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Obama’s Point of No Return

Aug 19

Posted by admin in Commentary, Opinion | No Comments

American Thinker

by J.R. Dunn

There comes a moment in a failing presidency where the incumbent, through some single gesture, action, or statement, crosses a certain line from beyond which there is no return. Through his own will and behavior he so underlines his failings, so frames his negative image, that no further action can ever erase it. Fate, accident, and circumstance have nothing to do with it. It is the president himself who puts the period at the end of his own sentence.

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.

Freelance graphic designers from UpstackThese doomsday statements work by putting previous suspicions and surmises about the president — always negative — into sharp relief, acting as verification and confirmation. Nixon had suffered a reputation as a conniver since his knock-down, drag-out 1950 battle against Helen Gahagan Douglas (it was Douglas who coined the “Tricky Dick” nickname). The tape gap fit so perfectly into that narrative as to crowd out everything else. Carter’s inept performance as president was rendered even harder to bear by his continual sanctimony and moral preening. The malaise speech merely added the patina of a whiner.

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.

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The Divine Right of Government

Aug 19

Posted by admin in Abuse of Power, Economics, Opinion | 1 Comment

American Thinker
By: Monty Pelerin

Freelance graphic designers from UpstackHistory 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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Our Patrick Henry Moment Is Here

Aug 3

Posted by admin in Commentary, Economics, Opinion | 1 Comment

American Thinker

By Monty Pelerin

Freelance graphic designers from UpstackObama’s election was supposed to transform America, at least in his mind.

This country’s first socialist president strode into office confident that he would remake this country. Fortunately for the country, the timing of his election was twenty, if not fifty, years too late. Socialism has failed in its pure form wherever it has been tried. Now it has failed in its modified form. While much of the world realizes this, President Obama is either ignorant or has more sinister plans for the country.

In the 1920s, Ludwig von Mises demonstrated via economic reasoning why socialism could not work. His argument was that without market prices, there was no way to properly allocate resources. About ten years later, Friedrich Hayek supported Mises’ conclusion from a different angle. He approached it as a “knowledge problem” and argued that no central authority, regardless of how intelligent, could possess enough information to make proper and efficient decisions for tens of millions of people and businesses.

History validated the theory of the two Austrian economists. Russia, China, Eastern Europe, Cuba, and North Korea produced inevitable the misery, poverty, and brutality. The two countries that continue the system are amongst the poorest countries in the world, held together only by totalitarian rule and outside economic support.

With the recognition that socialism did not work, “do-gooders” changed their efforts to a system that would be part capitalism and part socialism. They believed that capitalism could be used for resource allocation while the “caring nature” of socialism could ensure equitable distribution of wealth. President Clinton expressed interest in what was then referred to as a “third-way.” Western Europe had adopted this approach decades earlier.

Interestingly, Mises argued that a “third way” could not work, either. In the 1940s, Mises demonstrated that one intervention begets additional interventions. A so-called mixed system is nothing more than capitalism with interventionism imposed. Mises showed that any such system eventually degenerates into full-fledged socialism. In a collection of essays entitled “Planning for Freedom,” Mises concluded:

There is no other alternative to totalitarian slavery than liberty. There is no other planning for freedom and general welfare than to let the market system work. There is no other means to attain full employment, rising real wage rates and a high standard of living for the common man than private initiative and free enterprise.

The countries of Western Europe have, as Mises predicted, deteriorated into social welfare states likely never imagined or intended at their inceptions. As full-blown socialism approached, these countries became insolvent. Soon all will be forced to either dismantle their welfare states or incur sovereign defaults. The U.S., while never formally adopting either socialism or the mixed system, drifted into the mixed system by gradually adopting many socialist programs. As a result, the U.S. faces the same future of insolvency as its European counterparts.

In terms of history, the mixed system dates back only to Bismarck in the 1880s. It was initiated in a few countries in the first quarter of the twentieth century. Its widespread acceptance occurred after World War II, when several countries chose not to return to the decentralized economies that existed prior to the war. England was the prime example. Industries nationalized for the war effort remained nationalized after the war. England rapidly devolved into a third-rate economy as a result. Prime Minister Thatcher reversed the decline by re-privatizing most of these industries.

It took only about fifty to seventy years for the mixed systems to fail. That is literally a moment in terms of history. Many people are still reluctant to admit that socialism is a failure despite the theoretical warnings and the actual failures themselves. With socialists, it is never the system and always the people that are the cause of failure. “If only we had better leaders.” As Hayek and Mises pointed out, it has nothing to do with leadership. There is a fatal flaw in the concept.

As a result of attempting to extend the socialist myth, governments and their populations are now burdened with debt, much of which will never be paid. We are on the verge of a worldwide depression that will hit as governments run out of resources. It is likely that politicians will continue to play the game of “extend and pretend.” But we have reached Ms. Thatcher’s end-point: “The problem with socialism is that you run out of other people’s money.”

How ironic that President Obama’s first major achievement was ObamaCare. In May, Greece was ordered to privatize its health care system. This month, it was reported that England was going to overhaul their health care system. England was frequently referenced as a model of affordable, efficient health care by ObamaCare advocates. Apparently, the English government and its people view it differently.

These instances are not one-time events. Nor will they be limited to health care. The welfare states of Europe will soon be dismantled in part or whole. So too will the entitlement programs in the U.S. The laws of economics and physics are immutable. They are above legislation. Countries do not have the resources necessary to honor their commitments, period!

Our Founding Fathers, without using the term socialism, designed a Constitution to protect against such incoherent schemes. Over time, the Constitution was vitiated by “living document” interpretations, penumbras, and other nonsense. Now, the U.S. stands on the precipice of failure just as Western Europe. It is insolvent, and there are no other alternatives than to default or dismantle.

The world is at a very dangerous inflection point. We are about to enter a depression. Politicians are not going to back away from socialism willingly. They and large numbers of other beneficiaries will do whatever they can to retain the status quo. Despite the unequivocal failure of the modern welfare state, it is unlikely to disappear quietly. The status quo is always difficult to change. It becomes especially so in desperate economic times and for people who believe they are entitled to be taken care of by others.

The welfare state is headed for the dustbin of history. That is certain because it is no longer sustainable. The critical question is what will replace it. As Mises pointed out, there are only two alternatives: freedom or totalitarianism. There is no middle ground. There is no political compromise that can bridge this gap.

Regardless of which side of the issue you are on, the battle will be bitter and likely last a decade or more. Economically, everyone will be hurt, including many of the “well-off.” Whether our moral and ethical code is strong enough to get through this together is moot. We are not like our ancestors in the sense of their strong commitment to community, responsibility, forbearance, and integrity. We are the pampered generation, entitled to gratification now and willing to cut corners to get it.

In many ways, this problem is more serious than that faced by our Founding Fathers. After all, King George had little control over their lives or fortunes. Yet these principled men risked both rather than accept even a little bit of tyranny. Theirs was a fight of principle; ours is one of survival. The fight is made more important when it is coupled with a depression. We know what monsters rose to power during the last depression and their effect on the world.

We will either get liberty or totalitarianism. There is no middle ground. For me, the choice is clear and was stated by Patrick Henry more than two centuries ago: “Give me liberty or give me death.”

I am willing to sacrifice just as much as our Founding Fathers did so that my grandchildren and their grandchildren can live in the same country I grew up in. I hope enough others feel the same.

Monty Pelerin blogs at www.economicnoise.com.

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