Mark Hendrickson

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

Sunday, 20 December 2015 08:08

Hendrickson's View

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 & Values.

Sex, Life, and Death

Two summers ago, while passing through an airport, I caught a TV news story: a double homicide in Ohio. The victims were a young woman and the nine-month-old fetus she was carrying. The murderer was her lover, the unborn baby's father.

I was stunned, bewildered, grieved. Who could do such a thing?

Apparently, this particular crime is not rare. One expert interviewed for the report I saw averred that homicide is the second-most common cause of death for pregnant women in America.

I've thought about this heinous crime repeatedly during the past two years. Here are some thoughts that have occurred to me:

The perpetrators of this crime tend to be men rejecting the responsibilities of parenthood and marriage. Both child and mother are viewed as burdens to be disposed of. How dare the woman carry the baby to term and ruin a convenient, nonbinding sexual relationship!

These double murders don't occur in a void, but in a social context against the cultural backdrop formed by our values. Please don't construe what follows as suggesting collective guilt. What I will suggest is that men murdering their lovers and children is the most extreme manifestation of thoughts, attitudes, and beliefs that tend toward death and away from life. The perpetrators are responsible for their crimes. Let's look around us to see if there are trends in thought in our society that are nourishing a cultural ethos that depreciates the value of individual lives.

The increasing incidence of men killing their pregnant lovers coincides over the last 36 years with abortion having received legal sanction as a legitimate form of birth control. Legalizing the killing of unwanted babies was our first repudiation of the principle of the sanctity of life, a rejection of God's plan. "Shall I bring to the birth, and not cause to bring forth? saith the Lord" (Isaiah 66:9).

A next step after abortion on the slippery slope toward death is the killing of women bearing unwanted babies. (A quick aside here: The pro-abortion assertion that a fetus is just a growth inside a woman's body, not a life, receives a strong rebuke when our laws treat the murder of a pregnant woman as a double homicide.)

Roughly coinciding with the period of legalized abortion has been the insidious error, propagated by pagan environmentalism, that there are too many people, that having children is irresponsible, that a human being is just another mouth to feed, rather than an intelligent, creative, productive being whose life can glorify the Creator of the universe. God's first command to man - "be fruitful and multiply" (Genesis 1:28) - was contradicted by green theologians who proclaimed procreation a sin against Mother Earth.

Also feeding an anti-life culture has been the common "baby boomer" desire to remain young and carefree for as long as possible. Raising kids is hard work and ties one down, right? True, but millions of us who have opted for parenthood have found raising children to be the greatest joy in this world. But the fact remains that many boomers have preferred consumption to investment, immediate gratification to long-term, greater rewards. We'd rather partake of the pleasures of this world (exotic vacations, fancy cars, luxury goods) than sacrifice some of our immediate wants for the long-run benefit of our familial and societal posterity.

Another powerful anti-life undertow was generated by the "sexual revolution." For many, the Judeo-Christian concept of sex for procreation was eclipsed by the philosophy of sex as recreation. Procreation or recreation: Is sex about creating life or having fun? Is it about giving life and love, or is it about taking pleasure - a self-indulgence so devoid of love that in extreme cases it culminates in murder. Is it life-affirming or life-destroying?

To the extent that sex as fun has eclipsed sex for life, we have trivialized sex and devalued life. The result: soaring divorce rates, the emotional trauma of broken families, and even men murdering their lovers and unborn children. Clearly, being "liberated" from traditional sexual mores isn't as progressive - individually or socially - as the proponents of sexual "liberation" promised.

Here is some historical trivia, which I know will sound like raving right-wing paranoia to those who never studied the subject: Communists insidiously worked to encourage sexual license and subvert sexual morality in America. It's all there in black and white, dating back to Beria, the leader of Stalin's vile secret police. Communists understood that a demoralized population is far easier to enslave than a morally upright people. They delighted in the Vietnam-era countercultural mottoes, "Make love, not war" and "If it feels good, do it," because they understood that a society filled with people who value self-indulgence above heroism and sacrifice lacks the backbone to resist the encroachments of tyranny.

Indeed, it is difficult to conceive of a more demoralized society and one riper for the loss of self-government than one in which men choose to kill their pregnant lovers and wives.

As is always the case with life's great issues, the Bible provides the best guidance: "Lo, children are an heritage of the Lord: and the fruit of the womb is his reward" (Psalm 127:3) and "Choose life that both thou and thy seed may live" (Deuteronomy 30:19).

Welcome to the Brave New World Devised by SCOTUS

In a case of painfully ironic timing, between the 800th anniversary of Magna Carta on June 15 and our annual Fourth of July celebration three weeks later, the Supreme Court of the United States (SCOTUS) issued three decisions which fundamentally altered the legal landscape in America in ways that undermine the rule of law, economic liberty, and to the free exercise of the Christian religion. Let's take a look at a few aspects of the brave new world that the Court has thrust upon us by examining the implications and ramifications of these three cases: King v. Burwell, which upheld the Patient Protection and Affordable Care Act ("Obamacare"); Texas Department of Housing v. Inclusive Communities Project, which conferred constitutional legitimacy on the dubious doctrine of "disparate impact"; and Obergefell v. Hodges, which ruled that gay marriage is a right that the Constitution guarantees to all Americans.

1) King v. Burwell versus the rule of law. While many of us are rightly lamenting the survival of a poorly conceived, economically disruptive, and potentially tyrannical law that lays the groundwork for unelected political hacks ultimately to wield the power of life and death over Americans by granting or withholding health care from them, let's look at the harm inflicted by SCOTUS' 6-3 decision upholding the law.

As he did in upholding the PPACA in 2012, Chief Justice John Roberts (this time with the concurrence of Associate Justice Anthony Kennedy as well as the Court's four rubber-stamp approvers of all things progressive) employed word games to salvage the law. Three years ago, Roberts unilaterally redefined a fine as a tax. This year, Roberts showed that he has fallen all the way down Alice in Wonderland's rabbit hole and adopted the Humpty Dumpty theory of language. To quote Humpty, "When I use a word, it means just what I choose it to mean." In King, Roberts decided that a "state exchange" meant "not a state exchange." This is not only absurd and irrational (if "A" means "not A," reason has been abandoned) but sinister and Orwellian, for as Orwell memorably illustrated in his classic dystopian novel, 1984, when the government can redefine reality (e.g. "freedom is slavery") liberty indeed is lost.

In his opinion, Roberts abrogated the constitutional order by usurping the congressional prerogative to legislate. We can quibble whether he arrogated that right to himself by reversing the plain language of PPACA or bestowed that unwarranted privilege on the IRS by ratifying that politicized agency's creative interpretation of statutory language. In either case, though, Roberts neutered Congress.

Apart from the violence done to our constitution in this decision, in a very practical sense Roberts has created a moral hazard that is likely to result in Congress being increasingly sloppy and imprecise in writing laws. Congress (as it has been doing in recent decades, much to Justice Scalia's frustration) will be tempted to pass increasingly vague legislation that will allow unelected officials in the executive branch to decide the meanings thereof.

Tragically, 800 years after the principle that free people have a right to be governed by written, fixed laws instead of the arbitrary opinions of those in power, Roberts' atavistic thinking has abandoned that principle thereby jeopardizing liberty. Adios, Magna Carta and rule of law!

2) Texas Department of Housing v. Inclusive Communities Project versus individual liberty. With this decision, SCOTUS ruled that Americans may be found guilty of violating the Fair Housing Act of 1968, which prohibits racial discrimination, even if there was no intent of discrimination, but simply when the result shows a disparate impact on various races.

There are at least three major problems with the opinion written for the 5-4 majority by associate Justice Anthony Kennedy, who aligned himself with the four progressives:

First, Kennedy endorsed the kind of social engineering that one would expect to find in a Communist country like Soviet Russia than in a free society like the United States of America. When Kennedy wrote, "the Court acknowledges the Fair Housing Act's continuing role in moving the Nation toward a more integrated society," he authorized governments in the U.S. to move beyond the realm of negative law (i.e., telling people what they cannot do to others, such as by banning practices designed to segregate races or disadvantage particular races) to positive law, by which governments tell people what to do - for example by guiding and controlling things like where people live in order to meet certain preconceived notions of a "right" amount of racial integration. (As a flippant aside, do you suppose this decision means that the feds will see to it that a couple of Republican white guys are transplanted into those Philadelphia precincts that voted 11,000-to-zero for Obama over Romney?)

Second, by exalting specific politically chosen outcomes as the criterion for whether actions are lawful or unlawful, Kennedy essentially endorsed the practice of socialism - a system wherein the government ordains certain outcomes, choosing winners and losers, and abrogating the right of individuals to pursue happiness and conduct business as they see fit, so long as they don't deliberately undermine the rights of others.

Third, Kennedy's opinion sows the seeds of future confusion. Indeed, Kennedy himself anticipated the problems that his own language will cause. "Remedial orders that impose racial targets or quotas might raise more difficult constitutional questions." "We must be wary of policies that reduce homeowners to nothing more than their race." "Courts should avoid interpreting disparate-impact liability to be so expansive as to inject racial considerations into every housing decision." I agree with all three of those statements. The problem is, if disparate impact is defined as simple numerical discrepancies - and there is nothing in the Supreme Court decision that provides any other guidance or definition of disparate impact - then racial calculations and quotas inevitably will have to be considered by public or private providers of housing and other economic goods. In sum, Kennedy wants to have his cake and eat it too. He says he doesn't want us to boil decisions down to a matter of race even as his opinion mandates that we do so. We will be less free as government ensnares individuals and criminalizes actions even when the perpetrator has no objectionable intentions and nobody is hurt ("no harm, no foul").

One final thought about this case: The Texas Department of Housing was found to be at fault for building too many housing units in predominantly minority neighborhoods. I'm sure they could have been found at fault if they had built too many in white neighborhoods, too. What we have here is a disagreement as to what percentage of publicly funded houses a government agency should build in various locations. The obvious way to keep that disagreement from ever arising again is to return to the free market and get government out of the business of building housing units with taxpayer funds. Instead, the Supreme Court essentially upheld the principle of central economic planning, but ruled that the Texas housing officials weren't going about it the right way. It seems the free markets based on the American principles of individual liberty and private property weren't even on the Court's radar screen; instead, the Court wants government planners to engineer the Court's notions of social justice. SCOTUS has come down firmly on the side of Big Government and against the economic liberty of Americans.

3) Obergefell v. Hodges versus freedom of religion. Once again, this was a 5-4 decision in which Justice Kennedy voted with and wrote the majority opinion endorsed by the four progressives. This decision granted a fundamental right to same-sex couples to enter into unions that are legally identical to marriages. Let us not revisit here the longstanding debates about whether same-sex marriages should be legal throughout the United States, or the proper parental and property rights of homosexuals. There are, however, several aspects of the decision that merit comment.

Let me briefly state that, unlike some conservatives, I have some sympathy with Justice Kennedy's opinion. The current chaotic and confusing situation - in which Americans who are legally married or have protected parental rights in one state, lose them when they move to another - indeed cried out for consistent nationwide standards as a matter of practicality and fairness. I just don't believe it was the Supreme Court's role to establish such standards.

One problem with the Obergefell decision is that the judiciary branch of government usurped the legislative prerogative of Congress, thereby upsetting the balance of power in our constitutional order. Two years ago, in United States v. Windsor, SCOTUS declared unconstitutional the Defense of Marriage Act (DOMA) by which Congress defined (for purposes of federal laws) a marriage as a legal relationship available exclusively to heterosexual couples. Having nullified the people's legislature from legally defining marriage in U.S. v. Windsor, the Supreme Court, in Obergefell, proceeded to arrogate to itself the power to decree and mandate its own definition of marriage.

Thus, five unelected judges trashed the democratic process and perpetrated an unconstitutional coup by imposing a law that was not passed by a majority of 536 elected officials (435 representatives, 100 senators, and one president).

In one worrisome sense, Obergefell is like the King v. Burwell decision that upheld Obamacare. In both cases, the Court unilaterally assumed the power essentially to rewrite laws that Congress had bungled - Obergefell being a case (in the eyes of a SCOTUS majority) in which Congress earlier (via DOMA) had legislated an incorrect definition of marriage, and King being a case in which SCOTUS adopted the opinion that Congress meant the opposite of what was written in the law, with the result in both cases being that it, the Court, not Congress, ended up writing the law of the land.

A second problem with Kennedy's decision involves its careless use of language. What some referred to as Justice Kennedy's "soaring opinion" (and indeed, his opinion was quite rich in compassion, sincerity, and emotional conviction) at times lapsed into rhetorical excess that defied reason and fact.

Rhetorical excess #1: Emotion clouded Kennedy's objectivity when he wrote that homosexuals hope "not to be condemned to live in loneliness." This is a straw man argument. Nobody I know who favors traditional marriage wants homosexuals to be lonely. Long before Obergefell, adult Americans already were free to love and live with any consenting adult they want. And even if Obergefell had been decided the opposite way and not decreed a right of homosexual marriage, how would that have made homosexuals lonely?

Rhetorical excess #2: Kennedy's runaway emotions caused him to blunder into a blind spot that renders his lofty sentiments hypocritical. One of Kennedy's explicit reasons for legalizing homosexual marriages was to grant "dignity" to homosexual couples. I'm all for treating people with dignity. I also agree with Justice Clarence Thomas' dissenting opinion that dignity is innate, not something that the government has the power to confer or withhold. But if Justice Kennedy believes that it is the Court's role to grant dignity to American citizens, why did he heap an enormous indignity upon individuals who have broken free from homosexual attractions and practices by denying that such people exist? Kennedy twice asserted that homosexuality is "immutable." That assertion is blatantly erroneous. It demeans and disrespects the many erstwhile homosexuals who have gone straight; it treats them like Soviet Communists treated dissenters - as nonpersons.

Rhetorical excess #3: While I'm sure I love liberty every bit as much, if not more, than Justice Kennedy, he overreached when he wrote, "The Constitution promises liberty to all within its reach, a liberty that includes certain specific rights that allow persons, within a lawful realm, to define and express their identity." Shades of the '60s - do your thing, man! Maybe Justice Kennedy was a flower child when he was younger.

The '60s rockers had it largely right when The Rascals sang "People got to be free"; The Animals, "It's my life and I'll think what I want"; and the Fifth Dimension, "Go where you wanna go, do what you wanna do, with whomever . . ." But just because a person chooses to define himself in a certain way doesn't mean that the U.S. government should compel all the rest of us to ratify or agree with everyone's self-definition. If a man wants to call himself another man's "wife," that's his business, but should the rest of us not be free to describe him as someone's "civil partner" rather than "wife" or "spouse"? Or does the Constitution's protection of liberty no longer permit us to hold such views? Must we ignore biological differences between genders and pretend that a homosexual pair is "just like" a heterosexual couple?

The third problem with Kennedy's arguments in Obergefell is that it poses (at least) two other threats to liberty. One is broad and generic: By divining a "right" to homosexual "marriage" in the Constitution, Justice Kennedy and the four progressives essentially have adopted the ultimate "loose construction" philosophy - i.e. that since the Constitution doesn't say that homosexuals can't marry, they can. The other is much more specific and immediate: The Obergefell decision poses a real threat to our First Amendment right to practice religion.

