If The Democrats Take Over Congress

Want to think of something really scary? Imagine what the Democrats will do if they regain control of Congress.

Don’t worry. Financial writer James J. Cramer has already done the imagining for you.

Think about the oil companies.

Their billion-dollar profits are just too ripe for the picking. I predict that the Democrats will propose that "old oil" — oil that was discovered years ago, before the price run-up — should be subject to a high tax because it's just found money for these guys.

Of course, that would raise the price of gasoline but who’s counting?

Then there’s Big Drug and Medicare Part D.

The Democrats will insist on screwing Big Pharma by pitting drug companies with similar drugs against each other and insisting their profit margins come down.

That will cut down the money available to research new drugs, but who cares?

Want to go on? How about legislation to punish the eevil Wal-Mart?

(1) Demand that nationwide retailers sell a much higher amount of made-in-America content, (2) ban big-box retailers from urban areas to protect small businesses, and (3) insist on a prevailing wage for Wal-Mart workers.

And then there’s coal. You can be sure that the believers in the global warming religious belief system will want to put some sort of a sin tax on coal.

Sold all your stocks yet? But what should you buy?

Cramer suggests Archer Daniels Midland. We’ll always need to keep ethanol producers in Iowa happy—so long as the Hawkeye state stages its first-in-the-nation presidential caucuses.

Are Our Children Safe?

One of our little societal problems is that, while it’s OK to attack Wal-Mart for failing to provide heroic levels of health insurance for its employees, and it’s OK to criticize the military for failing to accommodate women and gays, and it’s OK to pile onto the Catholic Church for covering up its pedophile problem, there are other institutions that seem to get a pass.

Public schools, for example. For over a generation we have known that public schools are failing to teach our children. But “our teachers” still seem to enjoy the support of the American people.

But suppose that public schools were a sink of pedophilia?

We’ve already had national scandals out of adult women teachers having affairs with minor boy students. And now there is the curious case of John Karr, confessed suspected killer of JonBenet Ramsey.

Karr is a teacher.

Writes Tom Hoopes, executive editor of The National Catholic Register, where’s the outrage?

To coin a phrase: Mr. President, Are Our Children Safe?

Imagine if the suspected killer of Ramsey were a Catholic priest. Imagine the outrage.

But, according to a report authored by Hofstra University scholar Charol Shakeshaft, the problem of sexual abuse in public schools is 100 times the problem in the Catholic Church.

As the National Catholic Register’s reporter Wayne Laugesen points out, the federal report said 422,000 California public-school students would be victims before graduation — a number that dwarfs the state’s entire Catholic-school enrollment of 143,000.



Yet, during the first half of 2002, the 61 largest newspapers in California ran nearly 2,000 stories about sexual abuse in Catholic institutions, mostly concerning past allegations. During the same period, those newspapers ran four stories about the federal government’s discovery of the much larger — and ongoing — abuse scandal in public schools.

So why is that?

The fact is that institutions like public schools, labor unions, liberal activist groups, sexual activist groups, environmental groups, etc. all get a pass from the drive-by media.

It’s not hard to understand why. Liberals in the media trust their friends in the public schools, the labor unions, etc. They know that they are on the same side.

One fine day this whole informal conspiracy of silence will collapse.

But meanwhile, America has to ask a tough question. Are our children safe in these public schools?

Soft Landing or Controlled Crash for Economy?

We are at the stage in the business cycle where pundits are talking about a soft landing for the economy. The Federal Reserve has taken away the punchbowl of cheap credit and now the question is: how bad will the hangover be?

As usual, the markets do not tell us. On the one hand home sales are declining. On the other hand, interest rates are declining. On the one hand the stock market is down. On the other hand it is off its lows.

In other words, we still don’t know what the consequence of the Federal Reserve’s ultra low interest rates followed by an unprecedented increase in the federal funds rate from 1 percent to 5.25 percent in an uninterrupted series of quarter point monthly increases.

Columnist Robert Samuelson is also properly reticent about forecasting the future. Maybe this is the end of the great credit explosion of the last 60 years since World War II, or maybe it isn’t.

