It's the Pensions, Stupid.

On July 5, writes John Fund, "the Greek people will be asked to make a choice: either 'surrender' and give in to cuts in pensions and higher taxes or refuse and perhaps be forced to exit the euro and go back to a depreciated drachma as their national currency."

The Greek people are of one mind on all this. About 80 percent of them want to stay in the Euro; and about 80 percent of them are opposed to "austerity" spending cuts and tax increases.

So the Greeks aren't much different from Americans. We Americans all demand our entitlements and benefits but we don't want to pay for them.

Here's Cliff Taylor in the Irish Times talking about the difference between the Irish "austerity" and the Greek "austerity." Both countries did a pretty good job of "in terms of cutting borrowing" but to reduce debt you need high growth.

The problem is that Greece never got momentum moving firmly in the right direction; it never got around the corner. As the crisis took hold, its debt level shot up, reaching more than 170 per cent of GDP. Reducing such a high debt level requires high growth (along with a bit of inflation) and a big surplus on the government’s annual budget, excluding debt costs.

This ought to be obvious. You can't have a flourishing, prosperous nation state unless you have economic growth.

Ireland, on the other hand, started the crisis with very low national debt, so it was able to get "around the corner" and resume growth in 2012.

Of course, you can't really have high growth if you are burdening your economy with e.g. Obamacare.

So let us try and understand the problem of the modern administrative welfare state.

The problem is really very simple. The whole idea is to tax the country up to the limit that is politically possible, and distribute the revenue in entitlements and subsidies. Usually, however, the government borrows a little to sweeten the pot a little. Since this works pretty well in normal times everybody is happy.

But the truth is that when you get into debt you are making a bet against the future that cannot go wrong. You must have the income to make your payments; otherwise you get into a world of hurt.

This is obvious in personal finances. People that mortgage themselves up to the hilt get wiped out if they lose a job.

The same thing applies to administrative welfare states. When there's a recession or a crash they must continue to pay their normal entitlements to pensioners plus their free health care and free education, but must also increase their welfare expenditures substantially to take care of all the people thrown out of work. All this on reduced revenues because of the recession. This wouldn't matter if, say, the government was collected and spending about 10% of GDP. But at 40% of GDP you can't really afford a recession, because you already are paying entitlements to tons of people to do nothing. Now you need to bail out the banks and also pay the unemployed.

The solution is pretty simple: privatize all pensions, privatize health care and education. No more "defined benefit" pensions. Then the state can weather a crash and a depression by borrowing. No problem.

But of course no modern state is going to do that because every state that ever was has maintained itself by paying pensions to its supporters.

Either way, for nations and for individuals, don't ever forget that when you contract a debt you are making a bet that you'll repay before the downside hits. Because the downside for a debtor means that you get wiped out.

The thing to watch in the Greek crisis is how the bank depositors get screwed. In Argentina in 2002 they wiped out the depositors, and in Cyprus they gave them a haircut. The buzz-word is "bail-in."

The "Frozen" Girls "Inside Out" the Boat

At the end of The Boys in the Boat, Daniel James Brown's book about the University of Washington varsity crew that went to the 1936 Berlin Olympics, oarsman Joe Rantz marries Joyce, his faithful high-school sweetheart, and lives happily ever after.

The Boys in the Boat is narrative non-fiction that mixes male athletic competition with the hard-scrabble story of Joe Rantz and the horrible fact of rising Nazi fascism. One of the contrasts Brown draws is between the comfortable upper-middle class undergraduates "in pressed slacks and freshly shined oxfords and cardigan sweaters" and the kids from the artisan class who just managed to scrape together the tuition and were working night jobs to stay in school. Further in the book we get to contrast the converted government seaplane hangar in which the Washington Husky crew kept their rowing shells with the lavish crew facilities of the WASP colleges back east.

But I found myself reading the book as an allegory of our own time.

After all, if Joe Rantz was chucked out by his father's second wife when Joe was ten, we have our own abandoned athletes like The Blind Side's Michael Oher. And if you are a conservative you can't help notice the parallels between 1930s Nazi fascism and today's Liberal Fascism.

Oh sure, we aren't putting anyone in concentration camps, but we are firing prominent people for having the wrong opinions on gay marriage. We don't have Leni Riefenstahl and her Triumph of the Will, but we did have a big presidential acceptance speech a while back staged in a stadium complete with heroic camera angles and Grecian formula columns in back of the candidate. We don't have the virulently anti-semitic Der Stürmer, but we do have the virulent mob of social justice warriors ready to turn out a Twitter mob to name and shame anyone who dares to voice an heretical thought that departs from liberal orthodoxy.

