Eric’s Blog

I was astonished by something I heard Judge Andrew Napalitano say today on Neil Cavuto’s show. I should preface this with a thought I had about the bill Senator Max Baucus is introducing. Senator Baucus plans to require every American to have health insurance. Now pragmatically if you are a young self employed person who doesn’t see a need to spend $4,000 a year for decades before you have any real need he is proposing tax incentives. So someone who can afford health care and may well need it can help you buy yours. My point is that when your state government requires you to have liability insurance to drive on state and federal roads it is completely reasonable. It is a requirement that if you access public roads you certify you are responsible to pay for any damages you may cause others. I agree. I recall state exemptions if you could prove a net worth of a high enough value in years past, though that is not at issue. The point is that there is no requirement for you to have full coverage, only liability. So if you get in an accident that is your fault you still have to pay your medical bills and pay for the damage to your vehicle. I guess your lost income and tax revenue aren’t much concern there.

The problem I thought initially with the Baucus plan is that the government doesn’t own health care, at least not most of it. By what justification does the government insist you have insurance? Then again they do insist a business owner carry unemployment insurance. I recall a guy I knew who worked road construction. Over the winter the company he worked for would lay the work force off. They collected unemployment until the company was ready to start back up and they hired people back. It seemed perfectly fine to him. I can’t lay myself off, but I don’t want to anyway. It just bugs me that people work the system. Another thing I heard Judge Napalitano say once was that Social Security was the biggest Ponzi scheme ever. When I was young I remember the fight in congress to end the practice of using surpluses in Social Security to pay for general fund items. In the corporate world they call that embezzlement. I’m 52. I neither expect nor want to see a dime from Social Security and if you are 30… LOL But I digress…

I hadn’t looked at the constitution for a while, but the other day I did. After what I heard the judge say today I did again. It was particularly interesting after I read an article about the first amendment and that we tend to err and say congress grants the right of free speech. Read what it says.

Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.

In case you missed it it says congress cannot restrict your right to free speech. It is considered natural law, that you were born with a right to free speech and the government has no right to take it away. That is why McCain-Feingold is headed back to the Supreme Court. It is perhaps exquisite irony that Senator McCain lost his bid for the presidency while his savvy opponent opted out and outspent him 2 to 1. That’s just an aside, but cash remains the greatest mandate in politics. Again, I digress…

Article 1 Section 8 of the constitution enumerates the powers of congress. What the judge said was that there is no right whatsoever to legislate health care. To be clear consider the 10th amendment from the bill of rights.

The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.

When the United States was being formed there were years of arguments between those who thought states should have power and those who favored a strong federal government. They compromised. Compromise often proves wise. I should point out that some people interpret “providing for the general welfare” or other statements to mean we have a right to health care. Any such broad interpretations would necessarily mean a right to groceries, a nice house, etc… And for many that might be fine, but they tried that in the Soviet Union and it didn’t work so well.

The commerce clause though is where most extra-constitutional law is justified. As the judge pointed out seeing your doctor hardly constitutes “interstate commerce” and the point of the clause was Madison’s wanting to prevent states from creating tariffs and blocking interstate trade. Ironically this is precisely what congress has done with health insurance! Again as the judge pointed out, removing this highly questionable regulation would quickly drive down health insurance costs. He’s got a point. Does every man in New York need to insure for breast enhancement?

I often talk with my European friends and think it odd that after an election they assemble a government. We have constitutional government and consistency, a consistency that is unmatched in modern history. Yet when I look at the constitution it suddenly seems illusory. Every member of congress, the military, the president and I suppose other offices of the government takes an oath to uphold and protect the constitution. Is that now somewhat quaint and dated? Do a search on “negative rights” and you will see a popular view now is that the bill of rights is “negative” because it says what government can’t do to you. It doesn’t say what government must do for you. I have seen videos of our president talking about this idea.

If congress wants to make whatever laws it wants and let the courts decide if they are constitutional then are they upholding their oath? The president seems happy to wade into murky waters. Do we even care about our constitution any more? Here is a simple question. If those in the highest offices in our land are picking which parts of the law they wish to uphold and which parts to ignore than can we still say we are, in the truest sense, a nation operating on a solid legal foundation?

I am concerned that our current fiscal irresponsibility is putting our economy and thus our nation at risk. What we put at risk cannot begin to exceed the value of our principles and our character as a nation. Therein lies the rub. The greatest nation and success story on earth can only hold to that claim as long as it holds to the wisdom and principles of it’s founders… The power of government is granted by the people. They work for us! I close with a quote from Thomas Jefferson. “Any government big enough to give the people everything they want is big enough to take everything they have.” We should decide whether to throw out or keep the constitution.

