ThoughtRogue:  Considering America’s now rampant economic illiteracy and widespread ignorance of history and philosophy, I wonder whether we’re now past the tipping point and the American Dream is doomed?  You’ll notice that every policy decision that our beloved, alleged President makes is to further impoverish Americans – to make them wonderfully dependent, EQUALLY impoverished.

Two excellent books that lay a rock-solid foundation in economics is Henry Hazlitt’s famous Economics in One Lesson, and Basic Economics by Thomas Sowell.  Both explain economics to the layperson, without the use of formulas, with expert precision, allowing the reader to easily dissect for themselves the plethora of economic fallacies they are bombarded with daily.  These should be required reading of all students – not to mention of all politicians especially.

Turning the American economy around is really simple:

• Reduce the taxation monstrosity
• Reduce government spending even more
• Reduce onerous regulations and restrictions
• Reduce bloated, unconstitutional programs and bureaucracies
• Reduce the shackles on individual work and innovation

But, what has the Usurper-in-Chief accomplished and/or supported at every turn?

• Increased Taxes – net jobs killer and wealth destroyer.
• Gigantic Bailouts – net jobs killer and wealth destroyer.
• Increasing Federal Spending and Debt – net jobs killer and wealth destroyer.
• Repeal of Bush Tax Cuts – net jobs killer and wealth destroyer.
• More Money and Power to Unions, Lobbyists, and Government – net jobs killer and wealth destroyer.
• The ‘Cap and Trade’ Energy Bill Boondoggle – net jobs killer and wealth destroyer.
• Support for an Ever-Increasing Minimum Wage – net jobs killer and wealth destroyer.
• The Mass Amnesty of Tens of Millions of Illegal Aliens – net jobs killer and wealth destroyer.
• The Takeover of the Medical and Insurance Industries – net jobs killer and wealth destroyer.
• The National Socialization of Banking, GM, Mortgages, Education.. – net jobs killer and wealth destroyer.

Why Big Government Doesn’t Work

by DOCTOR ZERO, HotAir.com

A person living entirely on their own produces very little, beyond the bare minimum necessities of survival. He has no real “wealth” – no surplus production, to spend on discretionary endeavors. He has few real options in life, beyond daily survival. His moments of real choice come when he gets lucky. An exceptionally fortunate hunt might feed him for a few days, and give him some precious leisure time. Otherwise, he does what he must do, and rarely has time to think about what he could do. Some people enjoy living this way, but most do not.

The situation improves somewhat in a small, voluntary collective: a partnership with a trusted friend, or a small family living on its own. Their combined efforts produce more surplus food, and they can address the necessities of life with less individual effort. They may develop skills and talents that prove valuable to each other. Some people are content to live this way, with a small and isolated family that maintains very little contact with the rest of humanity – but, again, most are not.

When families begin cooperating with each other, production and wealth explode. Communities generate tremendous amounts of surplus production, and commerce allows people access to goods and services they could never produce themselves. The amount of time required to deal with personal survival dwindles away to virtually nothing. Doubtless the reader works hard at his or her job, but your job probably has very little to do with feeding or clothing yourself, or defending yourself from predators. Instead, you produce goods and services that would be unimaginable to a more primitive society – could you explain your job to someone from the tenth century A.D.? In exchange, you earn money, which you spend to purchase what you need – and, more importantly, what you want. Even the poorest member of an advanced society has options.

An advanced society requires a method for allocating its huge amount of surplus production, and meeting the basic needs of its members. There are two general mechanisms for doing this: commerce and government. Every society uses a mixture of these methods. Even the most totalitarian government has a black market, and even the most free-wheeling capitalist society will have a government. Attempts to artificially engineer a society without either commerce or government are doomed to failure, because they will form spontaneously, no matter how strictly they are forbidden.

Government and commerce don’t just co-exist in an uneasy truce. They need each other. Commerce, the free exchange of money for goods and services, produces wealth through choice. Remember the example of the man living alone: the poverty of his existence comes from his lack of choices. The value of money flows from the way it allows consumers to express their choices. For a simple illustration of this principle, compare a ten-dollar restaurant gift certificate to a ten-dollar bill. The ten dollar bill is more valuable than the gift certificate, because you have more choice in how to spend it. A government increases the wealth of its citizens by providing security – stable currency, secure borders, protection from criminals, respect for property rights, and legally enforceable contracts, to name a few of government’s duties. This has the effect of increasing the citizens’ wealth, by increasing the choices available to them. A ten-dollar bill has more value in a large, lawful city than on a tiny island where few goods are available, or a den of thieves where nothing can be bought with confidence.

