Wednesday, 16 December 2015 10:54

Hendrickson's View

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Hendrickson's View

Mark W. Hendrickson

Mark W. Hendrickson is a faculty member, economist, and contributing scholar with the Center for Vision and Values at Grove City College, Grove City, Pennsylvania. These articles are from V & V, a web site of the Center for Vision & Value, and Forbes.com.

The Democrats Are in Denial Over Their Spending Addiction

A primary meme of the Democratic Party in 2013 is that the federal government doesn't have a spending problem. That is what President Obama reportedly said to House Speaker John Boehner (R-Ohio) in their January budget negotiations. Acting on that assumption, Obama's State of the Union address signaled his desire to scuttle the 2011 sequestration deal that appears to be the American people's last best hope to trim federal spending.

The president's partisan allies have rushed to take up the cause. Two days after the State of the Union, Iowa Senator Tom Harkin (D-Iowa) stated, "I want to disagree with those who say we have a spending problem." Over the weekend, House Minority Leader Nancy Pelosi (D-Calif.) took up the refrain, telling Chris Wallace on Fox News, "It is almost a false argument to say that we have a spending problem."

With these statements, the political battle lines for 2013 have been drawn. The Democrats don't even want to talk about spending cuts. For them, the only desirable option is to continue what Washington has been doing for decades regardless of which party was in power - spend more.

With apologies to anyone struggling with alcoholism, a U.S. senator earnestly insisting that he and his colleagues don't have a spending problem is like an alcoholic denying that he has a drinking problem. While the problem is obvious to some, the senator is stubbornly in denial, not yet ready to face the unpleasant reality.

Harkin's fellow Congressman, House Minority Whip Steny Hoyer (D-MD), recently articulated his party's agenda, declaring, "The country has a paying-for problem," not a spending problem; in other words, full speed ahead with spending while we look for more tax revenues.

Nobody, however, believes that Congress will raise taxes enough to pay for all the spending that is forthcoming, sequestration or no sequestration. Instead, Washington will continue to spend more today while sticking future taxpayers with the bill by borrowing to cover the deficit.

The spendaholics charge ahead because they know they can borrow whatever they need. If Uncle Sam didn't have the power to tax, it would be considered a lousy credit risk. Taking into consideration over $16 trillion of "official debt," several trillions more of off-budget indebtedness, and perhaps as much as $200 trillion of unfunded liabilities, the risk premium attached to a borrower with negative net worth and insufficient revenues would result in interest rates far higher than today's abnormally low rates.

By cramming down interest rates, the Federal Reserve has become the federal spendaholics' enabler. Like many homeowners during the housing bubble last decade - who paid more for their houses than their income could support, only because creative financing enabled them to "tote the note" for a while - so, too, is the federal government able to borrow enough to avoid its day of reckoning: the universal recognition that it can't possibly make good on its obligations - because of the Fed's financial engineering.

Why? Here's one reason: power. Spending equals power.

All this government spending makes our society poorer, because such spending is "acatallactic" (a fancy economic word that means government spending withdraws scarce economic resources from the free markets and diverts them into the public sector, where they will be directed by political decisions into less-valued uses). The evidence that Big Government leads to economic anemia is overwhelming, whether in the extreme cases of socialistic governments that have commandeered entire economies to democratic interventionist states or where the dose of statist poison is smaller, but the positive correlation between size of government and slowness of economic growth remains.

How can the spendaholics get away with policies that don't make economic sense? Because they make great political sense. Democrats have seen how Europeans have taken to the streets to protest any and all budget cuts by Europe's broke governments, and they know that tens of millions of Americans are more concerned about continuing to receive federal benefits today than some potential financial Armageddon tomorrow.

Think of how George W. Bush and a Republican Congress acted like spendaholics when they were in power. This shows how difficult it will be for federal spending ever to be curbed. The fundamental problem isn't so much partisan as it is systemic. In a democratic system, politicians win elections by doing what attracts the most votes. Since voters like to receive benefits from government, but don't like to be taxed to pay for all those benefits, all the incentives are for politicians to adopt policies that increase spending faster than revenues.

This will all end badly some day when "the market" asserts itself and sweeps aside the rotten debris of spendaholic policies abetted by a compliant central bank. Until that day, though, the spendaholic binge will continue.

