Too Big to Fail. Again

Everyone agrees that a big factor in the recent mortgage meltdown was the "too big to fail" syndrome.

Big banks and big corporations are understood to be so big that their failure might cause a systemic failure of the credit system.

That's why we have the Federal Reserve System. To have a lender of last resort. And of course we have a bunch of other institutions each with a pot of money to help out in a jam.

Now come the Democrats in Congress with a $50 billion fund for the FDIC to use in case a big financial firm goes under in the future. According to Michael Barone:

Under the bill, the FDIC would use this "resolution authority" rather than have the firm go into bankruptcy courts, as Lehman Brothers did after it collapsed in September 2008.

But that just restores the situation that got us into trouble. Big banks know that, when push comes to shove, the government will bail them out because the government can't allow the credit system to fail.

Knowing that, they can afford to take big risks.

What is needed is to put the shareholders and bondholders on notice that they will be cleaned out. And it wouldn't hurt to have the major corporate officers personally liable to the full extent of their assets.

The way to cure "too big to fail" is to make sure that people are not just spending "other peoples money" when they are swinging their big dicks around on their highly leveraged deals. They need to worry that they are risking their mansions, their trophy wives, and their kids' educations.

The more that the government provides insurance the more it encourages "moral hazard," that is, the behavior that is insured against.

You'd think that the solons like Sen. Dodd (D-CT) would understand that. Maybe he does. But after all, a tax is a tax, and if the government taxes the big financial institutions for a big tax then they can spend the monies until the FDIC actually needs the money. The point is that money is money.

In reality, when the Feds get in a jam, they sell bonds or they print money. It really doesn't matter if they have $50 billion in a fund or not. At bailout time, the question is: does the market believe the Feds when they say that they stand behind Lehman or Fannie and Freddie. So far, the market has decided to believe the Feds. But in the future, it may not.

The big problem with our political masters is that they are not serious about anything except political power. They really don't care about the economy, about freedom, about people. They care about their power, they care about reelection and they care about people coming to them to ask for favors.

All the rest is narrative.

Trashing Bill Clinton's Legacy

Whatever you think of Bill Clinton, he did a bang-up job of rehabilitating the Democratic "brand."

During his presidency he changed the way that people thought about Democrats. They weren't hippy-dippy anti-war "Blame America First" activists or big-government ideologues. No, no. They were pragmatic New Democrats that understood that the era of big government was over. The extremists, on the other hand, were the mad, bad ranters on the Christian Right.

In one short year, President Obama has ripped Clinton's careful work to shreds. He's been running around apologizing for America, bowing to dictators, waving his finger at allies. And he has launched a full Monty liberal program of government takeovers from health care to automobiles.

And the American people hate it.

So now we've got to the point that pundits and prognosticators are salivating about a really big mid-term election this Fall. You know, the kind that historians love, with 70-plus seats changing hands in the US House of Representatives. Sean Trende thinks we could be looking at a real biggie.

He's got a chart that lines up elections with three factors: bad economy (check), previous "wave" election where one party did really well (check), and controversial agenda (check). When the stars align that way you can get really big elections. Like 1938, when the GOP picked up 79 seats. Or 1894 when 125 seats changed hands. Or 1874 when 96 seats changed party.

It's been a while. And these days, nobody expects a shift of as many as 50 seats, for, after all, these days politicians have enormous advantages of incumbency.

Except when they don't.

Looking back, you can appreciate the skill of Bill Clinton. He always kept nudging towards bigger government, but he always did it in a non-threatening way.

President Obama doesn't have the political skills of a Bill Clinton. He just figures: go for it. Go for all the liberal gusto you can and hope that, on the morning after, you have ratcheted big government up another notch.

Hey, it makes sense. Until, as the saying goes, you reach a Tipping Point, when the American people can see the strategic reality behind the words and the hype and the "brand."

At that point you remember that politics is civil war by other means and you just hope that things stay civilized.

Let's de-Clausewitz this. Politics is civil war for civilized people. And a 100-seat turn in the US House of Representatives is the political equivalent of the Fall of Atlanta.

Paying for Unemployment

They are arguing in the Senate right now about whether to extend unemployment benefits to 99 weeks. And the Democrats are playing the compassion card. According to the Wall Street Journal:

Iowa Senator Tom Harkin recently roared, "Is there any compassion at all left with Republicans for people whose checks are going to run out?" New York's Chuck Schumer calls Republicans "inhumane."

Just a minute, senators. The science is settled on this. Long-term unemployment is devastating to workers. The research shows that workers start losing job skills immediately they get laid off. It is essential for them to get back to work at something as soon as possible.

And as the Journal points out, people only start to look for work when their benefits expire.