As in his Texas Department of Housing decision, Kennedy's opinion included statements indicating that he recognized some of the problems that his opinion inevitably will cause and is aiming to avert. While granting a "right" to "marriage" to homosexual couples, he took pains to insist that Christians and their values also need to be respected. The problem is: it's one thing for religious values to be spoken of as worthy of respect; it's quite another thing for those values to be protected by law.

In defense of Christians, Kennedy wrote:

. . . it must be emphasized that religions, and those who adhere to religious doctrines, may continue to advocate with utmost, sincere conviction that, by divine precepts, same-sex marriage should not be condoned. The First Amendment ensures that religious organizations and persons are given proper protection as they seek to teach the principles that are so fulfilling and so central to their lives and faiths, and to their own deep aspirations to continue the family structure they have long revered.


Many who deem same-sex marriage to be wrong reach that conclusion based on decent and honorable religious or philosophical premises, and neither they nor their beliefs are disparaged here.

Further, Kennedy cited the Due Process Clause of the Fourteenth Amendment, affirming, "the fundamental liberties protected by this clause include . . . intimate choices that define personal identity and beliefs." In that context, he referred to homosexuals' "identity and beliefs," without including the necessary corollary that Christians' intimate choices - and practices - pertaining to their identity and beliefs deserve constitutional protection, too. The problem with Kennedy's language is that while it expresses what undoubtedly are his good intentions, it does not define where a homosexual couple's rights end and a Christian's begin when they are in conflict with each other.

The need for reiterating the basic First Amendment right to the free exercise of religion has been made glaringly obvious by the recent case in Oregon in which Oregon's labor commissioner upheld a fine of $135,000 "for emotional, mental, and physical suffering" assessed by an administrative judge against a Christian couple - Aaron and Melissa Klein, proprietors of a bakery - who refused to bake a wedding cake for a lesbian couple's upcoming special day.

Apart from the constitutional issue, which I'll address momentarily, the so-called "justice" in this case is highly dubious. The lesbian couple asserted that they suffered emotional stress from all the media attention they received. Question: Who was responsible for making a media circus out of this little incident? I doubt that the bakers bothered to call a bunch of reporters to tell them that they had turned down a request to bake a wedding cake. I'll bet you dollars to donuts that it was gay-rights sympathizers (perhaps even contacted by one or both of the lesbians) who generated the publicity. If, as seems likely, it was gay-rights groups and not the bakers who were responsible for the alleged stress, then why must the bakers pay the damages?

Now let's return to the main issue here - the constitutional ramifications: The commissioner justified the Kleins' draconian fine, totally out of proportion, by stating that Oregonians have a right "to move about unfettered by bigotry." Let those words sink in for a minute. In the present context, he unmistakably is saying that it is "bigotry" for Christian Americans to abide by the moral principles of their religion. In essence, he is saying that Christianity is a bigoted religion and Christians (at least, practicing Christians) are bigots.

If anything, it seems that the two Christians in this case have suffered far greater damage and indignities than the lesbian couple. The Kleins privately told the lesbians their reasons for refusing their order. On the other hand, the Kleins have been subjected to public humiliation (the public declaration of Oregon officials that their religious beliefs make them bigots). The Kleins also have received death threats and had their car vandalized at least twice by those sympathizing with the other side, and yet they are the ones being punished. If the fine assessed against the Kleins stands, then, in a de facto sense, Christianity is not to be practiced in the U.S., the First Amendment notwithstanding. (I'll bet you, though, that no progressive judge or administrator would dare fine a Muslim butcher if he refused to process a pig for a customer.)

One other thought about how Christian practice can be reconciled with Obergefell: The left used to believe strongly in "conscientious objector" status for young men who viewed military service as being inconsistent with their deeply held religious convictions. Our law accommodated those conscientious objectors, even though by not going off to war, somebody else's son was exposed to lethal dangers and, in some cases, died in their place. Can the left not muster enough tolerance now to accept and respect that Christians have a conscientious objection to violating their sincerely held religious beliefs? Apparently not. The supposed "harm" (way too strong a word; "minor inconvenience" is more accurate) "suffered" by those who are asked to go somewhere else to buy a cake cannot compare with the harm suffered by Americans who took up arms as a result of conscientious objectors refusing to do so. The conscientious objections of Christians deserve legal protection, not legal persecution. By failing to outline and mandate those protections in Obergefell, Justice Kennedy and four of his Supreme Court colleagues have weakened the First Amendment. They have given militant homosexuals a club with which to seek to bludgeon anyone, particularly Christians, who may disagree with their view of homosexuality and wish not to violate their conscience.

All in all, in light of the Supreme Court decisions in King, Texas Department of Housing, and Obergefell, it has been a tough season for traditional, long-venerated American principles. Welcome to SCOTUS' "brave [but less friendly and free] new world." *

Wednesday, 16 December 2015 12:07

Hendrickson's View

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

Lee Kuan Yew (1923-2015)

Singapore's Lee Kuan Yew quietly passed from this world from pneumonia on March 23 at the age of 91. Lee's vision and leadership (both officially as Prime Minister from 1959 to 1990, then unofficially behind the scenes) guided Singapore's transition from an impoverished Third World backwater to a gleaming modern affluent city-state. Indeed, no other person on earth has come close to matching the economic miracle that Lee wrought in Singapore, where per capita GDP has risen from around $400 in 1960 to over $56,000 today with an unemployment rate under two percent.

Mr. Lee was brilliant. A masterful communicator in three languages - Mandarin, Malay, and English - I loved to read his column in Forbes Magazine, written from 2001 until recently. It was filled with an impressive mixture of wisdom, extensive knowledge, and a keen understanding of the complexity of issues. Lee was an admirable combination of enlightened visionary and hardheaded realist.

A political pragmatist, Lee made common cause with Communist trade unionists to form the People's Action Party in 1954, guiding it to victory in 1959. Lee and his party gained independence from Great Britain in 1963, then, after two years in an uncomfortable federation with Malaysia, Singapore launched out on its own in 1965 and flourished.

We can see Lee's vision, wisdom, and brilliance in the course he charted for Singapore. He started by making English the official language while not suppressing either Chinese or Malay identities, thereby bringing a cohesion to Singapore's polyglot, multi-ethnic society. At a time when other newly independent colonies of various European powers succumbed to the European intellectual virus of socialism and devastated their populations with socialistic policies, Lee charted a course on the road less traveled. He purged the Communists from his party and implemented free-market policies that produced the world's greatest economic miracle of the past half-century. Singapore consistently ranks with Hong Kong as the two freest economies in the world, both in the Heritage Foundation's Index of Economic Freedom and the Cato and Fraser Institute's Economic Freedom of the World Report. ranks Singapore number one in the world for ease of doing business. Michigan State University's Global Edge website states, "Singapore has been ranked as having the most open, least corrupt, and most pro-business economy in the world." In fact, to Lee's lasting credit and our discredit, over the past 50 years Lee did a much better job of protecting Singaporeans' property rights than the U.S. government has done of protecting Americans' property rights - a fact that largely explains Singapore's faster rate of economic progress over that time span.

So effective were Lee's policies, right from the start, that China's leader Deng Xiaoping, after visiting Singapore in 1978, sent 22,000 Chinese officials to Singapore to study Lee's policies. Showing his ability to see the big picture, Lee believed that the U.S. involvement in Vietnam (which Lee supported consistently), though perceived as a defeat here at home, was hugely beneficial for Asia and ultimately for the world. It bought time for Singapore to develop along free market lines, which in turn convinced Deng to implement the many economic reforms that have enabled hundreds of millions of Chinese to climb out of poverty - an example that later induced Vietnam to turn its back on doctrinaire socialism and unleash its people's productive energies.

As a pragmatist, he understood that the only way Singapore could get on the fast track to economic development would be if it could avoid the common Third World problems of official corruption and ambitious individuals using government to enrich themselves at the expense of the people. So, he adopted authoritarian tactics to suppress the centrifugal forces inherent in a multi-ethnic, multi-cultural polyglot society with the usual share of political ideologues. He imposed order heavily enough to contain disruptive, divisive forces, but light enough for the people to prosper. The formula worked spectacularly. Lee's vision and leadership turned Singapore into a beautiful, gleaming, clean, wealthy city-state with one of the lowest crimes rates and highest standards of living in the world.

Naturally, Lee's authoritarianism offended those who were its targets. While pragmatic Communists like Deng admired and sought to learn from Lee, ideologically rigid Communisms detested him. And why not? He put the socialist models of Castro, Kim, Mao, et al., to shame. The Marxists always have trumpeted Jeremy Bentham's utilitarian tenet "the greatest good for the greatest number" as a prime directive, but Lee's Singapore, not the Communists' fraudulent and failed "workers' paradises," actually attained that goal. Lee brought breath-taking prosperity with breath-taking rapidity to his people whereas the Communists brought wretched poverty, and Lee did it without resorting to the draconian brutalities inflicted by Communists - extensive networks of slave labor camps, torture factories, summary executions etc. Lee once said that his greatest achievement was "beating them" - meaning, Communists.

Mr. Lee would be the first one to admit he wasn't perfect and that his pragmatic utilitarian policies were far from ideal and sometimes unjust. "I had to do some nasty things, locking fellows up without trial," Lee told a New York Times interviewer in September 2010. "I'm not saying everything I did was right. But everything I did was for an honorable purpose." It's hard to picture such candor and humility from Castro, Kim, or any dictator on the left.

Mr. Lee did not build a personality cult around himself. He could have continued as Prime Minister indefinitely, but he withdrew in 1990, handing over the reins of government to a younger generation while continuing to offer guidance from the advisory position of Minister Mentor until his retirement in 2011. When he died, he was mourned as a man, a social benefactor, a true friend of the people. What a welcome contrast from the state funerals of deceased Communist tyrants with their obligatory homage to rulers that demanded to be worshiped as fearsome pagan deities - angry gods who had degraded and oppressed the poor, suffering masses programmed to publicly mourn the passing of their own tormentors.

There are no saints in politics, and there is no perfect government on earth, but Lee Kuan Yew did much good. He uplifted his people and showed the world convincingly which policies bring prosperity. He deserves to be remembered as one of the world's greatest 20th-century leaders. R.I.P.

Is Obama to Blame for Weak Economic Growth?

A political science colleague sent me an article documenting President Obama's dismal economic record, and he asked me for added details and perspective. Here goes:

True, economic growth under Obama has been sluggish, fitful, faltering, historically weak, etc. However, U.S. economic growth has been trending downward for several decades. Conclusion: Our economic woes did not begin with Barack Obama. However, he has done nothing to reverse the trend; on the contrary, he has doubled down on the very policies that have hampered economic growth. For that he bears full responsibility.

The headwinds opposing economic growth are generated by what Ronald Reagan referred to as "the government disease." No president has advocated, championed, and imposed more harmful government intervention than Barack Obama.

Here's a short list of those interventions:

1.) Government spending. Economists as far back as Adam Smith have noted that the true burden of government is what it spends, not what it taxes. When political decisions about where to allocate scarce economic resources supplant market decisions, production inevitably is diverted from the most highly valued needs to less-valued things. Thus, less wealth is produced, economic growth is suboptimal, and the people are poorer than they otherwise would be.

While not having increased federal spending by as large a percentage as his predecessor (although not because he didn't want to, but because a Republican Congress has thwarted that goal) Obama undeniably has presided over more market-distorting government spending that any of his predecessors. To be fair, some of this spending was already baked into the cake - particularly the rising spending on Social Security and Medicare. Because federal entitlements operate on a "pay as you go" basis, these increasing expenditures to seniors do not consist of real economic returns on capital invested. Instead they transfer hundreds of billions of dollars from current workers to mostly retirees. Entitlement expenditures artificially inflate GDP and overstate the real wealth of the country, because those dollars represent purchasing power that does not arise from the production of actual goods or services.

2.) Rising debt. The greater the debt load, the more present income is diverted from present consumption to pay for past consumption. After a brief downturn following the 2008-9 financial crisis, total debt has risen by over 15 percent to a shade over $59 trillion, according to the Federal Reserve. Over half of the $7.35 trillion increase (some $4.84 trillion) is government debt stemming from Obama's budgets.

Obama's policy of encouraging and facilitating loans to college students has seen student debt soar to over $1 trillion with devastating economic consequences for the recipients. Young graduates struggling under the burden of debt have delayed marriage, child-bearing, home-buying, etc. In too many cases, college debt has stunted young American lives.

3.) Suffocating regulation. The Obama administration has burdened Americans with a record amount of federal regulation as measured by the number of new rules promulgated and pages in the Federal Register. The annual cost of the federal regulatory burden is now approximately $1.9 trillion (only nine countries' GDPs are larger). As reported in Investor's Business Daily, "the cost of enforcing federal economic regulations is . . . up 31 percent since Obama took office, and the 'Code of Federal Regulations' is 17,294 pages longer."

Furthermore, as noted by Obama's Council on Jobs and Competitiveness, the Sarbanes-Oxley law (which Obama inherited, but has not revised) and Dodd-Frank (which a Democratic Congress passed in 2010 with Obama's approval) have "placed significant burdens on the large number of small companies." Consequently, we are in the unusual and worrisome situation of businesses closing at a faster rate than they are opening, thereby shrinking employment opportunities and slowing economic growth.

4.) Tax policy. Business tax rates have remained unchanged under Obama, and that has had negative consequences in a world that has been shifting toward lower corporate profits taxes. By allowing the United States to have the highest corporate tax rate in the developed world, American businesses are migrating abroad via the corporate inversion maneuver.

5.) The war on work. While constantly professing concern for workers, Obama has consistently supported and implemented policies - raging from a higher minimum wage to federal jobs programs to anti-business policies - that have shrunk the number of jobs (see the Labor Force Participation Rate). Obama's prize legislative achievement, the Affordable Care Act, has shrunk the number of hours worked (and consequently the amount of wealth created) by incentivizing employers to reduce the number of full-time jobs. According to David Stockman, the United States has two million fewer full-time workers now than it did in 2007.

Bottom line: President Obama's policies have crippled the American economy. *

Wednesday, 16 December 2015 12:04

Hendrickson's View

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

Negative Interest Rates: A Brilliant Concept!

I have to admit that initially I was uninterested, even close-minded, about the negative yield being offered on a growing share of European sovereign debt. "It must be a short-term aberration," I thought at first. "Completely nutso," I sniffed dismissively as the phenomenon spread. "Who in their right mind would invest in a financial instrument that would guarantee a loss of principal?" Upon calmer reflection, I would shrug and think, "Well, to each his own, but none of those topsy-turvy debt instruments for me."

More recently, I have taken a more tolerant attitude toward negative-yield debt. As I teach my Econ 101 students, the key to success in the economic marketplace is to set aside your own preconceptions and preferences and to acknowledge that the consumer is always right. If some of my fellow human beings want investment products that repay them less than their principal, who am I to find fault?

In fact, the more I think about it, I find myself attracted to the idea of offering such a service to satisfy this unfathomable consumer appetite for negative yields. Maybe I should announce that anybody out there who would like to send me money on the condition that I return less than all of it to them in the future is free to do so (as long as they include payment for any incidental transaction costs). From that perspective, negative interest rates are quite ingenious.