In 1946, households had 22 cents of debt for each dollar of disposable income. Now they have $1.26. Behind these numbers lies a profound social upheaval: the "democratization" of debt. Everyone gets to borrow. But this process may now have reached its limits.

Or maybe it hasn’t. The thing about the future is that all you can do is place your bets. If you are right, you get to clean up. If you are wrong. Well, better not think about that.

Liberals are Different From You and Me...

They have fewer babies. That’s the finding of Arthur C. Brooks in the Wall Street Journal.
The math is pretty simple.

According to the 2004 General Social Survey, if you picked 100 unrelated politically liberal adults at random, you would find that they had, between them, 147 children. If you picked 100 conservatives, you would find 208 kids. That's a "fertility gap" of 41%.

Who cares? Despite the liberal slant of Big Education 80 percent of children vote like their parents. So that means that it matters that conservatives have more babies. More conservative babies means more conservative voters.

And there are signs that babies are becoming a status symbol. Hedge fund managers are going for four to five children. Hey, they can afford it. And in Greenwich, Connecticut, they tell me, “three is the new two.”

Now you know why Democrats are all in favor of immigration, and especially illegal immigration. They figure that importing a bunch of helpless victims is the only way they can make up the liberal babies lost to abortion.

But the line on Hispanics is that they track pretty well with the native US population. You can predict their voting behavior on income. So Hispanics may well turn into a conservative voting block in the next generation.

Back to the three Ks, eh liberals! Kirche, Kuche, Kinder.

We Must Share The Risk. But How?

It’s all the fault of Big Business, writes Malcolm Gladwell in The New Yorker. After World War II Richard Gosser, head of a United Auto Workers Local, proposed a central fund for collecting and paying workers’ pensions, paid for by ten cents an hour from their wages.

But the employers would have none of it. They came up with the company-run defined-benefit pension plan. No way they were going to yield up control of pensions to the unions.

Management guru Peter Drucker, writes Gladwell, saw through this at once. In a 1950 article in Harper’s he exposed the company pension plan idea as a mirage.

Drucker simply couldn’t see how the pension plans on the table at companies like G.M. could ever work. “For such a plan to give real security, the financial strength of the company and its economic success must be reasonably secure for the next forty years,”

And he was right. Of course, the union pension plan hasn’t been much better. But we don’t mention such things at The New Yorker.

It’s all about the “dependency ratio,” writes Gladwell, the ratio of workers to dependents. In a young company like GM in 1950, or a young country like Ireland in the 1990s, there are lots of workers to support dependents like children and old people. So the company, or the economy, booms. But when the baby boom starts to retire, then the dependency ratio turns south. And the company walks away from its promises.

What is needed (and you knew this was coming) is that

if you pooled the obligations of every employer in the country, no company would go bankrupt just because it happened to employ older people, or it happened to have been around for a while.

Good point. But the question is: How? You can see the spirit of “universal government program” hovering above these words. But come on, that’s not going to work. We already know it is not going to work. The federal government has promised trillions in defined-benefit Social Security and Medicare that it cannot pay back.

What is needed is the system that the workers set up for themselves in the nineteenth century before progressives came along and took it away. We need a safety net of mediating structures between individual and the megastructures of Big Business, Big Unions, and Big Government. There are names for such structures: family, church, fraternal association.

In these face-to-face social organizations people really are bonded in a community of common interest that does not obtain with the three Bigs. Big Business executives do not share a common lifetime interest with their employees. Nor do Big Union leaders share a lifetime common interest with their members. And Big Government politicians only care about your vote.

So if you pool the obligations of people with genuine common interest: family members, church members, fraternal association members, then you wouldn’t have to worry about them going bankrupt and skipping town. Parents naturally want to invest in the future of their children. Church members naturally want to help the church member that has encountered misfortune. And fraternal associations were set up precisely to share the risks of the modern economy among solid, trustworthy brothers and sisters at the lodge.

But liberals came along and ripped up this system. They taught the American people instead to trust their compassion and their sensitivity.

The trouble is that liberals really did not have a fellow feeling with the workers. They wanted the votes of the workers so they could obtain political power. And they wanted the workers to be dependent on them. Why else would liberals be resisting the reform of Social Security?

