Spread-the-Wealth

Conservatives have been pushing the Obama-is-a-socialist meme pretty heavily in the last few days.It’s probably the only thing that can pull the election out of the bag for John McCain. A recent Gallup Poll shows that, if you ask the right question, Americans oppose fixing the economy with spread-the-wealth programs by 84% to 13%. As Gallup report it:

When given a choice about how government should address the numerous economic difficulties facing today’s consumer, Americans overwhelmingly — by 84% to 13% — prefer that the government focus on improving overall economic conditions and the jobs situation in the United States as opposed to taking steps to distribute wealth more evenly among Americans.

And, of course, the Obama program leans heavily on finding ways to spray money at its supporters through tax credits and the like. (Of course, elite liberals get a look in with a renewed tax credit for buying a hybrid car.)

It’s not so much the spread-the-wealth that annoys me. After all, Republicans spread the wealth to Republicans with tax rate cuts. It is merely an incidental factor that lower marginal tax rates benefits not just Republicans but all Americans.

It’s the subsidies that I don’t like, and the distortions they introduce into the economy. First dollar health coverage. Subsidies for alternative energy. Subsidies for low-income homebuyers. “Free” education.

Everyone wants to help poor people, but how? Subsidies? Welfare? Free this and free that? It all seemed so simple a century ago when social democracy really got started. Everyone agreed on the problem: the poor lacked material resources. Give them the resources, and justice would reign.

It didn’t turn out that way. The poor did not just lack material resources. They lacked “spiritual resources,” as Robert William Fogel put it in The Fourth Great Awakening and the Future of Egalitarianism.

The way that the poor build up their spiritual resources is with religion and with love and with hard work and intact families. The welfare state has been a stunning success in breaking up families and turning low-income young men into feral beasts.

That is why we here at The Road to the Middle Class have just two words for the welfare state: Cruel and Unjust.

Because there is another way.

From Smarts to Song

You can often tell someone by trying to understand their enemies. You ask what the folks attacking your favorite politician have in the game. And then you start to understand what’s going on.

There must be something really important about Gov. Sarah Palin (D-AK). Else she wouldn’t have so many enemies. But even an occasional enemy can see the good in her, like feminist Elaine Lafferty in The Daily Beast. Palin’s smart, writes Lafferty, but not in a crude street-smarts way.

I mean, instead, a mind that is thoughtful, curious, with a discernable pattern of associative thinking and insight. Palin asks questions, and probes linkages and logic that bring to mind a quirky law professor I once had. Palin is more than a "quick study"; I’d heard rumors around the campaign of her photographic memory and, frankly, I watched it in action. She sees. She processes. She questions, and only then, she acts. What is often called her "confidence" is actually a rarity in national politics: I saw a woman who knows exactly who she is.

That, of course, is exactly the sort of leader that anyone would want at the top of their political party or movement.

But this is just the intellectual and political side of things. What about the cultural question? What about casting around for a good campaign song for for Palin 2012. It would have to be based on a good old patriotic song so that everyone knows the tune. I have an idea:

O beautiful designer specs,

And amber waves of hair,

Reformer of the female sex

Who’s smart and tough and fair!

America! America!

Let’s end the liberal bile.

And crown thy good with brotherhood

And Sarah Palin’s smile!

It looks like America The Beautiful is out of copyright, so folks could sing it at rallies without having to pay for performance rights.

And it would drive our liberal friends crazy.

One Tough Politician

You can’t tell a dog when it’s out hunting. You can only tell how good it is when it’s being hunted.

That’s why we don’t have a clue what Sen. Barack Obama (D-IL) would be like as president.

A couple of months ago we had the same problem with Gov. Sarah Palin (R-AK). Yes she could give a boffo speech, but what would she be like when the going got tough? Would the tough get going? Would she have a future as a national Republican politician, or would she turn out to be a flash in the pan?