Actually, (I'm going to attempt to be serious now) what really got me thinking about the growing phenomenon of negative-yield debt was how to explain the concept to my 101 students. The traditional introduction to interest rates involves three basic components. The first is the "originary" rate of interest - the time preference between the present and the future. In years of teaching economics, I've never yet had a student express a preference for a hundred dollars next year over the same amount today, and I doubt I would get a different response if I lowered the payoff in the future to $99.90. Conclusion: The time preference of humans doesn't account for the increasingly common negative-yield phenomenon.

Perhaps, then, we can solve the mystery by examining the second component of interest rates - the risk factor. Students readily grasp the rationality of lenders adding a risk premium to interest rates to compensate for lending to higher-risk borrowers. Traditionally, the primary function of financial intermediation has been to assess the creditworthiness of borrowers. That isn't always the case at present, with government citing "disparate impact" and penalizing lenders who dare to consider risk before issuing loans. I can get my head around a risk premium of zero for government debt, since central banks can use QE and other techniques to ensure that governments have unlimited ability to return to its creditors however many monetary units it has borrowed. But a negative yield? One could certainly argue that nongovernmental borrowers, not having their own central banks, can't give 100 percent guarantees that they'll be able to repay what they borrow, while governments do; therefore, some creditors feel safer contracting for a negative yield from a government than a positive yield from a private entity. The problem with this line of thinking, though, is that creditors could lock cash in secure storage and know that they would get all of it back, rather than paying government to borrow their money.

The third component of interest rates is the inflation premium that creditors sometimes demand to protect against currency depreciation. The late Franz Pick used to call bonds "guaranteed certificates of confiscation" because, between depreciation of the monetary unit and government taxation of interest income, bondholders' purchasing power was systematically and ruthlessly transferred to government. Even today, in the bizarro world of central banks trying to "achieve" positive inflation (i.e., currency depreciation), one would think that creditors would insist on an inflation premium to offset the targeted depreciation. Instead, we have the spectacle of widespread acceptance of a nominally negative return on paper denominated in a currency that the relevant central bank is actively trying to depreciate.

In sum, elementary interest rate theory doesn't solve the puzzle of why there are negative-yield instruments, so we need to look elsewhere. Perhaps the holders of negative-yield sovereign debt instruments anticipate earning capital gains due to increased demand for negative-yield securities in the future. This seems like a bet on the "greater fool theory" with central banks playing the part of the "fool." I suppose it's possible that in our strange new world of unlimited QE, chronic ZIRP, negative interest rates, etc., yields may become even more negative in the future, thereby rewarding those who solved earliest this counterintuitive riddle. Such a race deeper into the rabbit hole of negative yields may happen, but timid (blind?) little me won't be on the buy side of those deals.

One other possible explanation for the phenomenon of negative interest rates is that central banks are trying to make their currency less attractive in currency exchanges. This is what makes the most sense to me - central bankers hope that negative interest rates will be an effective tool of currency manipulation in a world of competitive devaluations.

Negative interest rates are a weird and alarming symptom of profound economic dysfunction. In a healthy economy, interest rates coordinate production between the present and the future according to people's composite time preferences. Today, those vitally important market signals are mangled, broken, shattered. Maybe negative-yield instruments will pay off in ways I don't yet perceive, but I'm content to keep my distance from them and let others play that bizarre game. I'd rather preserve my sanity.

Nobel Economist Joseph Stiglitz Misdiagnoses Inequality and the Cause of Middle Class Woes

In an interview posted on, Nobel Prize-winning economist Joseph Stiglitz spoke about growing economic inequality and America's shrinking middle class. Agreed, these are challenging and discouraging times for many, but as has happened before, Mr. Stiglitz provides a faulty explanation.

Stiglitz spoke fondly of the highly progressive tax code and lesser degree of inequality that followed World War II. Like his intellectual comrade, Thomas Piketty, he looks more favorably upon the Great Depression, with its greater poverty but lower measures of inequality, than the 1980s, with its significant improvements in standards of living for the non-rich accompanied by higher measures of inequality.

Stiglitz veers into historical revisionism by asserting that today's inequalities originated during the Reagan years with its supply-side tax cuts that made the tax code less progressive and allegedly benefited only the rich. I would counter that there is a much more obvious cause for today's sluggish economic growth and concomitant middle class struggles: Growth in government.

Stiglitz and I agree that standards of living improved after the end of World War II. He, though, implies that this prosperity was due to the more egalitarian progressive tax code of the era, with its top marginal rate of 91 percent. I know of no accepted economic theory that high taxes create prosperity. The real explanation for the post-war boom was that after years of suppressed consumer spending enforced by wartime rationing and the diversion of resources to the war effort, peacetime released a flood of pent-up demand as Americans made up for lost time. The huge decline in federal spending after the war (from 48 percent of GDP during the war down to 15 percent in the late '40s) released billions of dollars to the private sector which turbo-boosted a strong economic recovery.

Economic growth was more tepid in the 1950s. There were three mild recessions during the Eisenhower years, helping to tip the 1960 election to the Democrats. President Kennedy's bequest to the American people was a tax cut that boosted economic growth in the mid-'60s.

The foundation for today's malaise was laid in the mid-'60s when Lyndon Johnson significantly expanded the federal government by waging two expensive wars - the War on Poverty and the Vietnam War - while adding new federal entitlements (Medicare and Medicaid). Richard Nixon and Gerald Ford continued the spending binge, with an early casualty being the dollar's gold backing, followed by rampant inflation and rising unemployment that made the 1970s a lost decade economically for many Americans.

The economic stagflation of the 1970s was routed during Reagan's presidency. His supply-side policies revived economic growth. For Stiglitz to claim that only the rich benefited from Reagan's policies is egregiously contra-factual. The poverty rate fell and median incomes and net worth rose. The Reagan recovery (which carried on through the Clinton years with only mild pauses) was a boon to the American people. That being said, the failure of Reagan and the Democratic congress to halt the growth of government and to confine their spending to match government's tax revenue deserve a share of the blame for our sluggish economy today.

Deficit spending took a welcome breather under President Clinton and a Republican House under Newt Gingrich, but the regulatory state continued to expand its growth-restricting reach on the economy. Then, during the economically disastrous presidencies of George W. Bush and Barack Obama, massive spending (much of it in response to the fallout from the government/Fed-engineered housing bubble and subsequent Wall Street bailout) and increasingly active regulatory agendas have diminished economic growth, thus reducing opportunities for the non-rich to make economic progress.

So here we are today, suffering a record-slow post-recession recovery resulting in fewer opportunities for economic advancement for non-rich Americans. Big Government produced an $18-trillion debt that has impelled the Federal Reserve to suppress interest rates, thereby delaying the needed adjustment of ending the fiscal malpractice of government over-spending and distorting capital markets. This, combined with a suffocating regulatory regime that wars against business has put us in the unusual and worrisome situation of businesses closing at a faster rate than new businesses are opening, thereby shrinking employment opportunities.

The cause of the current economic sluggishness that is "hollowing out" the middle class is Big Government. Repeated economic studies, such as the ones I cited in my book cataloging the errors in Thomas Piketty's book on inequality, show the negative correlation between government spending and economic growth. Additional evidence is found in the Heritage Foundation's Index of Economic Freedom, which shows that as Big Government has made our economy less free, growth has slowed.

Joseph Stiglitz's diagnosis is flat-out wrong when he argues that the middle class is declining because the rich are getting richer. That zero-sum view is atavistic mercantilist nonsense. In a free market, transactions are positive sum, so individuals become wealthy in return for economically benefiting others. It is in the political marketplace where transactions are zero-sum - where wealth that benefits some comes at the expense of others. Indeed, we have a lot of that today in the form of bailouts, subsidies, boondoggles, and other forms of cronyism. If Mr. Stiglitz would oppose those growth-sapping cancers, I'd gladly make common cause with him, but for him to blame the rich instead of government for today's problems reflects a partisan and ideological bias rather than objective economic analysis.

Because Stiglitz's diagnosis is wrong, his prescription also is wrong. Raising taxes on the rich won't improve the economic prospects of the non-rich. Shrinking the burden of government will.

Free to Speak His Own Mind, Ben Bernanke Shows Himself to Be an Unreconstructed Orthodox Keynesian

As those familiar with my writing know, I was never a fan of erstwhile Federal Reserve Chairman Ben Bernanke. Indeed, while some praised him as "the greatest central banker in U.S. history," I thought otherwise.

In trying to give Bernanke every benefit of the doubt, I have wondered whether some of the pernicious policies he adopted at the Fed were not the result of his own economic convictions, but instead were forced on him by intense political pressures. Surely, I thought, no economist could really believe that creating money produces prosperity or that suppressing the pricing mechanism that coordinates present with future economic activity (i.e., interest rates) is prudent. Alas, it appears I was wrong.

Now that he is a private citizen again, I have wondered whether Bernanke might change his tune. In a word, "no." Recently, an entry from Bernanke's new blog found its way into my inbox. In this blog post, Bernanke dispensed advice to Germany that was unimaginative, unadulterated Keynesian orthodoxy - a flawed theoretical paradigm with a dismal track record. Tragically, the ghost of Keynes still haunts us today.

In writing about Germany's trade situation, Bernanke casts the problem in Keynesian terms, asserting that there is insufficient "aggregate demand" today. According to this view, the problem is that people aren't spending enough on consumption. Shame on them! Therefore, it's up to the government to correct this mistake. Here we see the close similarity between macro-economic policy prescriptions and socialist central plans: In both cases, the elite planners act like puppeteers, trying to pull the strings to make people do what the planners think they should be doing - as if they know better than the people what the people want or should want to consume.

In the macro paradigm that Keynes devised, the micro perspective of acting and choosing individual human beings is lost. For macro strategists to assert that a population is making a collective mistake in how much they demand ignores the fact that all of the individuals comprising the collective are making the right decisions for themselves. Who is Bernanke or any other economist to claim that they aren't spending enough? There are many valid micro-economic explanations for why individuals and businesses limit their spending: Perhaps they simply don't need or want any more of certain products; perhaps they would purchase more if prices were lower; perhaps they are burdened by debt from previous expenditures; perhaps they prefer to save some of their income for future instead of present consumption. Whatever the reason(s), markets will communicate the necessary price information to reshape economic production to align more closely to people's preferences - or at least they will if public officials don't intervene and falsify those signals through fiscal or monetary policy. Those in power do not know how much demand there "should be" in specific markets, and government attempts to "correct" market behavior is counterproductive economic quackery.

In his blog post, Bernanke makes several specific recommendations to Germany:

First, he says that spending more money to improve Germany's transportation infrastructure would "increas[e] domestic income and spending, while also raising employment and wages." Has Bernanke so soon forgotten President Obama's 2009 non-stimulating "stimulus plan," under which a massive increase in infrastructure spending produced no uptick in economic growth and employment? Government spending does not increase wealth, but merely redirects it. Jobs created by government spending are offset by an equal or larger number of jobs that cease to exist or do not get off the launching pad when scarce economic resources are diverted from the private sector to additional public-sector activity (Bastiat's lesson about "the things not seen").

Second, Bernanke writes, "German workers deserve a substantial raise, and the cooperation of government, employers, and unions could give them one." This is a normative statement, a personal opinion, not a specimen of economic analysis. Whether German workers deserve or should get a raise is a matter for markets to determine, not some economist. Surely, Bernanke knows that wages are a price phenomenon and that artificially raising wages above the market-clearing price is a formula for higher unemployment. Do some German workers "deserve" to lose their jobs?

Third, Bernanke recommends that Germany's government facilitate increased spending through targeted "tax incentives for private domestic investment; the removal of barriers to new housing construction; . . . and a review of financial regulations that may bias German banks to invest abroad rather than at home." Here, I see a glimmer of hope that Bernanke is not so completely in thrall to Keynesian mysticism, for he recognizes the importance of incentives to individual economic actors. However, he still has the state's role backward. The first rule of the economics profession should be the same as it is in the medical profession: first do no harm - in other words, before even trying to do something beneficial, make sure you're not doing something harmful. Thus, rather than advocating targeted tax incentives to promote desired actions, the correct recommendation would be to remove existing disincentives (taxes, etc.) that impede investment.

For the rest of this wish list, though, Bernanke is on target when he recommends removing the political shackles that limit and hamstring economic activity. Government intervention - whether in the form of taxes, spending, regulation, or monetary manipulations - warps market signals and thus distorts economic decision-making. What Germany needs, as Bernanke implies in his third recommendation, is less government interference with markets.

The problem, though, is that by viewing the situation through a Keynesian macro-economic lens, Bernanke wants to pick and choose which markets to liberate from stifling government restrictions - there is the puppeteer mentality again. The true path to prosperity is for all markets to be liberated from the quack tinkering of master planners and be allowed to develop freely within the context of the rule of law. Maybe Ben Bernanke will arrive at that conclusion some day. Until then, we can be glad that he isn't in a position of power any longer and that, for the moment at least, we here in the States aren't the target of his flawed Keynesian advice. *

Wednesday, 16 December 2015 12:01

Hendrickson's View

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

The FCC Versus Internet Freedom

Earlier this month, Federal Communications Commission Chairman Tom Wheeler announced that its five commissioners will conduct a vote on February 26 to decide whether to grant itself the authority to regulate the Internet under Title II of the Communications Act of 1934. It's highly likely the FCC will give itself this new power. Lawsuits are certain to follow. The Wall Street Journal's L. Gordon Crovitz denounced FCC Chairman Wheeler's decision to apply outdated regulations designed to manage the erstwhile Ma Bell telephone monopoly to today's rapidly evolving Internet. He warned that these "reactionary regulations" will mark "the end of the permission-less innovation that built today's Internet."

Mr. Crovitz is correct. Here are some of the far-reaching implications and negative consequences of the FCC's new policy:

Innovation will be squelched. Crovitz' phrase, "permission-less innovation" gets right to the heart of the problem. He notes:

In 2005, the U.S. Supreme Court warned that if the FCC treated the Internet as a telecommunications service, it "would subject to mandatory common carrier regulation all information service providers that use telecommunications as an input to provide information service to the public" - in other words, almost all websites and apps would be subject to regulation.

Chilling. If this were to happen, and it's not unreasonable to suspect that it could if not challenged, the FCC would have a chokehold on entrepreneurial innovation and technical creativity. Even if the FCC consisted of nonpartisan experts (which it doesn't and probably never will) the entrepreneurial process of creative destruction would be diminished. The problem with experts sitting in judgment and deciding which breakthroughs and entrepreneurial visions will be given the green light is that experts are only experts about the past, while entrepreneurs are the ones who invent the future. Today's "experts" are spectacularly unqualified to sit in judgment about how the future should evolve. To believe otherwise is to fall for the oft-discredited myth of government economic planning.

2) Cronyism and special interest politics will be strengthened. By adopting the highly subjective language banning "practices" that the FCC decides are "unjust or unreasonable," the FCC is inviting lawsuits from large corporations with deep pockets designed to cripple less-well-capitalized newcomers. Thus, the FCC continues the current president's pattern of favoring large entrenched corporations (e.g., the ACA and Dodd-Frank Act - see Timothy Carney's 2009 book, Obamanomics). In addition to favoring established big businesses, the new regulations create yet another government make-work program for lawyers.

