Political Portents for Obama's Second Term

You can see why the ancients looked to the heavens for portents of the future.  They had no other way of figuring out the moods and the ambitions of the divine gods that ruled over them.



In the modern era, we look to the media for political portents, because it is hard for ordinary humans to figure out what is really going on in the councils of government behind the political PR and the interminable spin.



In the last couple of weeks there have seemed to be some real portents in the sky telling us that things are going to change.



There's the general malaise pointed out by Peter Wehner in Commentary.  Not only is the president's approval rating in the 40s, but Democrats are starting to "grouse."  When did you last hear about Congressional Democrats "grousing."



Then there is the story of the president dissing Democratic Rep. Dan Kildee (D-Flint) at a closed-door meeting of House Democrats.  You should'ha listened to my State of the Union speech, the president told this freshman Democrat after egregiously insulting the rest of the meeting.   When did we last hear anything negative from a closed-door meeting of Democrats?



Then there is Sen. Patty Murray's (D-WA) stupid budget.  No spending cuts.  No entitlement reforms.  Just a trillion in tax increases.



So the Democrats are running out of gas.  And no wonder.  They have been on a roll since 2006, winning Congress back decisively in 2006 and the presidency in 2008.  But last fall they only won the presidency by a few points.  And now the future of congressional Democrats diverges from President Obama.



The president may be boldly proposing to take back the House in 2014, but most Democrats know better.



Think of an army.  Think of a great offensive.  You prep for it; you build up supplies.  Then you attack and advance.  But eventually you just run out of gas.  It's time to shorten the line and consolidate.



Really.  After you have nationalized healthcare, what is left to do?



The basic problem for Democrats, of course, is told in Patty Murray's budget.  They are out of ideas.  They don't know what to do about all their programs except for increasing taxes.



But more than that is the fundamental error of the administrative welfare state.  It's one thing to propose a nice little pension program to help the poor.  It's one thing to help seniors and the poor with health care.  It's one thing to help the illiterate get their basic three "R"s in government schools.  But when these activities dominate the whole economy, you have a problem.



And the problem is simply "mistakes."  How do you fix mistakes?  Well, we know that with the price system, everyone is on their toes all the time fixing mistakes.  That's what the price system does to you and for you.



But in government mistakes are terribly hard to fix.  That is way Social Security is such a burden.  If everyone were saving for their own pension then the democraphic shift towards longevity and fewer children would simply be solved as people retired later.  But government just sits around and does nothing while the unfunded mandate piles up.  With Medicare the problem is that people don't care what their routine medical care costs.  It's not like reading the supermarket circular for the week's bargains.  So grannie just keeps going to the doctor hoping he'll propose a wonder drug to fix her aches and pains.  So with welfare, and so with education.  They cannot adapt to change and they cannot fix problems.  Because change just isn't what government does well.  That's why "change" usually takes a revolution.



This is no mystery.  It's because of the difference between the price system and the political system.  The political system is a springtime for freeloaders, where politicians are promise free stuff to their supporters.  The price system is a cooperative system.  I think about what you might want to pay for, and produce it.  You think about what I might want, and produce it.  If I am right, I get to collect $300 and pass Go.  If I am wrong then I better figure out a better way to serve you.



That's the problem with Patty Murray and her budget.  It makes absolutely no attempt to "do something" about the federal government's appalling finances.  What about those $1 trillion deficits as far as the eye can see?  Pay no attention to that deficit behind the curtain!  Keep all the programs and pile on the taxes.



Which takes us to Herbert Stein's Law.  If something cannot go on forever, it will stop.



But it sure would be nice to stop before we hit the wall at the end of the box canyon.  You know what that will mean: Minorities and women hardest hit.

Staring at the Obama Apocalypse

What comes next?  That is the question at the back of every conservative mind.



I was triggered to think about this when reading Jennifer Rubin's Right Turn blog at the Washington Post.  That's because of the comments.  They are horribly abusive.



