The Government is NOT Your Friend, Regardless of What They Tell You...

 Ronald Reagan once said:  "The nine most terrifying words in the English language are: I'm from the Government, and I'm here to help." He was right, the government’s not your friend and it most certainly isn’t here to help you. 

The dirty little secret about government is that its purpose is not really to make the lives of citizens better, but rather, to accumulate power at the expense of citizens.  Not sure about that? Ask yourself, how many government agencies have put themselves out of a job because they succeeded? There’re a few who technology left behind, like the Steamboat Inspection Service, others that served their purpose like the Defense Homes Corporation, while others were merged into other agencies like the General Land Office, subsumed into the Department of Interior.  In our history there have been less than 100 federal agencies that have actually been shuttered, and most of those existed in the early 20^th century to deal with the Depression or the two world wars. 

According to the Federal Register there are 457 different agencies of the federal government.  That’s 457 agencies covering virtually every aspect of American’s lives, most of which are staffed by unelected bureaucrats, all of whom spend your money and many of whom write regulations that carry the force of law enforced by the police power of government. This includes everything from the State Department to the Geographic Names Board to the International Broadcasting Board to the ATF.  And that 457 is misleading.  While it includes a dozen organizations tied to Defense, there are dozens more agencies that come under it that are not listed in the Federal Register such as the DoD Education Activity or the Office of Naval Research.  Wikipedia lists a more realistic, but still lacking 1,500.   

The American government has become a leviathan.  It’s everywhere, involved in virtually every aspect of American’s lives, and it’s perpetual, regardless of its record of dismal failure.  Two examples: 

1) The War on Poverty, AKA the Great Society.  Brainchild of LBJ, the Great Society programs were created to address poverty in America.  They included things like food stamps, Medicaid, Medicare, Headstart and others. 

When the Great Society programs were passed in 1964 the poverty rate was 15%, dropping to 13.9% the next year. By 1969 the rate was 9.7%. Exactly 50 years later, in 2019 the rate was 8.7%. That means that as a result of fighting the War on Poverty for half a century, after spending over $30 trillion, the poverty rate dropped by a rounding error, by literally 1%! 

Yet somehow the War on Poverty goes on, with more programs, more money, more regulations and of course, more employees.  Indeed, DHHS, which manages many of the programs, has a staff of 80,000 and an annual budget of over $1 trillion.

2) Public education.  American public education is really just a jobs program and revenue generating program for unions. William McGurn over at the WSJ looks at the performance of schools in the largest school districts.  The level of failure is extraordinary.  For example, in 2019 Atlanta public schools spent $17,112 per student and the result of all of that spending was that only 10% of students were proficient in math and 15% in reading.  So for all of that expenditure, fully 90% failed basic math proficiency and 85% reading.  And this dynamic has been going on for decades across the country.  New York City spends $28,004 per student and 75% of them lack proficiency in math and 81% in reading, while Boston spends $25,653 and has similar marks with 88% failing math and 85% reading. 

On average the US spends approximately $14,000 per student in education, (Elem – HS) more than any nation in the world other than Luxemburg. And what do we get for that extraordinary spending?  Not much.  According to the National Center for Education Statistics, in 2018 American students ranked 15^th in the world for reading literacy, 18^th in science and 37^th in math!  Of all of the things that drive a society to prosperity, particularly in the technologically advanced world we live in today, education is easily one of the most important, and on that score government has failed miserably, spectacularly and perpetually. 

If the actual goal was to educate students, government would give that money to parents in the form of vouchers to kickstart a private / charter school revolution.  Sure, there’d be failures, but it’s hard to imagine how they could fail more spectacularly than the current systems are. But that’s not the goal…

The government spends $30 trillion over half a century and reduces poverty by 1%.  The government spends more on education than virtually every nation on the planet yet 85% of the students in its biggest (and most minority filled) school districts fail basic reading and math, the building blocks for success in our dynamic society.  And we’re supposed to believe government works for us?

American governments spend more money on education and social programs than anything else, more than the GDP of most countries. Yet they fail, year after year, decade after decade, but the funds keep growing, regardless of their catastrophically abysmal track record. And that tells you everything you need to know about the nature of governments. Their goal isn’t to solve problems. They’re not here to make life better for citizens. Their goal is not to protect the lives and liberties of citizens. No, government is the borg. Its raison d'etre is simple: Grow revenue and increase power for themselves and unions. Proof?  Despite the fact that the United States has 3,143 counties in 50 states spread out over 3,796,742 square miles, nine of the twenty richest counties are in a circle less than 100 miles across with Washington DC at its center.  And what is the industry that drives that wealth?  Finance? No. Entertainment?  No.  Steel or autos or high tech?  No. One thing:  Government power.

Accumulating power is the fundamental nature of government, and our Founding Fathers understood that, which is why they gave us the Bill of Rights and particularly the 9^th and 10^th Amendments. For the first 150 years of our nation those guardrails stood relatively firm, but today they are simply gone.  Sadly, America has become so detached from our Constitution that 90% of what our government does is unconstitutional.

Unlike in economics where the solution to driving prosperity is baking more pies, government is a zero sum game. They win you lose. The more power the government takes, the more influence it exerts, the less freedom citizens have and less control they have over their lives. At some point the expanse of government will spark a civil war between those who remember freedom and value prosperity facing off against those who seek to shelter themselves from cradle to grave under the blanket of government security, support themselves via government benefits that someone else pays for and use the police power of government to control what others think and do. What that civil war will look like is anybody’s guess, but like most civil wars it will not be pretty, and whatever emerges from the ashes will be a shadow of the greatness that once was America.

Happiness doesn't come from equality of outcomes... Nor does prosperity

For years we’ve been hearing stories of schools scrapping dodge-ball, sports leagues eliminating scoring and schools passing students despite their lack of academic achievement. The reason, we’re told, is to protect the self esteem of students who might otherwise be harmed by coming up on the short end of a competitive stick.

