Government Largess Can't Keep Economic Blood From Spilling - Particularly With Petty Fascist Autocrats in Charge

The stock market, after dropping 35% from its all time high on February 19^th sits today up about 30% from its March 23 low.  Overall the S&P 500 is down a mere 14% from its apex.  Everything being equal, things must be pretty good…

Not so much.  Although the world is slowly thawing from its government imposed freeze, the truth is far less sanguine than the stock market might suggest, i.e. that this Coronavirus scare was just a minor speedbump on our economic march to prosperity and beyond…

The reality is far darker, and the only reason that’s not readily apparent is that the federal government and the fed have poured $10 trillion or so into our economy via direct payments, loans, bonds and guarantees and governments around the world have taken similar steps. 

The fact that 30 million Americans today find themselves out of work will not be quickly fixed.  Jobs are not the kinds of things you can simply switch on and off… at least not in a capitalist economy. Businesses create jobs by trying to meet market demands in hope of earning a profit.  The Coronavirus shutdown has obliterated that entire dynamic.   

Restaurants are possibly the best resource to look to in order to get a picture of what the future holds.  Why?  Because restaurants are among the most entrepreneurial aspects of the American economy and they employ fully 10% of American workers.  There are about 1,000,000 restaurants in the United States and 13,000 more open each year, while a similar number close annually.  Of those million restaurants, 70% are single unit operations, 90% employ fewer than 50 employees and 6 in 10 adults have worked in a restaurant.

So what do restaurants tell us about the future?  It doesn’t look good…

Imagine you own a restaurant.  Not a fast food chain restaurant where 70% or more of the business was drive thru even before Coronavirus hit, but a restaurant where patrons come in, look at a menu, give their orders to a waiter and then eat on the premises. 

You’ve been largely idled for much of the last two months.  You might have been able to retool a bit in order to serve some take out or delivery orders, but odds are you simply closed.

Over the years you’ve adjusted your floorplan, you’ve tweaked your menu and you’ve trained your employees to upsell everything from wine and add ons to desert and cappuccino.  All for a business that probably gives you a 3-5% net profit or twice that if you’re lucky. 

Now you’ve been closed for two months and you’re wondering where you go from here.  Even if you laid off your staff so they could collect unemployment, you were probably still paying (or trying to…) your rent, pest control, outstanding invoices and making payments on the debts you incurred to open the restaurant in the first place. If you didn’t make the payments, they didn’t just disappear; they accumulated and will be waiting to be paid once you open back up. 

Now you find yourself in a quandary.  The governor has said that you can reopen, but in doing so you must take into account social distancing, i.e. your restaurant can only operate with 25% or 50% of the customer capacity.  That means that other than less labor and food, your restaurant has to operate with outlays almost exactly where they were before the virus, but do so with only half or less of the customers and revenue, plus now there are added costs of masks, extensive cleaning operations and perhaps even disposable silverware!  For most restaurants, that’s a money losing proposition.  Even if to-go business were to pick up, there’s little chance that the additional revenue would make up for that lost business.

More important than the revenue, is the margin.  Dine in restaurants make big profits on alcohol, sodas, coffee and desserts, all things that take out customers are less likely to buy than dine in customers.

Adding to all of that, your employees, who are collecting state unemployment plus $600 a week from the federal government, are now earning twice what they earn while working for you, and may well do so for months to come.  Given the economics, many will decline the opportunity to return and lose half the income they’re currently making, which generates pressure on you to offer higher wages.  So now your formerly relatively robust 5% profit margin restaurant business has transformed into a money losing albatross. 

How can one stay in business with numbers like that?  You can’t of course… And that’s the math quandary facing businesses across the country, and of course it’s not just restaurants.  It’s hair stylists and barber shops.  It’s nail salons and massage parlors.  It’s karate classes and dance instructors.  It’s accountants and business consultants.  Its gyms and movie theaters and many other businesses.   And don’t be surprised if schools, churches, hospitals, and government agencies don’t pile on.  Sure, those aren’t businesses, but they are all buy substantial goods and services from businesses…

All of this is particularly important for small businesses because unlike big businesses who often can tap into debt or equity markets, small businesses often face high hurdles when it comes to financing.  And, small businesses (as defined by the SBA as those with under 500 employees) are the lifeblood of the American economy.  They make up 99% of all businesses, employ half the workforce, and generate 70% of all new jobs.  And they are the ones most likely to have been sidelined by this lockdown and will have the most difficult time emerging. 

While government loans and guarantees are helpful, they can’t replace customers who are not there.  They can’t replace demand that has evaporated.  They can’t keep a business in business… and they can’t do any of that for any sustained period of time.  If printing money was the solution to this problem the Weimar Republic and Zimbabwe would be poster children for growth and prosperity.

Hence the divergence of the markets and main street.  Government largesse may work in the short run to keep the markets calm and the breadlines from forming, but it’s no recipe for prosperity or even economic growth.  Indeed, big businesses aren’t doing that badly under the current plan because they have legions of lobbyists who can ensure that they successfully navigate the restrictions and find the nuggets in the fine print of outlays, and Wall Street can see that.  But on Main Street, Adam Smith is coming, and he’s bringing Hell with him…

At the end of the day, all businesses depend on customers.  Customers spend money they’ve saved, earned or borrowed.  The first will eventually run out, the second can’t happen without a job and the third will soon be limited to those with pristine credit scores.  The Coronavirus lockdowns and government restrictions haven’t just killed the world's most prosperous economy since World War II, they have kneecapped the basic premise of free markets, that customers are free to buy what they want and sellers are free to sell their goods and services however they see fit.  True, we were hardly a free market before all of this, but now with government edicts about when you can open, what you can sell and how many customers you can have, we’re far closer to Karl Marx than Mr. Smith. 

