A Sampling of the Socialist Mindset

Today (January 11, 2010) I gave 180 of my new students an article about Joe Montana's house that was featured recently in The Wall Street Journal (November 6, 2009 wsj.com). Mr. Montana is attempting to sell his house for $49 million - a price that reflects some incredible features in and around his property.

I asked my students to comment on what should be done about people facing foreclosure, or people who cannot afford a home, given the fact the people like Mr. Montana enjoy such wonderful houses.

Here is a sampling of the answers I received:

"I believe that the people like Joe Montana are the reasons why regular Americans cannot afford a home or are facing foreclosure. Joe Montana got his wealth and his fame from the American people and I believe he should help the people that really need it. Why is it that a regular sized family needs a 10,000 square foot house on 500 acres that cost nearly 50 million dollars. Joe Montana should move into a regular sized home which cost a couple hundred thousand and then distribute the rest of his wealth to the Americans that made him rich in the first place."

"......the fans who paid his salary are struggling while he spends money on lavish unecessary junk."

"Government tax should be placed on homes worth an excessive amount. The revenues of which should go towards a government program that assists lower-income Americans in buying a home or avoiding foreclosure."

"...[ A bill ] should be passed to allow homeowners to walk away from the home they were paying on without having to be forced to pay the mortgage they cannot afford."

"When I read about the consumption of people who have money like Mr. Montana, I almost feel like supporting a society like Denmark's or Sweden's where 60% of income goes to taxes."

"......there is too much money invested in athlete's salaries. They don't help the economy in any way."

"One thing that I think the government could do to prevent people from losing their homes is pay off for all the houses in America."

"I think that this article shows how the rich stay rich and the poor unfortunately stay poor."

".....one wonders what can be done in order to equalize the playing field. Perhaps setting the limitation of what one can inevitably purchase."

"If people who have large amounts of money are able to afford large homes and nice furniture cannot spare some money to charity, then people like Mr. Montana should have their pay cut and distributed to those who can't afford anything or at least given to local shelters who can use the money for those who can't help themselves."

"Something that could be done is the Congress passing a bill that will force banks and loan companies to lower their interest rates....."

"One suggestion is that property taxes would increase for homes valued over, let's say, $1 million. That excess money could go towards a department that is in charge of dispersing money to future home buyers or those facing foreclosure."

"There should be a law preventing rich civilians from spending so much money on homes."

________

There were many others that echoed the sentiments of the students above.

It is going to be a long semester....

Do Older Americans still believe in liberty?

Recently, Orlando Sentinel columnist Mike Thomas made committed one of the greatest acts of political incorrectness by arguing that older Americans should not be receiving extra taxpayer dollars from the Obama Administration in an era where our mounting budget deficits threaten the long-term economic liberty of our children. Mr. Thomas should be more careful with his words. After all, today’s senior citizens and near seniors has become one of the greatest classes of plunderers in our nation’s history.
It did not used to be this way. From the founding of our nation until 1932 the government’s relationship with us was pretty simple as it applied to retirement and health care. Article One, Section Eight of the Constitution says nothing about helping us have a nicer retirement or good medicines. The agreement used to be that if you were young and had a job you needed to understand that someday you were going to be old and not want to have a job. Therefore from your young days until your old days you needed to assume personal responsibility for your impending retirement years by saving, investing and spending in a wise and frugal manner. You were also expected, in a nation founded on liberty, not security, to grasp the concept of illness, surgeries, the birth of children and so forth – and financially plan for that to.
Of course, our long experiment with socialistic economic policies began with Franklin D. Roosevelt and has accelerated under Republican rule (see George Bush’s budgets for social welfare programs) and Democratic rule (see today’s President).
For fiscal year 2009 the federal government will spend $3.998 trillion. Of that, $675 billion will be spent on Social Security and $386 billion on Medicare. That means that $ 1.073 trillion or 27 percent of the entire budget will be allocated to senior citizens. As Mr. Thomas bravely pointed out, the federal government is going to have to either raise taxes, or cut spending (you can start laughing now) by $101 trillion over the next 75 years to pay for the mandated future spending on older Americans.
Given our current birth rate and spending levels in other areas where the federal government is in charge, the average 21-year old American will, by the time they are in their mid-40’s, have to pay 50-60% of their total income in taxes in order to meet this obligation. That is up from an average of 33% today.
Many current senior citizens and baby-boomers claim that they are simply getting back what they paid in while they were working. Others argue that current federal spending is some sort of payback for winning World War II. Both arguments are nonsense.
First, during the first several decades that social security existed, people did not live very long, payroll taxes were small and the nation’s population of senior citizens was tiny compared to today. That means that the average American did not pay in much to the system that they are now enjoying. In fact, adjusted for inflation, it takes the average senior about two years to get back everything they paid in. After the two year mark they are simply living off of their children and grandchildren.
As for the World War II argument – or any other argument involving saving the nation – where does the G.I. Bill enter into the payback? Where does the idea that wars are won to preserve liberty rather than gain future political clout to take from your fellow man enter into the equation?
Winning wars is an act of self-interest – you don’t want the bad guys to win and take your stuff. Winning means you get to have your pursuit of happiness back.
If senior citizens really value the things that they fought for – and if the baby boomers really care about the liberty this nation is supposed to enjoy – the last thing any older American should be doing is filing a claim – through the voting process – on the private property of younger Americans.

