The liberties of our country, the freedom of our civil Constitution, are worth defending at all hazards; and it is our duty to defend them against all attacks. We have received them as a fair inheritance from our worthy ancestors: they purchased them for us with toil and danger and expense of treasure and blood, and transmitted them to us with care and diligence. It will bring an everlasting mark of infamy on the present generation, enlightened as it is, if we should suffer them to be wrested from us by violence without a struggle, or to be cheated out of them by the artifices of false and designing men.
[Samuel Adams]
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By: Monty Pelerin
History is a great teacher. It often provides clues that enable us to understand the present and future.
Ancient regimes’ concept of divine right of kings seems pertinent to today. Wikipedia offers as good a summary as any:
The Divine Right of Kings is a political and religious doctrine of royal absolutism. It asserts that a monarch is subject to no earthly authority, deriving his right to rule directly from the will of God. The king is thus not subject to the will of his people, the aristocracy, or any other estate of the realm, including the church.
The phrase “not subject to the will of his people” is an appropriate similarity to contemporary times.
Divine right was based on a metaphysical assertion. Despite “ultimate authority,” kings engaged “intellectuals” to provide supporting propaganda for the claim. Their efforts worked for a long time. As late as 1729, Thomas Paine saw fit to speak about the lingering right of heredity:
…the idea of hereditary legislators is as inconsistent as that of hereditary judges, or hereditary juries; and as absurd as an hereditary mathematician, or an hereditary wise man; and as ridiculous as an hereditary poet laureate.
We do not believe in the divine right of elected representatives, although some of them seem to.
The interesting parallel to today is the ancient regimes’ use of “intellectuals” as court propagandists. The same model exists today. The propagandists who led our country to its current dismal state, it seems to me, are economists. Today’s metaphysicians are called economic advisers. The Keynesian model is their tool for increased and activist government.
To many, the Keynesian myth is every bit as metaphysical as the divine right of kings. Gary North provides an evaluation that should unnerve Keynesians:
Ever since the third quarter of 2008, the nation’s nominal GDP has increased by a tiny $100 billion, but the Federal debt has increased by 25 times the GDP increase.
It has taken $25 of Federal deficits to produce $1 of GDP growth. This marks a major anomaly for Keynesian economic theory. The justification for government deficits in Keynesian theory is that government spending restores economic growth. Money spent by the private sector does not increase economic growth in a recession; government spending does. This has never made any economic sense, but now the non-response of the economy is exposing this original nonsense for what it always was: nonsense.
The ineffectiveness of Keynesian policies is a surprise only to those who worship at the Keynesian Temple. Many non-Keynesians accurately predicted that recent interventions would make conditions worse.
The Faustian bargain between some of the economics profession and the political class was struck after Keynes’ General Theory was published during the Great Depression. Keynes’ ideas provided cover for politicians to take increasing control of the economy due to its alleged instability. Government management was deemed necessary for consistent growth and wealth creation. For politicians, that was nirvana. For economists, it provided wealth and power in the form of government service. All they had to do was please the king and his court.
The Faustian partnership is now unraveling, despite the protestations of Keynesians. Worshipers like Paul Krugman claim that the economy would be worse if the Keynesian potions had not been applied.
The sacrosanct Keynesian paradigm is never doubted by true believers. All problems are assumed solvable by injection of more poison into the patient. There is no other solution. If results are less than expected, it is always the fault of practitioners who failed to administer enough medicine in a timely manner.
As the world economy implodes, the mountebanks are increasingly seen for what they are — descendants of the court advisers who supported the divine rights of kings. They are alchemists paid to support the divine right of government. It is their role to provide the intellectual support for the growth of government at the expense of the will of the people. These paid political hacks are little different from prostitutes or hired guns. They are the whores of the economics profession.
Let me be clear that I am not calling all Keynesians whores. Some are just plain ignorant. (Neither category is flattering.) Many are technocrats who have mastered mathematical techniques from prestige universities. Like idiot savants, they are brilliant with models, but not intelligent enough to know that aggregate models have nothing to do with individual human behavior. A wag’s characterization of Paul Samuelson seems appropriate to describe these types: “He is the best physicist that the economics profession has ever produced.”
Now their franchise is in danger. Their fingerprints are all over disasters like the Post Office, Amtrak, Medicare, Medicaid, Social Security, Fannie Mae, Freddie Mac and too many others to mention. Despite their best efforts and promises, there is no recovery coming in the economy. Keynesianism is under attack around the world.
It is times like these that paradigm shifts occur. Thomas Kuhn wrote about the difficulties of such shifts in the natural sciences. Vested interests were not easy to overcome, even with contradictory data. That does not bode well for changing the Keynesian paradigm in the social sciences where the vested interests are more numerous and powerful.
There are reasons to be pessimistic:
First, virtually every politician and bureaucrat favors the status quo. It has produced pay, retirement benefits, power and prestige relative to their counterparts in the private sector. There is no risk of unemployment of your employee relocating or going out of business. It is a sheltered overcompensated life that few would willingly change regardless of political affiliation.
Second, big media favors big government and big spending. They understand little about anything, especially economics. The Daily Bell discussed this shortcoming with respect to Time Magazine’s recent article on Economics and concluded:
Here is a woman who writes about economics for millions and whose platform is arguably the most prestigious magazine of its type during the 20th century. Yet both she and her editors allow her to publish an article that betrays such ignorance that the feedbacks beneath the article are of far more value than her own erroneous musings. When that happens, you’ve got a problem.
Third, major corporations are dependent upon various corporate welfare items, contracts and tax loopholes that they are unwilling to give up.
