Stimulus Plan Could Be Worse

Helicopter Money. That’s what Larry Kudlow calls it. The economic stimulus deal between the White House and House leaders announced today primarily amounts to a plan to borrow money from investors and give it to taxpayers. Up to $600 per person and more if you are married with children.

But if you want economic stimulus instead of the satisfaction of “doing something” then the way to stimulate the economy is to lower the marginal cost of doing business. You could lower the marginal tax rate on corporate profits. Or you lower the marginal tax rate on capital gains.

There is also to be a “temporary” increase in the maximum size of mortgages bought by Fannie Mae and Ginnie Mae. So that means we are going to increase the subsidy on home ownership.

Don’t mind me, but wouldn’t it be a good idea to start moderating the subsidies for home ownership? If you want someone to blame for the mortgage mess then it starts with the Home Loan Bank started in the Great Depression. Then there were the politically-connected Savings and Loans with their 30 year fixed rate loans. Then there was the government-insured FHA loan. Then there were Fannie Mae and Ginnie Mae. And every time there was a blip in home prices the subsidies were cranked up another notch.

I have a dream of an America in which house prices were not sky high. It would really help young people. A good way to do that would be to slowly reduce the amount you can borrow against your house. And another way would be to slowly unwind the government-sponsored mortgage giants like Fannie Mae and Ginnie Mae.

When you subsidize something you get more of it and you jack up the price for it. The folks who owned the “something” before the subsidy get a windfall. The rest of us just end up paying more for less.

Don’t mind me. I bought home construction stocks a month or so ago, so increased subsidies for housing will just crank up the value of my investment.

The Economy: Now What?

Last week Wall Street was calling for a cut of 50 basis points in the Fed Funds rate. And just to get the Fed’s attention international markets tanked over the MLK holiday weekend.

So what did the Fed do? Well we all know now. It topped Wall Street and made a 75 basis point cut, reducing the Fed Funds rate to 3.5 percent. A “panic” cut, according to the British media.

Well, yes, but if you look at other short term rates, not out of line.

But we ordinary mortals must wonder: Is this 1929 all over again, or what? The simple answer is that nobody knows.

But there are a couple of good signs amidst the gloom and doom. First of all, the Libor rate has come down from being about 50 to 75 basis points above the Fed Funds rate. A month ago the 3-month Libor was at 4.86 percent. Today Bloomberg has the 3-month Libor at 3.33 percent. That means that the banks are lending to each other again. Maybe the credit crunch is over.

And the housing construction stocks are up sharply since Tuesday. Why would that be? Well how about the 15-year mortgage rate coming down below 5 percent. Six months ago it was at 6 percent; now it’s at 4.8 percent.

No doubt we still have a leg or two to go in the bear market, and maybe a full-blooded recession. But maybe there is light at the end of the tunnel.

Why Republicans Don't Appeal to Blacks

In an article about the identity politics now playing at a Democratic presidential debate near you Lisa Schiffren lays out the simple reason why Republicans have never succeeded in attracting black votes.

In my bleeding-heart conservative youth, I once complained to Spencer Abraham — then the head of the Michigan GOP — that Republicans didn’t try hard enough to attract black voters. He repeated the then-current wisdom of the great, hard-bitten GOP strategist Lee Atwater. Atwater was convinced that the very process of attracting urban black voters would cost votes from the GOP base — not because the base was racist, but because white non-urban voters opposed the big-government programs that typically won black voters’ allegiance. There simply weren’t enough black votes to make it worthwhile for the GOP to court them and risk losing their base. It would be a net loss if it worked. Case closed.

What that means is that Republicans will start appealing to blacks when blacks decide that the politics of government programs is not for them. And right now there is hope on that front.

In City Journal Steven Malanga writes that blacks are suddenly waking up to find that Hispanics are elbowing their way past blacks for a seat at the government trough.

What’s the point, they say, of these quotas and set-asides if they don’t benefit us? What indeed?

Identity politics cuts both ways. It can give and it can take away.