There will be economic blood in the streets as America realizes that prosperity and economic growth can’t be dictated by government and that in most cases government action is a hindrance to both.  Prosperity requires entrepreneurs who are willing to risk their sweat and treasure to build something in pursuit of profit.  Economic growth requires markets that match consumer demands with businesses who can meet them.  Lockdowns and government edicts hinder both and the longer they go on and the more restrictive they are the more carnage there will be.  Business failures.  Bankruptcies.  Loan, mortgage and credit card defaults.  Tens of millions of Americans who can't find work.  And those are just the things you’ll see.  Imagine the new companies that won’t ever get out of the starting blocks.  The jobs that won’t be created.  The demand that’s simply not there…

Wall Street might imagine this Coronavirus disaster (the lockdowns, not the virus) is just a bump in the road, but it’s not.  It’s a cliff that we’ve been pushed off of, or more accurately, jumped off without much of a fight.  And it looks like the bottom below is littered with jagged rocks and glass.  Sadly we're not Road Runner in a cartoon where we can simply turn around in midair and run back onto solid ground.  It appears that we've become Wiley E. Coyote.  History will not look back favorably on the petty fascist autocrats and their delicate snowflake supporters who used a marginally dangerous virus in their march to undermine capitalism and decimate freedom and prosperity.  

For Marco Rubio being right on Barack Obama was a Pyrrhic victory

Marco Rubio’s campaign seems to have crashed on the rocks because of his… shall we say somewhat repetitive use of the phrase “Obama knows what he’s doing”, but the truth is, he was 100% right. The reason that so many people scoff at the notion that Obama knows what he’s doing is because the very notion of an American leader who seeks to destroy that which he leads is anathema to most rational Americans. And the truth is, Barack Obama doesn’t seek to destroy the nation he leads, he seeks to “fundamentally transform” it. Splitting hairs you might say, but there is a big difference between the two.

For Barack Obama the American glass is half empty. Sure, there’s water in the glass, but only what’s left after two centuries of whites stealing from blacks, Indians, Hispanics, after men taking from women and the rich taking from the poor. As such, it’s his goal in life to fill that glass up by redistributing that which has been stolen back to its rightful owners. At his very core Barack Obama is a divider – by race, by income by nationality among others – he is an anti-capitalist, anti western populist with fascist tendencies and no love for Christianity.

It’s only with that understanding that Rubio’s assertion makes sense. The nation that Barack Obama leads is not the same one most Americans live in. They inhabit the same geography, but they are not the same nation. It’s like the movie The Martian. Anyone watching it will recognize that it’s a serious movie that has a bit of levity scattered throughout. But somehow it was nominated for “Best Motion Picture: Musical or Comedy” at the Golden Globes. Most people would recognize that regardless of the category the Globes’ voters put it in, The Martian is no comedy. Similarly, the United States most conservatives inhabit is an imperfect one, but one full of opportunity, fueled by freedom and largely a force for good. For Barack Obama those same 57 states represent a nation defined by racism, inequality and oppression.

That is the nation that Barack Obama thinks he is leading and the one which he is seeking to fundamentally transform. And it’s easy to see that Rubio is right… he knows exactly what he’s doing. From Obamacare to the kneecapping of Chrysler shareholders to the using the IRS to muzzle Tea Party groups, it makes sense in the nation Barack Obama leads. This has been going on for seven years and most of the examples never find their way into the news. Here are three that recently did.

1. The Internet. The Internet may be the most egalitarian invention in the history of man. It has connected more people and given more opportunity to more people than any tool in all of human history. It was created by the United States and has been largely free from censorship and government controls since its inception. Barack Obama sees the Internet as a tool of American domination and therefore is moving to remove American control of it and give it to an international body that will leave the Internet’s freedom subject to veto and manipulation by such freedom loving nations as China, Russia, Iran, Saudi Arabia and Venezuela.


2. Economic freedom. American economic freedom is the engine that drove most of the world’s prosperity for a large part of the last century. The resilience and freedom of America’s markets and her entrepreneurs have led the world in almost every major economic development since 1900. American free enterprise has been the greatest driver of prosperity ever in human history, but under Barack Obama the United States has tumbled in economic freedom, to number 11 in the world (from number 6 when he took office.) And what causes such slippage? One thing: Regulation. Barack Obama sees America’s success as one of imperialism and outright theft, and he has used government regulation to stifle economic freedom at every turn, and the results have been devastating, resulting in the slowest economic recovery since the Great Depression.


3. Government intimidation. Barack Obama is using the police power of government to achieve his ends. The Tea Party are not the only targets either. Barack Obama’s Consumer Financial Protection Bureau was recently outed for coercing Ally bank to agree to pay almost $1 billion in fines for racial discrimination, despite the fact that that internal documents stated they had no complaints nor any evidence of actual discrimination. Barack Obama sees America through race colored glasses and feels it’s his role to use the power of government to readjust settings. From the NLRB to the FCC to HUD, Barack Obama seeks to use the government to control more and more of Americans’ lives, winnowing down the spheres of freedom within which the outcomes can be decided by hard work and the choices people make.

