That Stimulus Sickness

Everybody now knows what happens when the government decides to give everyone “affordable housing.” It takes a while, but eventually it takes down the whole financial system. That’s because, Virginia, when worthy Democratic voters that don’t pay their bills get mortgages, banks and Fannies and Freddies end up with toxic assets and nobody knows if they are worth anything..

So now our Democratic friends are proposing to stimulate the economy with a spending bill that, wait for this, increases the subsidies for health care. That’s according to the Wall Street Journal edit page.

The more we dig into the pile of spending and tax favors known as the "stimulus bill," the more amazing discoveries we make. Namely, Democrats have apparently decided that the way to gun the economy is to spend even more on health care.

The intriguing thing about all this is that experts now agree, both from the left and the right, that life-style is the key ingredient in health and life expectancy. This means that when the government increases the subsidy for health care they are gunning the engines on the national cigarette boat. So now we are heading towards the sound of the next big economic waterfall, the point at which government will have to cut back on health care, even faster than before.

The provisions are innocent enough. The Feds are going to increase the federal share of Medicaid reimbursement. They are going to offer Medicaid to the unemployed. They are going to subsidize Cobra benefits for people laid off. This is all very compassionate and thoughtful. Except for one thing:

When you subsidize people not to work, you get more nonworkers.

That’s the problem with the whole welfare state. People work because they have to. They work for food, for housing, for health care, for transportation. When the government subsidizes it then more and more people, especially the low-skilled, low-paid, decide against work. You can’t blame them. Who would work unless they have to?

We’ve been saying here for a while that the only way we are going to reform the welfare state is after it “hits the buffers.” We have mixed feelings about this. Good people, ordinary people are going to be hurt. And even people that never gave into the temptation of the welfare state are going to be hurt.

On the other hand, if you believe that “free” health care or “free” education isn’t going to cost you in the end, we’ve got a bridge we want you to look at.

Stimulating Democratic Voters

Here’s a thought for you eternal optimists. Maybe the Democratic stimulus bill is so egregious that it will give stimulus a bad name.

Any Republican that wanted an excuse to oppose it now surely has enough ammunition. You could get all the ammo you needed just from today’s Wall Street Journal.

First, there is the top editorial. The Journal edit page folks point out that there isn’t much economic stimulus in the bill at all.

Some $30 billion, or less than 5% of the spending in the bill, is for fixing bridges or other highway projects. There’s another $40 billion for broadband and electric grid development, airports and clean water projects that are arguably worthwhile priorities.



Add the roughly $20 billion for business tax cuts, and by our estimate only $90 billion out of $825 billion, or about 12 cents of every $1, is for something that can plausibly be considered a growth stimulus.

Twelve cents on the dollar of stimulus ain’t exactly going to stir the sleeping beast.

Next, there’s supply-side economist Alan Reynolds. He points out that the stimulus is mostly going to sectors of the economy that aren’t suffering too much from the recession. Like government employees.

The December unemployment rate was only 2.3% for government workers and 3.8% in education and health. Unemployment rates in manufacturing and construction, by contrast, were 8.3% and 15.2% respectively. Yet 39% of the $550 billion in the bill would go to state and local governments. Another 17.3% would go to health and education — sectors where relatively secure government jobs are also prevalent.

Well, OK. No serious person imagines that the stimulus is much more than a payoff to Democratic voters. Of course, you needn’t expect the MSM to point that out to alert voters. Move along there; nothing to see here. In fact you might even expect a loyal MSMer to worry that there wasn’t enough money for government in the stimulus.

Lastly, there is the Journal’s house liberal. Wouldn’t you know that Thomas Frank chooses this exact moment to criticize the notion of privatizing roads and bridges. He’s worried about the danger that the stimulus bill might include incentives to privatize infrastructure development. He sneers at privatization lobbyists who urge that governments lock in private investment before private investment money gets committed to other projects.

But there’s good reason to be reluctant to privatize. It doesn’t take an MBA to figure out that we didn’t build our Interstate highways in order to create opportunities for venture capitalists. The purpose was public service.

Oh really. I thought the whole idea of infrastructure development was to give jobs to union workers, fees to investment bankers and kickbacks to state and local politicians. Silly me.

It is the canard of “public service” that fuels the self-dealing monstrosities like the current stimulus bill in Congress. When can we ever hope for a time in which politicians (and particularly Democrats) stop dumping these wasteful proposals on the American people with the assistance of willing accomplices in the media like Thomas Frank? It ain’t public service, Mr. Frank. It is just politics as usual.

The idea behind bridges and highways is not “public service.” It is economic development. We want to build economic infrastructure that will help move goods and services around and save human and natural resources in doing so. It is, if you like, public service to build a road in Yellowstone National Park so people can drive around in an area of natural beauty. But for regular infrastructure, the purpose is economic. Modern political and economic theory and practice tells us that profit-seeking businessmen are much better at doing this than vote-seeking politicians.