3) Consumers will pay more. Government regulatory control almost invariably makes things more expensive by raising prices higher than free-market prices. This happened with trucking under the Interstate Commerce Commission, airlines under the Civil Aeronautics Board, and long distance telephony under this very same FCC. In fact, this new FCC rule will encourage and empower existing businesses that are falling behind to petition the FCC to hamstring and even shut down emerging competitors that are outperforming them. This is exactly how antitrust law has been abused throughout our history - penalizing efficient competitors to protect inefficient competitors at considerable cost to the American consumer.

4) The constitution will be weakened. The FCC's action is another step away from the hallowed principle of representative government and toward bureaucratic tyranny. It is simply the latest in a long series of executive branch usurpations of Congress' constitutionally mandated legislative prerogative. For a few unelected political appointees to break decades of precedent and unilaterally decide to regulate the Internet is abhorrent - especially since, once the process gets underway, these same unelected officials will act as judge, jury and executioner in the cases that come before them. Chairman Wheeler is trying to reassure us by promising to "forbear" from actually exercising full regulatory power, but of course, he is vague about what powers he and his colleagues wouldn't exercise. Once the sought-after powers have been conceded to the FCC, they will have vast discretionary and arbitrary powers.

5) Free speech will be compromised. The First Amendment itself would be at risk under this new FCC regime. If you think that the IRS discrimination against conservative tax-exempt organizations was offensive, imagine what the FCC could do to stifle communication by not approving select websites. If you need government permission to disseminate ideas, speech can hardly be said to be free.

Congress needs to wake up and decisively halt this unwarranted expansion of executive branch power. In previous cases of bureaucratic overreach (IRS, NLRB, NSA, etc.) some members of Congress have made lots of noise, but the consequences to the perpetrators have been pathetically weak. It's time to move beyond giving indignant speeches and an occasional slap on the wrist. Why not abolish the FCC, update federal communication law, and then let individual cases be litigated in common law courts?

Elizabeth Warren Is Right (Sort Of)

The junior senator from Massachusetts, Elizabeth Warren, gets a lot of mileage from proclaiming that "the system" is rigged against the middle class. While not completely accurate - upward mobility is still attainable, as millions of Americans have proved and are proving - it is true that other millions of Americans are encountering more obstacles and headwinds on the path to increased prosperity than ever before.

Here is a far-from-complete list of those obstacles:

1) According to Edward P. Lazear in The Wall Street Journal, the Affordable Care Act has lowered incomes in at least two significant ways: first, the individuals whose hours have been cut by employers to avoid incurring ACA-related costs; second, by reducing employment in the health care industry itself.

2) Like the ACA, the Dodd-Frank Act (which happens to have been Sen. Warren's brainchild) has reduced employment in its target industry, finance. Many smaller financial institutions have folded while multibillion-dollar Wall Street firms have received bailout guarantees (talk about rigging the system - shame on you, Ms. Warren!).

3) The pace of new regulations promulgated by Team Obama has reached all-time highs - 468,500 total new pages in the Federal Register so far during this presidency with an annual cost nearing $2 trillion. The costs of complying with Dodd-Frank alone could eventually add over $1,000 to the cost of living of the typical American worker, according to Robert Genetski, writing in Investor's Business Daily, Dec. 12, 2014. Due to the costs imposed by Dodd-Frank along with other taxes and regulations, more businesses are closing than opening, resulting in fewer employment opportunities.

4) The Obama Administration, egged on by the green lobby, has blocked approval for such privately funded projects as the Keystone XL and a dozen other pipeline projects (even though pipelines are more environmentally friendly than transporting oil by railroad or trucks).

5) Government spending has remained at elevated levels even though the crisis cited as justification for increased spending subsided long ago. One of the clearest macroeconomic relationships is the inverse correlation between government spending as a percentage of GDP and the rate of economic growth. Much of this elevated spending under Obama is for corporate welfare and cronyism, whether guaranteeing bailouts to big banks under Dodd-Frank and to health insurance companies under ACA, channeling subsidies to Boeing, GE, and Caterpillar via the Export-Import Bank, or bestowing taxpayer-funded largess upon green boondoggles.

6) Another economically crucial relationship is the positive correlation between economic freedom and economic growth. According to the annual Index of Economic Freedom co-published by The Wall Street Journal and The Heritage Foundation, 2014 was the first time in eight years that economic freedom did not decrease in the United States.

7) Another key factor that contributes to robust economic activity and job growth is private investment. Economist Stephen Moore and former Senator John Kyl reported (WSJ, Oct. 29, 2014, p. A17) that Team Obama has raised taxes on capital gains and dividends while private investment is a lower percentage of GDP compared to the 1980s (9 percent vs. 12 percent) when taxes on investment were cut.

8) Various government efforts to "help" workers - from increases in the minimum wage law to government "stimulus" and jobs programs - have contributed to the dramatically falling labor participation rate in recent years.

9) The Federal Reserve's bizarre policies of penalizing savers through its six-year-old zero interest rate policy while working to decrease the purchasing power of the dollar (for which the recent dollar rally is providing temporary relief) have been insidiously undermining middle class Americans' standard of living.

So, what is the common thread running through all these impediments to economic advancement? They all have been foisted on the backs of the American middle class by government and its partner in mischief, the Federal Reserve. This is where Senator Warren has it all wrong. Government is the problem, yet Warren argues that more government power is the solution to the middle class's economic woes. This is sheer quackery - a classic case of wanting to put the foxes in charge of the henhouse.

President Obama has an ideological antipathy for the middle class. Whether Sen. Warren shares that antipathy or is simply economically ignorant, I can't say, but clearly she hasn't come to the understanding that only a system in which the government doesn't have the power to rig economic outcomes - in other words, free-market capitalism - has the vitality and flexibility to generate the rapid economic growth that produces widespread prosperity. Perhaps she should read the book Problems with Piketty in which the author (yours truly) differentiates between systems like feudalism, mercantilism, and socialism - systems in which political elites rig the rules to enrich themselves at the expense of everyone else - with capitalism, in which the system is "rigged" so that the way to get rich is by creating wealth for others instead of draining wealth from them.

I share Elizabeth Warren's (professed) concern for the middle class, but the kinds of progressive government intervention she favors are poison, not medicine, for the economic prospects of the middle class.

The EU's Nightmare in the "Hotel California"

When the Eagles came out with their mega-hit "Hotel California" almost 40 years ago, I'm sure they never dreamt that their words would capture the essence of the economic and political nightmare that the nations of the European Union (EU) would be suffering through in 2015. For decades, Eagles fans have debated what those haunting lyrics really meant. What follows is one interpretation:

"This could be heaven and this could be hell." (Eagles, "Hotel California")

In agreeing to join the EU, the political majorities in various European nation-states entertained optimistic visions of economic gain - not actually "heaven," but definitely a significant improvement. They viewed greater economic integration as a means to increased prosperity through free trade, free migration, and perhaps even some transfer of wealth to help a country out during a time of need.

Alas, human nature being what it is, people proved far more interested in the benefits they could reap from membership in the EU than in doing the hard work of discharging their own treaty-defined responsibilities, such as balancing their budgets, so that the union would work like its architects had intended. Heavenly hopes have turned out to be hellish realities. Instead of flourishing via positive-sum, mutually beneficial cooperation, the EU has degenerated into a negative-sum squabble in which irresponsible governments have egregiously failed to honor their promises of fiscal discipline, thereby jeopardizing the financial stability throughout the EU. Far from keeping government budget deficits within specified limits (as they had promised) spendthrift governments have generated massive debts that have necessitated bailouts to avert defaults that would devastate the entire Union.

"We are all just prisoners here of our own device." ("Hotel California")

Greece and the other EU countries have been learning the hard way that democracy is like a Venus flytrap. Its allurements draw you in, then the trap door slams shut and it devours you. In the case of the EU democracies, though, the damage is self-inflicted. The Europeans themselves devised the very political systems that are now doing them in.

Our Founding Fathers clearly understood the self-destructive dynamics of democracy: Citizens, seduced by the attraction of getting the proverbial free lunch, vote for politicians promising to confer financial favors upon them; politicians, in turn, quickly learn that the way to electoral success is to feed the appetite of voters for increased government benefits. The problem is that this appetite is insatiable, and so, in the symbiotic relationship that exists between voters and elected officials in a democracy, government spending inexorably increases. The expedient of deficit financing inevitably is resorted to and debt accumulates. Eventually, the ability to make good on all the promises hits the inevitable wall of economic reality in which the government lacks access to sufficient funds to pay for all its programs and debt service expenses. Creditors worry that the government will default on its debt and start dumping bonds. Then arises the grim prospect of a catastrophic chain reaction of debt defaults and bankruptcies.

What options does a democratic government have for raising sufficient revenues to honor its financial obligations? The democratic system that seemed so attractive when it was set up has morphed into a prison that has trapped citizens and politicians in an unsolvable dilemma. On the one hand, there is a limit to how much it can cut spending before angry, frightened citizens vote incumbents out of office. In other words, politicians who dare to do what is economically necessary find that it is politically suicidal, and so they balk. On the other hand, there is a limit to how much the government can raise tax rates before so many businesses and individuals are crushed, ruined, or go underground, thereby shrinking rather than boosting tax revenues. Yet interest on the debt must be paid somehow. Where are the needed funds to come from when fiscal policy has become useless due to the democratic fiscal stalemate?

It turns out that the powers that be have an ace up their sleeve - a fairy godmother who can magically postpone disaster. This, of course, is the international and supranational monetary and political establishment - additional creatures of democracies' own device. In the case of the EU's current crisis, we are talking about the so-called "troika" - the European Central Bank, the EU, and the International Monetary Fund. These multilateral institutions are not subject to the normal strictures of democracy; they aren't accountable at the ballot box to the people whose lives they affect. They were conceived and brought into existence by national governments that gave them immense power to make momentous unilateral, autocratic decisions. ECB chief Mario Draghi's recently announced trillion-euro "quantitative easing" program (hardly a surprise, given the ECB's other trillion-euro bailouts over the last five years) is designed to stave off default and prop up Europe's moribund financial system despite Greece's essential bankruptcy and lack of economic viability. In the short run, it may appear that the troika has saved the day, but in the long run, when additional trillion-euro bailouts are launched to try to paper over the fiscal crackup of other European democracies, and the euro currency becomes a cruel joke, Europeans will rue the day that government officials created such powerful, unaccountable entities.

"They stab it with their steely knives, but they just can't kill the beast." ("Hotel California")

In the current Greece/EU drama, there are two beasts that cannot be slain despite impassioned mental knife thrusts. One is, from the perspective of non-Greeks, the apparent unwillingness of the Greeks to mend their ways and get their financial and fiscal affairs in order. The other, from the Greek perspective, is the gang of foreigners who are seen as oppressing the Greek people and attempt to undermine Greek sovereignty - the troika and some of the other European governments, most prominently Germany.

Greece's foreign creditors understandably want to be repaid. They view the Greeks as recalcitrant, irresponsible, and dishonorable. "This crisis would dissipate if the Greeks would just pay their bills." The problem here is expressed in that old clich about not being able to squeeze blood from a turnip. At this point, with the electoral victory of the Syriza coalition under new Prime Minister Alexis Tsipras, Greece's voters have shown that they aren't going to tolerate any more of the austerity that foreign creditors have demanded and that the outgoing government imposed.

Undoubtedly and undeniably, the Greeks are going to have to learn how to live within their means and figure out how to keep government from squashing the private sector. However, one should be able to understand the Greeks' current desperation, if not have a smidgen of compassion for them. The outgoing government did cut spending significantly (although it failed to accomplish a much-needed significant downsizing of the bloated and expensive government bureaucracies). Government spending in Greece fell from about 124 billion euros in 2009 to approximately 90 billion in 2014.

Despite this notable decrease, government spending as a share of Greece's GDP actually increased over the same time period from 46.8 percent in 2007 to 59 percent by 2013. This horrific statistic means that the private sector is contracting at an even faster rate than the public sector. Indeed, household income in Greece has fallen an estimated 40 percent since the crisis began, unemployment among young Greeks has soared to 64 percent, and the health care system is near collapse (with relatives often having to take care of hospital patients due to the shortage of nurses). The Greeks will find some way to survive. They aren't going to kill themselves no matter how hard and insistently their creditors pressure them.

Just as foreign creditors can't "kill" the problem of the Greeks' present inability to pay what they owe, neither are the Greeks going to kill off the ECB, the EU, or the ever-troublesome (whether to Greece or the U.S.) IMF. Still, given the magnitude of the economic catastrophe that the Greeks are suffering, the Greeks' anger with the troika, Germany, et al., is understandable. No wonder they made a statement at the polls: "Enough! It's time for a change. Go to hell, you foreign bullies!"

Whatever changes the Greeks eventually make (and they certainly need to be major fundamental changes) it is unrealistic and inhuman for non-Greek creditors to insist that the Greeks take larger doses of their current misery. The IMF's demand that the Greek government raise taxes on an impoverished prostrate populace is unconscionable. Indeed, while the Greeks themselves must bear responsibility for the myriad policy errors that have prevented its private sector from experiencing healthy growth, the IMF's "jack up the tax rate" policy is the most counterproductive, destructive policy of all.

"You can check out any time you like, but you can never leave." ("Hotel California")

Greece may in fact check out or get kicked out of the EU at any time, but it can never leave Europe nor escape its economic problems by exiting the EU. The Greeks will still need to make profound, far-reaching, fundamental changes to correct their multiple economic dysfunctions. They still need to figure out how to enable a productive private economy to emerge. They will still have to learn how to live within their means and to rid themselves of the government disease that has consumed their economic substance. They will still have to learn how to depend on free markets instead of Big Government to supply their needs. They will still need to learn to respect each other's property rights and refrain from using government to redistribute wealth. They will still have to kick their addiction to debt and learn to live within their means. They will still have to figure out what goods and services to produce and provide for commerce with their fellow Europeans and other non-Greeks. They will still have to learn how to manage their fiscal affairs sufficiently well to earn the trust of lenders if they are to have access to credit markets going forward.

Even if Greece leaves the EU, the remaining EU countries will still be stuck in the same EU version of Hotel California. Many other EU countries have the same problems that have bankrupted Greece, though not to such an advanced degree - yet. Several of them are in danger of replicating the Greek democracy's slide into bankruptcy and insolvency. Not one of the countries whose government debt problems were considered worrisome five years ago (specifically, the PIIGS - Portugal, Ireland, Italy, Greece, and Spain) has managed to reduce its debt-to-GDP ratio since then. While Greece's debt-to-GDP ratio rose from 129.7 percent in 2010 to 174.9 percent in 2014, over the same time frame, Portugal's rose from 83.7 to 129, Ireland's from 64.4 to 123.3, Italy's from 116.4 to 132.6, and Spain's from 54 to 92.1.

In fact, despite French President Hollande's plaintive cry, "Europe cannot continue to be identified by austerity," the reality is that cannibalistic democratic governments throughout Europe have continued to grow at the expense of the private sector. For the EU as a whole, government spending hit 49 percent of GDP in 2013, up from 45.5 percent in 2007. Only four of the 28 countries in the EU saw government spending as a percentage of GDP fall from pre-crisis levels through 2013 - Bulgaria, Romania, Lithuania, and Poland (countries that nobody ever suggests pose a threat to the viability to the EU) - while the other 24 countries have seen government grow faster than the private sector.