And by garbage I mean Micheal Moore. How uncouth do you have to be to make a movie capitalizing on the Columbine tragedy? Remember when he tried to ask if powerful people would send their children off to war? His assertion was that Bush would never send his child or go himself, but being a monster he would send children of those less well connected. I thought it was interesting in the last election that of the presidential and vice presidential candidates three of the four had children in the service going over seas. The exception being Obama for the obvious reason his children are too young. Funny how Moore wasn’t there and nobody talked about his stunts.

Now he’s back with a new film. Why? Maybe it’s the adulation, though I can’t think who still respects him. He has one schtick and it’s getting older than Robin Williams hamming it up non stop for two hours. As an aside I think Robin Williams is brilliant when forced to act. I digress. Maybe Moore just got addicted to all the cash of his initial success and as recent films haven’t done as well it’s time again to fill the coffers.

His new film asserts “Capitalism is evil” and what does he say it should be replaced with? “Democracy”. Now if you’re old school like me no doubt this is confusing. Don’t we live in a democracy? Technically no, it’s a republic, but it’s a democratic republic. Without getting into that civics lesson or arguing if we have become an oligarchy or flirted with fascism I’ll explain. It is best illustrated by the bastardization of democracy, democratization. Let’s use it in a sentence, shall we. The glorious and benevolent Argentinean leader Hugo Chavez is democratizing dozens of radio stations that disagree with him.

Now I know what those of you educated before our national education system made us a joke around the world are saying. This sounds anti-democratic. Here is an explanation. I’ll paraphrase. These evil businesses that had all that money didn’t speak for the people. The government is the people so by returning all speech to the government it is therefore once again democratic speech… That is whenever the government decides to begin broadcasting again and decides what speech is acceptable. See? Conversely with capitalism broadcasters would sell advertising at prices based on the popularity of the programming and the number of people reached. If broadcasts were unpopular they would be pulled and if broadcasters were unpopular they would go out of business. Therefore you would be stuck listening to programming that was the most popular from broadcasters that people chose. What a horrible failure that would be!

Some of you must be saying this is nuts, but I remember the 60s and 70s. Okay, some of them anyway. There were the Students for a Democratic Society (SDS). They spun off the Weathermen which were domestic terrorist bombers. You know, our president used to hang with William Ayers, one of the founders in Chicago and another, Jeff Jones, worked on the stimulus bill with Van Jones. BTW the SDS is back! Check it the sanitized info at Wikipedia. Okay, I’m not making the point very well.

The point is that public ownership of everything is to these people democratic. I’m reminded of the saying that true democracy is tyranny. The meaning of course is that a mob is very democratic when doing things like lynching people, but only in the heat of the moment. Of course the idea that we as citizens would actually have any power over that which is in the public purview can easily be illustrated by looking at congress. They exempt themselves from everything they lay on us and instead of seeing themselves as public servants see us as an annoyance lately.

There is an old saying you may have heard. “Power corrupts and absolute power corrupts absolutely.” To my mind that was the greatest wisdom of our founding fathers. They intentionally created a government designed to be dysfunctional and gridlocked. Bless their hearts! Jefferson said it so well. “Government governs best that governs least.” Let’s see if we can come up with a phrase for democratization, shall we. I have one. “From each according to their ability to each according to their need.” Sounds grand, doesn’t it? It just happens to be Karl Marx, the inspiration for Lennin to start Soviet communism. As I recall that regime decided at least 30 million of their own people should stop breathing for the good of the state.

Capitalism and the United States started as what was termed the “grand experiment” because free enterprise and self government were unheard of since Julius Ceaser crossed the Rubicon two millennium ago. Every nation on earth has been impacted and most transformed. From an age of royal despots to a world of freedom we should be an international hero. Our country and system is certainly less than perfect as is to be expected of all human endeavors, but is hardly ready for the trash bin of ideas like communism and fascism and doesn’t deserve an apology tour. I submit capitalism is best, but I’d stipulate it is at its very best when an educated public stops giving Michal Moore money. In these difficult times if anyone deserves to be “democratized” it’s him!

One of the most amazing things to me recently has been the level of outrage over government spending. However some people think it is just nuts. Rather than take a political approach let’s try to look pragmatically at rational fact. First a look at the two sides in opposition. On the one hand those on the left support the Keynesian arguments regarding spending that the government can spend it’s way to prosperity. I saw a youtube video of the president’s head economic adviser, Christina Romer, arguing that FDR failed to keep spending enough to prove it. (It may have been removed) Look up New Deal spending and see if you agree. On the flip side would be the total libertarian view of small government. FYI you might consider founding father Thomas Jefferson, the lead author of the Declaration of Independence, a bit libertarian as he said “Government governs best that governs least”.