Some day even dyed-in-the-wool liberal MSMers like Thomas Frank will admit this. But probably not before liberals bring the entire economic house down around our ears.

The truth is that almost everything the government does is a cruel waste of scarce natural and human resources. And it looks like the current victory-lap stimulus bill of President Barack Obama and Speak Nancy Pelosi and liberal commentator Thomas Frank is no exception.

But there is always Hope for Change. Maybe the more that ordinary Americans get to see of the stimulus bill the less they will continue to Hope that the Obama Administration and the Pelosi-Reid Congress represent anything within a country mile of Change.

When in "Doubt"

When I saw a trailer for the Meryl Streep movie “Doubt” I was turned off. You could just tell what a movie about accusations of sexual misconduct at a Catholic school would be all about.

But then, reading reviews, I started to wonder. Maybe it was doable, after all.

After seeing it last night, I can say that the movie is a miracle. No, the miracle is not the acting of Streep as the Catholic high school principal nun or Philip Seymour Hoffman as the priest that the nuns suspect is abusing a young high-school boy. Make no mistake. Their peformances were excellent. No, the miracle is the screen-play by writer-director John Patrick Shanley. The plot beautifully lived up to its title.

(Plot spoilers ahead) Did Father Flynn actually abuse the boy? We never know for sure. Is the authoritarian go-by-the-rules style of Sister Aloysius a relic of the Stone Age? The movie does not say. Is Father Flynn a practiced liar? Who knows? Was Aloysius right to pursue Flynn out of the parish? And what good did it do if he just gets shifted to another parish and another school? Good question. The movie, miraculously, doesn’t tell us what to think.

We also get charming cultural touches. We see the celibate nuns eating in solemn silence under the baleful eye of Aloysius; but the celibate priests laugh and smoke at their meal.

I’ll tell you. Just when you think that Hollywood cannot be redeemed, Hollywood comes up with a movie called “Doubt”that really deserves to be called a triumph.

Liberal Law Takes Freedom Away

It’s amazing how many people look at the current sue-mad society and wonder what’s the problem. It isn’t that hard.

The problem is fairly simple. It is the tangle introduced into the law by powerful government. Today we have the notion of law as the balancing of interests competing with the liberal law of “rights” all gummed up with the forest of adminstrative law that arises out of the enormous reach of government.

President Obama has called for a new era of responsibility, writes Philip K. Howard. It’s a wonderful idea. Just don’t try it out yourself or you’ll get creamed.

But there’s a threshold problem for our new president. Americans don’t feel free to reach inside themselves and make a difference. The growth of litigation and regulation has injected a paralyzing uncertainty into everyday choices.

The examples are all around us.

Most doctors say they wouldn’t advise their children to go into medicine. Government service is seen as a bureaucratic morass, not a noble calling. Make a difference? You can’t even show basic human kindness for fear of legal action. Teachers across America are instructed never to put an arm around a crying child.

Again. It’s not that hard. These problems are all problems because politicians, acting with the consent of the voters, have injected government power into areas that didn’t used to have government involved.

We have taught people to expect miracles from medicine. So people sue when medicine isn’t perfect. We have created vast bureaucracies to second-guess private actors. And it’s not surprising that teachers need to watch their step. They are acting as custodians of the nationi’s children in government custodial facilities. Of course their every action should be governed by administrative law.

Philip K Howard thinks he has a solution. He just wants to create a zone of freedom.

Freedom has a formal structure. It has two components:



1) Law sets boundaries that proscribe what we must do or can’t do — you must not steal, you must pay taxes.



2) Those same legal boundaries protect an open field of free choice in all other matters.

That’s all very well, but you can’t allow government officials “an open field of free choice.” The whole point of government is that government spending and regulation must be tightly regulated or it will descend into corruption, and spending money for no return.

If you want an open field of free choice then you’ve got to take the government out of it. So if you want teachers to touch children again, you’ve got to scale back government schooling. If you want doctors free of lawsuits you’ve got to take 3rd party payment out of the equation so that doctors have a one-on-one relationship with their patients.

But that goes against the very grain of modern society. The whole idea of modern society is that an educated elite gets to call the big shots on everything, generally through big government adminstrative programs or through big government administrative law.

You can’t have responsibility in that kind of a culture. Instead you get jealously guarded rights and endless second-guessing and punitive lawsuits.

Don’t like the era of rights and second guessing? Then get government out of the way.

Rove Sets Out Bush Legacy

People haven’t been obsessing about Bush’s legacy the way they obsessed over the Clinton legacy eight years ago. What was that Clinton legacy, anyway, and does anyone care?

But Karl Rove knows his duty, and so he’s set forth his list of has boss’s achievements.

• First, Bush was right about Iraq
  
• Bush was right to go after nations that harbored terrorists.
  