For me, the Command Central of liberal cultural orthodoxy is the children's CGI cartoon feature. I am talking about Disney mega-hit Frozen and the current Pixar-Disney hit Inside Out that's now playing in a theater near you.

Both Frozen and Inside Out are what used to be called "fractured fairy tales." They need to be broken because the originals don't serve the liberal zeitgeist and don't send the message that liberals want to indoctrinate in our children. Frozen is a rewrite of Hans Christian Anderson's The Snow Queen. Only now the heroine is not trying to find the ordinary lost boy next door, corrupted by a shard from the Snow Queen's mirror, but trying to rescue her sister, and both are princesses. In the Frozen ending the two sisterly princesses are best friends forever instead of the boy and girl next door living happily ever after through the strength of Gerda's Christian love.

In Inside Out we have a little girl tossed out of her happy Minnesota childhood, complete with championship hockey team, into the tech startup world of San Francisco; and her world collapses. Her troubles are symbolized by a pop-psych (but actually mechanical) representation of her emotions where Joy, Sadness, Anger, Fear, and Disgust rule her consciousness from Headquarters. The trouble starts when this white-bread upper-middle-class girl gets up in the diverse class in her new San Francisco school complete with right-on black teacher and discovers her sadness over the life she left behind.

(Diverse class? In the city of San Francisco? Where I imagine every parent is a white helicopter parent or an Asian tiger mom?)

In both movies we get hammered over the head with boys in girls' clothing. The movie makers are converting fairy tales into boys' adventure stories with the good parts played by girls. We are meant to think that every girl will grow up to become Carly Fiorina. (Only, of course, none of them will grow up to be a Republican. Eeeuw!)

But women just aren't like that. Daniel James Brown allows us a glimpse in The Boys in the Boat. Joe Rantz's sweetheart Joyce finds herself enraged that Joe's father could ever have allowed his second wife to toss Joe out of the family home.

After the Berlin Olympics it took two years for Joe Rantz to graduate from UW in 1939 with a degree in Chemical Engineering. He then went to work at Union Oil Company and later at Boeing, living with Joyce in the family home north of Seattle for decades where they raised five children.

In all those years, Joyce never forgot what Joe had gone through in his early years, and she never wavered from a vow she had made to herself early in their relationship: come what may, she would make sure he never went through anything like it again, would never be abandoned, would always have a warm and loving home.

That reads like the women I know, even, no, especially, the liberal women. Their entire lives revolve around moral analysis -- some might even say moral judgment. 

The one thing these women are not is faux heroines in faux liberal fairy tales.

The Chantrill Rule on Debt

Debt is a big deal these days, what with the National Debt, the Greek debt, the student debt.

And who can forget that the current sluggish Obama economy is a consequence of the Big One, the mortgage debt meltdown of 2007-09 and the Crash of 2008?

Today Victor Davis Hanson is writing at National Review about the current concept of debt, which is that you really don't have to pay if you are a little guy and the creditor is a big guy.

But I want to suggest a different understanding of debt. On my view, there are two kinds of debt: public-sector debt and private-sector debt.

Let us look at private-sector debt first.

In the private sector, people contract debt primarily to grease the wheels of commerce. A merchant borrows money in anticipation of selling those goods in a month or two. Or a homeowner borrows money to buy a house, using the house as collateral.

With this kind of private-sector debt, we are talking about a low risk proposition. The merchant or the homeowner cannot get a loan unless the lender is pretty certain that the borrower has the means to repay the loan. And the borrower shows that he has the means to repay, with the backup that the goods or the house in question is pledged as collateral in case of failure to repay. Nobody has any doubt that in the case of default the borrower must release the collateral to the lender and face a devastating loss.

But public-sector debt is different. Here the risk is piled on the lender.

Let us take the case of the National Debt of a sovereign nation. Typically, a nation state will borrow money to fight wars. The idea is that the extraordinary expenses of war will be paid back when the war is over, and then the nation state will run a surplus in its accounts to service the debt. Typically, the national debt is considered a low risk and the government enjoys the lowest interest rate as the most credit-worthy borrower.