Alan Krueger of the Treasury Department, who concluded in a 2008 study that "job search increases sharply in the weeks prior to benefit exhaustion." In other words, many unemployed workers don't start seriously looking for a job until they are about to lose their benefits.

For male workers in their 40s, a spell of unemployment very often means that they never work again. That's what the research shows. I'm not quite sure how this happens, but it does. Perhaps these men live off women, who are more inclined to work--at all ages. Or perhaps they develop bad backs and go on disability.

It may be good politics to shower your supporters with government benefits. But it is "inhumane," Sen. Schumer. People need to work. Men need to work, or they go bad really quickly. So your little plan of extending unemployment benefits to two years means that hundreds of thousands--maybe millions--of laid-off workers will lose job skills and never work again.

Yes, but what do we do? Suppose there aren't any jobs? We've got to help people!

Certainly. But this is the time to think about all the things that the government does to make it hard to find a job. It starts with the government's penchant for gunning the economy with low interest rates and Fannie and Freddie. It continues with minimum wages and licensing and credentialism and job-killing taxes.

Maybe if you geniuses could stop screwing up the economy for a moment we wouldn't need all these government benefits.

"Taxes are Its Sacrament"

It's tax time, and wouldn't you know, here's a liberal, James Carroll at The Boston Globe, talking about the sacred treasure collected in taxes by the government.

But the sting of taxes, paradoxically, is a prompt for gratitude because the returns we file, checks included, are both a signal and a precondition of the sacred treasure we share as a people — also known as commonwealth. Taxes are its sacrament.

Oh really! If that is the case then taxes are not really taxes but a tithe to the liberal church of the welfare state. In that case liberal politicians are some sort of German prince-bishops. And liberal journalists are altar boys.

And you can say goodbye to the First Amendment and the separation of church and state.

Of course, you have to give James Carroll credit. He is only being honest. Liberals really do think that the self-interested taxing and spending they preach is a sacred calling. Taxes are a sacrament and spending is compassion. They really believe that.

But they are wrong.

My American Thinker op-ed this week is on precisely this. Government cannot be compassionate and giving. Government is the force sector of social life. Its votaries are politicians and their coin is power.

If you want compassion and giving you cannot do it with government. Government is about taking from people by force and giving the proceeds out to the government supporters.

Government is force. Politics is power. All the rest is narrative.

Boost Palin? You'll Regret, Mr. President

"I wonder what he meant by that." That's what Talleyrand is supposed to have said on getting news of the death of the Turkish ambassador. Or was it Metternich on the death of Talleyrand?

So when the president responds to criticism by Gov. Sarah Palin (R-AK) on his nuclear policy:

President Barack Obama on Thursday made clear he was not going to take advice from Republican Sarah Palin when it comes to decisions about the U.S. nuclear arsenal.

You wonder. Is he serious? What would be the point of commenting on something Sarah Palin said? Does the president want to boost Palin because he thinks she'd be an easy mark in 2012? Or did he just say that in a careless throwaway remark?

I'd like to suggest this to the president: Don't boost Sarah Palin into the position of de-facto leader of the opposition. You'll live to regret it.

Your liberal pals in the mainstream media have done a bang-up job of demonizing Gov. Palin. So everyone left of center now believes that she is a flake.

Maybe they are right. But what if they are wrong? Despite the most horrendous attacks and humiliations, she's still there. She's very popular, not just on the far right wing but with moderate women. And I'd say she has the potential to appeal to rust-belt Democrats, the lunch-bucket Democrats that are on the cusp of deserting the new identity-multicultural party that sneers at God and guns.

Democrats have made much of Palin's inexperience. What are they talking about? She's been a professional politician since 1992. She's been a legislative politician on a city council. She's been an executive politician, as mayor and governor. And she's had experience as a regulator.

Yes, but she doesn't have national experience!

Here's my take on that. In my experience of politics, the higher you go, the more you get paid professional help. On the city council, you are on your own, and your staffers are as green as you are. But when you run for governor you start attracting contributions and ambitious people eager to hitch their wagons to your star. At the presidential level there is a whole subculture of campaign professionals, not to mention national think tanks, all eager to ride your coat-tails to national power.

Palin may have been inexperienced in national politics in 2008, but in 2010 she will be a kingmaker, and by 2012 she will have a fully functioning national political machine.

Palin has already defined her ideological position. She calls it "common-sense conservatism" and she mentions it with practically every breath. What does it mean? Good question, Senator. It means whatever she wants it to mean, but it seems to be uniquely suitable for a run against an ideological liberal.

If I were Obama I think I would much rather run against a Gingrich, a Romney, a Pawlenty, ordinary politicians without the star power of Palin.

But maybe the president knows something I don't know.

Gift-giving and Quarrels

In our tax-paying politics and our exchange economy we have less and less opportunity for gift-giving. We pay our taxes because we must and we exchange our labor for money because that's the best way to earn our bread.