Of course none of this is a surprise to anyone who has watched as liberals have transformed the United States economy from a dynamic prosperity creating machine to a middling debt addict where the middle class finds itself on its knees as the government takes care of those at the top and the bottom of the economic spectrum.

Tangentially… I occasionally play the lottery. If the jackpot posted on the sign on the road from downtown flashes over $200 million I’ll consider plunking down a dollar or two for a ticket. Of course I’ve never won but I find it entertaining to wonder for a brief moment what I might do with my windfall.

At the same time I’ve often wondered, if I actually did win the lottery, would I really be happy? Sure, I’d no doubt have lots of fun spending my millions, but would I really be happy? I’m not so sure. That might sound strange, but the history of many lottery winners seems to indicate that lottery money doesn’t bring happiness.

Here’s how these two tangential things are related. Happiness can’t be given to someone. Nor can self esteem. Yes, someone can give you money, and it can ameliorate some problems, but that doesn’t buy happiness. In a similar way, a parent or a school can tell a child they are wonderful, that grades or scores don’t matter… but the kids know better.

Happiness doesn’t come from having, it comes from earning. That’s the fundamental problem liberals don’t understand, whether it’s telling kids there are no winners or losers in sports, or the government giving people money and food stamps and phones and housing vouchers. Liberals focus on outcomes rather than opportunities. They seek a de jure egalitarian society rather than one governed by effort and innovation. It’s not enough for everyone to have the same chance at success based on some test or competition. No, the resulting output, whether it’s bank loans, jobs or college acceptance letters, has to reflect the hue and composition of the larger population or the test is by definition racist or sexist or some other ist. (While such a framework is supposed to apply in boardrooms and law enforcement, for some reason it never seems to apply in the NBA or the NFL…)

Liberals think that if they somehow make everyone equal, everyone will be happy. Once again they’re wrong. The Soviet Union and modern North Korea might be the best examples of “egalitarian” societies in modern history. And in both cases the people were indeed equal… but that equality was / is an equality of poverty, of desperation, of despair.

Just as there’s a difference between “equality” of outcomes and equality of opportunity, there’s a fundamental difference between earning something and being given it. Compare the way tenants of housing projects take care of their homes with the care shown by those who pay mortgages, or compare the level of pride expressed by a kid at winning a bronze medal to that of a kid being issued a participation medal. It’s natural to value something more when it’s earned, rather than when it’s given. Hard work doesn’t guarantee happiness, but it can instill pride, a sense of accomplishment and a sense of having done something of value, all things which are important elements of happiness.

It’s no coincidence then that as the government has become more generous in its gifts to citizens and its regulatory framework – intended to “protect” citizens from the verities of the marketplace – has become a leviathan akin to a straitjacket, the economic dynamo that was once the United States has become has become a lumbering husk of an economy that is kept alive via stratospheric levels of debt? The result is a workforce participation rate at levels not seen since the 1970’s, skyrocketing welfare rolls all while the percentage of people actually paying income taxes has fallen off a cliff.

At the end of the day, liberals claim they seek widespread prosperity and happiness. In reality however, whether it’s a participation trophy or a nanny state that “protects” the citizenry from virtually anything, they accomplish neither. From kids ill equipped to handle failure in life to millions of Americans who have simply stopped bothering to look for work, to the tens of millions who are on government assistance, liberals talk a game of prosperity but never actually realize it. Sadly, they're not the only ones paying the price for their failures. The entire country is.

But at least we can take solace in the fact that their self esteem won’t be hurt because success isn’t measured by actual results, but only by intentions…

The Invasions of the United States and Europe - Why Start A War When You Can Sign Up For Welfare?

Last Monday I wrote a piece about immigration here at home and a changing face of Europe abroad. It was inspired by a trip to Europe and Ann Coulter’s Adios America. With all of this on my mind I tuned into Rush’s show on Friday for my normal dose of Excellence in Broadcasting. And in a moment he crystallized exactly what was going on… both in Europe and here, although he was specifically talking about the refugee crisis / chaos in Europe. In a moment he completely changed my perception of the issue – or at least made sense out of what I am, and many others are, seeing. He was talking about the immigrants who were in Hungary and were trying to get to Austria and Germany. The papers are full of heart wrenching pieces of Syrians escaping persecution. Of dozens of Libyans drowning as their overcrowded boats seek out the Greek or Italian coasts. Of families not wanting to be sent to refugee camps. Of Iraqis seeking to escape the ruthless ISIS killers of men, women and children. All of those are true, and it is heartbreaking. The underlying current of all of this coverage is that if Europe doesn’t take in these people, they are heartless and probably racists.

Many of the people who are making up this refugee crisis are indeed escaping terror of one sort of another. But Rush points out something interesting. If it was just terror or repression these people are escaping… why don’t we see them stopping in Turkey, where, the leader may be an Islamist, they're not shooting people in the street. Or why aren’t they stopping in Greece where they would expected to be beyond the reach of most of the hated repressors they are escaping from? He points out that no, they are heading to Germany and Sweden where they can expect to receive generous benefits from the government. He puts it quite well: It’s not immigration, it’s an invasion.

If this was about helping refugees, Turkey and Greece could set up camps to provide food and shelter and the rest of Europe could fund them.  It would cost much less than new welfare recipients spread across the Continent.  But the refugees have no intention of staying in either of those countries or in camps in Hungary.  It's Germany or Bust!  I'm not familiar with many situations where refugees enter a place illegally and then demand where they want to stay and what kinds of accommodations they will accept.

Basically the Europeans are inviting Muslims to finish what Umayyads couldn’t accomplish in the 8th Century and the Ottomans couldn’t do in the 15th and 16th. Already Muslims make up between 5% and 10% of most major European countries – and upwards of 20% in many of the largest cities… and the numbers were expected to grow rapidly, even before this refugee problem.