Obama's State of the Union Was Well Designed to Gull the Gullible

There is good news and bad news: The good news is that President Obama is consistent; the bad news is that he is consistently wrong. Once again - as he has before - he filled his State of the Union address with rhetoric designed to gull the gullible by saying things that sound compassionate and wise and reasonable to those who don't bother to pause and reflect on what he said.

Clearly bent on breaking the 2011 sequester agreement that would cut federal spending, the president warned that "These sudden, harsh, arbitrary cuts . . . would slow our recovery, and . . . are a really bad idea." This is - ahem - inaccurate. How could such cuts be considered "sudden" or "arbitrary" if Congress and the president have had nearly a year and a half to prepare for such an eventuality? When the president goes on to say a few paragraphs later, "we can't just cut our way to prosperity," the implicit message is that a society needs Big Government in order to prosper economically, when the entire history of the 20th century proves the opposite.

The president's earnest assertion that Medicare requires "modest reforms" is as disingenuous as his statements over the past few years that the key to our trillion-dollar budget deficits is to get the rich to pay "a little more." Sorry, but the numbers don't add up. In both cases, the problems cited by the president will require far more significant action than the president is willing to admit.

Indeed, the president strayed into dreamland when he proposed to lower healthcare costs by having patients billed based on "quality of care" (How many lawyers will it take to figure out how you measure that?) than by objective measures, e.g., which procedures were performed or how many days a patient spends in a hospital. I imagine every hospital administrator in the country is depressed tonight.

In his typical pull-the-rug-out-from-under-us style, the president recited some good news on the energy front, particularly increased domestic production of oil and gas, only to say "but" and going on to warn us that he will bypass Congress and take "executive actions" to speed the transition away from reliable and abundant fossil fuels in the quixotic quest to save the world from the global warming bugaboo. In support of this policy, he stated, "the 12 hottest years on record have all come in the last 15" - a whopper that ought to keep all the fact-checkers busy. (Another dubious assertion was his claim that "study after study shows that the sooner a child begins learning, the better he or she does down the road," when, in fact, the definitive study of Head Start - one of the rare federal programs to actually have its effectiveness evaluated - shows that there are no measurable long-term benefits to children who participated in that program.)

The president offered his customary plans for government to redistribute wealth according to his vision, e.g., planning to "reward schools" (monetarily, of course) "that develop partnerships with colleges and employers;" promising that "states with the best ideas to create jobs and lower energy bills by constructing more efficient buildings will receive federal support;" and proposing that "affordability" influence "which colleges receive certain types of federal aid" (which sounds like a deal by which colleges that reduce tuition the most might get the largest federal subsidies).

The president once again revealed that he is still in thrall to Marx's fallacious labor theory of value when he called for legislation to guarantee that women "earn a living equal to their efforts." In a market economy, it isn't effort that counts, but productivity. There are the studies, such as those cited by Kay Hymowitz in The Wall Street Journal (on April 26, 2012) showing that women's aggregate per capita pay is lower than men's because, in total, they work fewer hours, and that "childless 20-something women do earn more than their male peers."

The rest of Obama's economic ideas read like nothing more than a Big Labor wish list, asking for another increase in the minimum wage and calling for heavy spending (the earlier pious pronouncements about reducing the deficit having already been forgotten) on various construction projects. Same old, same old.

Near the end of his speech, the president asserted, "As long as I'm Commander-in-Chief, we will do whatever we must to protect those who serve their country abroad." In light of the Benghazi fiasco, how can anyone believe this?

The conclusion that I take from Barack Obama's 2013 SOTU address is that this country will continue to remain divided between those who believe this president's pronouncements, and those who distrust them.

Erasing Ronald Reagan: The Illiberal War on Truth

The prospect of four more years of Barack Obama in the White House has caused several conservative voices (among them, The Wall Street Journal's Daniel Henninger, Fox News commentator Charles Krauthammer, and noted Ronald Reagan scholar Paul Kengor) to opine that President Obama's second term portends the passing of the Reagan era, the reversal of his pro-growth policies and the attempted burial of Reagan's credo, "government is the problem."

None of this is news. It is a given that Obama and his fellow progressives reject Reagan's values and philosophy. They will continue to try to expand government.