But what happens if the nation state loses its war? Well, then the lenders, the bourgeoisie and the widows and orphans, are toast. In effect, the nation state has wagered the savings of the bourgeoisie on winning the war. If the state loses, well, too bad for the bourgeoisie.

In our modern post-WWII age, nations rack up the National Debt during financial crises as part of the Keynesian consensus. They bail out the banks and they keep the entitlements going and they even spend money on "stimulus" to revive the economy. Typically, the national debt is considered a low risk and the government enjoys the lowest interest rate as the most credit-worthy borrower.

But what happens if the nation state fails to revive its economy after all the borrowing? Well, then the lenders, the bourgeoisie and the widows and orphans, are toast. Vide Greece.

Do you see the difference between private-sector debt and public-sector debt? In private-sector debt it is the borrower that is making the big bet, and if the bet is a bust then the borrower, the little guy, is wiped out. But in public-sector debt it is the lender, the government, that is making the big bet. And if the bet is a bust then it is the lender, the little guy again, that is wiped out.

In private-sector debt it is the borrower, the little guy, that must pay the piper when things go wrong. In public-sector debt it is the lender, the little guy, that must pay the piper when things go wrong.

That is why I believe that widows and orphans should not put their money in banks and in municipal bonds and state toll authorities, let alone federal debt. Governments are all the same. When the going gets tough they default on their debt, all the time.

People should bet their savings on the economy, not on the government. And that means stocks.

That's because when it comes to debt, the little guy always loses.

From the Confederate Battle Flag to the Boys in the Boat

The flap about the Confederate battle flag brings out the admiration in me.

How do liberals do it? One liberal writer brings up the issue of the Confederate battle flag, that featured in the on-line rantings of the racist killer Dylann Roof, and immediately 30 million liberal hearts are beating as one to demand that the flag be taken down at the South Carolina statehouse.

Imagine if conservatives could come together on an issue and carry all before them, if only for a week!

I suppose the answer is: that's what liberals do. That's what it means to practice a secular religion and combine your religious and political practice in one. Everything is political, and everything is a moral outrage. And everything comes down to "The Issue."

For conservatives like me, things are more diffuse. Morality is separate from politics, because morality is about right and wrong, while politics is about strong and weak. And to me, "slavery" is a more complex subject than the peculiar institution that prevailing in the years in the South before the Civil War.

For instance, the plantation owners didn't choose African slaves to work their plantations out of racism. They chose them because west Africans four hundred years ago had developed a peculiar immunity to malaria. The plantation owners could have used white Europeans on their American plantations, and they did, bringing indentured servants to the Americas. The only problem was that the white indentured servants died of malaria in the malarial swamps of the east coast of North America.

Put it this way. The plantation owners that hired white indentured servants failed, because their workers all died. The plantation owners that bought west African slaves thrived, because their workers didn't die as much as the wimpy whites.

Yes, but how could those Southerners face themselves in the morning!

They could face themselves in the morning because we each of us write ourselves a moral blank check each morning, while checking the bank balance of others with admirable and searching rectitude.

That's how liberals manage to politicize the evil actions of an evil racist lone wolf while remaining silent about the black-on-black carnage in, e.g., the South Side of Chicago. And the cultural tsunami of fatherless boys in America. And the utter incompetence of government at all levels, including the apparent Chinese hack of all federal employee records.

I'm reading The Boys in the Boat by Daniel James Brown, the 2013 book about the University of Washington crew that competed in the 1936 Berlin Olympics. It follows a number of themes, from the horror of Nazism to the agonizing sufferings of Americans in the Great Depression.

But for me the overriding theme is the cultural differences between then and now. The heroes of the book, the boys in the boat, were mostly from the artisan class, and from unstable, fractured homes. Before enrolling at the University of Washington in the fall of 1932 they had faced formidable hardships in their young lives, including being chucked out by their father's second wife. There wasn't no welfare state; these young men had to find a job, had to find a place to sleep, had to find a way, somehow, to overcome -- and then pay for tuition at the UW. The book contrasts their privations, their grit, and their shame, with the easy effortless lives of their upper middle-class classmates.

Back in the 1930s in America it was white Northern European youngsters trying to build a life out of the economic chaos of a failed government and the social chaos of their parents' struggles and failures. Today in the 2010s, nothing has changed. Only now it is African American youngsters trying to build a life in the wreckage of failed government policies, and the chaos of their parents' struggles and failures.

But by all means let's stop selling Confederate flag memorabilia at Walmart.