The Nobel Idiots

From January 20, 1977 to January 19, 1981 James Earl Carter - our 39th President - managed to allow the Soviet Union to run rampant in Latin and Central America; much of Africa; Afghanistan and remain dominant in Eastern Europe and Southeast Asia while simultaneously allowing thugs in Iran to take - and keep - 52 American hostages for 444 days.

His great response? Boycotting the 1980 Summer Olympic games and barring Iranian oil from flowing into the U.S.

By the time he left office 40% of America's military personnel was living on foodstamps while our position as a world leader was diluted into a world joke.

Carter left office as one of our least-popular and weakest presidents.

For his accomplishments, he managed to win the Nobel Peace Prize in 2002.

Seven years later, Barack Obama has won the Nobel Peace Prize after only 37 weeks on the job. His great accomplishment towards world peace has been a speech to the Muslim world, a willingess to engage Iran in nuclear talks and the decision to remove missle protection defenses from Europe.

Meanwhile, Ronald Reagan has still not won the Nobel Peace Prize.

All he did - by the admission of his enemies in the Soviet Union - was end the Cold War and save millions from the ravages of nuclear war without firing a shot. During his eight years he accomplished more to save the planet from tyranny without war than every president in our nation's history. The record on this is clear. Go read about it for yourself.

Tell me please - how can two liberals - one who endangered the world with his weakness, and another who has done nothing to make the world a more peaceful place in his 200 plus days in office, win this award when a real savior of our earthly lives does not share in this honor?

I suppose the next award will be the Nobel Memorial Economics prize to Karl Marx.

A Summary of how Government Serves Us

The following was sent by a former student who understands the case for limited government. Enjoy...

The U.S. Postal Service was established in 1775 - they've had 234 years to get it right; it is broke, and even though heavily subsidized, it is not able to compete with private sector FedEx and UPS services.

Social Security was established in 1935 - they've had 74 years to get it right; it is broke.

Fannie Mae was established in 1938 - they've had 71years to get it right; it is broke.


Freddie Mac was established in 1970 - they've had 39 years to get it right; it is broke. Together Fannie and Freddie have now led the entire world into the worst economic collapse in 80 years.

The War on Poverty was started in 1964 - they've had 45 years to get it right; $1 trillion of our hard earned money is confiscated each year and transferred to "the poor"; it hasn't worked.

Medicare and Medicaid were established in 1965 - they've had 44 years to get it right;
they are both broke; and now our government dares to mention them as models for all US health care.

AMTRAK was established in 1970 - they've had 39 years to get it right; last year they bailed it out as it continues to run at a loss!

This year, a trillion dollars was committed in the massive political payoff called the Stimulus Bill of 2009; it shows NO sign of working; it's been used to increase the size of governments across America , and raise government salaries while the rest of us suffer from economic hardships. It has yet to create a single new private sector job.

Our national debt projections (approaching $10 trillion) have increased 400% in the last six months.

Cash for Clunkers" was established in 2009 and went broke in 2009 - - after 80% of the cars purchased turned out to be produced by foreign companies, and dealers nationwide are buried under bureaucratic paperwork demanded by a government that is not yet paying them what was promised.

So with a perfect 100% failure rate and a record that proves that each and every "service" shoved down our throats by an over-reaching government turns into disaster, how could any informed American trust our government to run or even set policies for America's health care system - - 17% of our economy?

Maybe each of us has a personal responsibility to let others in on this brilliant record before 2010, and then help remove from office those who are voting to destroy capitalism and destroy our grandchildren's future.