MLK, Roe, and Conservatism

A week ago presidential candidate Hillary Clinton got herself into hot water by making the point that it is presidents like Lyndon Johnson that write the laws and not activists like Rev. Martin Luther King, Jr.

She has a point. Politicians do tend to come along at the last minute and suck up all the oxygen in the room when they take credit for movements that have been decades in the making.

In my view it is not politicians that count. It is the people who think thoughts and the actors who lead movements and activist organizations.

But never mind. Maybe we want people like Hillary Clinton to believe that it is politicians that count, not ordinary people and not extraordinary people like the Rev. King.

This day is not just Martin Luther King Day. It is also the anniversary of the Supreme Court’s Roe v. Wade decision. And it is also a day to think about the importance not of changing the law but of “changing hearts and minds.”

When the Supreme Court handed down Roe v. Wade it changed the law of the land. But it did not change the culture. Initially, the pro-life movement that arose in opposition took the same road. It worked on changing the law.

But we can see now that the important work for the pro-life movement is not changing the law, it is changing hearts and minds. When you have changed hearts and minds the work of the politicians in writing new laws is merely an afterthought.

And anyway, in my view the important thing is not to make abortion illegal, but to make it “safe, legal, and shameful.”

As conservatives face a rebuilding year, it is important, as John O’Sullivan wrote ten years ago in National Review, that conservatives work to reduce the amount of law in society. For the intensive law and bureaucracy regime is inherently anti-conservative. All that law, he asserts,

[I]t discredits the dispersed moral sentiments of traditional society — such virtues as duty, fidelity, and chastity — which enable that society to work spontaneously without too close a bureaucratic supervision.

That is what liberals don’t understand. When you kick away the props of society, the virtues of duty, fidelity, and chastity, then you have to do everything with expensive law and bureaucracy. And the truth is that there just isn’t enought bandwidth to do that successfully. The social emotions, shame, guilt, love, and generosity, are much more efficient in ordering society.

So we don’t want women to fear doing something illegal when they have an abortion. That is so liberal and so bureaucratic. We want them, and the fathers of their children, to fear the shame of it: killing the fruit of their union.

Back of the Bus No More

It’s always good to hear the sensible words of the adults after a week or so of ranting and raging by the kids.

So today Charles Krauthammer opines on the LBJ-MLK flap. 

You remember.  Hillary Clinton said that it is presidents that get things done.  It took Lyndon Johnson to pass the civil rights acts of the 1960s. 

That is true, and it is true for a shameful reason.  Back in the 1960s blacks were disfranchised.  They had to get in the back of the bus and let the liberals lead on Capitol Hill.  Liberals have preened themselves on their nobility ever since.

Today, that arrangement — white liberals acting as tribune for blacks in return for their political loyalty — is a demeaning anachronism.

And that is why blacks have reacted with offense and outrage over the patronizing remarks of the Clintons on race.

For conservatives there is a real frisson of Schadenfreude over white liberal Democrats getting the Treatment over race.  We risk the Treatment any time we open our mouths.  And couldn’t happen to more deserving people.  Krauthammer

But where, I ask you, do such studied and/or sincere expressions of racial offense come from? From a decades-long campaign of enforced political correctness by an alliance of white liberals and the black civil rights establishment intended to delegitimize and marginalize as racist any criticism of their post-civil rights-era agenda.

Today there is a black man running a mainstream campaign for a major party presidential nomination.

What Barack Obama is saying by his presence as a major contender with a real chance at winning the nomination is that it is time for blacks to get out of the back of the political bus.  They don’t need liberals to front for them any more.

And liberals are shocked.  How could blacks forget all that we have done for them, they whimper.

But this is an old story.  The history of the United States is full of hyphenated Americans that grew up in the motherly embrace of the Democratic Party.  And then the day came when it was time to grow up.  It became time to throw off the hyphen and become an American.

African-Americans have had as rough a time getting to that moment as any group in US history.  But now it looks like they are getting there.  And one of the rites of passage is to throw off your allegiance to the Democratic Party, to leave the liberal plantation.