Now we are beginning to get her measure. After an unprecedented firestorm of invective and criticism, including ruthless gotcha interviews from Charlie Gibson and Katie Couric, she has not lost her nerve.

When criticized about her $150,000 wardrobe she didn’t miss a beat but came right back and played the sexism card on the liberals that criticized her.

And now we have the unsourced article from CNN. “Palin’s ’Going Rogue,’ McCain Aide Says.” If your liberal friend has caught onto the article, he’s probably sneered knowingly about it.

On the contrary, the news couldn’t be better. Palin has determined that the McCain campaign is mishandling her, so she is ignoring them and taking her own counsel. That may not be too good for anonymous McCain aides, but it portends well for the future.

It means that Palin is not out for a Sunday drive. She is an ambitious politician thinking of the long term, running for president in 2012, for starters.

So now we are beginning to take her measure. She is gutsy. She can take a punch. She won’t lie down meekly and allow people to drive her into the political wilderness.

What we have here, it seems, is a politician of remarkable courage and talent. She seems to have Bill Clinton’s talent to turn lemon into lemonade, and never, never, never, let anyone think that you are whipped.

Republicans aren’t used to this kind of leader. Even Ronald Reagan often reckoned that discretion was the better part of valor.

Fasten your seatbelts. It’s going to be a bumpy ride.

An Obama Market Panic?

Are the markets panicking at the prospect of an Obama presidency and his presciption of more spending and higher taxes? Or are they just panicked?

The New York Post advanced the Obama Panic meme a while back, but I think that the panic is more about the fact that we are heading into a pretty nasty patch of economic weather.

And the markets sense that the politicians really haven’t a clue what to do about it. Let’s be frank. If McCain wins in November he’ll want to lower tax rates. And if Obama wins he’ll want to send out tax rebates. How about something we can agree on: tax rate cuts for corporate taxes? How about a cut from 35 percent to 25 percent?

Just as big as the Obama uncertainty problem is the fact that nothing will get done until the new president and the new Congress take office in January.

Here’s an idea from good old J.P. Morgan in the 1907 Panic. He did triage on the companies asking for a bailout. If he figured that the company would survive anyway he refused to extend credits. If he figured that the company would fail anyway, he refused to extend credits. But if he figured that the company could survive if he gave them a loan then he did.

Do you imagine that the new president and the new Congress could rise to something so practical and sensible?

I have my doubts.

Stimulus, for Sure, But What Stimulus?

We’re at the point of the business cycle where governments enact bold stimulus programs.

Yes, but what stimulus? What package of economic measures will get us out of the present economic malaise most effectively?

We’ve already done the monetary thing, and how. The Federal Reserve System is pumping liquidity into the world like there was no tomorrow.

But what about fiscal stimulus? It is over fiscal stimulus that the two political parties disagree, as Michael J. Boskin, a McCain adviser, makes clear. The Democrats believe in helicopter money, and the Republicans believe in changing the rules, principally by manipulation of marginal tax rates.

The big risks are higher taxes, protectionism, regulatory micromanagement, vast new spending, subsidies and mandates. Recall that the stock market crash of 1929, and the ensuing recession, were turned into the Great Depression by tax increases and protectionism (and bad monetary policy).

It doesn’t take a genius to see that Democrats would find it very hard to resist a program of vast new spending, subsidies, and mandates. After all wasn’t that what FDR did to beat the Great Depression?

Yes, he did, and conservatives believe that it was the spending and the subsidies, and the new mandates in labor law that prolonged the Great Depression.

Capitalism, wrote Joseph Schumpeter, is a process of creative destruction. It is continually creating new businesses out of the ruins of old businesses. As such it is anathema to the politician, who creates new programs to last, he imagines, for all eternity, and to the homeowner, who builds a house to last for a lifetime.

We are going to see a lot of creative destruction in the next year or so. But it’s the only way. The malinvestments must be liquidated in a bonfire of the vanities, and out of the ashes will rise a new economy.

