatives (and originalists) generally hate."

Really? That's the "only possible" argument? What about the fact that banning drugs is not one of the enumerated powers given to Congress in Art. I, Sec. 8? What constitutional authority does Medved think justifies the drug war? The current ridiculous interpretation of the Commerce Clause? The same one that's been incorrectly used to justify Obamacare and the vast expansion of federal power over the last 100 years?

Fortunately, judging from the comments such as those below, people aren't buying this BS. Look at the thumbs up vs. down. That's a good sign.

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  TG 17 hours ago Report Abuse

  Prohibition taught us that criminalizing vices is an enormous waste of time and resources, and only turns the whole business over to the underworld. The trillions of dollars we routinely throw out the window would be better spent on education and rehab. Ron Paul is not the crackpot here, Mr. Medved.

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  Richard 14 hours ago Report Abuse

  how would you describe a presidential candidate who insists that the federal government has no right to interfere with states rights to deal with prostitution & drug laws? i would describe him or her as someone who has read the constitution.

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  Paul 13 hours ago Report Abuse

  Another example of the corrupt media.
  Thank you, Ron Paul, for sticking to your priciples.
  It's already obvious that this piece is backfiring on Medved.
  This country is in sad shape when it no longer recognizes liberty and free speech, or worse, tries to suppress it.
  You have my vote, Dr. Paul.

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  Cincinnatus 16 hours ago Report Abuse

  I believe that it is actually Medveds pot that is cracked....

  Reply
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  Sean F 15 hours ago Report Abuse

  State's Rights! Federal Government is too big. That is what the man is saying.

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Against the Drug War

Here's an extremely superficial hit piece on Ron Paul regarding his support for ending the War on Drugs.

Regarding whether drug use harms other people:

"[O]ne can be a casual consumer of alcohol. One cannot be a casual user of cocaine or meth."

First, what about marijuana? Second, while I certainly don't recommend it, we've had numerous examples of causal users of cocaine - Oprah ... Freud ... our last two presidents. Third, the drug war actually created our meth problem. Finally, the war on drugs hurts a LOT of people. In the last few years, tens of thousands of people have been killed due to our war on drugs in Mexico alone. People were no longer mowed down from violence in the whiskey trade as soon as the federal government legalized it in the 1930's.

The author also claims that rehab doesn't work, so we have to keep pushing the drug war.

"The other problem is the spotty record of rehab in curing people from addiction to drugs. One can only point to the bad examples of Charlie Sheen and Lindsey Lohan to conclude that rehab more often than not does not take and, at the very least, needs to be repeated a number of time until a person is off the pipe or is dead."

He's saying that rehab is ineffective, so our only option is to continue pursuing the drug war. Well, how effective has the War on Drugs been since we started it half a century ago? Consider what we've received in exchange for the $1 trillion or so it's cost us so far.

-No real decrease in the number of drug users

-More dangerous drugs (i.e. meth) have been created as cheaper alternatives because of higher street prices for traditional drugs such as cocaine

-Hundreds of thousands of dead people

-The militarization of local police forces and the institutionalization of unnecessarily dangerous SWAT team home invasions

-The highest incarceration rate in the entire world

The drug war has been a complete failure. There is no part of it that can be viewed with any degree of success. We've spent a trillion dollars, and have not achieved any progress on any of its goals. Many things are actually far worse. Even so, few are willing to reconsider whether it is worth pursuing.

Ron Paul is one of the few elected officials principled enough to hold his ground on this issue, despite knowing full well that it will result in unfair caricatures of his actual beliefs. Why isn't the burden on the Drug War advocates to explain why we should keep pursuing an expensive, tragic policy that has not worked at all for the last 50 years? Do they need more time? More money? More laws?

We've tried all of those things. It's time we try something else.