It got me to thinking.  All those liberal trolls: they have absolutely no idea what is coming.  All they hear is that the Republicans are obstructing everything that the president wants to do.  They are not thinking about unsustainable entitlements.  They are not thinking about what happens after the Fed stops its QE.  They are not thinking about what happens to the credit system after it is regulated into the Consumer Financial Protection Bureau.  They just know that the Republicans are scum.



And they think that the way to tame the economy is to subject it to proper regulation by disinterested experts.



But the conservative blogosphere is trying to think about what comes next.  Here is Kathy Shaidle musing about ways to step aside when the day of financial judgment arrives.



Don't save for retirement: the government will probably take your retirement savings like they already did in Argentina.  Don't go to college: start a business.  Don't earn a lot of money: they government will just take it.  Don't have kids, and don't be embarrassed about joining the freeloaders.



Then there is John Ransom musing on the VIX, the fear index.  The fear level is low right now, with the market up.  Which means that fear is low right now because the market it up.  Until it isn't.



Which is why I'm invested mostly in broad-gauge and consumer stocks.  When the crash comes, there will be no place to hide in the short term, and I am pretty sure that dollar assets like savings accounts and bonds will get demolished.  That is not a good place to be because whatever you lose in bonds will be gone forever.  The value of the dollar will not come back.



But if you have stocks then you have a share in the wealth creation of the post-crash America.  At least, that's my fondest hope.  If there is an America.  If there is any wealth.



What is certain is that in a few years the federal government will be desperately trying to get out of a jam.  It will be desperately trying to cut where it can without bringing people out into the streets, and it will be beating the bushes for revenue, starting with the low overhanging fruit.



The only question is: who will be left holding the short straw?

Can Government Correct a Mistake?

Over a century ago, at the dawn of the "common school" era, someone decided to stop teaching reading using phonics and to start teaching using "whole language" approach.  Modern "whole language" is credited to Noam Chomsky and Ken Goodman.

Trouble is that "whole language" makes reading into a job approaching in complexity the acquisition of literacy using the ideographic system of Chinese and Japanese.

Popular opinion for some years has represented the "whole language" approach as a mistake.  Maybe it is, maybe it ain't.  But the question is: how do we tell when the government school system has made a mistake, and if it has made a mistake, how do we get it to change.

That's the problem with government.  It is very difficult -- almost impossible -- to get government to fix a mistake.

Let us call in Thomas Sowell, who attacks the "mistake" problem with great vigor in his Basic Economics.  If you go to Google Books and search for "mistakes" in the 4th Edition, you get  8 snippets on your browser.  Here is his main address to the question.

Humans are going to make mistakes in any kind of economic system.  The key question is:  What kinds of incentives and constraints will cause them to correct their own mistakes?

The answer he gives is that people correct their mistakes consistently and rapidly under the price system.  But in government, mistakes can take years, even decades to get recognized and corrected.

Why is that?  The simple answer is that the price system is a two-way communications system in which producers and consumers signal to each other constantly and unequivocably.  Mainly, they signal what they don't want.

If a producer prices a product and very few people turn up to buy it then he has a problem.  If a consumer wants a product and cannot find it at the price she wants to pay, then she has a problem.  In both cases, the producer and the consumer have made a mistake.  The producer must lower the price, or improve the quality or improve the advertising.  The consumer must either pony up more money or go without.

It's simple.  Either you respond to the signals the price system is sending you or you go broke.

Government is a two-way communications system too, but it is a system with a very narrow bandwidth.  Moreover, like an army, a government does not immediately respond and stop what it is doing when things seem to be going wrong. It bellows "once more into the breach" and decides that more money is needed to solve the problem.

The phonics vs. whole language controversy illustrates the issue.  It went on for decades while partisans argued, and ended up with a qualified victory for "synethic phonics."  Meanwhile generations of kids went through the schools system.  Should generations of kids be sacrificed to a mistake?

If schools were private then they would quickly respond to the demands of parents.  There could even be schools declaring their commitment to phonics in no uncertain terms or to whole language, and let the market decide.

The point is that, in a free market under the price system, producers and consumers are ceaselessly communicating to each other, and products and services are constantly getting adjusted and improved to meet the needs and the price preferences of the consumer.  Under government, not so much.