Consider the example of the impoverished loner versus the citizen of a prosperous society again. The citizens’ money represents wealth, thanks to his many choices, but it represents something else of enormous value: extra time. The loner spends most of his waking hours staying alive, and seeing to his minimal needs. The wealthy citizen spends almost no time on these things – he uses it for economically productive work, self-improvement, and leisure. A ten-dollar bill will purchase you a shirt that you probably don’t know how to make yourself… and even if you had the knowledge, it would most likely take you longer to make the shirt than it takes you to earn ten dollars.

Government allocates wealth through top-down commands, imposed by force. There would be no need for massive tax and spending bills if everyone was freely choosing to spend their money the way the government wants them to. Capitalism has priorities, while government has imperatives. Capitalists fulfill their ambitions through competition, which increases the choices available to consumers. The ambitions of the working class lead them to work harder, and engage in increasingly valuable and productive labor, to earn a better living for themselves and their families. This system is not perfect – there will always be people who try hard but don’t get ahead, and people who don’t make a very productive contribution to society – but over the long run, and measured against a population of millions, free market commerce will tend to produce increased choices, improved technology, and greater value through competition.

Government fulfills its ambitions through compulsion, which reduces choice. Sometimes compulsion is necessary – you can’t fund national defense by passing around a collection plate. When government exceeds the minimal functions necessary to provide stability and security, and begins interfering in the economy for the benefit of certain constituencies, by definition it reduces the overall choices available to its citizens. It doesn’t matter if the government’s intentions are noble – every law it passes to redistribute wealth inevitably reduces wealth, because it reduces choice.

In an economy dominated by the government, the ruling class fulfills its ambitions by serving faithful constituencies at the expense of others. It tries to address its failures by increasing control, which reduces wealth even further, in a downward spiral. It’s not in the nature of government to abandon failed programs, because if government was intelligent and morally superior enough to assert control over a situation in the first place, it will not see the logic in surrendering that control to inferior free-willed citizens. Instead, it will redouble its efforts.

In this environment, the citizens can best fulfill their ambitions by joining favored constituencies if possible, and becoming adept at petitioning the government for greater benefits. This tends to be more successful than working hard, as there is little competition in a state-run economy for the most skilled and productive workers. There are always exceptions – people who give 100% effort out of compassion, personal drive, or a religious calling. There will be politicians who are truly selfless, and sincerely wish to act as wise stewards for the resources of society. Exceptional people cannot be relied upon to power a society of millions. In the long run, and projected over a vast population, the incentives of a government-dominated economy produce stagnation, and strife between warring groups of citizens, who can only gain more benefits at each others’ expense.

That is why Big Government never works. It can’t address conflicting priorities efficiently. The ambitions of its masters are best served by catering to the demands of small, energetic groups, or big corporations who wish to compromise its rightful duty to ensure free trade. Its citizens are not rewarded for exceptional effort, or taking great risks. Worst of all, every single action it takes destroys the very wealth needed to improve the lives of its citizens. Big Government pounds on every problem with a hammer that crumbles in its hands.

ThoughtRogue:  Gee, some lessons in economics that even a Congressman might be able to understand.  Maybe.  Perhaps not.. never mind.

How Much is That Clunker in the Window?

The parable of the crushed clunker.

ThoughtRogue:  Jonah may have beat me to illustrating the “Broken Window Fallacy” lesson here, but man, did he nail this one on the head.  There’s so much nonsense and ignorance contained in the “wildly successful” Cash for Clunkers “stimulus” program that only a completely ignorant, out-of-touch, out-of-control arrogant Congress could trumpet this boondoggle as a “success” (and add 2 $Billion more as did our RINO Rep. Reichert).  Folks, on net, it is DESTROYING your wealth.  The Cash from Kleptocrats program creates a plethora of new broken windows.  The grand point of this famous economic parable, which eviscerates Obanomics, is that without the hoodlum breaking his window, the baker will buy whatever goods he was going to buy in the first place, AND he has an intact window (retains more wealth!).  But, of course, in C4C, the genius kicker is that the baker’s other out-dated windows (which still have value in a free market) are also broken for his added convenience – so he can replace them with more efficient “green” windows.

By Jonah Goldberg, National Review

Gilded Excrement Award Winner: Cash for Clunkers!

Ce qu’on voit et ce qu’on ne voit pas.

That may exhaust my French-phrase quota for the year, but it’s worth it. The saying is the title of an essay by 19th-century French economist Frédéric Bastiat and means “that which is seen, and that which is not seen.”