The question on pension and health care defaults is not whether to socialize the risks of life. The question is: How? We’ve tried it with Big Government, Big Business, and Big Labor.

Or we could return to a method that really works.

Wal-Mart's Global Poverty Reduction Program

When the Boston Associates built the textile mills in Lowell, Massachusetts, they hired single young Yankee women right off the farm. When the farmer’s daughters went on to bigger and better things, the mills hired the Irish. When the Irish were too prosperous to work in textile mills the mills opened up in the rural Carolinas.

Now the textile mills are florishing in China. Many people don’t like the sweatshop wages and working conditions, Michael Strong writes. For sure, he says:

"China is the most populous country, with 1.3 billion people, most still poor enough to willingly move hundreds of miles from home for jobs that would be shunned by anyone with better prospects."

But the jobs at the sweatshops in the city pay more than twice as much as jobs in the country. Who wouldn’t travel hundreds of miles from home for that?

But for some reason, lots of people think that such disparities are a disaster.

D. Gale Johnson, an economist who studied regional inequality within China, described the enormous disparity between urban and rural workers as "the great injustice." Urban workers earn about 2.5 times as much as rural workers. Even after counting the higher cost of living in urban areas, urban workers make about twice as much. Not surprisingly, massive numbers of people are moving to the city to work in factories.

I guess that one man’s injustice is another man’s market signal.

And of course it is the demand for Chinese manufactures from the shoppers at Wal-Mart that generates the higher wages in the city.

So should we thank Wal-Mart for their global development policies and for raising millions out of poverty?

The fact is that people move off the farm into the city because they expect to make more money in the city.

And also, and this is a big deal for peasants used to working outside in rice paddies in all weather: they also expect to work inside. They really like that.

Beyond Welfare Reform

Everyone is doing their ten year anniversary pieces for the welfare reform act that President Clinton signed ten years ago today, August 22, in the summer of 1996.

And as he should, Bill Clinton writes today in The New York Times about his role in “ending welfare as we know it.”

The last 10 years have shown that we did in fact end welfare as we knew it, creating a new beginning for millions of Americans.



In the past decade, welfare rolls have dropped substantially, from 12.2 million in 1996 to 4.5 million today. At the same time, caseloads declined by 54 percent. Sixty percent of mothers who left welfare found work, far surpassing predictions of experts... [M]ore than 20,000 businesses hired 1.1 million former welfare recipients.

Bill Clinton does a good job of recounting the policy wonk details of all the government programs that were changed to help change the face of welfare. But what he does not really address is the societal question, of which welfare dependency is the tip of the iceberg.

It was over 40 years ago, as Robert Rector reminds us, that Professor Daniel Patrick Moynihan warned up about the collapse of the Negro family.

In 1965, Moynihan authored a report for the Johnson administration titled "The Negro Family: The Case for National Action." The... Moynihan report... looked at the state of the black family in America and argued that many of the problems commonly believed to be attributable to race and other factors were actually due to differences in family structure.



"Indices of dollars of income, standards of living and years of education deceive," reads the introduction to the Moynihan report. "The fundamental problem . . . is that of family structure."

The problem of welfare is not a problem of programs and benefits, but a problem of single parents, primarily single mothers.

But this is part of a much bigger problem, the source of which can be found in the culture of the educated middle class, the idea that the purpose of life is not to found a family and grow children into worthy, productive adults.

The educated middle class lives by the idea of creativity, of replacing the creativity of the loins with the creativity of the mind. The first idea is a family idea; it believes in creating children. The second idea is an individual idea; it believes in art and genius. It is not surprising that people who believe in individual creativity are people who don’t do much in the way of creating children.

That is the Big Problem that dare not speak its name. The problem is us: the educated middle class and our desire for individual fulfillment.

In the middle class we can afford a pathology or two, and a busted marriage or two. But the poor cannot. That is why they are poor. And we, the sophisticated middle class, have visited a murrain upon the poor of epic proportions.

The sad thing is that most of the middle class have no clue what we have done.

That is another thing about the middle class. We are clever enough and rich enough to be able to keep brutal reality far enough away to keep it from crashing in on us.