Fourth, 47% of individuals pay no income tax. These individuals have the incentive to vote for larger government because they are “free-riders.”
Fifth, the elderly receive Medicare and Social Security. Presumably they paid into these systems during their earning years. When someone talks about government reform, they see their primary source of income threatened — “they are trying to take away my benefits. How will I live?”
Sixth, the balance of the population is generally unable to determine whether they are winners or losers from government. There are too many programs and regulations to make such a calculation. Many deem a particular program or regulation good because they do not know its costs. Even if proper cost determinations could be made, the calculation is terribly biased because of deficit spending. Deficit spending is close to 50% of total spending. If people compare what they pay in taxes as the costs of these programs, they fool themselves by being biased toward government spending.
Seventh, intellectual arguments cannot overthrow the Keynesian paradigm. Unlike the natural sciences, replicated laboratory tests of a hypothesis are not possible. Proof in the social sciences is never as definitive as in the physical sciences.
Vested interests are much greater than Kuhn described in the natural sciences. No constituent group supports a move toward smaller government. Eventually the truth outs, at least in the natural sciences. Will that happen in the social sciences? Will we overthrow the false paradigm of Keynesian economics? Will big government be able to be rolled back? These are questions that only the passage of time will reveal.
The Keynesian paradigm has gone on too long. It is likely that it cannot continue much longer. Rational evaluation will not kill it. It will die from self-immolation. It will perish in the flames that consume our economy. Consensus that it is dead will probably only come when the economy has reached a similarly terminal condition.
One hopes that this tragedy unfolds fast enough that our freedom still remains. If so, we will rise from the ashes painfully but quickly. If not the world may enter an Economic Dark Ages.
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Obama’s Point of No Return
Aug 19
Posted by admin in Commentary, Opinion | No Comments
by J.R. Dunn
Such moments are obvious in retrospect, though not always at the time. With Richard Nixon, it was the “eighteen-minute gap.” An oval office tape recording turned over to Judge John Sirica, who was overseeing the investigation of the Watergate incident, turned out to have a lengthy period of silence smack dab in the middle of a conversation between Nixon and chief of staff H.R. Haldeman. The White House claimed that Rose Mary Woods, the president’s secretary, had inadvertently hit the wrong button for those eighteen minutes. This might well have been true, but in light of Nixon’s long reputation as Tricky Dick, it sounded like the cock-and-bull story to end them all. Nixon had been holding his own in the Watergate battle up to that point. The voting public viewed the uproar with bemusement rather than indignation. But the tape gap finished him. In less than a year, he was forced into resignation.
For Jimmy Carter, it was the “malaise speech” of July 15, 1979, in which he attempted to shuffle the blame for his tepid performance as president from his own administration onto the shoulders of the American people. Carter claimed that a national “crisis of confidence” (he never actually used the word “malaise”) made it impossible for him to adequately grapple with the country’s problems. It was America’s fault, not Jimmy Carter’s. The public reaction was open disgust and the abject collapse of any support for the Carter presidency.
With Obama, we have an abundance of riches: the multiple vacations, the legal harassment of the state of Arizona on behalf of illegals, the clownish response to the Gulf oil blowout. But when historians come to select the moment when Obama went over the edge of the world, I think they’ll find the great Iftar mosque speech of August 13, 2010 hard to beat.
During a White House dinner celebrating Ramadan the president found it appropriate to come out in favor of religious freedom. Not in support of Christians being attacked by janjaweed gunmen, or Bahais tormented by Iranian mullahs, or Jews being stalked by assassins, or even American citizens being told that they cannot pray in public, but in favor of a shadowy foreign foundation with suspicious financing and disturbing Jihadi connections that wishes to build some kind of victory monument congruent to the site of the 9/11 massacre.
With Obama, suspicions have involved his status as an American. The foreign parentage, the registration in an Indonesian school noting him as a Muslim, the uproar over the birth certificate, aroused misgivings that, despite media scorn heaped upon those noting them, he has never quite been able to put to rest. As of last weekend, his opportunities to do so are ended. Impressions trump arguments, and for most of the country, Obama will, from here on in, be a strange and untrustworthy figure — a man who does not understand what Ground Zero means to America, who utilizes American law and custom to support foreign interests, who speaks to strangers more clearly than to his own.
Nothing either Nixon or Carter did enabled them to recover from their faux pas. Even as the tape gap story broke, Nixon was supervising a massive airlift of supplies and ammunition to Israel, which was involved in life-or-death struggle against massive Arab attack in the Yom Kippur War. It gained him nothing, scarcely earning a mention amid all the public speculation about Watergate. Less than three months after the Carter speech, Iranian “students” (actually professional revolutionaries under the control of the Ayatollah Khomeini) sacked the American embassy in Tehran, taking nearly a hundred American hostages. I can attest that I was not alone in thinking, “Great — and we’ve got Mr. Malaise is charge.” The year-and a-half-long hostage crisis, climaxed by the disastrous Eagle Claw rescue mission, hastened the collapse of the worst presidency of the later 20th century.
The past two years are the best Obama will ever see. The real crises of his presidency are still to come, and are easily visible as they move toward us — Iran, terrorism, the economy, the collapse of the national health care system hastened by his own policies. He will meet them under a cloud of his own making, attempting to overcome them as a president who takes endless vacations, who will not defend his country’s borders, who sat out the Gulf oil crisis, who overlooks the sacrifices of his own countrymen in favor of dubious foreign figures.
The tide has gone out for Barack Obama. It is all epilogue from here on in.
Tags: failure, obama, president