Of course, the whole point of government is to stop change.  We don't want to change the form of election to suit the partisan advantage of the current ruling class.  We don't want to change the Bill of Rights.

But what about Social Security?  The current system doesn't respond to changes in demographics, in the economy, and in life expectancy.  That is why it is going broke.

What about Medicare?  The president knows the problem, according to the senators who dined with the president last week.

"He said the problem with Medicare is people think that it’s their money,” when in fact "they pay in a buck and get three.”

If Medicare were a private system it would adjust to this and correct it within weeks.

The problem with our national politics right now is that the national myth about the welfare state is a lie.  But nobody dare admit it, because they know that the first person to tell the truth to the American people will get run out of town on a rail.

There has got to be a better way to own up to mistakes and fix them.

There is a better way.  It is called the price system.

Does Obama's Charm Offensive Matter?

According to Peggy Noonan, the Republican senators that dined with President Obama last week had nice things to say about the president.  But one of the senators pointed out his lack of leadership.

At certain points in the conversation the president, according to the senator, said that even if he wanted to agree with the Republicans on certain specific questions there would be a rebellion in his own party: “He said that a few times. But that’s an abdication. You have to lead! You have to educate as only a president can with a bully pulpit, you have to bring your party along.”

At the American Spectator Peter Hannaford talked about Trojan Horses and an invitation to betrayal.  The White House's idea is to get just enough Senate votes to send a bill to the House to undo the sequester.  Then, when the House rejects it,

Obama’s mouthpiece, Jay Carney, will say with a straight face, “He did everything he could. He worked with Republicans in the Senate, but the House just wouldn’t let go of its protection of millionaire and billionaire tax loopholes.”

Well maybe.  But I'd say that any Republican politician in Washington DC knows by now that you cannot trust the president on anything.  Whatever agreement you think you have, the president will change if he thinks he can score a point on you.



I just can't believe that any successful politician (and they are all successful to have made it up the greasy pole to Congress) would want to trust President Obama further than they can throw him.



Naturally, they say nice things to Peggy Noonan, and naturally Peter Hannaford is worried.  But really, here is a president that didn't want to talk to the Republicans until, all of a sudden, he lost a round in the blame game.  You don't think that these veteran politicians can smell weakness?



Michael Barone said it straight out about Obama and the White House.

They're flailing. That's the impression I get from watching Barack Obama and his White House over the past week.

The fact is that Obama is doing what any Democrat president would do.  He is putting off the inevitable day when the Democratic base will have to start eating "give-backs": cuts to their sacred entitlements.  The only way that a Democratic president will be able to sell cuts to the Democratic base is when the city walls are crumbling in a fiscal earthquake.  Until then, don't expect any leadership on spending from any Democratic leader.



Rahm Emanuel is justly famous for his remark that you never want a crisis to go to waste.  But the full truth is that in politics you can never do the difficult thing unless there is a crisis.

Unemployment: The Household Survey Story

Yeah, yeah.  Unemployment was down this month from 7.9% to 7.6%.  Hurray! A robust recovery is finally here!



Only it ain't.  As all red-blooded Americans know, the Unemployment Rate is computed from the Labor Department's Household Survey, using the Labor Force and the Employment Level numbers.



Last month the Employment Level was up by 170,000.  Which is OK, a so-so number.



But last month the Labor Force number was down by 130,000 people.  A bad number.



Here's what the numbers would look like if we got into a real recovery.  You would see the Employment Level going up by 300,000 to 500,000 per month.  And initially, you would see the Labor Force number going up even faster.



Why?  Because when discouraged workers get the word that there are jobs out there they start to look for work.  And then they get included in the Labor Department's count of the Labor Force of people that have jobs and people that want jobs.  So, in a robust recovery, the Unemployment Rate may actually go up for a while.



So the fact is that we are still not in a solid recovery.



No surprise there.  You want a solid recovery?  Then you, the government, need to implement policies that encourage people to produce and consume.  You need to produce a solid monetary policy, not an inflationary monster that merely keeps the government's interest cost down.  You need to curb crony capitalism in all its guises.  And you need to cut government spending.  You need to cut tax rates.