In addition to the official debt of the non-Greek PIIGS having risen over the past five years, so have their unfunded future liabilities. Those liabilities range in size from two-and-a-half to five times the amount of their explicit debt in those countries. (The same predicament exists in Germany, France, the U.K., and, yes, the U.S. None of these democracies will ever be able to honor all these obligations. Some of these liabilities, this negative wealth, will have to be vaporized, either by explicit defaults or through the maneuver of currency depreciation. There are going to be a lot of unhappy residents when they find that they can't leave the nightmare of their countries' political Hotel California.

The fact is that even if Greece leaves the EU, most Europeans will still be stuck with a Frankenstein currency; they will still be subject to the monetary quackery of the ECB as it mirrors the Federal Reserve's bizarro world; they will still have the machinations of EU bureaucrats pulling whatever levers they can to strengthen the EU and protect their generously compensated jobs; they will still have to contend with pests that have a more global reach, like the IMF. The people of Europe and their sovereign governments won't be able to leave the EU's dream-turned-nightmare Hotel California until they wake up from the spell that they are under. They will need to repent of, repudiate, and reject Big Government, democratic welfare states, debt addiction, a currency based on nothing, and a host of other economic errors. I doubt that this awakening will come before the ECB creates trillions more euros, destroying it in the vain attempt to avert an eventual catastrophic implosion of the European sovereign debt bubble, crackup of the EU, and tragic economic pain shared by millions of Europeans.

Kim Kardashian, Ronny Porta, and Other Beautiful People

Last weekend, I had a real treat. My first college roommate visited us. We hadn't seen each other in three years.

While sitting in the gazebo on a perfect spring morning, we did what old friends do: We engaged in relaxed, desultory conversation punctuated with blissful intervals in which nothing needed to be said, and we simply enjoyed each other's presence. The conversation ranged from the past to the present, from the profound to the trivial, and from the personal to the universal.

At one point, out of the blue, I asked Steve, "Do you know who Kim Kardashian is?" I asked because I don't know. I mean, I've seen dozens of headlines about her online - Kim gets married, Kim gets unmarried, Kim dates so-and-so, Kim gets pregnant, etc., but what does she do, other than be famous? I haven't cared enough to Google her and find out. Steve didn't know who she is either.

Actually, I was one step ahead of Steve. I've seen her photo enough to know what she looks like. She is young, curvaceous, and has some nice features, so I conclude that she is known for her physical beauty. The phenomenon still puzzles me, though. There are many, many physically beautiful young people in America. Ms. Kardashian must have the country's best publicity agent to have created such visible celebrity out of so little substance. "The Marketing of Kim Kardashian" should make a classic business school case study.

Within minutes of our passing mention of Ms. K, Steve checked his iPhone messages while I read the previous day's USA Today. On page one, I read the story of Ronny "Tony" Porta, an ex-Marine who lost his arm and whose face had been badly burned by an IED explosion in Iraq. Immature kids mock and taunt Tony for his disfigurement.

What a heart-rending story. Here's a man who suffered greatly for his service to his country, and instead of compassion, gratitude, and appreciation, he is the object of scorn and derision. And yet, in reading the story, I see an inner beauty in Tony - an honesty, a sensitivity, a strong and gentle man.

Speaking to the reporter who interviewed him, Tony asked, "Who will love me now?" That gets right to the nub of his great longing. I immediately thought, "I do, Tony, and so does my wife, my friend Steve, and a ton of other Americans you don't know." Of course, that's not Tony's primary need. Like any other young man, Tony desires acceptance, and hopes to receive the love of a partner.

Does Tony have any chance of finding the happiness of that one special companion? Indeed, the odds are long. I know from my own development over the decades and what I have observed from others that one's desire for physical beauty generally exceeds one's appreciation for inner beauty at least during the first four or five decades of life (permanently, in some cases). But it surely isn't impossible.

Tony can take heart from another story I encountered over the weekend. A friend had sent me the viral email with 22 photos depicting the love story of Taylor Morris, the young man who lost all four limbs from a bomb blast in Afghanistan, and his girlfriend, Danielle Kelly. Danielle has continued to love Taylor in spite of the radical change in his physical appearance. She has that admirable ability to look beyond the surface appearance and see the same wonderful man she had known since her junior high school days. Only 24 years old, Danielle is wise beyond her years. She sees not just with her eyes, but also with her heart. She sees beyond the transient physical beauty that lasts but a few years or decades to the abiding beauty of character and qualities that transcend and outlast mere physicality. Isn't it great to know that there are people like that out there?

And while we are talking about beauty, let me salute another beautiful person about whom I learned in the same section of the newspaper in which I learned about Tony Porta: Heather Abbott. Heather's foot was severely injured by the second bomb at the Boston Marathon. She explained to the reporter that she decided to have her leg amputated below her knee so that she could get a prosthetic device and resume normal activities rather than endure years of disability with a mangled foot. What really impressed me was her buoyancy and constructive attitude. She said she isn't thinking about the bomber, but focusing all her attention on making the best of her own life. What a gem! If I were the dad of this positive, wise, and sunny young woman, I'd be bursting with joy. Even with her being a total stranger to me, I can't help but think, "Oh, yeah, this wonderful person gets it, and what a blessing she will be to those who are close to her."

Writing about economics and politics isn't always a happy task. It was a real treat to take this detour to appreciate the inner beauty of young Americans like Tony Porta, Taylor Morris, Danielle Kelly, and Heather Abbott. These beautiful people help to make the United States the amazing country that it is. *

Wednesday, 16 December 2015 11:58

Hendrickson's View

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

The Fed: Painted Into a Corner

Speculation abounds as to when the Federal Reserve will begin to raise interest rates. Decades ago, this would have been called "the $64,000,000 question," but today trillions rather than millions of dollars are at stake.

With the warning that I have neither a crystal ball nor connections to anyone inside the Fed, it seems to me most unlikely that the Fed will raise interest rates in 2015.

In a statement that received huge publicity, the Federal Open Market Committee stated that it "can be patient in beginning to normalize the stance of monetary policy." This latest instance of "Fed-speak" oozes with understatement and irony. Being "patient" will be no challenge to the Fed. Even the word "glacial" doesn't quite describe the Fed's actions in regard to its zero-interest-rate policy of the last six years. "Frozen in place" seems more accurate. What's a little more " patience" in that context?

While most commentators focused on the word "patient," I found the word "normalize" to be more telling. It is an implicit admission that the policy in recent years has been anything but normal. Interest rates have not been normal; credit markets have not been normal; the Fed's massive interventions - buying several trillion dollars worth of government debt and agency-owned financial detritus (i.e., "Old Maid" mortgage-backed securities) - have been anything but normal. Why not keep the bizarreness - the abnormality - going for at least another year.

Whether Yellen and her cohorts genuinely want to raise interest rates, I know not, but I don't see how they can. Quantitative easing (QE) may be over for the time being, since federal deficits - though still gigantic - are a lot lower than they were when the QE policy was launched, and the Fed seems to be receiving enough principal payments to keep rolling over its portfolio of mortgage-backed securities, but when it comes to interest rates, the Fed is painted into a corner.

One factor working against the Fed discontinuing its repression of interest rates is the federal debt. Most of Uncle Sam's $18 trillion worth of debt is short-term. The annual carrying cost of that debt will begin to rise rapidly once the lid comes off interest rates, wreaking havoc with the federal budget and precipitating a paralyzing, disruptive political conflict.

Another factor is the precarious financial situation of most of the rest of the world. A friend of mine who is a very cagey retired bond trader recently pointed out that emerging markets - the most vulnerable and fragile markets in the world - have borrowed over three trillion U.S. dollars from banks and have issued almost another $3 trillion in USD-denominated bonds at very low interest rates. Should domestic interest rates rise (and along with interest rates, the exchange rate of the buck) emerging market paper would be devastated, triggering a chain reaction that would convulse markets around the world. It's hard for me to conceive of the dovish Janet Yellen and her colleagues on the Federal Open Market Committee willing to risk taking the blame for a global financial crisis.

As one who greatly respects the power of markets, I realize that there may come a moment when interest rates rise whether the Fed wants them to or not. But until that moment comes, it seems to me that Yellen & Co. will do everything within their power to suppress interest rates.

Let me repeat the caveat that I gave you in paragraph two: I don't know the future and my conjectures about it are worth exactly what you are paying to read this article. I get the impression that top Federal Reserve officials wistfully long for a normal interest rate market. They have to know that near-zero interest rates are neither normal nor healthy, but what choice do they have? They are prisoners of circumstance, painted into a corner that may lock us into artificially low interest rates for a lot longer than is commonly imagined.

Heeding History's Lessons in the Search for the Right Macro-Economic Policies

Hooray for James Grant! The longtime publisher of Grant's Interest Rate Observer has come out with a new book, The Forgotten Depression: 1921: The Crash That Cured Itself. Published by Simon & Schuster this Tuesday, I already have seen it reviewed in the Pittsburgh Tribune-Review and The Wall Street Journal, so it clearly is receiving lots of attention. Good!

The Depression of 1920-21 needs to be remembered and its lessons need to be learned. I have written about it repeatedly and have been hoping that the story would be told on a larger stage. Jim Grant is well suited to this important task. He is a writer of uncommon style - dry humor, droll wryness, given to elegant turns of phrases. He also has a razor-sharp intellect - erudite, incisive, and keenly perceptive. These qualities equip him to debunk the grotesquely flawed conventional narrative of American history that perpetuates such whoppers as: Warren Harding was one of our worst presidents (when he had the most effective economic program of any 20th-century president); Herbert Hoover drove America into the Great Depression because of his adherence to outmoded laissez faire policies (when, in fact, he was an aggressive interventionist whom one of FDR's minions went so far as to portray as a socialist in the 1932 elections); and FDR's massive interventions and deficit spending in the 1930s saved America (when his Hoover-like policies helped to prolong the depression needlessly for another eight years).

Incidentally, in a review that commits a couple errors of its own, The Wall Street Journal's reviewer, Burton Malkiel, unfortunately suggests that the term "depression" might not be appropriate for the 1920-21 slowdown. I disagree. In an era when we shudder at a 2 or 3 percent contraction of GDP, I think the 23.9 percent collapse of GDP in little over a year spanning 1920-21 - and an unemployment rate that exploded from under 5 percent to a high point over 14 percent in a matter of months - would qualify in the minds of most Americans as a depression. The reason this depression has been so easily forgotten is that it was so short and also because it was eclipsed by the horrific and prolonged suffering of the 12-year Great Depression that stretched from the stock market crash of 1929 to the bombing of Pearl Harbor in 1941.

The paramount question is: Why was the earlier of the two depressions of such short duration? Answer: Not luck, moonbeams, or fairy dust, but because of the correct policy response. The Harding/Coolidge administration cut taxes and cut federal spending in half. They got government out of the way and let markets make the necessary adjustments by allowing prices to find their market-clearing levels. The result was spectacular: By 1923, unemployment fell to as low as 2.4 percent and industrial production soared over 27 percent. This was the last laissez faire response to an economic slowdown in our history. Its very success is what makes the orthodox condemnation of laissez faire so abominably wrong-headed.

Given the truism that those who forget history are prone to repeat it, Americans need to understand our own history to see what works and what doesn't. The Bible says that "Ye shall know the truth and the truth shall make you free," (John 8:32) and that can be literally true in a political sense. Knowing the truth about both the successful policy response to the "forgotten depression" of 1920-21 and the disastrous policy response to the downturn that happened a decade later will equip American voters to distinguish between wisdom and balderdash. I don't know whether President Obama knowingly or ignorantly misstated American history when he claimed that "only government can break the vicious cycles that are crippling our economy" or when he asserted that shrinking government and relying on free markets "didn't work when we tried it in the decade before the Great Depression." If his misstatements were intentional, well, what can you say? But if they were due to ignorance, then he should read James Grant's book and get the history right.

I would agree with those who say that such a policy response to a recession is virtually unthinkable today. In this day of massively entrenched bureaucracies, the cronyism of special-interest politics, and gargantuan entitlement programs, the notion of cutting federal spending in half is a pipedream. Furthermore, union contracts in particular have rendered it impossible for wages to have the flexibility to fall alongside consumer prices, as they did in the early 1920s to quickly return to virtually full employment at lower wages paying lower prices (i.e., without significant loss of purchasing power or reductions in standards of living).

However, just because there are more obstacles that would prevent Uncle Sam from adopting the laissez faire approach that quickly cured the forgotten depression of 1920-21, that shouldn't stop us from at least getting the story right about what actually happened in our past. A favorite tactic of the left is to attribute economic problems to "market failure" when the elementary fact is that markets work (that is, they adjust the balance between supply and demand) when they are allowed to work. Often, though, government intervention disrupts natural economic functions, and then political demagogues blame the resulting dislocations on free markets. Thank you, Jim Grant, for helping to set the record straight.

Countering Egalitarian Ingratitude with "Thanks!" for Wealth Creators on Thanksgiving Day

Editor's Note: This essay was written last November.

Egalitarians - those poor souls obsessed with an equal distribution of wealth - have a problem. Actually, they have several problems. Each one is a chronic "Gloomy Gus." The equality they desire is illusory, impossible, and unattainable, dooming them to permanent unhappiness.

Egalitarians are blind to the beauty of our differences - our inherent inequality as individuals, the uneven distribution of skills and talents that underlies the social division of labor and accounts for the marvelous diversity in human society.

Egalitarians see the economic glass as half empty when in fact it is more than half full, and getting fuller all the time. The grim ideology of egalitarianism impels its adherents to complain instead of celebrate, to criticize instead of compliment, to be ingrates where gratitude is due.

Here's an example: In an article from The Christian Science Monitor this summer (Aug. 11 issue, p. 32), a professor emeritus of economics from the University of Massachusetts-Amherst stated, "I'm surprised the American people have allowed this [income inequality] to go on as long as it has" and "I think we're headed for enormous conflicts in our society. . . ."

This phenomenon of an intellectual comfortably removed from poverty thinking that economic (rather than political) inequality leads to class conflict goes back as least as far as to Marx and Lenin. Such a mindset remains obtusely impervious to the recognition of a salient economic fact - namely, that standards of living, even for the bottom quintile, are at a level that most of the rest of the world envies.

Indeed, the amenities commonly available to low-income Americans - climate-controlled automobiles and homes, various electrical appliances, life-saving pharmaceuticals, mobile communications with instant connections to virtually anywhere - these would have been the envy of Queen Victoria and the other monarchs of the world barely over a century ago.

There is something askew in human psychology that causes people to denigrate the very system of wealth production - i.e., free enterprise, not its counterfeit called "cronyism," private property, and profit-seeking enterprises practicing voluntary exchange in openly competitive markets - that has made our lives as affluent as they are. The historian Bertrand de Jouvenel commented on this perverse tendency decades ago, observing that the higher the level and greater the reach of affluence, the greater the resentment and denunciation intellectuals (generally not the humble worker who was climbing up the economic ladder) directed against the very engine of that economic progress - the "capitalist," to use the loaded term favored by the left.