• Bush was right to fight AIDS in Africa.
  
• He was right to cut tax rates, on wages, dividends, and capital.
  
• “Mr. Bush was right to match tax cuts with spending restraint.”
  
• He was right to do Medicare Part D drug benefit.
  
• He was right to do No Child Left Behind.
  
• He was right to be pro-life.
  
• He was right not to respond to Democrats who called him “a liar and a loser.”
  

It’s helpful to have Karl Rove’s take. It provides a benchmark on what the Bush administration thought it was doing, and wants us to think of it, now that it’s all over. For this conservative, what is palpably missing is a serious effort to start a movement away from the welfare state culture of compulsion.

The truth is, I’m not sure I know where to start.

Actually I do. The effort to reform the welfare state and move towards a welfare society begins with women. When women decide that they don’t want the important things in their lives—health care, education, and welfare—run by the government on a model of universal compulsion and brute force masquerading as compassion, then things will start to change.

It’s up to us to help in any way we can.

The Liberal Tipping Point

I sent this to some liberal friends on January 20:

I think we should remember the generation before mine that did the heavy lifting on civil rights and that made today possible.

• The African Americans who fought in WWII in an army that was desegregated by President Truman after they came home.
  
  
• Liberals like Hubert Humphrey who had the courage to split the Democratic Party over civil rights in 1948.
  
  
• Lawyers like NAACP Chief Counsel Thurgood Marshall who argued segregation before the Supreme Court rather than in the streets.
  
  
• Activists like Dr. King who led African Americans in an exemplary campaign of non-violence.
  
  
• The African American rank-and-file who overcame their fears to offer their bodies and their lives in the cause of freedom.
  
  
• The young freedom riders, often Jews, who went into the South to register voters at risk of their lives.
  
  
• President Johnson, a Southerner, who pushed the civil rights and voting rights acts through Congress even though he predicted that Democrats would lose the South for a generation.
  
  
• And so many more.

We are inheritors, standing on the shoulders of those who came before. And I am glad to know several liberal men now in their 70s and 80s and appreciate the generosity of spirit that still shines from that generation as it heads for the exits.

What I did not say was this:

Right after the triumph of the civil rights acts came the Tipping Point (to coin a phrase). In 1965 a young Assistant Secretary of Labor put out a report entitled “The Negro Family: The Case For National Action” which “hypothesized that the destruction of the Black nuclear-family structure would hinder further progress towards economic, and political equality.” That man was a Democrat, Daniel Patrick Moynihan, and he was told to shut up.

The year 1964 was liberals’ finest hour. The year 1965 began the descent into hubris. It began the descent into the liberalism of today: cruel, corrupt, unjust, and deluded.

After the Bailout

Many conservatives are skeptical about the bank bailout last fall. All that money thrown at Wall Street fat cats and what do we have to show for it, we grumble.

It is annoying, but the simple fact is that the government cannot let the credit system collapse. Period. And anyway, the banks are not really true private sector institutions. They are GSEs like Fannie and Freddie, only not quite as government-sponsored. Only a little bit pregnant.

No doubt, as Donald Lambro writes, the money expended in the bank bailout in purchase of toxic assets, in preferred shares and so forth, will come back to the government and reduce the deficit. (That will create a new problem, as solons decide they want to spend it rather than save it.)

No, the bigger problem is the way the government has learned to use the credit system to subsidize its favorites and to imagine that it can ease the business cycle. In Britain, Labour Prime Minister Gordon Brown used to boast that he had abolished “Tory boom and bust.” Now they are ramming his boast down his throat weekly at Prime Minister’s Questions.

Let’s stipulate that the government can do something to ease the business cycle. The question is: how much is enough? And when should it be done and when should the government just get out of the way? Obviously the credit operations of Fannie and Freddie are egregious errors, worse than a crime, a blunder. But we obviously need the government to print money and issue lots of debt when it has a war to fight.

The fact is that the way that the government “helps” in a down cycle is by the resort to inflation. That’s what happened in the Great Depression. That’s what happened in the inflationary/recessionary Seventies. And that’s what happened when Alan Greenspan brought interest rates down in 2001-2003. The key to these interventions is to know when to stop. And the record shows that the government doesn’t know when to stop. That’s why it took $20 to buy an ounce of gold in 1900 and now it takes $800. Today’s dollar will buy the same amount of gold as 2 1/2 cents in 1900.

But why worry? Government bonds are yielding 3 percent right now. From the government’s point of view, it doesn’t matter what it does to the value of the dollar as long as it can sell its bonds on the world market.

Well, it may not matter to the government and all the folks who got to eat lunch in the Capitol Rotunda on January 20. But it matters a lot to the rest of us. Debauching the currency is a crime. It is a crime upon the ordinary people that put their hard earned savings in bank accounts and fixed income securities.

But will we mend our ways after staring into the abyss last fall? Don’t bet your nestegg on it.