This poses an interesting juxtaposition… and a bit of irony. For 50 years American leadership kept much of Western Europe free in the face of a Soviet menace that was constantly seeking to enlarge its empire. Because of the security provided by the United States those same European nations were able to spend billions of dollars a year on welfare programs. Now, today, after six years of American failure of leadership AKA “leading from behind” it is those welfare programs themselves that are acting as a magnet to those who more often than not have no use for the freedoms that the United States spent half a century defending… Why fight a hot war against the Crusaders when you can simply sign up for their welfare programs and help them collapse from within?

The same holds true for the United States and the influx of illegals from Latin America. Just as the welfare programs of Europe have been drawing and supporting Muslims for a quarter century, American welfare programs have been doing the same for immigrants – both legal and illegal – from south of the border for even longer. Just as Europe’s crisis is coming to a head, so too one is here in America, where La Raza seeks to create its own empire called Aztlan... but thankfully Donald Trump has put that crisis front and center.

If only the Soviets had been smarter, they could have conquered both the United States and Europe without firing a missile. Just as ISIS has promised to put sleepers in amongst the refugees flooding into Europe, Gorbachev could have recruited Manchurian candidates from the Middle East and Latin America to invade Europe and the US respectively. Unlike the character Frank Sinatra investigates in the movie however, these Manchurian candidates wouldn’t have had to actually assassinate anyone. They could have just gone forth and multiplied and continued to receive their welfare checks. Eventually the Russian Bear would have been able to walk right into both after their economies and the cultures were obliterated. Perhaps it’s only fitting that all of this is occurring just as a leader formed in the kiln of the Soviet Union’s KGB is reasserting Russian military might at the very time the West is so vulnerable. Russian vodka, Mexican tequila and the Koran… that might make for some interesting interactions.

The War on Poverty - $40 Trillion Funding Failure Rather than Facebook or FUBU or Ford

Last year the United States celebrated the 50th anniversary of the War on Poverty begun by LBJ in 1964. Over that time the country has spent approximately $40 trillion on welfare and redistribution programs of one sort or another – and that number doesn’t include expenditures for Social Security or Medicare. The program started out slow, but has steadily picked up steam so that today the United States spends over a trillion dollars on welfare programs every year. To put that $1 trillion in perspective, that is more than the GDP of every country on the planet except for the 15 largest. It’s bigger than the GDP of Sweden, Saudi Arabia, Indonesia, Turkey, the Netherlands and around 175 others.

That’s a lot of money, but it must be worth it as the War on Poverty must have been a success… right? Not so much. Today poverty in the United States stands at approximately 15% of the population. Fifteen percent sounds relatively low, except when compared to the 18% rate it was $40 trillion dollars ago. After $40 trillion dollars and 50 years, the War on Poverty has reduced poverty by a staggering 3 percentage points!  What's worse, the War on Poverty actually stopped the progress that was already occurring:  During the 15 years prior to the beginning of the War on Poverty, the poverty rate in the United States had dropped from 30% to 15%!

Indeed, the single biggest accomplishment of the War on Poverty seems to have been the proliferation of single parent households… i.e. children born out of wedlock. In 1964 the percentage of American children born to unwed mothers was approximately 4%... so out of every 20 babies born, only 1 was born to an unwed mother. Today 8 out of every 20 babies born in the United States is born to an unwed mother. And according to studies by HHS and others, that’s largely because the welfare state has made such as choice feasible: Holding constant a wide range of variables, including income, education, and urban vs. suburban setting, the study found that a 50 percent increase in the value of AFDC and foodstamp payments led to a 43 percent increase in the number of out-of-wedlock births.

And the proliferation of unwed motherhood has resulted in a dramatic increase in crime, violent crime in particular. According to the Atlantic Magazine: “The relationship [between single-parent families and crime] is so strong that controlling for family configuration erases the relationship between race and crime and between low income and crime. This conclusion shows up time and again in the literature.” In 1965 there were 20 violent crimes for every 1000 Americans. By 2013 that number was 37. That doubling might not sound bad, until you realize that the incarceration rate in the US tripled over that same period, which means that as a percentage of the population there are three times as many Americans incarcerated today as there were when the War on Poverty began, but with many more criminals locked up the violent crime rate has still doubled.

So almost $1 trillion a year of welfare spending for half a century has basically made a small decrease in the poverty rate, pushed unwed motherhood through the stratosphere and dramatically increased the violent crime rate and prison population in the country. That sounds like a typical government success story.

Now let’s compare that to what a trillion dollars in one year might look like were in the private sector. Below are fifteen companies whose combined North American revenue was $1 trillion last year: Amazon, Apple, Coke, Disney, ExxonMobil, Facebook, Ford, General Electric, Google, J&J, JP Morgan, McDonalds, Microsoft, Nike, Walmart. So these companies with a combined $1 billion in revenue, what have they accomplished? Simply put, they have changed the world. Walmart has almost single handedly changed American retailing and driven inflation down everyone. Amazon redefined retail even further. Microsoft and Apple essentially created the computer revolution. McDonalds feeds the entire US population once a month. Facebook has connected a billion people around the world. Disney has entertained generations, ExxonMobil has fueled their journeys and Ford has built their cars and trucks.

Not only do these companies employ millions of people directly, but indirectly via their suppliers they drive the employment of tens of millions of others. So with a trillion dollars in revenue – money that was willingly exchanged for products and services – these companies have directly or indirectly generated an income for tens of millions of Americans who in turn support millions more family members. And they accomplished all of that while providing material benefits to the country as a whole.