Another example of egalitarian angst is a Harvard study that Reuters reported about in September. The study called the wealth gap between rich and non-rich as "unsustainable" and called for corporate leaders to help solve it by working for improvement of the K-12 education system, transportation infrastructure, and skills-training programs. Doesn't it seem odd that they want private businesses to fix three sorry problem areas that are all controlled by the government? Does it not follow that if the problems that are holding back lower income Americans are not being caused by businesses that maybe, just maybe, the income gap is a government-caused problem and not the fault of "greedy capitalists"? (You can also blame the Obama administration's policies and the Fed's.)

At Thanksgiving time, I, for one, would like to salute all the private-sector entrepreneurs who have made fortunes by producing the goods and services that have uplifted standards of living for Americans. Our affluence isn't a random blessing that fell out of the sky or grew on trees. It is the result of the strenuous efforts of wealth creators - society's economic benefactors. Those entrepreneurs deserve our respect and our gratitude rather than censure and condemnation. And we all had better hope that their wealth-creating activities remain sustainable - which they will be if the powers-that-be in Washington don't ruin us by killing the entrepreneurial goose that lay's the golden egg of American affluence.

"Happy Thanksgiving!" everyone, but especially you entrepreneurs! *

Wednesday, 16 December 2015 11:52

Hendrickson's View

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

A Free-Market Economist's Take on Ken Burns' "The Roosevelts"

By now, you've probably seen or heard about Ken Burns' 14-hour documentary on the three most famous Roosevelts: Theodore, Franklin, and Eleanor. I have to confess that I almost didn't watch it.

There were two reasons for my reluctance. First, I am not a fan of either Teddy or FDR as presidents. The former was guilty of a lust for war and domestic strongman tendencies, and the latter tragically prolonged the Great Depression. Second, I had watched a one-hour preview of the seven-part series and found it almost nauseating in its worshipful tone. Listening to the hostess, one would have thought that America would have remained mired in the 19th century were it not that these three gods had come down from Mount Olympus to show us the way.

Thank goodness I made myself watch the actual documentary. Ken Burns and his writer, Geoffrey C. Ward, steered clear of presenting a mythological hagiography, and instead gave us vivid, insightful, fair-minded biographies of three immensely important, but oh-so-human Americans.

Although America's history from the late 1800s until Eleanor's death in 1962 serves as the backdrop to these three larger-than-life biographies, it is crucial to understand that this documentary isn't a history of America, but of the Roosevelts. Sure, I or any other economist or historian could quibble about the details. For example, when the script says that Teddy never advocated a redistribution of wealth, I could retort: What about his statement, when running for president on the Bull Moose ticket in 1912, "Our aim is to promote prosperity, and then see to its proper division?" Or when the narrator mentions that some businessmen characterized FDR as dictatorial, he could have cited the 1936 Gallup poll showing that 45 percent of Americans believed FDR's policies could lead to dictatorship or the 1941 Fortune Magazine poll showing that fully 93 percent of employers felt their property rights were under siege and were worried about dictatorship. I never felt, though, that the authors were trying to mislead, manipulate, or propagandize.

Instead, the filmmakers scrupulously strove to present fair, balanced portrayals of their three protagonists. First, they straightforwardly and without sensationalism dealt with the less-than-flattering aspects of their characters - Theodore's compulsive need to be in charge and prove his manhood; Franklin's need for loyal, adoring female companionship and his "deviousness" (although Geoffrey Ward never quite explains that characterization); and Eleanor's aloofness as a mother. Also, the documentarians included many of the Roosevelts' opponents' criticisms, leaving it to the viewer to decide which side was right on various issues.

"The Roosevelts: An Intimate History" shines on at least five levels:

1) It humanizes three individuals who have largely become iconic caricatures. You may not agree with them, but if you can't find anything to like or admire about these three, you have a heart of stone.

2) For all but dedicated Roosevelt scholars, there is much to learn. I personally gained a new appreciation for FDR's morale-boosting leadership during World War II, and for Eleanor's courageous commitment to civil rights for African-Americans.

3) This program provides encouragement and inspiration to anyone who has suffered loss, heartbreak, and trauma, either psychological, such as losing both parents early (Eleanor) or one's mother and wife on the same day (Theodore) or physical - e.g., FDR's polio, the severity of which I never understood until seeing this documentary. Whatever you think of the Roosevelts' politics, it is a triumph for the human race when individuals can survive, thrive, and accomplish much after being dealt harsh blows.

4) The series raises interesting implicit questions about the psychology of presidents. Should we know what makes presidential candidates tick? Certainly it takes a person of special strength of character to be a great president, and often such character is forged in the furnace of shattering experiences, but should we elect someone like Teddy whose manic behavior was driven by a need to escape his demons and to constantly prove that he is strong and manly?

5) Finally, "The Roosevelts" encourages us to think about what kind of president is right for America. What is the right balance between leadership, vision, and values (essential) and power (dangerous) in an American president? Even if a president means well and has good intentions, do the ends justify the means, such as doing an end-run around the Constitution?

I salute Ken Burns for a top-notch, informative, fascinating documentary. And I say that as a free-market economist who has fundamental disagreements with many of the Roosevelts' economic policies. Watching the documentary was 14 hours well spent.

Saudi Arabia Versus the Keystone Pipeline

Wow, I had barely recommended repealing the laws that restrict U.S. oil exports as part of an overall ramping up of competition in global oil markets when news hit that the Saudis were cutting the price of oil shipped to the U.S. The price of oil has been zigzagging downward since then - much to the benefit and delight of American motorists, who have seen gasoline prices fall, and to the angst of oil producers as lower prices squeeze profit margins.

Some may think that the Saudis are targeting American producers by cutting the price of crude oil shipped to the States even as they raised their price to Asian markets where the supply/demand balance is more in the Saudis' favor. However, Stansberry & Associates resource analyst Matt Badiali points out the sour crude that the Saudis are shipping here doesn't compete directly with the light sweet crude coming out of American shale. The Saudis are competing with Canadian producers to whom, as Badiali shows, they have been losing market share. Since the Saudi cost of production is lower than the cost of producing oil from Canadian tar sands, it looks like the Saudis have the upper hand in a price war against the Canadians.

Of course, there are multiple factors here which make predicting the long term problematical: How much longer can the Saudis maintain their rate of production? How fast are the Canadians achieving economies of scale and advancing along the learning curve to reduce the cost of extracting oil from tar sands? Can the Saudis make up in increased sales volume the profits that they lose as the price of oil declines? What geopolitical events might throw a monkey wrench into the Saudis' strategy?

Still, as of today and for at least the near future, the ongoing fall in oil prices has to be a major concern to Canadian tar sands producers. At what price point will lower oil prices force them to cut back on production? Given the possibility that producing oil from tar sands may become uneconomical, would building the Keystone XL pipeline through the American heartland still make sense for American companies and investors?

Indeed, the Saudi decision to drive down oil prices in North America means that the future prospects for the economic viability of the Keystone project need to be re-examined. President Obama has stubbornly refused to give the green light to Keystone. Wouldn't it be ironic if, after squandering so much political capital on his obstructionist position, it turns out that market prices kill or continue to delay the project? Up until a few months ago we needed Keystone - if not for actual production, at least as a sign that America was committed to the development of petroleum resources. The very commitment to increased energy production likely would have been factored into market prices, lowering them earlier has actually happened.

So, what now? Should the Keystone Pipeline be built? That's not for me to say and, frankly, I don't see the future clearly enough to know whether it will be economically viable in the coming years. Neither is it for President Obama to say or know. Only the market can tell us which decisions to produce are wise and which are mistaken.

Policy-wise, the president should simply get out of the way, call off his regulatory dogs, tell his green constituents to sit on it, and let entrepreneurs decide what risks they wish to incur. If they build it and lose money, well, it's their money that's being lost, not the taxpayers' money as it has been for various Obama-financed alternative energy boondoggles. And if they do make money, it will be because they are supplying a commodity that Americans want and their addition to the total supply of oil will result in prices to consumers being lower than they otherwise would - in other words, a win-win situation for both consumers and those who took the risk to build and own the pipeline (with an added beneficiary being the government through its tax on corporate profits).

A final thought: The Saudis aren't being "the bad guys," even though those who hope to work on or otherwise profit from building the Keystone XL pipeline might wish the Saudis and their cheap oil would disappear. There are no "good guys" and "bad guys" in this strenuous struggle for market share. What we have in the oil markets is an example of the rough-and-tumble, unsentimental, take-no-prisoners nature inherent in competitive commodities markets. The sovereign consumer is in charge. Consumers decide which firms thrive and which die based on which ones best serve us. Consumers don't care which particular producers supply our need for commodities - we just want to buy the commodity as cheaply as possible.

The oil market is working. We consumers - thus, society as a whole - are benefiting. In the competitive scramble to serve us, some producers will succeed while others fail. We should be grateful for them all, winners and losers, for each one of them, in their attempt to earn profits by supplying our needs has added to the competitive pressures that have pushed down oil prices. The cheaper oil gets, the more our prosperity will increase. Good luck to all the competitors, and thank you for working for our benefit. *

Wednesday, 16 December 2015 11:48

Hendrickson's View

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

The Flood of Illegal Immigrant Children: Why the Secrecy?

Illegal immigration is a subject I generally avoid. The issue stirs stronger passions and produces greater polarization than almost any other.

Without touching on the usual hot buttons, I wonder if we could at least agree that there is something - I grope here for the appropriate adjective - suspicious, irregular, uncomfortable, or not quite right about the administration's furtiveness and secrecy in the current crisis of illegal immigrant minors flooding into the United States.

Team Obama has imposed at least a partial media blackout. Journalists seeking to interview the young detainees at Fort Sill, Oklahoma (a long way from the border they crossed) were put off for days, and even then told that their scheduled 40-minute tour would happen only on the grounds that the journalists would ask no questions, take no photos, make no recordings, or otherwise do the kind of investigative work that reporters normally do. Such a Potemkin-type tour with its heavy-handed censorship violates the people's right to know.

At least one member of Congress (Rep. Jim Bridenstine, R-OK) has been denied access to the children detained at Fort Sill - rather astounding, considering that Bridenstine sits on the Armed Services Committee that oversees federal military installations and that Fort Sill is located in the state that the congressman represents. Why the cloak and dagger? What's the big secret? These are mostly peasant children, not dangerous spies or terrorist leaders.

Why, too, the seeming furtiveness with which the administration is transporting hundreds of these minors to various far-flung states? Nebraska Gov. Dave Heineman declared:

I found out in the last 48 hours that approximately 200 illegal individuals have been transported to Nebraska. The federal government is complicit in a secret operation to transfer illegal individuals to my state and they won't tell us who they are.

Denying the governor of a state that kind of information is high-handed and disrespectful. It certainly mocks the principle of federalism.

Overall, the administration's conduct smells like a cover-up. Why? What needs to be hidden? Maybe nothing at all, but why not lift the veil of secrecy and let the truth out in the open? By keeping Americans from having access to the truth, the administration invites speculation, rumor mongering, and distortions that can only cloud the issue and make it harder to figure out what actions would be appropriate.

Already there have been reports, including charges by U.S. Congressman Phil Gingrey (R-GA), a physician, that some of the recent illegal immigrant children are suffering from tuberculosis, dengue fever, swine flu and other infectious diseases. This sounds like it could be exaggerated sensationalism and a false alarm, but how can we know for sure without more openness?

There are so many questions that remain unanswered, but that need to be answered if we are to make informed, intelligent decisions about what we think our government should do: Who are these children? How many of them made the decision to come north on their own and how many were directed (coerced?) by adults into making the journey? How did they get to the border? Do they qualify as refugees? What have they been promised, both before their journeys started and since their arrival? What are the medical problems they are experiencing, are they receiving adequate medical attention, and is there any risk of them spreading disease? Who is going to monitor the children that have been placed with relatives and sponsors to make sure that they show up for their scheduled hearings? Are relatives being asked to pay for a child being delivered to their door or is this a "free" service paid for by the American taxpayer?

The most crucial question is: What will be our policy going forward? What are we going to do with Central American, Mexican, and other foreign children who enter our country illegally, but whose parent(s) or guardian(s) in their native country won't accept them if they are repatriated? It is hard for Americans to understand the mentality that causes parents to send their children on a dangerous, potentially lethal (and, they expect, one-way) journey to the States. I once lived in a Latin American country where poor parents would maim their child (cutting off a foot was the favored form of maiming) and turn them loose on the streets where they depended on the compassion of strangers. To those parents, this was their child's best chance for survival. Similarly today, some parents believe that they have nothing to lose - if the kid gets killed trying to get to the States, well, his prospects weren't appreciably better at home, but if he makes it, then he has the opportunity for a much better life. Roll the dice: The fatalistic attitude, "Que sera sera," is a crucial component of the Latin American psyche.

This is the wrong time and wrong issue for the administration - the one that President Obama promised would be the most open in history - to maintain a wall of secrecy. Mr. Obama, tear down this wall! Let the American people see what is going on.

Deja Vu: Misplaying the Patriotism Card Again

A decade ago, soon-to-be Democratic nominee for president, John Kerry railed against "Benedict Arnold CEOs." That was his term for American executives who moved their business operations offshore. To equate offshoring with something as evil as treason is over the top even by the perfervid standards of political campaigning, but hey, "All's fair. . . " right? Well, not exactly. It turns out that the very corporations Kerry was excoriating were leaving the States due to policies adopted or perpetuated by the very Congress in which Kerry himself then sat.

Take, for example, the iconic candy manufacturer Lifesavers and their venerable competitor, Brach's. Both companies had moved abroad (Lifesavers to Montreal, Brach's to Mexico) not long prior to Kerry's incendiary remarks. They did this not for the purpose of hurting America, but to improve their odds of survival in a very competitive global market.

These companies decided to leave the U.S. because the domestic price of sugar was twice as high as the world price due to Congress' protectionist policies. It's difficult for a business to survive if it has to pay significantly more than its competition for one of its principal factors of production. I'm sure the executives would have preferred to stay in Holland, Michigan (Lifesavers) and Chicago (Brach's) than go to the expense and disruption of moving, but the congressionally imposed cost disadvantage they faced drove them away. For Kerry and other opportunistic pols to condemn those CEOs for leaving after they themselves had virtually driven them out takes a lot of chutzpah. Isn't that what liberals call "blaming the victim"?

Fast forward to July 2014: Secretary of the Treasury Jack Lew is reprising Kerry's rhetorical tactic. In language only slightly less egregious than invoking the name of America's most notorious traitor, Lew has impugned the patriotism of American corporate leaders who are contemplating corporate "inversions" - i.e, acquiring a smaller corporation overseas and then relocating corporate headquarters to the acquired entity's country. Lew said American corporate leaders should show "economic patriotism" by staying here and continuing to pay America's worst-in-the-developed-world 35 percent corporate profits tax.

Once again, moving offshore isn't a matter of executives being anti-American, but simply one of economic viability. In a competitive global marketplace, expecting a business to compete at a significant cost disadvantage is asking a lot. Companies that do what markets impel them to do-e.g., to lower costs-are in a better position to employ workers, reward investors, and lower prices charged to consumers.