At the end of the day, Barack Obama does indeed know exactly what he is doing. He is laser focused on one objective: Diminish America. Reduce her influence on the world stage and suffocate freedom and free markets at home. If you’ve been paying attention for the last seven you’ve seen him doing that and much more, and doing it very effectively. It’s simply not possible to rack up that level of success – as Obama defines it – without knowing exactly what you’re doing and being very good at it. Sadly for Marco Rubio, being right was a Pyrrhic victory.

Secession, Revolution... are they the end game of a deck stacked against freedom?

I’ve argued for many years that the United States is the greatest nation in the history of the world. From driving prosperity to winning two world wars to putting a man on the moon to ensuring individual liberty the United States is unlike any other country in history. And it has nothing to do with DNA. Indeed, some of America’s greatest men came from elsewhere… Alexander Hamilton was born on St. Kitts. Andrew Carnegie was born in Scotland. Albert Einstein was born in Germany. Leo Baekeland – the man who brought us plastic – was from Hungary. Nikola Tesla – the man responsible for the current running in your house – was born in Croatia.

It’s not the blood that makes the United States great, it is the Constitution. The US Constitution was the first document in history to form a government based on the principals of individual freedom, private property, limited / representative government and the rule of law. None of the things in the Constitution were completely unique. The Greeks had representative government and the Magna Carta put limitations on the Crown after all. What made the Constitution unique was the combination of those factors and the fact that the power resided in the hands of common citizens.

That could, frankly, have only occurred in the United States… because it was a new and free nation. Because of that youth, the colonies did not have vested interests sufficiently powerful to mold the formation of the government to benefit themselves. And as a result, the power resided in the hands of common men, the citizens. Not in the hands of an aristocracy. Not in the hands of the church. Not in the hands of some bourgeoisie merchants. No, in the United States the power to govern was put in the hands of regular citizens. There were power centers of course, but none – such as the northern states who still had debts to be paid from the Revolutionary War and the southern states who wanted low or no import tariffs – had the power to dictate the language of the Constitution. (To the degree that there was one vested interest powerful enough to make such a demand it was the slave states and the result was the most anti-freedom part of a document built on freedom.)

But why Philadelphia and not London or Paris? Both the British and the French had access to the same writings our Founding Fathers did – from Plato to the Old Testament to the Magna Carta to John Locke and Adam Smith and William Blackstone and Edmond Burke – but they did not create anything like US Constitution. Indeed, France, whose revolution followed the American revolution by a mere decade, spiraled into bloody chaos and brought about a dictatorship. The reason is because both France and England had strong vested interests loathe to give up their power and privileges, and as a result, neither laid the foundations for lasting prosperity that the US Constitution did.

And that prosperity was enormous and far reaching. By 1950 the United States economy was more dominant on the world stage than any economy in history. The US commanded fully 40% of the world’s GDP with less than 5% of its population. While both China and India had achieved that same 40% mark centuries before, they accomplished it with 35% & 30% of the world’s population respectively.

And that economic prosperity ushers in many benefits that are not measured in dollars like life expectancy increases, leisure time growth and dramatically safer employment conditions. Another measure of the impact of that prosperity is the Nobel Prize. Since the American economic heyday of the 1950’s, Americans have won over 50% of the Nobel Prizes in Physics, Chemistry, Medicine and Economics. Interestingly, 1/3 of those winners were immigrants who chose to come to the United States in pursuit of success, often because they didn’t feel they could do so at home. America is increasingly the epicenter of research of all sorts. Unfortunately however, it is not research that drives prosperity, it is economics and increasingly the United States is falling behind.

The freedom that drove the United States to become the most influential economic juggernaut in history no longer exists.  Today American GDP is 23% of the world's.  While we are still experiencing advances in technology and medicine, increasingly the United States is becoming an economic morass. Although we see companies like Apple, Facebook and Google creating millionaires and billionaires by giving citizens great products, the chasm between the ultra rich and the middle class and poor is growing. An example is that can be seen in the data since the recession of 2007 & 2008. According to the Wall Street Journal:

“All told, average inflation-adjusted income per family climbed 6% between 2009 and 2012, the first years of the economic recovery. During that period, the top 1% saw their incomes climb 31.4% — or, 95% of the total gain — while the bottom 99% saw growth of 0.4%.”

But it’s broader than that. American incomes have been declining for over a decade, from a high of $56,080 in 1999 (inflation adjusted) to $51,017 in 2012, a drop of almost 10%, a decline unprecedented since the Great Depression – another government induced disaster. But it didn’t need to be this way. Had our economy had been as productive over the last twenty years as it was in the 1950’s and 60’s the average American family would today have an income in excess of $120,000 per year. At the same time, and not coincidentally, the rate of employment in the United States has plummeted, with the labor force participation rate at its lowest level since 1978 and disability claims skyrocketing.

All of this, and much more, are the consequence of the United States abandoning the very things that caused it to be great in the first place: limited government and individual liberty. Just as the British and the French were straight jacketed by their vested interests the United States is straight jacketed today. And that vested interest is government.

