The Year of the Race Card

Although our Democratic friends appear to be in the catbird seat, passing universal and mandatory legislation over the opposition of the American people, don't forget that their power rests on a very shaky foundation.

It rests on scaring African Americans and Jews to death.

The simple fact is that you cannot get 90 percent of people to agree on anything unless you scare them to death. That's why you typically only get 90 percent electoral majorities in thug-dictator countries.

The reason that African Americans vote 90 percent for Democrats is that Democrats scare them all the time with the race card.

They have to. Otherwise they couldn't win a presidential election. Ever.

That's what James Taranto is talking about.

Since 1964, blacks have voted overwhelmingly Democratic. If Republicans were able to attract black votes, the result would be catastrophic for the Democratic Party. Even in 2008, the Democrats' best presidential year since '64, if the black vote had been evenly split between the parties (and holding the nonblack vote constant), Barack Obama would have gotten about 48% of the vote and John McCain would be president.

Guess what. The same thing applies to Jews. The reason that American Jews vote so heavily for Democrats is that Democrats scare them all the time with the Christian Right.

Political and religious leaders have always done this sort of thing. But it was all supposed to stop with the Sixties and the Civil Rights era.

Of course it didn't. And the reason is not that Democrats are evil, but because they got themselves in a jam. There is no way they can win power without striking fear into the African American heart.

One fine day, of course, African Americans will break out of their cultural ghetto and discover that people really don't care about them one way or another.

But Democrats can't allow them to find that out. Not until they have found a new victim class to ride to power.

Is it possible that this year, in their desperation to avoid a total wipe-out in November, the Democrats will jump the shark on race, and that African Americans will come to realize that they have nothing to fear but fear itself?

Here's hoping.

Goldman isn't the problem

It's all very convenient that the Securities and Exchange Commission has decided to indict Goldman Sachs, the uber-investment firm, right in the middle of the Senate's debate on the Dodd financial reform bill. Let's get those Wall Street rascals and make the financial system safe!

Like The Wall Street Journal edit page I find myself underwhelmed by the SEC's case. The Journal calls it less of a smoking gun and more like a water pistol.

Now, I have no particular fondness for Goldman Sachs. They mainly give money to Democrats, so I wonder just how badly Goldman will be hurt in the financial reform effort.

And I have no particular fondness for the SEC. Where were they when in mattered, in 2005 and 2006 when a bit of savvy regulation might have softened the crash?

But by all means select a scapegoat and slit its throat on the nation's altar.

Senator Dodd, principal author of the finance reform bill, is one of the hares that helped create the whole Fannie Freddie mess. Where was he in the early 2000s when the storm signals were posted? Now he wants to hunt with the hounds.

My problem is that we need less government regulation, not more. We need laws to force more transparency, and especially make clear what risks a corporation is exposed to if things go south. We need laws, not regulation.

And the fact is that a lot of the problem would go away if financial corporations had to post more equity and carry less debt. Because it's equity that guarantees the financial system when things go south. The government righted the financial system in the fall of 2008 by buying equity, through preferred shares, in the banks. On the other hand, there's no reason why a futures market in debt securities couldn't operate successfully. But it needs sensible design so that it can inspire confidence--without the bumbling intervention of government regulators.

No, the big financial problem remains. It is the government's reckless credit policy, from its incompetent central bank to its credit subsidy facilities in mortgages, exports, student loans and who knows what else. Not to mention the ordinary on-budget federal deficit.

Fix that mess and you'll go a long way to fixing the nation.

Tea Party Not Radical Enough

I know that the radical and angry Tea Party movement is said to be full of racists and homophobes. But what bothers me is that it's not radical enough.

David Harsanyi in The Denver Post has been reading the CBS/NYT poll on the Tea Party movement.

[They] are more educated than the average American, more reflective of mainstream anxieties than any populist movement in memory and more closely aligned philosophically with the wider electorate than any big city newsroom in America.

They send their children to public schools and "majority of them also deem Social Security and Medicare worthy taxpayer burdens."

Oh dear. That's a shame. It means that the Tea Party folks aren't ready to get serious.

Social Security and Medicare are at the heart of the budget problem. That's because, according to the latest numbers being thrown around, the politicians have promised about $100 trillion more in benefits than current taxes can deliver.

In short, we can't pay for what we've been promised. (Forget ObamaCare!) Something will have to change. Otherwise the United States will end up like Argentina--which recently defaulted on its national debt and raided everyone's bank account--or Greece--which may or may not stop short of default.

Does it matter? Yes, it does. When the national government defaults then the economy takes a dive and ordinary people suffer. Here's how.

• Pensioners lose their dollar denominated savings, because of devaluation or inflation.
• Lots of marginal businesses go under. Lots of average people lose their jobs.
• The poor suffer most. Especially today, where the government spends trillions every year on the poor. The Poles have a word for it: "eating the paint off the walls."
• People will compete for a share of the smaller pie in the political sector. That will increase social conflict, setting American against American, group against group. People will rush for protection under some powerful patron.

It won't be a pretty sight. And it's a pity that the Tea Party folks are not yet ready for radical action. That is, they are not yet ready to give up on their share of the loot.

But they will. We all will. Because when the balloon goes up, we'll all know that the world starts again for us. At zero.

And that is a shame. Because we could take measured, sensible steps right now to reform Social Security and Medicare so that they don't break the bank.

But we won't. Because nobody, not even the Tea Party movement, is ready to get serious.

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.