Obviously, as head of the federal government's woefully indebted Treasury, Lew is scrambling and scrounging for revenue. We can understand why he would make every effort to persuade corporations to remain in the States. But put yourself in the CEOs' shoes: Is the higher right to protect the interests of their employees and shareholders or to support the profligacy and wastefulness of congressional spending - boondoggles like Solyndra, monstrously inefficient bureaucracies, corporate welfare and other vote-buying special interest handouts? Instead of asking CEOs to ignore their fiduciary responsibilities, Lew should urge the White House and Congress to show their economic patriotism by forswearing the chronic irresponsible overspending that endangers our country's posterity.

Instead of growling like ravenous predators seeking to devour business profits, it's time for government leaders to take a different approach. They should ask the simple question: Why are some American businesses re-domiciling offshore? The predominant reason is to become more competitive by shedding a cost disadvantage - namely, higher corporate tax rates in the U.S. than abroad. Washington could reverse the flow by adopting lower corporate tax rates than other countries have.

Just as private firms compete for consumers by offering them lower prices, so governments compete for corporations by offering them lower prices (i.e., taxes). Of course, everyone from President Obama to the IMF and OECD, to the new progressive rock star, economist Thomas Piketty, abhor the idea of governments competing against each other, but why should we object to competition? After all, it was good old-fashioned economic competition that helped make the U.S. the richest country in the world. Instead of trying to avoid competition, let's embrace it and win. That's the American way. That would be true economic patriotism, American-style. *

Wednesday, 16 December 2015 11:46

Hendrickson's View

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

How to Stop The EPA's Jihad Against Carbon

A few years ago, Congress narrowly defeated passage of legislation to implement a "cap and trade" program that would have made fossil fuels more expensive. Cap and trade would have been the mother of all excise taxes, transferring large sums of money from users of electricity (i.e., all of us) to Uncle Sam. Penalizing consumption of CO2 would have been a body blow to America's energy-based economy.

The EPA now proposes to do what Congress didn't do. It has proposed mandating a 30 percent reduction in CO2 emissions by the year 2050. In doing so, it is supported by a Supreme Court ruling that greenhouse gases are to be defined as "pollutants" under the Clean Air Act. Given President Obama's stated desire to bypass Congress with unilateral executive action, it is no surprise that the EPA has acted at this time.

What terrible timing! The economy's growth rate is negative; furthermore, the case for taking costly action to address the alleged threat of anthropogenic global warming is even weaker now than it was five years ago.

The supposed scientific case for the AGW theory has collapsed. Attorney Francis J. Menton, Jr., in a brilliant letter to EPA administrator Gina McCarthy, wrote

. . . the most recent IPCC report completely undermines any basis for determining climate sensitivity with the following statement: "No best estimate for equilibrium climate sensitivity can now be given because of a lack of agreement on values across assessed lines of evidence and studies." This means that the IPCC admits that it does not have a credible mean, mode, or median value of the equilibrium climate sensitivity parameter. In the mathematics of Decision Theory, this situation is called Complete Ignorance Uncertainty.

Menton then states that the EPA's "Endangerment Finding" of 2009 (which purports to demonstrate the dangers of CO2) "has been invalidated by the failure of real-world data to support each of the three 'lines of evidence' on which EPA purported to rely in reaching its Finding." Indeed, the data completely demolish and refute the finding.

Yet, some of the more zealous proponents of carbon regulation have taken to manipulating numbers (shades of "Climategate"). It turns out that the claim that 97 percent of climate scientists agree that human activity is likely responsible for the earth getting warmer is fiction. Joseph Bast and Roy Spencer, writing in The Wall Street Journal a few weeks ago, found the actual figure to be closer to 1 percent of the papers used to conjure up the 97 percent claim.

What is particularly ironic about the EPA continuing to press on with its anti-carbon jihad is that even some of the scientists who have advocated stringent anti-carbon rules essentially exploded their own case several years ago when they began to tell us that the earth is likely to cool for a few decades before entering a prolonged period of rapid warming. For years, alarmists insisted that CO2 warms the planet. Then they began to assert that rising levels of CO2 won't warm the earth for 30 or 40 years, but will do so later on. Come again? Does CO2 warm the earth or doesn't it? Alarmists are finally conceding the main argument of global warming skeptics: Other forces - particularly solar variations - overwhelm the greenhouse effect.

The unfathomable irrationality of the EPA's new edict is seen in this: The IPCC's own figures - problematical as they are - project a reduction of a minuscule 0.08C by the year 2050 if the U.S. were to eliminate all CO2 emissions. Presumably, reducing such emissions by the proposed smaller amount - 30 percent - would make even less of a difference. It shouldn't be too hard to frame the issue to the public in terms of whether, if they believe that humans are responsible for global warming, they are willing to pay much higher prices for electricity and suffer a more sluggish economy in exchange for temperatures several decades hence being a few hundredths of a degree lower.

Why do President Obama and the progressives pursue their anti-carbon jihad so relentlessly? It certainly isn't for the well-being of the American people. I can only surmise that it has something to do with the usual preoccupations of politicians, i.e., money and power (and, in the case of President Obama, ideology).

Money? Perhaps people like Sen. Reid see how Al Gore became a very rich man by investing in the very global warming alarmism that he helped to spawn while working in government.

Power? Perhaps the jihad against CO2 has something to do with keeping those campaign contributions from wealthy green groups flowing. Or maybe the "Curley effect" (make Americans poorer and more dependent on government) is a factor. And since progressives, like socialists, prefer to control "the commanding heights" of the economy, it's only natural that, after doing much to increase government control of health care, finance, and education, Obama now craves increased control over energy.

Ideologically, the president is simply opening another front in his war against the middle class and proving once again that he is a "mean green."

So, what is to be done to free us from the counterproductive war against carbon-based energy? Alas, as long as Harry Reid is the Senate Majority Leader and Barack Obama is in the White House, we're stuck, but here is what I propose:

First, Congress should undo the damage done by the Supreme Court and curb the EPA's bureaucratic overreach by passing legislation that states simply: For purposes of U.S. law, greenhouse gases are not to be defined or categorized as "pollutants."

Second, no member of Congress, his or her staff, or any of their relations may ever invest in any enterprise pertaining to green energy or climate change.

Some day we will look back at global warming alarmism and be amazed that so many people were enthralled by such phantasmagoria. At present, though, the threat is painfully real.

America's Losing Battle Against Poor Governance and the Whac-a-Mole

Under President Obama's leadership, a veritable flood of contentious issues has convulsed our body politic. Republicans and Conservatives are aghast at what they perceive as Team Obama's disastrous governance. They cite scandals (Fast and Furious, Benghazi, the IRS, the VA), fiascoes (Obamacare), and bureaucracies running amok (EPA, NLRB, FCC, BLM, et al.). Democrats and progressives counter that there are no real scandals, fiascoes, or abuses, and charge that allegations to the contrary are nothing more than partisan fabrications designed to obstruct and undermine the agenda of the man who has won the last two presidential elections.

I fall into the former camp. What I find ironic and frustrating is that the sheer volume of incidents of poor governance appears to work to Team Obama's advantage. Just when the Republicans look like they might get their hooks into one major problematical policy, several additional such instances arise, each taking its turn in the media spotlight and diverting the public's attention from earlier scandals, fiascoes, or abuses. Instances of poor governance have proliferated at such a dizzying pace that Congress has been unable to gain traction on any individual problem. Instead of providing needed damage control against executive branch malfeasance, the legislative branch futilely spins its wheels as the federal leviathan grows out of control.

Let's slow down for a moment here to take a closer look at just one of this year's disturbing federal flare-ups - the confrontation that the Bureau of Land Management (BLM) had with Nevada rancher Cliven Bundy. There are four aspects of that episode that bear important lessons for us.

The first lesson is the considerable power of the media to frame the public debate. There were multiple important issues in the Bundy/BLM case - property rights, federalism, proper or admissible conduct by federal employees, etc. All of a sudden, though, when Cliven Bundy made some artless, dumb, warped statements, the media turned a serious story involving issues of vital concern into a circus about the question of whether Bundy is a racist. It seems clear that there is little chance that any major government malfeasance or malpractice will be investigated thoroughly unless the major media keep the story alive.

The second aspect of the Bundy/BLM case that merits further attention is the conduct of BLM personnel and other federal employees. In her column, "Liberate The Federally Occupied Western States," former New York Lt. Gov. Betsy McGaughey reported that when BLM personnel moved in on Bundy, they seized his cattle at calving time, separating cows from their less-than-week-old calves, thereby inflicting trauma, suffering and, in some cases, death on those vulnerable creatures.

Such conduct was inexcusable; it showed a premeditated meanness. The raid was a naked power play, timed to inflict maximum damage on an American citizen's livelihood and (I believe) intended to convey an unspoken but unmistakable message to the American people: Uncle Sam is the boss, and if you ever stand up for your rights against his agencies, they will smack you down. (And by the way, what did the cattle do to deserve suffering and death?) The BLM exhibited the same spirit that the president manifested when he sought to impose maximum pain and discomfort on innocent Americans back during the budget sequestration talks. The BLM's heavy-handed tactics in Nevada were reminiscent of the brutal tactics employed by Communists to subdue those who dared to resist them. One vivid example: During the famine in Ethiopia in the mid-1980s, the Stalinist president, Haile Mariam Mengistu, drafted young men off the farms and into his army just before harvest time so that the crops would be lost. It seems that the BLM, like Mengistu, figured that the most effective way of subduing people is to deprive them of their means of sustenance.

Another troubling aspect of the BLM's tactics against Bundy is that employees of the BLM and other federal agencies came after Bundy with SWAT teams, snipers, and overwhelming firepower. Aside from that ridiculous degree of overkill to be brought to bear against a rancher who, according even to his opponents, is a deadbeat squatter, not a rapist or murderer, there is something horribly unsettling about federal bureaucracies taking up arms against American citizens. Yes, by all means, in necessary cases deploy the FBI and other law enforcement agencies. But in the last year or so, there have been too many reports of non-law enforcement agencies obtaining weapons - everything from the Social Security Administration ordering large stockpiles of hollow-tipped bullets to the Department of Agriculture's equipment order for submachine guns.

The third point we need to reassess is the role of the BLM. This federal agency currently controls one-eighth of the surface landmass of the United States plus subsurface mineral rights that are almost three times as large. (All federal agencies combined "own" 28 percent of U.S. land.) Thus, the BLM is larger than many countries in the world. Its current director is 35-year-old Neil Kornze, who previously worked for Senator Harry Reid.

Since the Bundy flap, I have been on the lookout for BLM news. It turns out that young Mr. Kornze is doing his part to help President Obama bypass Congress and set national policy in at least two major ways - namely, assisting Team Obama's green energy plans and weakening the policing of our border with Mexico. In regard to the former, BLM is promoting the green energy agenda by authorizing a corridor for green energy transmission lines through the Defense Department's White Sands Missile Range in New Mexico. This would benefit the private investors of a company named SunZia while compromising national security, according to New Mexico's Governor, Susana Martinez, and Congressman Steve Pearce. Question: Since when did Congress delegate authority to the BLM to pick winners and losers in the energy industry? The BLM is also acting to undermine law enforcement agencies' ability to intercept illegal immigrants across from the notorious Ciudad Juarez by designating 600,000 acres of land the "Organ Mountains-Desert Peaks National Monument." Existing wilderness designations mean that border control patrols cannot ride on the protected land, making it much easier for illegals to elude detection.

This brings us to the fourth aspect of the BLM's 2014 activities that merits further thought: Where is Congress? Why haven't congressmen called BLM on the carpet for its role in usurping Congress' prerogative to legislate the rules that help to determine what energy companies will thrive and what our country's immigration policy should be? In fact, why hasn't Congress begun to dismantle the BLM by privatizing its vast land holdings? Government control over real estate was the first of 10 points in Marx's platform for socializing an economy. Why do we tolerate our government "owning" so much land? Other than keeping the land it needs to support national defense and house the offices of other federal departments, the federal government has no business keeping such vast and valuable resources out of the hands of the productive private sector.

As much as I wish Congress would rein in the BLM and reform it radically, I don't see it happening. This isn't because those members of Congress who see Team Obama's executive branch overreach as unconstitutional and pernicious are lazy or irresponsible. Rather, there simply isn't enough time for them to conduct thorough investigations of most of the abuses. A sensible wish list for those who want to return to sound government would be to extricate us from the suffocating tentacles of Obamacare, get to the bottom of the Benghazi scandal, restrain the IRS, untangle the VA mess, rein in the rogue EPA (and FCC and NLRB and...), etc. Obviously, this ain't gonna happen.

Like a supercharged version of the arcade game Whac-A-Mole, new executive branch problems and abuses keep popping up faster than Congress' ability to address existing ones. We are seeing the scary reality of Obama's bold promise to bypass Congress and implement his policies unilaterally through executive branch agencies, bureaus, and departments. Obama has demolished the traditional system of checks and balances between the legislative and executive branches. Through sheer volume of rule by regulatory fiat, Team Obama has neutered Congress.

To be fair, executive power has been eclipsing congressional power for decades already. I'm sure many of you reading this have seen the photo: The reams of paper stacked in the cabinet are the regulations - rules we all have to obey - promulgated by federal bureaucracies last year. Did you notice the small stack of papers on top of the cabinet? Those are the laws duly passed by our elected representatives in Congress last year. This shows graphically how dominant the unelected bureaucrats in the executive branch of the federal government have become. And if you want to put a dollar figure on the cost of this usurpation of the legislative function by the unelected bureaucrats of the executive branch, economists John Dawson and John Seater calculated that the 2011 GDP of $15.1 trillion could have been $53.9 trillion - three-and-a-half times greater - if federal regulations had remained at their 1949 level.

It's hard to have hope that we will somehow be able to cast off the massive, tangled network of bureaucracy that has steadily and stealthily accumulated so much power over us. Given the current composition of Congress and the administration in the White House, it's going to get worse before it gets better (if, indeed, it ever actually gets better). We're not about to win the battle against the regulatory Whac-A-Mole state.

What I'd settle for now, what I implore our Congress to do, is this: Could we at least have a congressional hearing about whether federal bureaucrats should be amassing fearsome weapons and becoming armed in their official capacity as "civil servants"? And please, Congress, don't single out just BLM, the Social Security Administration, the EPA, or the Department of Agriculture, or any other single bureaucracy. Just have one detailed public hearing on the question of whether federal agencies that aren't explicitly and specifically dedicated to law enforcement should be armed. What do you say, Congress? Are there any takers out there? *

Wednesday, 16 December 2015 11:40

Hendrickson's View

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

The Politics of St. Paul?

In Romans 13:1-7 the apostle Paul writes:

"[A ruler] is the minister of God to thee for good" (v. 3);
"Wherefore ye must needs be subject . . ."(v. 5);
". . . pay ye tribute [taxes]" (v. 6).

St. Paul seems to be saying that God ordains human governments and that Christians should honor and obey the government under whose jurisdiction they live. Many Christians conclude from these verses that Christians should accept whatever government and laws their country has. Other Christians, while accepting the need for government and lawful behavior, question whether Romans 13 commands us to submit to human governments unconditionally. They ask: Is rebellion ever justified? Reform movements? Civil disobedience? Tax protests? Change?