What the government can do is help people in the painful transition from today to tomorrow. It is human and compassionate to give people a hand as they pick their way over the rubble. But the heavy lifting will come from intrepid businessmen starting new businesses and expanding old ones in the teeth of the present panic. What does the government propose to help them?

Two Americas Updated

Sometimes you learn more from losing than from winning. Lessons learned, and all that.

And victory is oftern sown in the furrows of defeat. Ronald Reagan first emerged onto the national stage in the disastrous year of 1964.

So in a year that will probably go down as one of the worst Republican years ever, with a perfect storm of a financial crisis, war weariness, and 8 year fatigue, You can see the Republican future starting to take shape.

And yes, Virginia, there are Two Americas. There is Credentialed America and then there is Aspirational America.

Credentialed America is the world of our liberal friends. You get your credentials and that sets you up for life in tenuered work that can never be taken away. It may be that you get, on the top end, a Harvard law degree. Clearly you are marked out for the top jobs in everything, not excluding the presidency of the United States. Or you might be a dental technician. You go to school, get your credential, and work away in a safe job forever.

There’s an inverted credential culture too; it centers on the accredited victim. Yes, if you can be certified as a victim, from discrimination or disability, then you too can have an income for life.

Then there is Aspirational America.

The Republican Party has always been the party for aspiration, but recently it has forgotten this. Not any more. The explosion onto the national stage of Gov. Sarah Palin, (R-AK) has put paid to that. And if you didn’t get the message, Joe the Plumber makes it perfectly clear. There are millions of Americans out there who aspire to something. They want to live better, achieve more, and contribute more. They don’t just want to “get theirs.” They want to excel.

This type of American was profiled years ago in The Millionaire Next Door by Thomas J. Stanley and William D. Danko, two academicians who decided to write a best-seller. The millionaire of the book was a risk-taking businessman who maybe owned a couple of dry-cleaning establishments. He didn’t live high on the hog. Instead he saved his money, living in a modest part of town and driving a nothing automobile. He probably started out like Joe the Plumber.

What about the millionaire’s children? Good point. He sends his kids to college so that they’ll get credentials. The thing about a college degree is that it is is low-risk option. You pay your money, you go through the motions, get your credential, and you can get a well-paying job, a job without the downside risk of starting a business.

I’ve never been much of a risk-taker, but I’ve always honored those who are. And I’d hate it if the Republican Party ever turned its face away from aspirational risk-takers like Sarah Palin and Joe the Plumber.

Good News on the Economy!

Yes, I know that it’s the end of civilization as we know it. But there are some portents out there telling us something different.

First of all there’s Libor. That’s the London Interbank Rate, the interest rate that banks charge each other on interbank loans. Remember, the big problem in the current crisis is that banks are afraid to loan money to each other. Well, here’s the trend in in Libor and longer term interbank rates in recent days from Bloomberg.

10/17/08 10/20/08 10/21/08 1-month 4.18% 3.75% 3.53% 3-month 4.42% 4.06% 3.83% 5-yr Bank 6.36% 6.35% 5.84%

So that’s all right. The Libor rates are dropping like a stone.

Then there’s the news from the housing market in Southern California. Home sales were up in September by a record 65 percent. Daniel Taub from Bloomberg reports.

Southern California home sales rose 65 percent in September, the biggest year-over-year increase in at least two decades, as buyers took advantage of foreclosures to purchase properties at discounted prices, MDA DataQuick said.

Why is this important? Let’s hear from Ludwig von Mises, conservative economist and RMC Chappie. He wrote that a recession is the period of liquidation of the malinvestments of the previous boom.

But when the liquidation ends, then it’s time to start a new economic expansion. So the quicker the liquidation proceeds the sooner we’ll get to the other side.

Things are really looking up. Why, the economy may turn around and start expanding by January 20, 2009 when President Obama takes office. And then he can take the credit for the improved economy. It will happen on his watch, right?