We conservatives say: Welcome!  There is nothing in the world like being an American.

Freakologic: Making Life Logical

After a stunning success with The Undercover Economist, British economist Tim Harford is out with a new book, The Logic of Life. It’s all about the logical choices that people make in their lives.  For instance, how would you think that women react when a lot of men are in prison?

The more men are in prison, the more likely women are to get themselves a job, and the more likely they are to go to college.

In New Mexico, according to Harford, 30 percent of young black men are in jail.  So that means that young black women are very unlikely to marry. 

Of course, it works both ways.  The men that don’t go to jail find that there are lots of women available, so they are less inclined to get married.  Why buy the cow when you can get the milk for free?

And so it goes, according to Harford.  What about the rise in divorce?  Can you explain that logically? 

Well, a century ago, looking after a family was so time consuming that a radical division of labor in the home was essential.  But once modern labor-saving devices came along, the importance of the domestic division of labor declined.  The cost of divorce went down.  So more people got divorced.  And when the supply of divorced people increased the cost of finding a suitable new mate went down too.

When the cost of divorce went down, more women could afford to pay the cost of getting out of an abusive relationship.  That had an effect on men.

The result? Domestic violence fell by almost a third, and the number of women murdered by their partners fell by ten percent. Female suicide also fell.

Obviously, that’s not the whole story.  And maybe the decline of divorce in recent years is a sign that people are learning to be more careful about getting married and better behaved once they commit.

But it’s interesting to think that the left-wing agenda of destroying the family was actually helped by the conservative reaction to high crime rates.  With lots of men in jail, lower-class women responded by avoiding marriage completely.

And the ready availability of government assistance made the choice less expensive.

It’s something to think about in the years ahead as conservatives journey in the wilderness of the Clinton-Obama administration.

The Reagan-Bush Era Is Over

Last Sunday Newt Gingrich went on George Stefanopoulos’ ABC Sunday show and said that the Reagan era was over.  Said Newt:

We are at the end of the George W. Bush era.  We are at the end of the Reagan era. We’re at a point in time when we’re about to start redefining — as a number of people started talking about, starting to redefine — the nature of the Republican Party, in response to what the country needs.

Rush Limbaugh was not amused.  To him the Reagan era is not just an era. Said he: “I don’t think the Reagan era is anything other than conservatism.  And I don’t think conservatism is over.”

Yesterday Newt came on Rush’s show to ’splain himself.  And really, it turned out that Newt and Rush were saying the same thing, only on different pages.  Said Newt:

Reagan gave a speech on the creative society.  He said, "Public officials are elected primarily for one purpose, to solve public problems."  Now, that’s what I was trying to get at.  We need a 2008 agenda that is as bold for us as Reagan was in 1975[.]

My view, opposed to both Rush and Newt is that there’s a problem with the Reagan vision.  It is excessively masculine. 

It misses the point to say, as Newt says:

I think the challenge is for our generation to come up with a platform that is as bold, a set of solutions that are as bold, as Reagan was in 1979-1980.

That’s how you speak to men and rally them for battle.  But what about women?  Republicans already have nearly all the men who don’t live on Social Security or who work for the government.  But what about women?

Women are risk averse.  They don’t want bold solutions.  They just want things to work.  They want schools that meet the special needs of their children and they want health care that meets the health needs of their family. They just want the resources to care for the people they love.

In the last century it has been Democrats that have communicated best with women by promising to deliver resources.  Yes, said Democrats, we care about the kids.  We care about health care.  We care about senior citizens.

But what Democrats delivered were cruel bureaucracies.  They delivered school bureaucracies that delivered paychecks and pensions to teachers, but didn’t deliver much education to children.  They delivered an incredibly expensive government-dominated system of health care.  And they encouraged people to warehouse their parents in “assisted living.”

And that is to say nothing about the destruction of the family by big government programs.

In my view there is an opening to start communicating with women about a better way to care for children, to provide health care and to care for seniors.  One that puts women at the center of the care network, not bureaucracies and government programs.

But it will not be about anything that Rush or Newt understands.