There is, however, a more sinister dimension to the progressive agenda: Rush Limbaugh asserted that Obama wants to "erase every trace of Reagan from America" - not just to repeal and reverse Reagan's policies, but to engage in wholesale historical revisionism by obfuscating Reagan's record and reshaping public opinion about him. It serves the progressives' interests if they can obscure the fact that Reagan's policies of lower tax rates, a sound dollar, and reductions in governmental regulatory micromanagement enhanced prosperity and raised standards of living. Those of us who lived through the Reagan years remember the resulting economic growth, but nobody under the age of 30 has first-hand knowledge of those years.

Is it really possible that the left could rewrite the history of the Reagan presidency? Absolutely. They've already perverted the record of earlier Republican presidents. Take, as Exhibit A, Warren G. Harding - the president who always appears at the bottom of presidential rankings.

Yes, I know there were a couple of crooks in Harding's cabinet. Those odious men betrayed the trust of both a president and a nation. But while they gained a few hundred thousand dollars, Harding's policies enriched the American people by billions. Harding entered office in the midst of the Depression of 1920-'21 - a downturn as rapid and severe as any in American history, with GNP contracting 24 percent and unemployment more than doubling to 11.7 percent.

Harding's policy response was to get government out of the way and let free markets make the necessary adjustments. He induced Congress to slash federal spending by 40 percent in two years and lower the top marginal tax rate from 73 percent to 56 percent (on its way down to 25 percent under his successor, Calvin Coolidge). Demonstrating the fallacy of the Keynesian dogma that government should increase spending and deficits to cure recessions, the Harding spending cuts yielded large surpluses (used to pay down World War I indebtedness), and yet, by 1922, GDP was rising and unemployment falling, plummeting to a minuscule 2.4 percent by 1923. Maybe Harding wasn't the best judge of character, but his economic program was arguably the most successful of any president in the 20th century. A "terrible" president? Absurd.

Another example of historical revisionism, progressive-style, involves Herbert Hoover. Today's students are routinely taught that Hoover was the last of the "laissez faire" presidents. Last year, progressives produced a "take back the American dream" special edition of "The Big Picture" during which the host denigrated the alleged laissez faire trio of Harding, Coolidge, and Hoover, contrasting them with the great economic savior, Franklin Roosevelt. Part of the error is simple partisan bias - i.e., Republicans are bad and Democrats are good - but party aside, Hoover should have been lumped with FDR, not with his two predecessors. Harding and Coolidge truly were sympathetic to free markets. Hoover was not. He disdained and distrusted the laissez faire philosophy, and was almost as much of an interventionist as Roosevelt. Indeed, FDR's own advisers recorded in their memoirs that the true originator of the New Deal was Hoover. It is political propaganda, not historical verisimilitude, which paints Hoover as a clone of his predecessors rather than of his successor.

The lesson is clear: If those who understood and approved of Reagan's policies fail to reiterate Reagan's beliefs and policies, Reagan's progressive opponents will distort his history, and he eventually will be as misunderstood as Harding and Hoover are today. (For the record, I did not vote for Reagan either time - although I would have if I had thought that he needed my vote to spare us from the incompetent Carter or the robotically statist Mondale - because Reagan was too big a spender for my taste. How much of that was due to Reagan himself, how much to Tip O'Neill's Democratic House, and how much to the popular thought of the day, is another debate.)

The progressive war against historical accuracy should concern all American citizens. When those in power mutilate truth, the welfare of the people is at risk. Think of what all the illiberal movements - whether fascist, socialist, Communist, environmentalist, or progressive - have in common. All exalt state power at the expense of the individual rights of liberty, property, and ultimately life itself. In the effort to attain that power, they also commit depredations on truth, as George Orwell warned in 1984. Watch to see how often Team Obama employs the Big Lie technique in attempting to revise Reagan's record.

The Bible says, "Ye shall know the truth, and the truth shall make you free." A corollary would be that if we, the people, do not know the truth, there's a good chance we won't be free. Whether we agree or disagree with what Ronald Reagan did, we shouldn't let anyone lie about it. Falsehood is the enemy of human progress.

Brent Musburger, Phil Mickelson and Me: Encounters with Political Correctness

What do television sports announcer Brent Musburger, world-class golfer Phil Mickelson, and yours truly have in common? We've all had pointed encounters with political correctness - the efforts by zealots on the left to discomfit and intimidate, if not censor and silence, those who utter ideas that depart from their ideological orthodoxy.