Our liberal friends have lately taken to whining that cuts in government spending reduce the gross domestic product.  So they do, because government spending is included in the GDP.  That's what happens when the indices are designed by people that believe in Keynesianism.



But in reality government spending, all government spending, is a weight on the economy.  It leaches wealth and prosperity out of the economy.  You want to fix a sluggish economy?  Then cut government spending.



Done that?  Good.  Then cut spending some more and while you are at it, cut tax rates.



That, Mr. President, is what I call a balanced program to fix the budget and revive the economy.



The reason we have all this stupid Keynesianism and inflationism is that the people getting government spending handouts screech like banshees when the checks stop coming.  I mean everyone, from Social Security recipients like me to crony capitalists getting lots of lovely green subsidies.



(Golly, who knew that dear old Uncle Warren Buffet was getting green subsidies from his investments in wind and solar?  That guy sure knows how to make a buck on the government's dime.  Right now he is benefiting from the delay of the Keystone pipeline, 'cos the Bakken oil has to move over his railroad instead of environmentally cleaner pipelines.)



Politicians are practical people, so they listen to experts that come up with rationalizations for what comes to them naturally.  The Keynesians give the politicians a reason to delay biting the bullet.  So they do.



People want free stuff, and politicians give it to them.  Until the money runs out.  Then the politicians move on and the people are stuck eating the paint off the walls.

The "Mordida" of Liberal Politics

The problem of all government power is that it tends towards protecting the power and privileges of a ruling class.  Back in the old days, the ruling class of the South ran a racial privilege system to keep the blacks down.  Fast forward to today, and the ruling class of educated liberals run a class and race privilege system to keep minorities and women on the liberal plantation, particularly in corrupt states like California, New York, and Illinois.



Item: Victor David Hanson's lament about the liberal "Mordida", the "bite" you are supposed to pay for the privilege of living in California.  Who would want to live in Texas with its 110 degree summers and "fossil-fuel" air conditioning sneers Gov. Jerry Brown, (D-CA).

Translated, Brown's retort meant that despite California's sluggish economy, high taxes and poor services, it's still worth staying there to enjoy its beautiful climate -- especially along the 1,000-mile-long coast, where most of the state's elites live comfortably without a need for high-priced air conditioning.

Ah yes.  The liberal elite makes sure that it's summertime and the living is easy for educated liberals.  But what about non-liberals living in California?

But it is not such an accommodating a landscape if you are in the shrinking middle class and seeking a good-paying job in energy, construction or manufacturing; a safe daily commute on good roads; reasonable taxes; an affordable house; or a good public school.

But where is the political movement to curb the power of educated California liberals that make life a hell for others so that they can live on the balmy California coast?



Item: Section 5 of the 1965 Voting Rights Act, the one that requires certain southern states to get pre-approval of election practices from the US Justice Department.  It's up before the US Supreme Court right now and the Chief Justice of the United States asked the US Solicitor General about racism in the South. H/T Daniel Henninger.

Chief Justice Roberts: General, is it the government's submission that the citizens in the South are more racist than citizens in the North?



General Verrilli: It is not, and I do not know the answer to that, Your Honor. . . .



Chief Justice Roberts: Well, once you said it is not, and you don't know the answer to it?



General Verrilli: I—it's not our submission. As an objective matter, I don't know the answer to that question.

I see.  So does that mean the South still has to bow the knee to the liberals in the US Justice Department for another 50 years, or not?



I don't know about you, but in my personal experience, the most racist people I know are blacks.  And the most bigoted people I know are gays.



It's no mystery why this should be.  People know when to shut up.  Whites know that they can get into trouble with racist talk.  Ditto gay-bashing.  But liberals condone racism in their black clients and anti-straight bigotry from their gay clients.  There is nothing more delicious than spewing hate out to people that can't fight back, at least if you are a racist or a bigot.



If you go back a century, then if you are a liberal you can pat yourself on the back for helping the working stiff.  But today the low-income working stiff isn't working and the low-income woman isn't married to the father of her children, and liberals should be ashamed.