"I predict future happiness for Americans if they can prevent the government from wasting the labours of the people under the pretence of taking care of them." Thomas Jefferson

There is no "Health Care Crisis"

Lost in the debate on what government should do about health care in America is the question no one seems to want to ask. That is, "Why fix a crisis when there is no crisis?"

According to the Obama Administration somewhere in the neighborhood of 50 million people do not have health insurance in America. So what? That is only about 15% of the entire population.

Why do we need to have the federal government - the same government that invades countries that do not invade us first; fail to deliver mail better than our phones or FedEx; provides lousy housing for the poor; lousy education for children; lousy roads, bridges, food inspection services and more - in charge of the biggest industry in America? Who are these functional morons who actually believe that government can do a better job at health care then they can at anything else? The American-Indians on reservations have been getting government care for decades. You would not want to go to one of the clinics these Americans are compelled to use.

I wonder how many of the 50 million people who do not have insurance could afford it but choose to spend their money on other things?

How many of the 50 million could afford some insurance if they altered their lifestyles and allocated their funds in a more rational manner?

How many of the 50 million could have some insurance if they would improve their stock of human capital by learning a trade or getting an education that would make them valuable enough to an employer to gain a job and employer-provided health care?

In a nation with rampant obesity, sexually-transmitted diseases, dangerous drivers, high crime and a "you owe me something" mentality, providing health care through the nose of the taxpayer is going to be very, very expensive. Nations like Canada, Sweden, Norway and other quasi-Socialistic places that have low populations and people who do not look as bad, or act as bad as we do, already have tax burdens that are hard for the average worker to manage.

In a nation of 307 million people with all of our problems, reforming health care to save 15% of us is simply idiotic.

In a week or so, the posting on this site will provide some economically sensible solutions to problems in our health care market.

Stay tuned...

Cash for Clunkers = Horrible Economic Policy

In my 20 - plus years as an economist I have witnessed many taxpayer-financed programs that have have little or no merit - economically, morally or Constitutionally.

However, I think I may now be witnessing a program that confirms my deep belief that Americans are almost completely economically ignorant.

Recently the Obama Administration announced plans to steal $1 billion (plus interest) from future taxpayers to help current Americans buy a new car. The "Cash for Clunkers" program, as of today, has used up all $1 billion and now the socialists running our country are preparing to add upwards of $2 billion to this "successful" stimulus to our moribund automobile sector.

This program is steeped in economic stupidity for a variety of reasons. Here's why:

1. If you are a car buyer who thinks of this program as $4,500 of your money at work you are wrong. This is not a tax credit where the government tells you to deduct $4,500 from your 2009 tax bill (assuming your tax bill is at least $4,500). This is government telling you that it will take almost $4,500 from your fellow taxpayers and give it to you. If you take it, over 99% of this figure will constitute theft on your part. Legalized theft, but theft nonetheless.

To calculate how much of the $4,500 is "your money" all you have to do is look at what you typically pay in federal income taxes each year. The federal government collects about $2.5 trillion in taxes annually. You need to figure what percentage of $2.5 trillion you paid. Then, take that percentage out of $1 billion (the cost of the program so far). THAT is how much of the $4,500 that is your money, rather than your neighbors money. When you do the math you will probably see that out of $4,500, your "tax credit" is probably 7 or 8 cents and the rest is government plundering on your behalf.

2. If you think the program will stimulate the automobile sector, think again. Yes, over 220,000 new cars have been purchased so far. But that means 220,000 cars that were still running have also been taken off the market. In this program you have to trade in a car that is operable then the dealer destroys the engine and it leaves the supply part of the market for cars. 220,000 new cars driven away, 220,000 used cars, with value to someone (the poor, teenagers, parents looking for a car for a kid, etc.) leave. That is called a zero-sum event. With used cars now becoming more scarce - especially if the program continues - we will see a tighter supply for these cars and higher prices for poorer Americans who could have used an $800 car to get around in for a couple of years.

The 22,000 new ones also are a false stimulus. Many of these would have been bought anyway but the lucky people who were already in the market simply get to save money at our expense.

Of those who would not have bought a new one, now the government has encouraged them to buy. This looks like a good thing for our auto industry but what happens when this false stimulus ends? Do you think the car industry is going to add more workers for a temporary program? What happens to the people who went into debt - during a recession caused by too much debt - to buy a new car? The law of opportunity cost means they took money away from some other purpose to buy this car. That means less money for other sectors of the economy and debt incurred at a time when less debt would be a better idea.