But Roger Scruton in "Gratitude and Giving" points out the importance of giving.

There is, in the gift-giving culture, a display of gratitude at the moment of gift, and a kind of rejoicing that warms the hearts of those involved. On the gift day the tribe does not merely put aside old quarrels; it feels a renewed surge of affection toward its neighbors. This affection is a kind of moral capital on which it may draw in times of conflict.

In our welfare state, where charity and religion have been marginalized, we lack the warmth of giving. So it comes as no surprise that, with the decay of neighborliness, there has also come an increase in conflict. Politicians draw dividing lines between red and blue, and people respond to their encouragement by demonizing the opposition.

Our liberal friends talk a lot about religion as a means of "social control," and they mean by that the power that religion gives the political elite to keep the populace afraid and subservient.

But they forget that religion also ennobles gift-giving, love, sacrifice, and forgiveness. Leaving aside the question of divine will, we can see that any belief system that encourages these qualities will also diminish the opportunity for conflict. People are quick to quarrel. The hard part is to get them to lay down their grievances. "I would you would accept of love and grace," says Sir Walter Blunt to the hot-headed Harry Hotspur in Henry IV Part One.

We need a culture of gift and grace because otherwise there is nothing but politics, and politics is about conflict, civil war by other means.

More and more, I like my Greater Separation of Powers between the three sectors of society: the political sector of force and taking, the economic sector of trust and exchange, and the moral/cultural sector of faith and giving.

Our liberal friends have made a mortal error, in thinking that the political sector, the locus of force, can administer compassion and caring.

They ought to have learned by now, since the great lessons of the last century were the inevitable brutality of fascism and communism, the regimes where the three sectors are collapsed into the political sector.

When you collapse the three sectors into the political sector all you get are mass graves and social collapse.

Even though liberals won't learn the lessons that are staring them in the face, there is no reason why we should stand by and let them wreck this nation while they learn the hard way.

We must take back this nation and revive the separation of the economy from politics and separate the necessary and ennobling care for the unfortunate from the brutality and the inevitable conflicts of power politics.

And the take-back starts in November.

Robin and Roger and Robert, Oh Yeah!

You can think of them as the Three "R's," the three folks that help you learn what to make of the current mess in America, the Mess of Obama.

From Robin of Berkeley, the recovering liberal, we get "The Rape of America." Here's what rape is all about.

Give me what you have because I want it. Whether it's the iPod torn from your ear, or a big chunk of your income, or your standard of living, no matter. I want it, I demand it, give it to me.

What does this mean? It means that that politics is about taking.

From Roger Scruton, conservative philosopher, we get "Gratitude and Grace." Grace, from the Latin , gratia, means giving.

The idea that the world is sustained by gift is second nature to religious people, who believe that they should be givers in their turn, if they are to receive the gift on which they depend for their salvation.

What does this mean? It means that religion is about giving.

From Robert Samuelson, economic writer, "The Poisonous Politics of Self-Esteem." Although " the standard view of politics is that it mediates conflicting interests and ideas." Yet more and more, politics is conducted in moral terms.

President Obama pitched his health care plan as a moral issue. It embodies "the core principle that everybody should have some basic security when it comes to their health care," as he said when signing the legislation. Health care is a "right"; opponents are, by extension, less moral... People backed it because they thought it "the right thing"; it made them feel good about themselves.

So on this view, people are using politics to set a moral agenda.

But I suggest that getting moral content out of politics is a chimera.

Government is force, and once you resort to force to enact your moral agenda, you no longer have a moral agenda. You just have force. Because morality is about you giving and sacrificing, not the other guy.

So now I want to fold this into my general theory of The Greater Separation of Powers between the three sectors: political, economic, and moral/cultural. Under the Greater Separation of Powers, we have the separation of church and state, and also economy and state, and also church and economy.

Thus we have state as the locus of taking, economy as the locus of exchange, and religion as the locus of giving.

Politics is about taking; if you carry politics into the economic sector you infect the process of exchange with taking: Robin of Berkeley's Rape of America. If you carry politics into the moral/cultural sector you make religion into a power trip, you transform giving into compulsory taking.

The great mistake of our liberal friends is to imagine that, by distributing benefits and "social justice" through the political system they are "giving."

But that cannot be so. A gift must be freely given, otherwise it is just a tax. When people who believe in giving through politics get into power, all they end up doing is raping the people. Because rape is an act of power, and politics is power.

That's why we believe in limited government. We believe in limiting the scope of taking, the arena of force. Only when you limit forcible taking can the sturdy fruits of work and exchange come forth. Only when you limit forcible taking can the delicate flower of grace and giving open its petals and bloom.

Government is force. Politics is power. All the rest is narrative.