Musburger drew the ire of the PC brigades during the telecast of the Alabama-Notre Dame football championship a few weeks ago. His offense? He dared to call Miss Alabama, a friend of the Alabama quarterback who was being shown to millions of viewers in a close-up camera shot, a "lovely lady," following it up with a corny comment about how it seems that quarterbacks "get all the good-looking women."

It is positively weird that the self-anointed, PC-language police remain silent about the vulgar crudities and disrespectful references to women as "hot chicks" or "babes" on primetime television, and then go ballistic over a few innocuous words. Had Musburger described Miss Alabama lewdly, lecherously, or in crude terms comparable to the customary swill on television, then a rebuke would have been appropriate, but what is so objectionable about the respectful compliment "lovely" lady?

Perhaps the PC crowd is protesting nature for being cruelly unfair, because some people are more handsome and attractive than others, and so they denounced Musburger for committing the sin of anti-egalitarian heresy by calling attention to humans' individual differences? Or could it be that the presumed fault here is heterosexuality - that for a man to say aloud that a woman is lovely is an atavistic instinct appropriate for Neanderthal man, but disgraceful in a modern male?

Another example of the obnoxious aggressiveness of the PC mob was the mini-firestorm that erupted when one of America's top golfers, Phil Mickelson, mentioned that he was thinking of moving out of California due to the increasingly heavy tax burden there. This should have been an uncontroversial statement. After all, it's a time-honored tradition for Americans to grouse about their taxes, and lots of people already have fled California's high taxes. (Indeed, when someone asked Tiger Woods about Mickelson's remarks, Tiger said he understood why Mickelson might relocate to a low-tax state, because Tiger himself already had done so.)

Alas, Mickelson wasn't aware that in a politically correct world, rich people aren't supposed to complain about taxes. According to the PC-speech police, it's fine for a Warren Buffett to state that taxes on the rich should rise, but unacceptable for Mickelson or other rich Americans to express the opposite opinion. Even one of Forbes.com's bloggers scolded Mickelson, asserting that, because he earns millions of dollars annually, he has no business stating his dislike of the fact that Big Government perennially takes millions of his earnings and is coming after more. The implicit message: "Shut up, Phil, you're lucky the government isn't taking it all."

My own brush with political correctness is not as public as what Musburger and Mickelson were subjected to. In that way, it actually was more insidious. Before he would publish an article I wrote about the weaknesses of the manmade global warming theory, the editor of a major national newspaper said he had to ask me if I ever had received compensation from a fossil-fuel company.

The answer, in my case, is "no," but the very question is an insult, and it shows how political correctness already has infiltrated the mainstream media. The question insinuates that anyone who has received money from an oil company is venal and untrustworthy. When I asked the editor if he was required to ask pro-global warming writers whether they have received government funding, the answer was "no." This is a rather peculiar double standard, since government has poured vastly more money into the climate change issue than have energy companies. The PC notion that anyone whose funding comes from government is immune from conflicts of interest and is unbiased is logically ludicrous and brazenly bigoted.

The implications of what Musburger, Mickelson, and I have experienced are plain. As the left aggressively pursues its economic, political, and cultural agenda, they are eager to denounce, discredit, hound, harass, vilify, abuse, and make life difficult for anyone who dares to contradict their catechism. And if we object to this treatment, we will be accused of incivility, intolerance, partisanship, and ideological rigidity. Such is the game plan of the peevish scolds of political correctness.

Obama Can Make His Own Reality, But Laws of the Universe Won't Necessarily Adhere

An oft-quoted adage is, "You are entitled to your own opinion, but you are not entitled to your own facts." A corollary to this is that you can't make your reality, and the laws of the universe won't change because you want them to. What's the point of me even writing such an obvious, even banal, truism? It's the fact that various ideologues, reformers, revolutionaries, utopians, and other political fanatics persist in the belief that our social problems are the fault of a lack of will, and that if we just insist on something vehemently enough, nothing can prevent the desired improvements from coming to pass. This belief is a dangerous, and often destructive, delusion.

An incident that the late Alexander Solzhenitsyn recounted in The Gulag Archipelago illustrates the tragic consequences of allowing ideological zealotry, hubris, and political fanaticism to lead one to deny and defy reality and the laws of the universe. Soviet officials wanted to transport larger loads of steel by railroad. They told some railroad engineers what they wanted to do, expecting the engineers to make it happen. When the engineers explained that the request was impossible because the heavier loads would exceed the capacity of the tracks and cause them to break down, the party officials had the engineers shot as saboteurs of progress. They then began to ship heavier, and, as the engineers had warned them, the tracks indeed broke down. The Communist Party had the power of life and death over Soviet citizens, but they were powerless to revise or repeal the laws of physics or the principles of engineering.