One has to wonder what might have become of poverty had the $40 trillion the government siphoned out of the pockets of hard working Americans over the last half century had been left in their pockets. How many more of those children born to a single mother might have been born into a two parent household, gotten an education and gone on to start the next Disney or FUBU or UBER? How many more Spanx or Harpo Productions or Mary Kay Cosmetics were never founded because single mothers were sitting at home waiting for a welfare check rather than coming up with some revolutionary entrepreneurial moonshot? How many Under Armours or Facebooks or Chipotles never got founded because children grew up in poverty with no positive male role models around to help guide them? How much poverty would have been eliminated had each year’s trillion dollars gone into financing new startups rather than creating a dependency ecosystem?

At the end of the day the War on Poverty has been nothing short of a disaster. Not only has it sucked $40 trillion out of the hands of American workers and entrepreneurs, but it has also created an environment where tragic of circumstances have become the norm for tens of millions of Americans. More crime, more broken families and more broken dreams are the outcome of a half century of government failure. The tragedy is that this abject failure took place during one of the most economically dynamic periods in American history, and as a result of another failed government policy tens of millions of Americans found themselves stuck in the quicksand of government dependency and never had much of a shot at pursuing the American dream and seeing what potential greatness they might have brought to the world.

What six years of Barack Obama's economic incompetence has wrought

Now that Barack Obama’s first six years are over it might be nice to see what he has wrought, and compare him to another iconic president, Ronald Reagan.

When Barack Obama took office in 2009 65.7% of Americans were participating in the laborforce. (This is called the Labor Force Participation Rate – LFPR – which includes those working and those looking for work.) Six years later that number was down to 62.8. When Ronald Reagan took office in 1981 63.9% of Americans were participating in the workforce and six years later that number had grown to 65.6%.

Unemployment is the measure of those in the laborforce looking for work but can’t find it. At first blush Obama seems to be doing well using that measure. In February 2009 unemployment sat at 8.3% and by November 2014 it had dropped to 5.8%. In February 1981 Ronald Reagan took office with an unemployment rate of 7.4%, which by November 1986 had only dropped to 6.9%. Using the unemployment measure seems to suggest Obama’s policies trump those of Reagan.

Upon closer inspection however… not so much. The LFPR tells the story – or really its inverse does. That is the number of those not working who must be supported by workers, unless they were independently wealthy. A 65% LFPR indicates that 35% of the population would be supported by workers. In the case of both Obama and Reagan the US population grew by approximately 11 million people over their first six years in office. Under Reagan, because job growth was so strong – 11 million new jobs – the total number of people who needed to be supported by those working (unemployed + those not in the workforce) remained steady at 93 million throughout those six years. Under Obama however, because job growth was so anemic – 3 million total new jobs – the number of people who needed to be supported by those working actually jumped 8 million from 121 million to 129 million. That means that under Reagan the number of workers in the US grew by 11 million while the number of non workers remained steady. Under Obama the number of workers grew by 3 million while the number not working grew by 8 million.

But some might argue that Obama faced a tougher economic situation than did Reagan. Not really.

When Ronald Reagan took office inflation was 10.1% and six years later it was 1.9% while under Barack Obama inflation started out near zero and has remained there throughout his terms. What’s ironic about this tame inflation is that it has much to do with dropping prices for things like big screen TV’s, mobile phones and oil, – the latter despite Obama’s best efforts – while core items that the poor spend most heavily on such as meats, poultry, fish, eggs and electricity, are hitting all time record highs.

When Reagan took office interest rates were 19.5% and by his sixth year they were down to 7.5%. When Barack Obama took office interest rates were at 3.25% and have essentially stayed in that area since. That extraordinarily low rate is in large part due to the Fed’s pumping of $4.5 trillion into the American economy since 2008, allowing the federal government to borrow like a drunken sailor.

Of course that pumping also has the impact of juicing the GDP numbers as there is more borrowing and investment going on than the fundamentals would otherwise support. And it’s in this easy money environment that Barack Obama’s biggest failure can be seen. In the six years he’s been president GDP grew by a total of 22%. Compare that to the same period under Reagan, where GDP grew by a whopping 42%. Of course Reagan did add substantially to the national debt, growing it by 6% of GDP during each of his first six years. But Obama borrowed even more, growing the national debt by 8% of GDP each of his first six years. Add to that the 5% the Fed kicked in each year with its Quantative Easing and it’s almost impossible understand how GDP could grow as slowly as it has under Obama.

The key however is hiding right in plain sight. Q4 GDP numbers give it away. The administration crows that the economy grew at a 5% clip in the last quarter of 2014. Not bad. What they don’t tell you is that fully half that uptick came specifically as a result of coerced Obamacare spending. Obamacare is a microcosm of what’s wrong with Obama and his administration. On the one hand it kills jobs, increases prices, eliminates choices and puts private practice doctors out of business. On the other hand, those very same regulations force Americans and companies to spend more on its mandates, which has the result of juicing GDP. So by regulatory fiat the government can remake the economy and claim Americans are better off in the process by juicing GDP numbers. Now imagine the same thing with hundreds of thousands of regulations over the last six years and you understand just how it’s the case that GDP seems to keep growing but Americans seem poorer.

To put the cherry on top of this indictment of Barack Obama’s economic incompetence is a quote from Ronald Reagan: “Welfare’s purpose should be to eliminate, as far as possible, the need for its own existence”. Barack Obama likely disagrees. When he took office there were 32 million Americans on food stamps. Today that number stands at 46 million. In six years Barack Obama’s economic policies have so damaged the country that 5% of Americans have been added to the food stamp rolls while fully one third of the country receives some form of welfare. All of this while the rich are paying more in taxes than ever and half the country pays no income taxes at all and the middle class try to keep their heads above water.  That's what happens when your policies bring about the slowest economic recovery in the last half century. 