Entrepreneurship has been the life’s blood of American prosperity and today it’s on the ropes. While Silicon Valley venture capitalists throw money at high tech startups the rest of the country has seen regulation strangle entrepreneurs in their cribs. Government regulations, particularly federal regulations, have strangled small businesses in America. For the last 40 years the gap between the rate of companies starting to rate of those failing has been getting smaller. The bigger the gap (Companies started – companies failed) the better for the economy because it means more companies are surviving and creating jobs and value. In 2009 the lines crossed and today there are more companies failing than are started annually. The result less prosperity as small businesses are the golden goose of the American economy, generating 65% of all new jobs.

What we have today as a result are fewer, bigger companies that are increasingly turning to the government to hinder competition. From Wal-Mart supporting Obamacare to steel companies seeking import tariffs to General Electric pursuing Export / Import Bank subsidies to Wall Street banks lobbying for low interest rates to the Chamber of Commerce advocating for open borders, big companies are increasingly looking for government to protect them from the vagaries and verities of the competitive markets that helped create American prosperity in the first place. They are willing to trade higher taxes and endure more regulation for a playing field that is tilted in their favor… that is of course until when the taxes become too high and the regulation becomes too onerous, then they simply relocate outside the country.

In America in 2014 we have the opposite of the recipe for prosperity. We have a ruling class that has no desire to give up its power and privileges and a business class willing bend to that power and fund those privileges in the name of fattening their bottom lines. In this case the ruling class is the federal government. The power is demonstrated by the fact that the federal government has its claws in virtually every aspect of American life… from what you can do with your land to what your kids can bake for a bake sale at school to the healthcare you have to the kinds of light bulbs you can buy. At the same time they are writing thousand page laws – which generate tens of thousands of pages of regulations – the government is taking ever greater amounts of money from taxpayers for its redistribution schemes. From a sixth of the population on food stamps to taxing the lunch your boss provides, the ruling class of government seeks to control virtually every aspect of American life.

And being in power has its privileges. Federal workers have achieved for themselves that $120,000 average income (including benefits) while the average private sector employee gets by with less than half that. Seven out of the country’s ten richest counties – out of over 3,000 – surround Washington, D.C. And of course government employees enjoy almost guaranteed lifetime employment. And those at the upper echelons enjoy even better privileges, taking advantage of the revolving door of power. When their party is out of power the revolving door turns and the regulators simply join the regulated class or their lobbyists, at even higher salaries, until their party returns to power and the cycle starts over again.

Perhaps the perfect example of how America used to be a place where things could get done, where private enterprise could achieve great things was the Empire State Building. Started in 1929, it took 14 months – four months ahead of schedule – to complete what would be the tallest building in the world for the next 40 years. Today, 13 years after the destruction of the towers that took that tallest designation from it, the World Trade Center complex is still not complete. Only within the last year did the first of the towers open that would replace the destroyed complex and pieces of it are not expected to be completed before 2020… 19 years after the complex was destroyed. And it may well be the most expensive building project in American history. Was it technical capabilities that kept the complex from being replaced? Had Americans suddenly become too stupid to understand how to build buildings? No. It was bureaucracy. It was regulations. It was lawsuits and political interference. In other words it was government and government empowered chaos.

Which brings us back to the beginning. The United States was at one time the single greatest economic power in human history. As a result of that prosperity it has had more of a positive impact on the condition of man than any force in history. But that was an America where citizens had big ideas and big dreams, and the freedom to build on the first to achieve the second. Today that America doesn’t exist and a tyranny of the vested interests has replaced it. From government bureaucracy to crony capitalists to politicians who use the government purse as a vote buying scheme, America is no longer the bastion of freedom and prosperity that it once was. It is no longer the shining city on a hill. It is no longer the place where anyone can pull themselves up by their bootstraps by sheer will and hard work. And as guilty as the Democrats are in this, there are many big government Republicans who are just as much to blame.

Is it any wonder that 25% of Americans would consider secession? No. I count myself among them.  What about a revolution? Yes, I’d consider that too, but not the violent kind in either case. When faced with the same kind of vested interests that kept the British or the French from doing what our Founding Fathers did, what can be done? The real question isn’t whether the gift that James Madison, George Mason, John Hancock and Sam Adams gave us can be saved? The answer to that is yes. The real question is, how…

Maybe it’s time to drop the picket signs and pick up a copy of The Road to Serfdom

It was with great interest that I watched Facebook catch fire with support of the calls for picketing and sick-outs at Wal-Mart stores across the country on Black Friday. From what I could tell, most of those supporting the calls were liberals who attacked the company with claims that it doesn’t pay “a living wage”, “exploits” its workers, or owes its workers health care. I even saw one fantastical claim that a majority of Wal-Mart employees are on food stamps. The suggestion was that Wal-Mart should be forced (via government itself or indirectly via unions) to change completely how it deals with its employees in terms of salary and benefits.

To set the record straight, according to Business Insider, Wal-Mart pays its workers an average of $11.75 per hour, just slightly below retail’s national average of $12.04 and well above the federal minimum wage of $7.25. The company itself states that the average non-manager employee earns between $10 & $12 per hour.