3. The planet will not cool off as a result of this program, but more people will die from it. The Obama Administration launched this program in part to get pollution-belching cars off the road and help lower the temperature of Earth. Give me a break. Let's say I trade in my truck - that gets a polar bear harming 13 miles per gallon - for a new truck that gets 19 miles per gallon. Better yet, I trade it in for a car that gets 29 miles per gallon. So, I get an improvement of 16 miles per gallon by driving my new tin can. Will I drive more now that I get better mileage? Will I be less safe on the roads? Yes and yes.

It is a rational reaction to enjoy the better mileage by going to the beach, taking more frequent trips to the grocer and other trips - long and short - that I would not take in my current gas-guzzling truck.

One brief stop on Google will also help you uncover the hard data on the number of people who get killed by driving smaller cars.

These accidents have to be paid for by insurance, health care professionals and by consumers who have to spend more to fix small cars than bigger, safer ones. This is a real cost that few in government are talking about.

Finally, and perhaps most sadly, is the cost of raising our kids to think of government as Santa or the tooth fairy. For every adult who buys a new car under this program they are unwittingly sending a message to their kids that there is "free money" out there for the taking and that we should just go get it.

That, my friends, simply adds to the ranks of future voters who line up to steal other people's money on election day.

Enjoy your new car.

July 4th is no day to celebrate

From the July 4, 2009 Orlando Sentinel

In 1794, Congress appropriated $15,000 for relief of French refugees who fled from insurrection in San Domingo to Baltimore and Philadelphia. James Madison, the principal author of the U.S. Constitution, stood on the floor of the House to object."I cannot undertake to lay my finger on that article of the Constitution which granted a right to Congress of expending, on objects of benevolence, the money of their constituents," he said.A few decades later, while serving in the same capacity as a member of the House of Representatives, David Crockett, upon listening to pleas from his fellow congressmen to give tax dollars to the widow of a deceased naval officer, said, "We have the right, as individuals, to give away as much of our own money as we please in charity; but as members of Congress, we have no right so as to appropriate a dollar of the public money."Madison and Crockett would not recognize the United States of America as we approach our nation's 233rd birthday. In fact, these gentlemen, along with the others who created our great nation, might suggest that the July Fourth festivities be canceled and replaced with a national day of mourning for what we have lost the past several years.When our republic was founded, the framers of our Constitution formed a rule book that established our government as the protector of our life, liberty and private property. Article 1, Section 8 of the Constitution states that along with national defense, Congress can allocate our earnings to provide for the general welfare of the citizenry.Thomas Jefferson, James Madison and others argued that "general welfare" was confined to only those functions that secure our rights. These three natural rights were to be the only rights we would enjoy. Everything else — a car, access to education, decent health care, concert tickets — would be part of our interests, things we would have to obtain by serving our fellow man effectively enough so as to earn the income necessary to enjoy them. Where our earning capabilities were stunted by disabilities, illness or bad luck, charity from secular and religious sources was to fill the gaps.During the Constitutional Convention in 1787, Alexander Hamilton argued that the general welfare clause should not be confined to the specific spending clauses in our Constitution. Hamilton argued that the government should be able to spend money on anything so long as the argument could be made that it was for the general welfare of the nation. Not one of the Founding Fathers agreed with Hamilton during the convention.The Supreme Court agreed with Hamilton in 1935. Fearing that the Roosevelt administration would pack the Supreme Court with justices sensitive to his big-government agenda, the court specifically mentioned Hamilton as the Founding Father who best understood what the role of government should be in our lives. Consequently, since the 1930s, the cost of government has risen from about $20 per person annually to more than $10,000.Today, our quasi-socialistic nation has moved so far from the intent of the Founding Fathers that it is laughable to hear politicians swear an oath that even mentions the Constitution.Consider the past few years alone. Trillions of tax dollars have been allocated to pre-emptive wars, domestic spying on innocent citizens and bank, automotive and insurance bailouts. We have seen huge increases in social-welfare spending for the elderly, people facing foreclosure and farmers who were supposed to know that sometimes it rains and sometimes it does not.We are witnessing the nationalization of General Motors, the banking sector and the health-care industry, all while higher taxes are imposed on America's most productive citizens to pay for the well-being of the less productive. Moreover, we now have the highest corporate income-tax burden in the developed world, while India, much of Eastern Europe and China moves in the opposite direction.If you believe in liberty and small government, July Fourth is no day to celebrate. We cannot, in good conscience, celebrate our independence when we have become so dependent on the government.It is a day to think about how much longer a nation can survive when the citizenry forms a longer and longer line at the trough of public tax dollars.