Too bad no one saw this coming…

The Obamanization of your neighborhood... turning your community into the south side of Chicago

Next to families, communities are perhaps the single most important part of American life. Communities are made up of the places we shop, the churches we attend, and perhaps most importantly where we live. Aside from where we work, our homes are probably the places where we spend the most time. It’s at home where we typically can be most relaxed, where we can be ourselves, where we can feel comfortable, or at least usually have some level of control.

If you are like most Americans, your home, whether it’s an apartment you rent, a single family home you own or anything in between, is the single biggest expense you have and we usually take great care in figuring out where we want to live. Everything from the number of rooms to its proximity to your job to quality of the schools to the price all play a role. Another big part of the decision about where we live is the understanding that we are making a significant commitment, not only in terms of dollars, but in our time as well.

One of the great aspects of the American Dream has always been the notion that one of the benefits of hard work and becoming successful is that we give ourselves more options in terms of where we can live. We may have more income to spend on housing which may allow us to buy a bigger home or move to a nicer neighborhood. We may have more highly valued skills that expand the number of cities or states we can go for a job. Whatever it is, for most Americans a core element of the American Dream involves some element of housing. The ability to choose where we live, the communities we want to be a part of are integral to the concept of being American.

With the advent of the civil rights legislation of the 1960’s, many limitations of homeownership based on race were eliminated. As a result communities across the country became integrated as minorities found that they too could move anywhere they could afford to buy or rent.

That ability for anyone to live where they want, to live anywhere they can afford to purchase or rent is a core American freedom. While there is no “Freedom to live where you want…” enshrined in the US Constitution, that’s because the Founders understood that it was such a basic freedom that it didn’t need to be codified. Needing such a declaration would be the equivalent of needing one that says “The freedom to breath air is protected.” Some things are so basic that they simply don’t need to be stated. The freedom to live and raise our families where we choose has lasted for two centuries, but it may not last much longer.

If you are one of those homeowners or renters who has chosen to live in a good neighborhood, worked hard to move to a community with (relatively) good schools, if you’ve decided to move to a community where trees and green lawns are common, the Obama administration is coming after you. If you and your family struggled to leave behind the crime, deprivation and crumbling schools of the city for the relatively tranquil suburbs, don't get too comfortable, the Obama administration is planning on sending you back to the future.

The Department of Housing and Urban Development, the people who inflicted the squalor and tragedy of public housing on citizens and communities for five decades, have decided that they are now not only qualified, but also have the power, to decide what your neighborhood and community should look like. That’s right, the Obama administration has decided that they have the power to decide what your community should look like from an economic, racial and ethnic makeup. Essentially they can decide who should live in your neighborhood. If you’ve moved into a neighborhood that only has single family homes they can force local authorities to zone for apartment buildings or high rise condos. If you’ve moved into a community that recognizes that owners tend to take better care of their properties and therefore limits rentals… too bad. If the citizens of your community choose not to rent to those using Section 8 vouchers for payment, too bad, the government can force them to do so. Essentially, the government that gave us a failed education system, figured out how to make welfare pay more than work and loses billions of dollars annually on green energy boondoggles now plans to manage our neighborhoods…

Our communities are the core of American life. They are where you spend the majority of your non working hours. They are where you are the most vulnerable – i.e. where you close your eyes and go to sleep. They are where you raise your children, send them to school and volunteer at their scouting functions. They are where you go to church and the Rotary. They are the anchor around which much of your life revolves. So the question is, for something that is so fundamentally important, who is better positioned to decide what your community should look like, some nameless cog in the machine of government sitting behind a desk in Washington or the people who live in the houses, mow the lawns, attend the churches, raise their families and pay the property taxes? If you said the latter, you must be one of those anti-government zealots who the Obama administration thinks is a threat to America. Welcome to your new neighborhood. Enjoy!

Barack Obama finally embraces Supply Side Economics - but adds just a wee hint of redistribution

Last week the Bureau of Labor Statistics released a report that said that the labor force participation rate (LFPR) dropped to 63.6%, the lowest rate since Jimmy Carter was in office. Essentially that means that of the population of 16 year and older, 37.4% of them decided not to work or not to seek work. That’s 88.8 million people! To put that in perspective, when George Bush took office the LFPR was 67.2% and eight years later it was 1.5% lower at 65.7%. It has dropped 2.1% in Barack Obama’s first four years, the most precipitous drop in workforce participation since they started keeping records in 1948. But percentages only tell you so much. Each of those percentage points represents approximately 2.5 million people. Since Barack Obama became president over 5 million people have simply stopped trying to find a job. If just half of those 5 million people were still looking for jobs, the unemployment rate would actually be 9.4% rather than the official 7.8%. Now some of those are students who chose to go to college because they couldn’t find a job and others are senior citizens who’ve retired from the workforce, but the overwhelming majority of those 5 million are people who have simply given up hope.

And that’s the point, and the problem… Not since the 1970’s have the American people felt so discouraged about the prospects for the nation in general and their individual economic circumstances in particular. For most of American history the notion of having a job, doing something productive for your family and your community was the norm. Barack Obama is seeking to rapidly change that, and he got a good head start during his first term. The President has doubled the number of people on food stamps and he gutted Bill Clinton’s (grudging) welfare reform. That’s his version of Supply Side Economics, he supplies the benefits and people will be happy to give him four more years. Add to this the regulatory nightmare he has unleashed on businesses and four years of demagoguing those who drive American productivity and you have an ever increasing number of Americans who believe they either can’t or don’t have to find jobs.

For much of the 20th century the United States was looked at as the place to come to seek your fortune, to make or do something with your life, basically where anything was possible. Although Hollywood and Coke and Levis brought the American Dream to the rest of the world, far more importantly, most Americans were pursuing it here at home, if not living it. Today something all together different is occurring. As the Gallop poll demonstrated, much diminished is that "Can do" feeling that most Americans had for most of our history, the feeling that prosperity and success were just around the corner and anyone could achieve it if they worked hard enough.  America has become a state of dependence, where half the population pays no income taxes and where 40% of the population suckles at the public tit, either in the form of government handouts or as employees of a bloated bureaucracy.