Bastiat’s essay is most famous for the “parable of the broken window,” in which a young boy shatters a shopkeeper’s window and, after some initial outrage, the villagers conclude that the rascal helped the local economy. Why?

Because if no one broke windows, window makers would be out of business, and if window makers were out of business, they wouldn’t buy any more bread or shoes, hurting the bakers and cobblers. So the six francs the shopkeeper must spend for a new window is really a boon to the community.

The problem with this argument can be gleaned from the title of Bastiat’s essay. By counting the money the shopkeeper spends to replace a perfectly good window (that which is seen), we ignore the money he might have spent on something else (that which is unseen). The shopkeeper might have instead dropped six francs on new shoes, a book, or a bonus for his assistant. Those who celebrate the broken window as a generator of growth take “no account of that which is not seen.”

Sorry for the long digression, but the parable of the broken window is worth keeping in mind, or perhaps even worth updating to the parable of the crushed clunker.

This parable is more convoluted, but the upshot is that Uncle Sam pays people to destroy their own cars as long as they use the money to buy a new, more expensive car.

As you’ve no doubt heard, the “cash for clunkers” program gives buyers up to $4,500 of taxpayer money toward the purchase of a new car if they trade in their old cars for vehicles with better gas mileage. The old cars, still roadworthy, are then destroyed just like the shopkeeper’s window.

The thinking behind the program is that the car companies need a boost, Michigan needs a boost, the environment needs a boost (through lower emissions), and Americans need help too.

Unsaid, but just as relevant, is that the authors of the government’s mammoth stimulus plan need some proof that something is being stimulated.

The program’s $1 billion funding evaporated in days rather than months as consumers, most of whom had been waiting to trade in their clunkers anyway, lined up for free cash. Washington is now agog with its successful effort to give out free money.

That Washington is shocked by the news that Americans like getting free money shows how thick the Beltway bubble really is.

Like the drunk who only looks for his car keys where the light is good, Washington can only see the economic activity it has created, not the activity it has destroyed.

For starters, who says the smartest thing for people with working cars is to buy new ones? Personal debt is supposed to be a problem, so why not look at this as bribing consumers into taking out car loans they don’t need? Even with the $4,500 subsidy, not all of these customers are going to be paying cash for their new cars. So they’ll be swapping serviceable-but-paid-for cars for nicer cars that are owned by banks.

Besides, maybe some people would be smarter to buy a savings bond or max out their kid’s college fund or — here’s a crazy thought — buy health insurance. But instead they’ve been seduced into spending the equivalent of their six francs on a car they don’t really need.

But, you might say, some buyers surely do need a new car. True. But if they needed a new car, they’d get one anyway, eventually. Indeed, they might already have gotten it, but rationally opted to wait for the program to kick in.

Or maybe they’d have needed to delay the purchase until next year, or buy a cheaper car, possibly even a used car, which will now become more difficult for poor people to find because we are taking all these cheap cars off the market.

But at least under these scenarios, they’d be spending their own money.

Under the government’s program, tax dollars are being diverted to people with cheap cars so they can buy expensive ones. That’s just really inefficient wealth distribution, not wealth creation. But government can see it, and that’s all that counts.

ThoughtRogue:  Folks, take a look at the unbelievably sobering graphs below (courtesy of The Wall Street Journal).  Note the following: (1) Obama’s deficit is larger than Bush’s largest by a factor of FOUR – and the Usurper still attempts to shift the blame to others, especially Bush. (2) For the first time EVER, the federal deficit exceeds $1,000,000,000,000.00 (that’s 1 $Trillion in overspending) – and the fiscal year is far from complete. (3) The federal “revenues” have significantly SHRUNK in comparison to last year’s – that’s because business profits are disappearing along with tens of millions of tax-paying jobs. (4) The insatiable federal spending, bars on the right, are displayed on the same scale – and include all the bailout schemes to date.

WARNING:  These audacious, skyrocketing federal deficits do not yet include: (1) The “Cap and Trade” massive tax scheme (largest in American history if it passes the Senate). (2) The Socialized Medicine extravaganza – destroying our superior private health care system, in favor of the rationed ObamaCare “Universal” health care scheme. (3) “Immigration Reform” – aka The Mother of all Amnesty schemes.  And now, Congress is even contemplating another colossal “stimulus” pork-laden spending scheme.

Also, likely to compound this Obama Nirvana, (1) another stock market crash in the next few months. (2) a crisis in commercial real estate. (3) a continually collapsing value of our Dollar, and (4) a debilitating rate of inflation when our economy finally does become able to recover.