The progressives in Washington seem infected with zeal comparable to that which Solzhenitsyn described. These flights from reality manifest themselves in a variety of policy initiatives.

Take, for, example, the "reasoning" employed by the left when they pushed Obamacare through Congress nearly three years ago: Then-Speaker of the House Nancy Pelosi extolled the marvels of this new legislation that would, she believed, be of universal benefit by putting "a cap on your [health-care] costs, but no cap on your [health-care] benefits." Anybody with an elementary grasp of economics recognizes the Pelosi promise as a pipedream, and that the actual consequence of such a policy will be pronounced shortages necessitating rationing of health care as opposed to unlimited consumption thereof.

Another example of ideological zeal resulting in an absurd policy is Congress' astounding constellation of policies pertaining to cellulosic ethanol. Having decreed that energy companies had to buy stipulated quantities of cellulosic ethanol, it turned out that the inherently uneconomic realities of the production process for such ethanol were such that companies decided not to produce it so that they wouldn't suffer losses. This hasn't stopped Congress from madly insisting that energy companies pay fines for not purchasing as much American-produced cellulosic ethanol as Congress had mandated - even though the reason they aren't buying it is because it doesn't exist.

I can't help but think of such depressingly irrational behavior this week as I think of another four years with Barack Obama in the White House. Here is a man who pleases the crowd by using his inaugural address to pay lip service to working in a bipartisan fashion to reduce federal budget deficits, even after already having told Republicans that spending cuts are completely off the negotiating table. The president talks about creating a bright future for our posterity, even as he mortgages that future by amassing crushing debts that amount to tax increases on our children.

There are other signs that Obama, in his zeal to transform America, seems to believe that he and his fellow progressives can use government to alter the way the world works. Examples: He now speaks of gay marriage as essentially indistinguishable from heterosexual marriage (a quite different proposition from impartially protecting the rights of all Americans), thereby ignoring the span of human history and inescapable biological realities; proceeding as though taking more property from productive Americans and giving more to the unproductive is an economically or socially sustainable policy, which makes one wonder if Obama believes that he can reprogram human nature to produce "the new man" that the Soviets failed to mold; the belief that overall safety can be enhanced by more extensive gun regulations, despite abundant historical evidence to the contrary; feeding the notion that human beings can control earth's climate, which is perhaps today's ultimate utopian conceit.

This is not to say that Barack Obama is literally as oblivious to reality as the Soviet officials mentioned above, or even Nancy Pelosi. Indeed, there is a grimmer, more chilling possibility here: Obama is no dummy. He may be well aware that his policies will impoverish our future, and yet he will pursue them anyway, knowing the damage he is causing. You can decide for yourself what his motivation is. Maybe Obama's unsustainable deficit spending really is due to misguided idealism, but it also could be due to a desire to wreak revenge on America for past sins, imaginary and real (the Dinesh D'Souza theory); his adherence to a Marxian ideology; and the fact that he is a hard-core member of the "mean green" club that believes that Americans are guilty of having committed the sin of affluence; or maybe it's just a ruthless application of the Curley strategy designed to benefit him politically while inflicting heavy economic costs on the people.

Is it possible that Obama designed his inaugural address rhetoric to make the left feel good, and that his actual intention is to govern closer to the center? From my perspective, indulging in such a fanciful belief could be as delusional as the leftist fanaticism of believing that one can alter reality through force of will. I'd love to be proven wrong, but leopards don't change their spots. Obama is who he is and believes what he believes, and I think that we are in for four years of hectoring, pounding, executive orders, end runs around Congress, increasingly heavy-handed regulatory control, and more suppression of liberty in the name of some mythical "justice." *

Read 1723 times Last modified on Wednesday, 16 December 2015 16:54
Mark Hendrickson

Mark W. Hendrickson is a faculty member, economist, and contributing scholar with the Center for Vision and Values at Grove City College, Grove City, Pennsylvania. These articles are from V & V, a web site of the Center for Vision & Value, and Forbes.com.

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