How long can a population survive when fewer and fewer people are supporting an ever increasing population of non producers? Not long. Frances Fox Piven and Richard Cloward posited in 1966 that you could overload the welfare system in an effort to bring about a redistribution of wealth. If you read their manifesto, you can’t help but recognize their methods in Barack Obama’s policies.

While it’s impossible to know what the future holds, it’s not difficult to wonder what the situation of the country might be in 4 years if the same policies that brought us to where we are today were implemented during the president’s second term.

If Food Stamp growth were to decline to 25% (vs. 50% over the President's first term) there will be 60 million Americans on the program. If Social Security Disability (which is at its highest level on record) increases by another 25% as it did in the last four years, a total of 13 million Americans will be on disability. (What’s most heart breaking about this programs is that the rampant fraud and bureaucratic incompetence are keeping benefits out of the hands of the truly needy.) Those measures alone would bring the total of people receiving government checks (i.e. money taken from taxpayers or borrowed that will have to be paid back by taxpayers) from 18% of our population today to almost 23%. Add in the 8 million or so people receiving unemployment benefits and the 4.4 million on welfare and you have over a quarter of the population on the receiving end of some wealth redistribution program. On the workforce side, if the LFPR declines another two percent it will sit at 61.6%, a level not seen since 1977. With a LFPR of 61.6% and an unemployment rate that stayed at today’s 7.9%, we would have only 141 million workers supporting a population of 323 million people verses today’s 144 million supporting a population of 313… That’s 3 million fewer workers supporting a population that would have grown by 10 million! Inverted pyramids like that don’t last for long.

At the end of the day, one has to wonder what exactly were those 65 million voters hoping for when they voted for Barack Obama? If it was more of the same they just might be in luck… at least in the short run. It appears that the President plans on doubling down on his policies. He appears to be executing the socialist Cloward Piven Strategy perfectly. While his devotees may be happy with his rhetoric today, they will likely not be happy when his grand strategy succeeds tomorrow. The problem with socialism in America is that it assumes a static nature of the citizenry, i.e. that government can impose whatever requirements on workers and producers and they will have no choice but to comply. Nothing could be farther from the truth. With countries from Australia to Canada to Singapore to Estonia to Denmark offering greater levels of economic freedom, those who fund what the government redistributes have many options available to them. Money, like water, flows to the areas of least resistance and the resistance is increasing in the United States. Eduardo Saverin, Tina Turner and a record number of other American citizens are making it clear that do indeed have options. Lots of companies do too. When all of the producers have finally left the country, all that will be left of Barack Obama’s redistributive state will be those who no longer know how to fend for themselves. Somehow I can’t imagine that being the Nirvana that Obama voters were thinking of.

The Constitution, Deadbeat Dads, and the Hypocrisy of Obamacare

America is now poised to enjoy the fruits of what has been a demand from the left for over a quarter century: Government mandated socialized medicine.

There have always been three main arguments behind that drive:
1) Everyone has a right to free healthcare.
2) Fairness
3) We’re paying for it anyway.

As usual, the liberals miss the mark on all three fronts.

On the first they are wrong about what a right is. Our Constitution explicitly defines a number of rights… Speech, Religious liberty, Assembly etc. Most of the rights enumerated in the Constitution limit the government from impeding on a citizen’s free exercise of those rights. Other than the 6th and 7th Amendments’ right to a jury trial, nothing in these rights impose duties on others to provide anything. Rights are things you could take with you if you decided to move to a desert island somewhere where there was no one else there to provide them.

Healthcare is simply not a right. It is not free. It is not an infinite resource that can be redistributed endlessly. No, healthcare is a service that must be provided by individuals who willingly exchange their time and energy for whatever value someone else places on it. They do that so that they can in turn exchange that money with others for things like garbage services, car loans, dental floss, chocolate, gasoline, video games and a wide variety of goods and services for which they are either not interested in or not capable of providing for themselves. That alone distinguishes healthcare from a right.

The right to free healthcare is nowhere to be found in the Constitution. Indeed, none other than the patron saint of progressives, community activist Barack Obama recognized as much: “…the Constitution is a charter of negative liberties. Says what the states can’t do to you. Says what the Federal government can’t do to you, but doesn’t say what the Federal government or State government must do on your behalf…” Too bad President Barack Obama forgot as much.

The left also has it wrong on the notion of fairness. Fairness is a value judgment, not a logical basis upon which to distribute a finite resource. Fairness is relative to the person making the judgment. History, both ancient and near, is full of stories of people fighting over land and property they feel is rightfully, fairly, theirs. Fair depends on perspective.

What’s more, life is simply not “fair”. Some people are tall, while others are short. Some are kind while others make the Grinch look like Ghandi. Some are skinny, others are fat while a few look like Adonis or Aphrodite. More importantly, some work hard while others seek to live off of the efforts of others. Those differences have existed throughout history and will continue to do so as long as we remain human. As such, there is simply no way to ensure “fairness” because everyone has a different understanding of the word. We see this demonstrated every day. Liberals think it’s fair to take half or more of what someone earns to give to others while those whose sweat or intelligence generate wealth think they should be able to keep it.

Finally, those demanding universal healthcare are hypocrites as well. Not sure? Ask them about the following. They claim that the government should provide healthcare to everyone because we’re paying for it anyway when people who can’t pay go to emergency rooms and the rest of America has to pay extra to cover them. If that logic works, how about extending it to unwed mothers and deadbeat fathers? Unwed mothers are a disproportionately large segment of those living in poverty and receiving welfare. We’re paying for that. Americans have spent trillions of dollars on poverty programs over the last half century; indeed the acronym AFDC stands for Aid For Dependent Children… for which a family was ineligible if a father was present. As such, is it appropriate to forcibly tie the tubes of women who have children they cannot support until such time as they get married or can support the children on their own rather than making the rest of society pay for them?