If you go back half a century, then if you are a liberal you can pat yourself on the back for helping the African American.  But today minorities and women are hardest hit by the worst economy in the last 50 years, and liberals should be ashamed.



Over the past century, Progresssives-liberals-progressives have done some good things.  They have also done some terrible things.



America's agenda for the next 50 years, whether liberals like it or not, is going to be unraveling the tangle, the "bite" of injustice resulting from a century of big-government liberalism.



The sooner we start, the less people will suffer.

Hugo Chavez and Charismatic Leadership

Ding, dong, the wicked witch is dead.  I mean the wicked witch or wizard of Venezuela, Hugo Chavez.



His passing is salutary, because he is a solid example of a charismatic leader.



People turn to charismatic leadership, according to Max Weber, when ordinary political leadership seems to be failing -- in "times of trouble", according to Reinhard Bendix in Max Weber: An Intellectual Portrait.

Hence, in times of trouble the "natural leader" is neither the official nor the master whose authority is based on the sanctity of tradition, but the man who is believed to possess extraordinary gifts of body and mind.

We may disagree about whether Venezuela was really in a "time of trouble" when Hugo Chavez was elected president, but the lower orders certainly felt so.  In the AP's piece,

"Chavez masterfully exploits the disenchantment of people who feel excluded ... and he feeds on controversy whenever he can," Cristina Marcano and Alberto Barrera Tyszka wrote in their book "Hugo Chavez: The Definitive Biography of Venezuela's Controversial President."

 This is the left-wing approach to politics that goes back to Marx and Engels and the Communist Manifesto.  Exploitation, "naked, shameless, direct, brutal", is the core of the Marxist message.  You are suffering because you are being exploited.



No doubt in many South American countries the poor are being exploited.  In The Other Path, Hernando De Soto explained how the exploitation works.  It was basically that everything in the formal economy was decided through politics, through negotiation between powerful special interests.  So if you were a campesino, coming to the city of Lima from the altiplano in the high Andes, you were outside the patronage/clientage system and its constellation of interests, an unwelcome disturbance to the status quo.



Let us admit that for the campesino, the outsider, a charismatic politics is the rational solution to his problem.  He wants a shakeup to the status quo, hoping that, in the fallout, he will get some crumbs.  He wants a leader who will fight for the people against the powerful.



In reality, of course, the charismatic leader is a monster that collapses the entire economy through his endless resort to government force.  Capitalism may be exploitative, but that is because it is inhuman.  It just matches supply and demand through the price system.  If you are a low-skilled campesino, then you don't get to charge a very high price for your labor in the city, particularly if you need to be a member of a union, or need to be worth more than the minimum wage before you can get a formal job. And that, you are likely to judge, is unjust.



But capitalism doesn't care.  Once you get some skills it will mindlessly include you in the system.  Because now you are worth more.  If you really apply yourself and acquire some unique skills in high demand, it will shower you with money.



The trouble is that the charismatic leader is worse than inhuman.  He is demonic.  He delights in upsetting all human relations and resorts to physical force and compulsion, gulags and extermination camps, on principle.  He is a war leader, not a negotiator or a builder.



Which brings us to Barack Obama.  Obviously, Obama is a charismatic leader, but not, perhaps, a great one.  He owes his presidency more to the eagerness of the mainstream media to waft him aloft and to ordinary Americans eager to elect our "first black president" than "extraordinary gifts of body and mind."



And Obama is not only an Affirmative Action charismatic leader; he is also not a nice guy.  Quin Hillyer:

Just the other day at lunch, a friend of mine, a businessman with good connections across the country, recounted a conversation he had with a Democratic insider while Obama was in the midst of his first presidential race. “It’ll take the American people five years,” said the insider, “to realize what Obama’s really about and what he’s really like.” Then, presumably, the public would catch on to his manifold defects.

Yeah.  Now they tell us.



In Venezuela they had a real charismatic leader.  In the US we only have a fake one.  That, if you are looking for it, is merely proof of American exceptionalism.



Because, after five years Americans are beginning "to realize what Obama's really about" and they don't like it.  At least that's what recent opinion polls are telling us.