Based on scriptural texts, Paul appears to be a quintessential conservative - not in the contemporary American sense of favoring a smaller government, but in the more traditional political sense of not wanting to disrupt the established order. Indeed, contemporary progressives reject Paul's unwillingness to challenge the social status quo. In his epistles, St. Paul tells servants to treat their masters well and vice versa. There are no appeals for "social justice," equality of status, or redistribution of wealth. In addition to the famous passage in Romans, Paul exhorts Christians to pray for all in positions of authority (I Timothy 2:1-4). These are not the writings of a political dissident.

Before categorizing Paul as a political conservative, let us consider another possibility: Perhaps he was apolitical. Like his Lord and Savior, Jesus Christ, Paul's life was devoted to a spiritual mission - the advancement of the heavenly kingdom that is not of this world. His objective was to reform and reconstruct the architecture of the thought, soul, and heart, not the superstructure of civil government. Paul was an evangelist for God and His son, not a political philosopher or activist. He was too busy being a spiritual radical to get involved in a political movement.

Indeed, Paul had to take great care that the fire of the Holy Spirit that burned in men's hearts not be conflated with the flames of political passions. Many Jews were still looking for a militant Messiah to lead them in revolt against the hated Romans. Paul must have known that if the followers of Jesus became a political movement challenging the authority of Caesar, the Roman army would crush, if not annihilate, the nascent Christian movement. Out of love for his Lord and his fellow man, Paul would not lead his flock to certain slaughter. His apparent cautiousness was not due to personal timidity or concern for his own safety. This faithful apostle bravely endured repeated hardships in the service of his Lord:

Five times received I forty stripes save one, thrice was I beaten with rods, once was I stoned, thrice I suffered shipwreck, a night and a day I have been in the deep . . . In weariness and painfulness . . . in hunger and thirst . . . in cold and nakedness (2 Corinthians 11:24, 25, 27).

Ultimately, this "great lion of God" (as the novelist Taylor Caldwell characterized him) was martyred for his faith.

It is significant that Paul's statements about honoring government occur in his letter to the Roman church. Certainly Rome, as home to Caesar and capital of the Roman Empire, would be particularly diligent in monitoring potential rebels. What if Roman authorities were to intercept Paul's letter? In that case, his statements about honoring government would contradict any charge that Christians were somehow disloyal to the emperor. At the same time, Romans 13 conveys messages that were opaque to the pagans but transparent to Christians.

The chapter begins, "Let every soul be subject unto the higher powers" (v. 1). While Roman authorities might have assumed that Paul was writing about Caesar, Christians knew that "the higher powers" were divine - that God is the sovereign to whom one owes fidelity. And when Paul writes that a ruler "is the minister of God to thee for good" (v. 4), doesn't this imply that he is speaking of rulers who are just and good - those who uphold God's rules protecting the sanctity of life, marriage, property, reputation, etc.? Yes, we should pray for all who are in positions of authority, for benign and just rulers, that they continue to be so, and for corrupt or unjust rulers, that they mend their ways and govern better.

Here is a jarring thought: If Christians are never to rebel against unjust government, then America's Founding Fathers were wrong to rebel against the English crown and parliament to establish a republic where most people's God-given rights were given greater protections than anywhere else on earth.

This leads us back to those controversial, fundamental questions about which Christians of good conscience may strongly disagree: What is the proper scope of government? To what extent should Christians "turn the other cheek" and "suffer it to be so now" by accepting the status quo, and when is challenging and changing laws and government justified? Is it possible that Paul's contributions to the scriptural canon were not essentially conservative, but so profoundly revolutionary on a long-term basis, leavening human thought until, centuries later, Christians' hearts and minds were filled with the unshakable conviction that it was a human right to throw off unjust governments?

Here is one point on which most Christians may agree: Governments often adopt policies that don't seem right, and we disagree on which policies those are. But all of us can take heart from that glorious promise that St. Paul gave us in that same letter to the Romans: ". . . all things work together for good to them that love God . . ." (Rom. 8:28). Amen.

The UN, EPA, and the Latest Climate Change Folly

When writing about the IMF last week, I mentioned that bureaucracies tend to do everything possible to perpetuate themselves. So it is with the United Nations and the Environmental Protection Agency.

The UN long ago found common cause with redistributionist national governments on the subject of climate change/global warming, spouting an alarmist theory of impending disaster unless we Americans slow down on economic growth and the governments of richer countries give more of their taxpayers' money to the governments of poorer countries. Thus, predictably, the UN's Inter Governmental Panel on Climate Change has just issued its fifth assessment report in which it continues to sound the alarm about warming caused primarily by increased concentrations of CO2 in the atmosphere. It also states that developing countries need between $70 and $100 billion per year to make needed changes - money that the developed countries are expected to supply, even as they shrink their own GDPs.

The EPA has been progressively expanding its reach, successfully positioning itself as a ubiquitous presence in our lives and establishing itself as one of the most powerful agencies of the American government. Its latest gambit involves attempting to regulate emissions of bovine flatulence - a major source of methane, a gas that traps much more heat than CO2. The EPA initiative has far-reaching implications, since the only way to reduce the amount of gas emitted by cattle may be to curtail our consumption of beef by reducing the number of cattle in existence.

There are multiple flaws in the alarmist position. Let's cover just a few:

1) The climate change gurus can't forecast the future. This goes beyond the problem that the alarmists have as a result of their dozens of computer models not conforming to real-world historical data and all contradicting each other like some sort of scientific Tower of Babel. The inescapable problem is that much of the climate is a "coupled, nonlinear, chaotic system," meaning that it may not be possible to predict it with accuracy.

2) Not only can we not "prove" that earth will warm or cool over the coming decades, we don't even know what the net gains and losses of either alternative would be. Maybe (I don't claim to know) warmer would be better on a net basis, maybe cooler would be better (although based on the history of the last 2000 years, I lean toward warmer).

3) Not only can mere mortals not predict the future climate, we cannot control it with present or near-term technology. The UN report warns "that the problem will become increasingly difficult to manage." This belief that humans can somehow "manage" the climate is what Friedrich Hayek called "the fatal conceit" on steroids.

Look, the alarmists themselves already have sabotaged their own theory. A number of them in recent years have started to hedge their bets by suggesting that the current 17-year stretch of non-warming may continue for several decades. They avoid mentioning that manmade CO2 emissions are likely to continue to increase over that period. That pretty much nullifies their thesis that CO2 is the primary driver of climate change. Essentially, they are conceding the skeptics' point that other factors have greater impact on global temperatures than CO2.

Over 20 years ago, the George Marshall Institute published a study showing that all of the small increases in global temperature from 1900 to 1990 could be attributed to increases in the sun's energy output. Over the course of earth's history, changes in earth's orbit around the sun, changes in the tilt of the Earth's axis, and changes in albedo (reflection of light from the planet, due partly to cloud cover) have driven changes in terrestrial warmth. As for the atmosphere's greenhouse effect, by far the major portion of that is attributable to the primary greenhouse gas - water vapor (which even the UN and the EPA aren't foolish enough to propose regulating). As for the minor share of the greenhouse effect due to global warming, since humans account for only about four percent of total global CO2 emissions, it becomes apparent that we humans are, in terms of our impact on climate change, a monkey on an elephant's back - we're not the driver, we're just going along for the ride.

We need to remember how hyper-politicized the IPCC and EPA are. They have their agendas. I was interviewed about climate change for a Voice of America broadcast a few weeks ago, and, since I'm a skeptic, was asked if I had received money from fossil fuel companies. My reply was that I haven't, but how horribly biased it is to ask skeptics if they receive oil money, but not to ask alarmists if they receive government money. Why this presumption that private money is corrupt but government money is pure and noble? What a naive, unrealistic, perhaps deluded assumption that is. Billions of government dollars have been spent advancing the alarmist scenario/agenda. The alarmists bring to mind something H. L. Mencken once wrote:

The whole aim of practical politics is to keep the populace alarmed by menacing it with an endless series of hobgoblins, all of them imaginary.

Don't let the hobgoblins scare you. *

Wednesday, 16 December 2015 11:39

Hendrickson's View

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

The War Against Work and Wealth?

The Congressional Budget Office's recent analysis of the Affordable Care Act concludes that it will result in the equivalent of 2.3 million full-time workers leaving the work force to preserve their taxpayer-financed subsidies for health insurance.

This is troubling on several levels: In terms of fiscal impact, it will exacerbate the federal budget deficit, both on the revenue side (fewer taxable hours being worked) and on the expenditure side (Obamacare's new subsidies). Economically, our country will be poorer than it otherwise would be. Work produces wealth; less work means less wealth, and also less upward mobility for those who drop out of the labor force. Politically, as the number of unproductive citizens dependent on government increases and the number of productive citizens whose taxes finance government decreases, the unproductive may achieve a permanent majority - a political hegemony - as happened in ancient Rome with dire consequences.

News of fewer Americans working should come as no surprise with the current administration running the show. Whether it be the unproductive "stimulus plan," increasing the minimum wage, suffocating regulation, increasing unemployment subsidies (miscalled "compensation"), adding record numbers to the disability rolls, etc., the Obama presidency has been a job-destroying machine from the start, as I noted four years and two-and-a-half years ago. Even as the heroic efforts of industrious Americans manage to keep our economic nose above water, the labor participation rate has fallen.

What is remarkable about the all-too-predictable loss of jobs resulting from Obamacare is the administration's response. Jason Furman, the chairman of the White House's Council of Economic Advisers, tried to spin the projected net reduction in productive labor as a positive. He said, "This is not businesses cutting back on jobs, this is people having new choices they didn't use to have." Team Obama's attitude seems to be that it's bad for society when businesses reduce jobs in the face of increased cost burdens - as if the primary reason businesses exist is to "give" somebody a job rather than to produce wealth and serve consumer needs - but it's good for society if individuals cut back their work hours and increasingly live on government support. Note the double standard: If businesses respond to Obamacare's disincentives to employ people by reducing employment, that's bad (and the IRS, without statutory authority, will play the grand inquisitor, and demand to know if Obamacare was the reason they cut employees' jobs or workweeks) but if individuals respond to Obamacare's disincentives to work by reducing their hours of work to qualify for larger government subsidies, that's good.

Referring to a record number (over 100 million) of Americans not working, White House spokesman James Carney hailed this lost economic production as a wonderful development. Or, in other words, "a milestone on the path toward the ultimate complete liberation of the American worker from the drudgery of work," to quote Lewis K. Uhler and Peter Ferrara. This utopian vision of a world without work is uncomfortably close to the economic irrationality of the Occupy Wall Street crowd.

At their 2012 May Day rally in Chicago, the Occupy Wall Street members prominently displayed signs saying, "If you have to work to live, is it a choice? If you have no choice, are you free?" Sorry, people, but, we aren't born with a lifelong supply of sustenance accompanying us, and so we are not free from the necessity to produce what we consume - that is, to work. Those who lament that they aren't free if they have to work seem remarkably unconcerned about the freedom of their fellow citizens. To reword the slogan on the Occupy Wall Street sign: If you don't work, and you expect your fellow citizens to work to support you, can your fellow citizens be free?

This administration's desire to make it easier for people not to work and to live at taxpayer expense makes no economic sense. It reduces the amount of wealth produced and keeps people from ascending the ladder of individual economic progress. Politically, though, it makes a lot of sense to Obama and his progressive allies. By continually increasing the number of citizens economically dependent on the political process, Obama comes that much closer to achieving the Curley Effect and securing a permanent Democratic majority over an increasingly shrinking productive sector. Should that happen, the war on producers, and therefore on wealth, will escalate, resulting in a poorer America. The longer Team Obama's war against work continues, the more they cripple the wealth production upon which our standard of living depends.

The State of the Disunion

Americans are deeply divided in 2014, suggesting that this year's elections will be another bitter clash. One major fault line that divides us is that many Americans view the federal government as their benefactor while others perceive it as a grave threat to their well-being.

A recent Pew research project found that 53 percent of Americans think that today's government threatens personal rights and freedoms. (Incidentally, this isn't the first time Americans have felt this way. As historian Burt Folsom reminds us in New Deal or Raw Deal, at the end of Franklin Roosevelt's first term in 1936, a Gallup poll indicated that 45 percent of Americans thought that FDR's policies could lead to dictatorship.)

Government aggression against Americans is indeed rampant. The IRS has targeted conservative groups, persecuted individuals who have tried to expose election fraud, and will now act as the grand inquisitor of businesses that have laid off workers due to Obamacare's costs. The rogue EPA is hounding energy companies and others, the National Labor Relations Board has once again shown it isn't impartial by helping to get Volkswagen workers to join the UAW, and the NSA's snooping seems ubiquitous.

Perhaps most worrisome is that even elected leaders are becoming bolder and more overt in expressing their hostility to individual rights. It's almost as if they feel they are so close to achieving an unbreakable political hegemony that they don't even have to pay lip service to tolerance, pluralism, or the rights of conscience any more.

Here are a few examples: Last month, New York Governor. Andrew Cuomo, stated on live radio that "extreme conservatives" (Americans who are right-to-life, Second Amendment absolutists, and those who do not embrace the gay agenda - far too sizable a percentage to merit the pejorative "extreme") "have no place in the State of New York." (Cuomo's team went into damage control spin mode, claiming that all he meant was that conservatives couldn't win statewide elections.)

New York's senior Senator Charles Schumer followed Cuomo's outburst a couple of days later by openly calling for the IRS and other government agencies to continue to hamstring tea party and other conservative groups so that he and his fellow progressives can exert more control over national policies. Apparently, Schumer no longer fears a public backlash from advocating the suppression of free political speech.

Then, of course, there was the ominous irony of the president declaring in his State of the Union address that, if Republicans wouldn't work with him to adopt the policies he wants, then he would bypass the people's elected representatives completely and rule by executive fiat.

And don't forget Senator Harry Reid's decision last year to jettison Senate rules by reducing the votes needed to approve key presidential appointees from 60 to a simple majority. Critics at the time thought Reid's decision was short-sighted - that he might rue having changed the rules once the Republicans regained a majority. But what if Reid doesn't think the Democrats will fall from power? What if he, Cuomo, Schumer, Obama, and company believe that by ignoring precedent, defying the constitution, and usurping power, they will never relinquish control of the government to Republicans - that they are so sure of their own rightness and good intentions that they feel entitled to rule and that the end justifies the means?

Some of you on the right might regard these brazen statements on the left as a godsend, on the grounds that surely the majority of Americans will perceive how tyrannical the left is, thereby paving the way for a conservative counterrevolution. Although I hope that is the case, the question then becomes: Who are you going to turn to as an alternative - the Republicans?

The problem with today's Republicans is that they do not offer a unified, principled opposition. Recently, they have capitulated on the debt ceiling issue and helped to pass the $956 billion farm bill "with strong bipartisan support." Runaway spending continues unchecked. Central planning is alive and well in Washington, the welfare state is undiminished, and cronyism remains firmly entrenched as the basic modus operandi of the federal leviathan. Combined with the internecine feuding between the GOP "establishment" and the tea party, constitutionalists, and conservatives, prospects for a significant change of direction in Washington in 2014 seem dim.

It appears that those Americans who want to use the government to redistribute wealth outnumber those who feel victimized by the predatory state. This is the true state of our disunion in 2014.

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