Those wages are at least sufficient to make Wal-Mart the largest employer in the country, with a current headcount of over 1.4 million employees. And no one forced those employees to take those jobs. One of the beauties of freedom is that employees are free to work at Wal-Mart or they can take their labor and sell it to someone else… or better yet, they could start their own businesses.

I couldn’t help but think back to the nonsensical Occupy Wall Street protests of a year ago. Many of the participants were carrying around signs decrying Wall Street for its profit mongering and the harm big businesses were inflicting on small businesses and the little guy. Of course their solution of choice was more regulation. Naturally.

Both of these instances reveal more about the protesters than it does about the companies being pilloried. The very regulations they seek are one of the reasons big businesses are so successful verses small businesses in the first place.

It’s a simple example of liberals either not knowing or ignoring basic economics. Take economies of scale. One of its benefits is that you can spread fixed costs out over a larger volume. It works for rent as well as for regulations. Let’s imagine there are two widget stores operating next to one another with identical rents of $10,000 per month. With everything else being equal, the store selling 2,000 widgets a month can build a $5 cost per widget into his prices, whereas the store selling only 1,000 widgets per month has to build in a rent cost of $10 per widget. As such, the store selling more widgets will likely be more profitable, successful and eventually may be able to buy out the second widget store and start its journey to becoming a hated big business.

The same holds true for regulations. Frequently large businesses not only influence regulations to their benefit, but they can also absorb the costs of such regulations far more easily than can their smaller brethren, even if they were unable to influence their writing. Take the tax code for example. At 75,000 pages, a five billion dollar company can easily afford to hire a phalanx of lawyers to find ways to reduce its taxes or lobby for changes. Such luxuries are rarely feasible for small businesses.

According to the Small Business Administration, big businesses with more than 500 employees pay about $7,755 per employee to comply with federal rules each year, while small businesses with fewer than 20 employees pay $10,585 per employee. That is almost 50% more that small businesses have to pay per employee than do large businesses. All because of regulation.

This push for regulation is simply another example of the left using the cover of populism to disguise its real agenda: more government control over business. Whether using the fig leaf of environmentalism to further the nonsensical, inflation causing ethanol mandates or the lie of “the rich don’t pay their fair share” to push for higher taxes, the left rarely lets facts get in the way of their pursuit of a socialist, statist agenda.

Which brings us back to the Wal-Mart protests of Black Friday. The real goal of liberals is not to improve the lot of Wal-Mart employees, it’s control of the company via unions and their government enablers. In doing so they would be able to use government regulations to not only take money out of the pockets of Wal-Mart workers, but more ominously, they could harness the power of the NLRB to impose a wide range of costs, controls and dictates on the company.

To put a cherry on top, take Wal-Mart’s misguided and calculating support of Obamacare – calculating that it would impose greater costs on its small competitors – that has now resulted in the company itself dropping healthcare coverage for many employees while drastically raising the premium costs for others. By pushing such utopian, economically illiterate regulations as Obamacare, the Community Reinvestment Act, ethanol mandates and higher taxes for the rich, liberals not only fail in their stated objectives, but they also invite a wide range of unintended consequences, none of which ever seem to be good. Maybe it’s time to drop the picket signs and pick up a copy of The Road to Serfdom.

The November Choice: An election of historic proportions.

As I think about the election in November, I can’t help but think about Matt Ridley and his outstanding book “The Rational Optimist – How Prosperity Evolves”. In it he chronicles the evolution of human society and demonstrates a perfect understanding of why nations fail:

“Empires, indeed governments generally, tend to be good things at first and bad things the longer they last. First they improve society’s ability to flourish by providing central services and removing impediments to trade and specialization”.

But then “governments gradually employ more and more ambitious elites who capture a greater and greater share of the society’s income by interfering more and more in people’s lives as they give themselves more and more rules to enforce, until they kill the goose that lays the golden eggs.

From Ancient Egypt to the Roman Empire to the Ming Dynasty to the Soviet Union, these and countless other entities collapsed under the weight of their own regulation, either from the state or the church.

One has to wonder where is the tipping point that harkens the descent of a nation into the chaos that inevitably leads to its end… and more importantly, where the United States is on that scale. If you imagine a spectrum with tyranny on the left and anarchy on the right, the Constitution of the United States was crafted so that the government be a fulcrum balancing the state between the two. It worked that way for a while.

For its first 125 years the government of the United States was largely reluctant to take over the lives of its citizens. Over the last century it has become far more enthusiastic in that pursuit, with a particular emphasis in the fifty years. As Ridley points out, this is not particularly unique among nations. The United States is unique however. It is the only nation that was established for the specific purpose of allowing its people to live in freedom. The Declaration of Independence clearly articulates that the rights of men are natural and are not bestowed by any government. The Constitution sought to codify limitations on the government’s ability to infringe on those rights.

As we all know, those Constitutional limits seem to resemble paper tigers more and more each day, from everything from Obamacare to ethanol mandates to eminent domain abuses. The question as it relates to November is, must the United States go the way of the Roman Empire or can it figure out how to save itself from the seemingly inevitable fate of states?

Rarely are voters presented with two so clearly different paths ahead. On the one hand you have Mitt Romney who is an unabashed fan of the markets and market solutions. While Romney may be tin eared in some respects – read RomneyCare – he has become an avowed advocate of government restraint. His selection of Paul Ryan demonstrates his intent to address the growth of government while that’s still possible.