Ah, the wonders of Hopenchange!!  Perhaps we should have elected someone who is actually Constitutionally eligible (not to mention competent) for POTUS instead?

Economic Nirvana

ThoughtRogue:  Why is it that Obama and Company can’t seem to implement a single policy which makes good economic sense?  Every single leftist, goofy Keynesian, been-there done-that policy dead-end is all they seem to have!

How about implementing any combination of the following:

• Cut taxes.
• Lower or Eliminate the corporate tax rate.
• Put a moratorium on the Capital Gains Tax.
• Implement the Fair Tax system (which eliminates the IRS, AND repeals Amendment XVI)
• Stop these gargantuan $Trillion porkulus spending bills.
• Make real cuts in government (other than Defense).
• Reduce onerous government regulations – remember the concept of Freedom?

Oh nooooooo.  Our benevolent Big Daddy (is Watching Over You) government can only do the following:

• Raise your taxes ever higher
• Hose $Trillions of your productivity directly into a sinkhole of Wall Street payoffs and Back-room Deals
• Pass ridiculous Bills in Congress (which aren’t even read by the legislators) absolutely riddled with grist and waste
• Cut the national Defense budget – like the F-22, and Missile Defense development, etc.
• Pass ever more regulation and onerous laws riddled with special treatment and special payoffs
• Nationalize the automobile industry – fire private CEO’s, infringe upon the Rule of Law, etc.
• Mortgage your children’s (and children’s) standard of living to the Chinese and other foreign entities
• Run the currency printing presses at the Treasury up to 24/7
• Hammer businesses and productivity even more by raising their taxes and creating stupid regulations
• Etc.

ThoughtRogue:  That’s right Zo – RINO’s, get lost!  This guy understands economics better than anyone in Faux-bama’s entire administration…

-ThoughtRogue:  It’s an inconvenient fact that whatever is subsidized, it encourages getting more of it.

By Thomas Sowell, Author of Economic Facts and Fallacies

The only person toward whom there is no compassion is the taxpayer.

A Must-Read!

The federal government has decided to bail out homeowners in trouble with mortgage loans up to $729,000. That raises some questions that ought to be asked, but are seldom being asked.

Since the average American never took out a mortgage loan as big as 700 grand – for the very good reason that he could not afford it – why should he be forced as a taxpayer to subsidize someone else who apparently couldn’t afford it either, but who got in over his head anyway?

Why should taxpayers who live in apartments, perhaps because they did not feel that they could afford to buy a house, be forced to subsidize people who could not afford to buy a house, but who went ahead and bought one anyway?

We hear a lot of talk in some quarters about how any one of us could be in the same financial trouble that many homeowners are in if we lost our job or had some other misfortune. The pat phrase is that we are all just a few paydays away from being in the same predicament.

Another way of saying the same thing is that some people live high enough on the hog that any of the common misfortunes of life can ruin them.

Who hasn’t been out of work at some time or other, or had an illness or accident that created unexpected expenses? The old and trite notion of “saving for a rainy day” is old and trite precisely because this has been a common experience for a very long time.

What is new is the current notion of indulging people who refused to save for a rainy day or to live within their means. In politics, it is called “compassion” – which comes in both the standard liberal version and “compassionate conservatism.”

The one person toward whom there is no compassion is the taxpayer.

The current political stampede to stop mortgage foreclosures proceeds as if foreclosures were just something that struck people like a bolt of lightning from the blue – and as if the people facing foreclosures were the only people who mattered.

What if the foreclosures are not stopped?

Will millions of homes just sit empty? Or will new people move into those homes, now selling for lower prices – prices perhaps more within the means of the new occupants?

The same politicians who have been talking about a need for “affordable housing” for years are now suddenly alarmed that home prices are falling. How can housing become more affordable unless prices fall?

The political meaning of “affordable housing” is housing that is made more affordable by politicians intervening to create government subsidies, rent control, or other gimmicks for which politicians can take credit.

Affordable housing produced by market forces provides no benefit to politicians and has no attraction for them.

Read the rest of this entry »

NC:  Earth to Liberals:  the secret to pulling out of the looming Depression is simple – (1) Stop the bloat of Big Daddy by reducing federal spending, (2) Stop borrowing ever more from the Chinese, (3) Stop printing our currency like you’re manufacturing candy, (4) stop taxing (stealing) the U.S. Citizenry blind, (5) Eliminate all corporate income taxes, (6) reduce all welfare payments, especially for corporations, (7) Nuke the Sarbanes-Oxley (SOX) Act which strangles business, (8} eliminate all capital gains taxes, (9) reduce regulations and litigations, and (10) implement the FairTax system now.