Similarly we all pay for the police who capture criminals as well as the courts that try them and the prisons to lock them up. Does the progressive logic hold then that since men who grow up without fathers present are disproportionately represented amongst the criminal element, that we should forcibly give men who refuse to raise or support their progeny vasectomies? While someone who cannot afford hypertension medicine or the cost of an ankle cast may be poignant, is it more calamitous than a parent suffering the loss of a son or daughter murdered by a criminal who grew up without a father? If government can seek to ameliorate the former by edict, why not apply that logic to eliminate the second?

At the end of the day, President Obama and his liberal cabal have it wrong on healthcare, as they usually do on virtually every other issue they harness to redistribute wealth and turn the country into a statist Nirvana. From misunderstanding fundamental concepts in the Constitution to ignoring the basic nature of mankind to crafting irrational, self serving arguments, they seek any route available to impose their fatuous, untenable programs on an uninformed public, knowing that once in place they will live on forever.

President Obama is certainly on his way to achieving his goal of “fundamentally transforming America”. One can only wonder as the true nature of Obamacare plays itself out over the next five years and its mandates begin to crush the vitality out of the American spirit, whether citizens might look to something other than the Constitution to save freedom. There is another American document to which they might want to turn. Its first line reads as follows: When in the Course of human events it becomes necessary for one people to dissolve the political bands which have connected them with another and to assume among the powers of the earth, the separate and equal station to which the Laws of Nature and of Nature's God entitle them, a decent respect to the opinions of mankind requires that they should declare the causes which impel them to the separation. The catastrophe of Obamacare just might be at the top of the list.

President Obama's deleterious effect on America's work ethic.

The United States was built on the backs of hard working people. From pilgrims who survived an ocean’s journey and founded a colony at Plymouth to slaves who endured the blistering sun as they harvested cotton to settlers who braved temperatures, terrain and Indians to fulfill a Manifest Destiny, the United States was the product of people who worked like their lives depended on it. And in many cases, they did. In the 20th century however, other than a number of wars, and increasingly, simply living in intercity neighborhoods, most aspects of working in America don’t involve putting your life on the line in order to survive.

Today, America is still powered by work, in whatever form it takes, everything from building bridges to creating smartphone apps to finding investment opportunities. Work has created a foundation for the prosperity that has given the United States two centuries of greatness. Unfortunately, the very concept of work as something positive, something necessary, something that is part of a normal family’s existence, is slowly going away… and it’s no accident.

One wonders what someone could do to destroy the work ethic…

For starters, try two full years of unemployment benefits… although the longest period today has dropped to 83 weeks – a year and a half – President Obama had benefits up to an unprecedented 99 weeks in his first year in office. This, despite the fact that studies show that fully 1/3 of those receiving unemployment benefits find a job within one week of their benefits expiring, and a sizable number of the rest soon thereafter. This is not just an exercise in navel gazing… it has a real impact. In Fort Wayne, Indiana, despite offering between $9 and $20 per hour and a 7% unemployment rate, hundreds of employers cannot fill their open positions. Either they can’t find enough qualified applicants (thank you teachers’ unions) or the pay they are offering is simply not good enough to convince people to give up their unemployment benefits.

And unemployment benefits are not the only government program weighing on the work ethic. Then there is welfare. The GOP half of the Senate Budget Committee released a report last week that was astonishing: “Welfare spending per day per household in poverty is $168, which is higher than the $137 median US income per day.” To put that in perspective, those welfare benefits, including food stamps, housing, healthcare and child care amongst other programs, equal to $61,320 per year per household in poverty. That compares to the median US household income of $50,054 per year. And to add insult to injury, that $50,054 is taxable while the welfare benefits are not. A conservative 20% combined federal, state and local tax rate would bring that take home pay to approximately $40,000, fully 35% lower than the income from the household living in “poverty”.

Now of course liberals say that these numbers are skewed and that all those benefits don’t go to people living in poverty, but also go to people who are experiencing particular hardships. Perhaps, but isn’t that exactly what unemployment insurance is for? Should welfare benefits really be going to those who are not living in poverty? And of course, don’t forget, poverty in 2012 doesn’t mean what you might expect.

Then there is this nugget from the Bureau of Labor Statistics: While the economy has created 2.6 million jobs since June 2009, fully 3.1 million workers signed up for disability benefits. There is something staggering about the fact that for every one person who found a job in the last three years, there was another person who not only didn’t help grow the economy, but who sought support provided by people with jobs! It’s like you and a stranger going to apply for a job. You get the job and the stranger says he can’t actually work but wants to be paid out of your salary… You might not be surprised to learn that lax enforcement and fraud are part of the mix.

Finally there is this. It’s called the Labor Force Participation Rate. Essentially it’s the percentage of people 16 years of age and older who are either working or looking for work. (Those not in that number include students, retirees, those unable to work and those not looking for work.) For most of the last 20 years that number has been between 66% & 67%. Since President Obama took office that number has plummeted to 63.6%. That is the lowest level in over three decades. Fundamentally, what that means is that since President Obama was sworn in, fully 2.2% of the adult population of the United States has decided to exit the workforce. (Remember, that doesn’t include those who are looking for work…) That works out to be approximately 5 million people who have decided that they can get by one way or another without working… which means of course that someone else has to pay to support them.

Taken together these data are nothing less than catastrophic. A country that was built on sweat, ingenuity and perseverance is today foundering under the sheer weight of a segment of the population that sees either no need or no point in contributing to the prosperity of the nation. It’s no wonder that the economy is stagnating despite the infusion of over $5 trillion in debt over the last four years.