While Romney may not have the libertarian leanings that many of us would like, he stands in stark contrast to the man he faces in November. Romney seeks to move the lever (the board that sits on the fulcrum) rightward to balance the scale of freedom closer towards the center, Barack Obama seeks to slam it to the left where government takes over every aspect of a citizen’s life and freedom and free markets become little more than a distant memory.

Not sure about that? A few points should demonstrate the truth of that statement.

More than one third of the American households receive income based welfare assistance from the United States government – that doesn’t even include Social Security! Barack Obama has actively sought to increase that proportion, including gutting the 1996 welfare reform that reduced welfare rolls by half, and embarking on an advertising campaign to increase food stamp rolls.

At the same time fully half the population pays no income taxes while the President suggests the rich are somehow taking advantage of the system. This despite the fact that the top 1% of income earners pay 37% of all income taxes yet take home only 17% of all income. At what point do the people in that 1% or 5% or 10% decide to take their money and play somewhere else? If just the top 10% of taxpayers emigrated, they would take with them 71% of income tax revenue.

Then there is the notion of success. The President famously told businessmen that “If you've got a business, you didn't build that. Somebody else made that happen." That gets to the core of what Barack Obama counts as success. To hammer the point home, a week later he held up General Motors as a stellar example of success, going so far as to suggest “Now I want to do the same thing with manufacturing jobs, not just in the auto industry, but in every industry.” Of course this success that Obama is so proud of was bought by pouring tens of billions of taxpayer’s dollars into the company.

Then there is the regulation. In his first three years in office Barack Obama issued 106 major regulations that will impact the economy by more than $100 million or more. This compares with 38 (a still too high number) by his predecessor. A President Obama not constrained by another reelection campaign will likely increase that number dramatically.

Whether in the form of the Ming Dynasty, 18th century France or modern Greece, Spain or California, history demonstrates clearly that when government grows to the point that it overwhelms the citizenry’s ability to operate with even the most basic level of freedom, particularly economic freedom, the house collapses. Romney was not my first choice for the next president, but at least he’s mostly committed to the notion of individual liberty and economic freedom. Compare that to the cleptocratic and authoritarian Obama and the choice is simple. One wonders if the Romans had the opportunity in 180 AD would they have been smart enough to put someone other than Commodus on the throne. We are at that same point in 2012. The difference is, we have a choice. The question is, will voters understand what’s at stake when they walk into the booth in November?

Jimmy Carter is Rick Perry's biggest fan...

If Barack Obama were prone to conspiracy theories, he might think the last couple of weeks were part of a plot orchestrated by Jimmy Carter to salvage his own legacy.

First off the Democrats get the GOP to acquiesce to a debt ceiling bill that will result in the federal government raising taxes and increasing spending by over $7 trillion over the next decade. The immediate result is United States government debt being downgraded for the first time in history, something Treasury Secretary Tim Geithner stated unequivocally would not happen only the week before.

Soon thereafter the Fed looked into their crystal ball and decided that economic prospects were so bad that they had to take the unprecedented step of publicly stating that they would be leaving interest rates near zero until mid 2013. It seems as if Keynesians never see – nay recognize - failure, they simply see another opportunity to try and do the same thing over again, only each time a bit bigger.

Up on Wall Street things weren’t going any better. The Dow dropped 600 points the day after the downgrade and it has spent the subsequent two weeks on a daily triple digit roller coaster. All together the market is down almost 10 percent since the beginning of the month.

Those things are tough, but they don’t really add up to much of a conspiracy. Hey, the unemployment rate went down… from 9.2% to 9.1%, that can’t be a bad thing. Unless of course that decline is the result of more people simply throwing in the towel and giving up looking for a job at all. Add to that the decline in productivity and the increase in labor costs and things start to look rather bleak. All this while Obama’s approval ratings slipped to the lowest levels of his presidency.

Across the pond, as if to add gasoline to the proverbial fire, the socialist Mecca of Europe is crumbling from within. In the UK you have waves of chaos and riots perpetrated by youth who’ve spent their lives suckling at the public teat. The little rascals are ostensibly rioting against the police and government budget cuts, but seem to take particular joy in burning businesses and stealing jewelry and electronics. In Greece strikes and protests continue unabated while in Italy Silvio Berlusconi is fighting to keep his country solvent. It’s so bad over there that George Soros is recommending that Greece and Portugal pull out of both the EU and the Euro.

While it’s unlikely that Carter had a hand in any of this, the fact that the Consumer Confidence index is at its lowest level since he was President must give him some hope.

As if an economy on life support was not bad enough, on Saturday Rick Perry finally made it official and announced he was running for the GOP nomination to succeed Barack Obama.

If Perry gets the nomination it will set up a match Vince McMahon could only dream of. For the first time since Jimmy Carter occupied the White House, Americans will have a crystal clear choice between two philosophies that are diametrically opposed to one another.

In one corner you have Barack Obama who is leading the progressive charge that seeks to turn the United States into the train wreck that is Western Europe. In the other corner you have Rick Perry, an avowed 10th Amendment fan, a fierce advocate of small government and an unabashed believer in American Exceptionalism.