Now let’s consider a rational evaluation. I saw former head of the DNC, Howard Dean, say on the news today that the president inherited deficit problems and has been working on it with the stimulus. Ummm… Wasn’t the stimulus $787B in deficit spending? I have learned to develop the skill of active listening. My reason is simple. The easiest person in the world to lie to is yourself. I believe the most natural thing in the world is to repeat those lies to others when the subject of the conversation comes up. That’s how I learned to market our products, by addressing the misconceptions we all have. We have those misconceptions by registering information without properly applying the scientific method. For those unfamiliar the scientific method says you take a hypothesis and thoroughly test it to see if it is true. What Mr Dean said demonstrates mixed metaphors while shuffling talking points and the absurdities that result. Issac Newton posited the scientific method with the assertion that an idea could not be trusted until it had been demonstrated to be supportable in testing. No matter how good an idea sounds I look for evidence to support it before getting behind it.

So let’s begin with our hypothesis. How does the economy work? We create a product. We use innovation and design, apply labor and transform raw materials. This is the “value added” proposition where we produce a higher quality catnip and then add further value putting it in a toy. The “value added” strategy is what made Japan the second largest economy in the world because they don’t have much in the way of raw materials so everything must have value added before reselling. By marketing our product we create wealth… Okay, not so much in our small case, but as a model when this is done on a large scale it does create wealth by adding value into society. Think of houses, cars, gadgets and our infrastructure and businesses. This is the private sector creating wealth we can buy and sell.

Now let’s look at the public sector. Again, let’s not get sucked into constitutional or morality arguments. Let’s take a centrist perspective that there are a number of worthwhile essential things done by our government. Government funds what it does through taxes on the private sector. Again, not to say all taxes are good or bad, the fundamental truth here is that the public sector must balance against the private sector. (This is where economist Art Laffer proved brilliant with his “Laffer Curve”.) If the government is unable to fund vital services all the wealth of the private sector is risked as plunder to those who might wish us harm. Such enemies can be internal. For instance it is estimated that because so little is spent to police Medicare that $70B-$120B a year is lost to fraud. However if too much is extracted from the private sector it affects the supply of money to loan to businesses and individuals and tax burdens could be so oppressive as to stifle growth.

Now without getting political let’s just consider a simple illustration. Let’s say the private sector economy grows at 2% per year and the government grows at say 9%, which is where some programs have been set. If we were to start in 2008 with a $13T private sector and a $3T public sector and put it on a spreadsheet we would add 9% every year to the public sector. To the private we add 2% and then we subtract out the difference in the current public year from the last. In 2015 the private sector is $12.3T and the public is $5.5T. In 2030 private drops to an alarming $378B and public skyrockets to $19.9T. In 2031 the private sector goes negative. Let me be clear, this illustration is a gross oversimplification and there is no possible way for these numbers to follow linear progressions. They are merely an illustration of a principle.

On to reality. If you look at spending under George Bush you will see huge increases. Before you argue they were defense related and expected consider that non defense spending moved at an alarming rate. Okay, now consider that George Bush is not in office so there isn’t much we can do about it. But his last year deficit was $455B and we’re projecting $1.6T this year. Actual spending for the federal government is closer to 33% than it is to 9%. We also shrank our economy by about $1T in the last year. While we list unemployment currently at 9.7% total underemployment (including those who gave up, ran out of benefits or took part time work) is probably approaching 17%. One in six Americans. That has lead to a 17% decrease in tax revenue. In fact our economy has been shrinking, not growing at 2%. On top of that social programs like social security are headed for insolvency in a matter of years. A more sunny and detailed explanation can be found on Wikipedia. Keep in mind many elements of projections rapidly devolve into the unknown in a matter of a few years.

I thought that the arguments on public sector spending creating wealth were so totally disproved they would not be tried again. What does the government plan to do? Many are saying there is no choice but to raise taxes. Meanwhile it is estimated that only 1% of the so called stimulus has gone to “shovel ready” jobs. What has it done? It has helped shore up state governments that are also short of tax money. In short it is making government bigger and more expensive for the most part. With the top 1% income earners paying 95% of all taxes in this country every new spending idea is met with the suggestion they need to pay more of their fair share. Unfortunately the vast majority of these so called rich are small business owners employing most of the population… which explains why there are no new jobs and won’t be for years. Do you think truly wealthy people even pay income taxes? No, they have trust funds and private jets, which you can’t afford on a mere $250K a year.

What the government needs to do is cut their spending to reflect current tax revenues. It’s called living within your means. It’s what people like us have to do. It’s all the more important when you consider that the US is hardly the only fiscally irresponsible government in the world. There just isn’t anyone with a few trillion dollars extra laying around every year and I haven’t even gotten into what happens when governments print that kind of money. Let’s just say Warren Buffet was late to the party warning we could become a banana republic. I believe it’s because the truly rich can make lots of money in economic crisis… but it’s hard to spend if your country goes under. Thanks Warren for warning us we may go too far and wreck it for you!

Don’t trust the pundits! Do your own due diligence. Most importantly we should demand our government use the same fiscal responsibility that each and every American has to. It’s only reasonable in a government of the people, for the people and by the people.