This is Margret Thatcher’s “The problem with socialism is that you eventually run out of other people's money” playing itself out in real life. Today we have fewer and fewer people getting jobs while we have skyrocketing numbers of people living off of government handouts. Unfortunately, a majority of voters just reelected a man who not only doesn’t see a problem with this, but who has been driving it. What’s worse, he’s using tax and regulatory policy to dissuade investors, entrepreneurs and businessmen from starting or growing the businesses whose jobs are supposed to support this lunacy in the first place. And of course forgotten in all of this is that work, in addition to providing a person with an income, also provides a feeling of dignity, independence and the pride in the fact that they are benefiting not only themselves but the society as a whole.  One has to wonder, when 2016 comes around will there be enough Americans left with jobs (or the memory of jobs) to derail this progressive train to oblivion?

How about letting members of the Fortune 500 run America's welfare programs?

Imagine what you could do with a quarter of a trillion dollars. You might buy a new house, maybe a new car and maybe even take a trip to Hawaii or Australia. Nice.

Seriously, what can $750 billion accomplish? Well, that all depends on who’s spending the money.

According to the Congressional Research Service the federal government spent $745 billion in 2011 on welfare payments.

That means that government took 20% of every dollar it extracted from citizen’s wallets (or borrowed on their behalf) and gave it to somebody else. Not in exchange for part of a system they have paid into like Social Security or Medicare, or earned such as veteran’s benefits, but simply because they, the recipients were deemed poor. What’s more, virtually every element of the welfare state has gone up by double digits over the last 3 years: Healthcare up 37%, cash aid up 12%, education (college) assistance up 57%, energy assistance up 67% and who knows how much “Obama phones” have grown. Those numbers are simply staggering. That welfare spending, when combined with the $300 billion states have to pay for federal programs, brings total welfare spending to $1.03 trillion, fully 7.5% of the American economy.

To put that spending in perspective, in 2011 the 500 companies that make up the Fortune 500 list earned a total of $825 billion in profit on revenues of $11.2 trillion for a profit margin of about 7%. (1/3 of that revenue came from outside the US)

It’s interesting to see what, in the right hands, upwards of ¾ of a trillion dollars can do.

Of course in the private sector it’s profits that drive the activity. Entrepreneurs often start companies because they’d like to make a profit doing what they love. Investors invest in companies because they believe the potential for profit outweighs the risk of losing their money. At its core profits are what drive a prosperous society.

So what did those 500 companies do to earn their $825 billion? They directly employed 17 million Americans and indirectly employed tens of millions more both in the United States and around the world. What’s more, they touched the lives of virtually every person in the country in one way or another: Utilities – PG&E and Georgia Power; cable TV – Cablevision and DirectTV; Food – Wal-Mart and McDonalds; Healthcare – HCA and Pfizer; Information – Google and TimeWarner; Entertainment – Disney and CBS; Insurance – State Farm and Aetna; Communication – Apple & ATT; Transportation – Ford and American Airlines.

The US revenue from these 500 companies represents about 50% of our GDP and improved the lives of virtually every man, woman and child in the country in the form of a paycheck or cheaper products or more efficient services or more effective treatments. They are the top performers in an economic system powered by innovation and experimentation and has generated unprecedented prosperity. All driven by $800 billion in profit…

Now contrast that with the government spending $745 billion. From food stamps to cell phones to housing assistance to healthcare, government spending on welfare programs have been growing for decades and have taken off like a rocket ship under the Obama administration. Surely with that much money spent the results must be phenomenal. With $20 trillion spent over the last half decade surely there must be no more poverty anywhere and no more hungry children.

Of course that’s not quite how things have worked out. Today there are 47 million Americans on food stamps, record levels of poverty and the most downtrodden communities are plagued by violence, broken homes, failed schools and double digit unemployment. Not so surprisingly the food stamp program is so well run that earlier this year Congress felt the need to prohibit EBT cards from being in strip clubs and stories of EBT cards being used for everything from liquor, to cigarettes, to porn to casinos are legion.

At the end of the day however, welfare is not supposed to be a profit driven endeavor. (Of course there’s nothing in the Constitution that gives the federal government the power to run a welfare program in the first place, but why quibble about technicalities…) The government created welfare programs were supposed to support those in difficult circumstances until they were able to get back on their feet. It, the welfare state, has been an abject failure for everyone involved, from the people whose money is taken to fund it to the recipients themselves, sometimes generations of them. This failure has been catastrophic, both in terms of the lives lived in misery or those not lived at all, as well as in terms of the loss of human capital in the pursuit of prosperity.

Is it not time to consider a model where the people who bring us everything from iPads to Velcro to overnight delivery to Big Macs are given a shot at solving the problem that government is simply incapable of solving? American private enterprise has driven the improvement of the human condition farther and faster than any economic system in the history of mankind. Is it not time to abandon the failed policies of the welfare state and allow the profit motive to attempt to solve a problem that apparently warrants the spending of a trillion dollars a year of taxpayer’s money on?

If not business per se, then private charities and churches. In his excellent new book “Who’s the Fairest of Them All? – The truth about opportunity, taxes and wealth in America” Stephen Moore discusses a study by Arthur Brooks that shows that private charitable dollars are far more effective in helping the poor than public programs. Moore states

"That is in part because private charity often requires some change in the behavior of the person receiving the aid, such as getting off drugs, working for the aid or helping others. Public charity almost never attaches these conditions".

And that explains why government welfare programs have failed. They don’t require anything from anybody. Private enterprise succeeds because businesses require adapting to circumstances and markets to achieve the goals. Citizens should demand that we harness the innovative power of the private sector to attack a problem that government has been making worse for 50 years. While the country as a whole would benefit from the lower taxes, the bigger benefit would be achieved by those freed from the oppressive yoke of government dependency who would be able to share in the prosperity that has so long escaped them. Now that’s redistribution worth considering.

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?