Rarely is it the case that voters have such a clear choice between philosophies of government. One need look no farther than the housing market to understand the consequences of the choice to be made. (Pick up a copy of Thomas Sowell’s The Housing Boom and Bust for a full telling of the tale.) California, one of the most unaffordable places to live in the country – not coincidentally the most regulated state in the Union – has seen massive bloodletting in the housing market as a result of the burst of the real estate bubble. Tellingly, despite the massive declines the state is still one of the most expensive places to live in the country. Texas on the other hand – largely due to its dearth of regulation – never experienced a bubble and its real estate has continued to appreciate throughout the recession. At the same time while California has an unemployment rate sits near 12% Texas’s is at 8.2%. And of course the state’s economic growth rate is almost double California’s and it has no income tax while California’s is amongst the highest in the country.

Barack Obama of course is not the Governor of California, he is the President of the United States. California is however the embodiment of everything Barack Obama holds dear, overarching regulation, high taxes, enormous social spending, an illegal alien and union paradise all under the watchful eye of an unassailable green lobby. Given his druthers Obama would indeed turn the United States into California.

At the end of the day, the progressive vs. freedom comparison that Rick Perry offers does not bode well for Barack Obama. No candidate provides a starker contrast of philosophy, and more importantly, actual results, than does Perry. (During the decade he’s been governor Texas has produced more jobs than the other 49 states… combined.) Of course he still needs to secure the nomination, but don’t be surprised if FEC documents show a large donation to the campaign chest from an anonymous donor down in Plains, Georgia.

What does it say about the United States when a Russian president sounds more like a capitalist than the American president?

In preparing for the 2012 election campaign the President said the following: "The proposition that the government is always right is manifested either in corruption or benefits to 'preferred' companies." He went on: The “economy ought to be dominated by private businesses and private investors. The government must protect the choice and property of those who willingly risk their money and reputation." Also: "Corruption, hostility to investment, excessive government role in the economy and the excessive centralization of power are the taxes on the future that we must and will scrap."

Hallelujah! After three years of statist rhetoric a President who understands that it is free markets that create economic prosperity.

Unfortunately however the president speaking was not President Obama, but rather Russia’s President Medvedev. What has become of the world when a Russian president is making a stronger case for free markets than a sitting American President? Is the world standing on its head? Should we now expect the Chinese to declare Falun Gong as the national religion and announce free and fair elections?

As depressing as having a President who’s less of a free market fan than his Russian counterpart is, he’s only the tip of the iceberg. President Obama has plenty of progressive company across the country who fail to understand that freedom and economic prosperity go hand in hand.

And freedom is beginning to exit stage left… Not sure about that? The National Labor Relations Board went to court this week seeking to give unions the power to decide where private companies can invest their money; San Francisco is trying to ban circumcision, and some Chicago schools actually ban students from bringing their own lunches from home.

In a less anecdotal appraisal of our freedoms, the Mercatus Center at George Mason University just released the 2011 edition of its Freedom in the 50 States - An Index of Personal and Economic Freedom. The rankings take into account 150 different measures of freedom compiled into four main measures: Fiscal Policy, Regulatory Policy, Economic Freedom and Personal Freedom. Together they give an overall picture of a citizen’s level of freedom on things like the ease of starting a business, overall tax burden, gun laws and a wide variety of other measures.

The rankings pretty much play out the way you would expect. At the top of the list – most free – are # 1 New Hampshire; # 2. South Dakota; # 3. Indiana; # 4. Idaho; # 5. Missouri. At the other end of the freedom spectrum are # 46. Massachusetts; # 47. Hawaii; # 48. California; # 49. New Jersey; # 50. New York.

I would venture to say that most people are not surprised by these rankings. The notion of freedom to do just about anything you want in places like New Hampshire and Idaho are about as strong as the recognition that California and New York are busybody states that seem to want to regulate everything.

I thought it would be interesting to look at the correlation between freedom in general and economic prosperity in particular. My hypothesis was that the states high in freedom would be significantly more robust economically. I was surprised to discover that on my first datapoint – income level growth – that was not the case. From 2005 – 2009 household income for the five least free states grew faster than income growth by the most free in 3 of the 5 years. And their incomes were higher.

That was the last of the surprises however. On every other measure the most free states came out clearly ahead. Unemployment: Every year from 2005 right up to today the average unemployment rate amongst the five most free states was lower than the least free. Indeed, as the economy worsened the disparity grew: In May 2005 the most free states had an average unemployment rate of 4.36% while the least free states had 4.44% - a difference of .02%. Jump ahead to today and the most free states have an average unemployment rate of 7.22% while the least free states have an average rate of 8.52%, a difference of 1.3%.

On taxes the story is pretty much the same. Every single year from 2005-2009 the average tax rate was lower in the most free states than in the least free states, with an overall average of 8.6% vs. 10.8%.

What about cost of living? In ranking the states from 1-50 with one being the least expensive state to live in and 50 being the most expensive, there are no big surprises. The most free states averaged a score of 15 while the least free states hovered near the bottom with an average of 45.

So there you have it… citizens of the most free states have lower unemployment, lower taxes and a lower cost of living than their counterparts in the least free states. Residents of the least free states however come out slightly ahead based upon income and income growth.

It almost seems like it might be a wash with a slight tilt towards the free states… until you look a bit deeper. Why did income grow more in the least free states? Well, it turns out that that difference in growth is not that hard to find… it’s from their state governments’ deficit spending. During 2009 the five least free states ran an average deficit of $11 billion each while the five most free states averaged $494 million each. During 2010 the numbers were even greater, $17 billion vs. $828 million. In both cases the billions of dollars in deficit spending of the least free states was more than responsible for the disparity in income growth rates. So, not only do the citizens of the least free states pay higher taxes, suffer greater unemployment, experience a higher cost of living, it turns out the one measure where they were ahead of the game is a mirage created by a government shell game that leaves them with tens of billions of debt on their backs.

Dmitry Medvedev seems to have come to the realization that freedom and economic prosperity go hand in hand. If he ends up losing the 2012 presidential race to Vladimir Putin (who's not known for his capitalist or freedom sentiments) perhaps he can start a second career here in the United States teaching President Obama and the rest of the progressives how to bring an economy back to life…

Can Michigan show the country how to save itself?

One of the great things about the United States Constitution that few people realize and even fewer understand is the idea of federalism. On the most basic level federalism is the notion that there are distinct spheres of influence and responsibility between the federal and state governments. James Madison thought that that notion of federalism was crystal clear in the original document itself that he originally opposed a Bill of Rights. He believed the federal government was already limited by the fact that it could do only those things explicitly detailed in the document. John Hancock, Patrick Adams and others insisted and eventually the Bill of Rights was added with the federal perspective enshrined in the 10th Amendment.

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.

Aside from limiting the powers of the federal government – at least in theory, as Obamacare demonstrated – the federalist system does something quite extraordinary, or at least it’s supposed to. What is that thing? Experimentation! Fundamentally federalism has given us 50 different testing grounds for new ideas. The notion being that when one state does something - good or bad - the others will notice and act accordingly.

A big part of the problem with the federal government becoming involved in so many areas of our lives is that it kills one of the great legacies left to us by George Mason and friends. They understood that in most cases it is the people closest to problems who are best equipped to handle them. As true as that was with a population of 4 million people it is exponentially more so with one of 310 million.

As such, now that the elections are over and the march towards 2012 is on, now is the perfect time to take to experimenting. And in our center ring I would like to suggest Michigan step up and take a page out of Rahm Emanuel’s book that says “You never want a serious crisis to go to waste” and take a shot at leading the country in a different direction.

Why Michigan? Because the state is a basket case. Detroit has gotten so bad that the government is considering turning a quarter of the city into farmland! Importantly, unlike the brain dead voters in the People’s Republic of California, the people of Michigan have shown themselves to recognize bad ideas when they see them. After eight disastrous years of Jennifer Granholm, Michigan’s citizens voted 2 to 1 to make businessman Rick Snyder their Governor. In addition, they gave Republicans the majority of seats in the state legislature and they made the GOP the majority of their Congressional delegation.

Michigan is one of those states that is in the middle of the pack in terms of freedom – economic and otherwise. According to the Mercatus Center at George Mason University the state is #17 out of 50 states in terms of overall taxes although on corporate taxes it’s #48. It’s #22 on government spending and believe it or not, #1 in regulatory freedom. Overall, the state comes in at #15 overall in the Center’s 2010 Economic Freedom rankings. Given that middle tier of economic freedom, Michigan should be somewhere in the middle of the economic road relative to the rest of the country.

Alas it is not. The state has lost an average of 500,000 jobs in the last five years and today it sits with an unemployment rate of 13.5%, behind only real estate ravaged Nevada. As bad as Michigan is right now, it would have been exponentially worse had not Barack Obama’s imperial federal government taken billions of dollars from non-Michigander's to give to General Motors and Chrysler and then in turn give the UAW unearned ownership in the companies they ruined - of course at the expense of secured creditors. Without Obama Michigan under the Democrats would have made some third world countries look like Germany by comparison. It may actually be the worst state in the country in terms of economic prospects. It is this chaos that creates the opportunity that Governor Snyder has in front of him.

He should seize upon this morass to demonstrate exactly what can be done when you let people vote with their feet. The first thing he and the new GOP legislature should do is eliminate all state and local income taxes. The second is to make Michigan a right to work state. Immediately after doing so the state should auction off all of that abandoned real estate in Detroit. (There are five states with no income taxes that are also right to work states: Florida, Nevada, South Dakota, Texas and Wyoming. Florida and Nevada have surging populations but have been decimated by federal housing policy. South Dakota has the second lowest unemployment rate in the country, Wyoming the 8th and Texas created more jobs over the last decade than all of the other states combined.)

Doing these things would immediately make Michigan a kind of job magnet – to the extent any company in America wants to create jobs given the Federal government’s leftist policies. The state’s relatively low level of regulation, combined with a reasonably priced (aka non-union) skilled labor force, low real estate prices and no income taxes would make for a very compelling locale for investors and corporations.

Governor Snyder has an opportunity to do for Michigan what Rudy Giuliani did for New York City in the 1990’s. He has the opportunity to take a state that has been turned from arguably the most powerful economic engine in the country into a banana republic by decades of mismanagement and turn it around. By essentially turning the state into an Enterprise Zone he will give companies a reason to invest in the state, he will give citizens a reason to stay, and like Giuliani’s New York, a Michigan turnaround can become a shining example for other states as they seek to climb out of their own economic swamps. The Founding Father’s federalism is alive and well and one can only hope that success in the Wolverine State will show Washington what might work on a national scale.