Hey Millennials! Have I Got A Deal for You!

Everybody knows that Millennials looove the Democrats. Because gay marriage, or something.

But millennials are discouraged and demoralized. No jobs and punishing student debt.

Do you realize where no jobs and punishing debt come from? You should. A lousy economy and punishing student debt come from Democrats.

Let me explain.

The Democratic Party stands athwart the free-market economy saying Stop. That's because the Democratic Party stands for the following notions that really screw young people trying to get started in life.

• Entitlements Forever. You've been told that Social Security and Medicare are the best things since sliced bread. And so they were, for the first generation that enjoyed them. But now you chaps are stuck with the bill. Republicans stand for reform of entitlements, which will help millennials.
• Government Employee Pensions Forever. If you are wondering why the roads are a mess and that your school fees are so high, there is one overriding reason. Democratic politicians have promised pensions, payable by you, to their loyal Democratic-voting government employees at all levels of government. Republicans don't owe these folks a dime.
• Student Debt Forever. Sounds like a groovy idea. Borrow money from the government to finance your education. The only problem is that the higher education industry took the money and hiked their fees and hired a bunch of administrators that make things worse. And, of course, as you know, student debt cannot be discharged in bankruptcy.

Now I have a suggestion for you millennials. Forget cool. Forget progressives and social liberal rubbish. Forget the Democrats.  Think about Republicans, who stand, despite everything you have heard from your teachers and from your cool friends and from social media, for people without political connections, without a comfortable sinecure, without showers of subsidies for fashionable gentry liberal enthusiasms. Think about a party that, stupidly and blindly, actually represents your interests instead of misleading you with coolness and social media.

In conversation with Hugh Hewitt the other day, the blowhard Donald Trump called for new leadership in America, a cheerleader that would inject a new optimism into America and Americans. Their conversation made me realize how singularly lacking President Obama has been in the optimism department. And they agreed with each other that the way to get the attention of millennials would be in the matter of college costs and student debt.

What would you millennials think of a presidential candidate that proposed to "do something" about spiraling college costs and crushing student debt?

Just don't look for a Democratic candidate to do much about the cost of education. You see, millennials, the most central part of the Democratic Party base is the education blob, professors and adminstrators, that has grown fat and sleek on government subsidies for education and unlimited student debt.

But hey, we still have a secret ballot. So you millennials can vote what you want and don't have to admit anything to your cool friends and your social media buddies.

Meanwhile just think about which side your millennial bread is buttered. Whether it makes sense to vote for the party of privilege and patronage, or the party of people building lives for themselves. And whether it is Time for a Change, to mend the torn and divided and demoralized America that has come out of the much advertised Hope and Change of 2008.

The Trouble with Scott Walker's Tax Policies

Scott Walker is the remarkable GOP governor of the purple-to-blue state of Wisconsin and he's running for president.

His record on taxes, Henry Olsen tells us approvingly, departs from supply-side orthodoxy. In Wisconsin, he reduced the marginal rate on the state income tax for the middle-class taxes from 4.6% to 4.0%. But he only reduced the top rate on the rich from 7.75% to 7.65%. And he sweetened the pot with middle-class deductions for contributions to HSA accounts and private school tuition. No general tax rate relief for corporations, of course.

The result is that Scott Walker got reelected in a landslide in Wisconsin, but Sam Brownback, running for reelection for governor in Kansas with an orthodox supply-side record, only squeaked in.

The fact is that the middle class cares about what the politicians do for them, and that means lower taxes on the middle class. The middle class resents anyone else getting a break. And that, I'd say, is a pity.

It's all very discouraging to me, because the way out of the welfare state box canyon is not to create more middle-class sweeteners while keeping tax rates on the rich high. Why? Because high tax rates on the rich and corporations are in fact catnip for political corruption. Lobbyists can deal small-ball exemptions and carve-outs below the radar with the politicians that benefit existing powerful interests. And high marginal tax rates make it hard for newcomers to accumulate wealth to challenge the status quo.

But you can't explain that to Americans. In fact, Rule One in politics is that if you are explaining, you are losing.

Henry Olsen calls Ronald Reagan to testify for his anti-supply-side arguments. Reagan didn't sell his tax reductions on the benefits to entrepreneurs but to ordinary people. And he made sure that his tax proposals included big middle-class sweeteners.

By indexing standard deductions and tax brackets for inflation, he steered hundreds of millions of dollars to middle- and working-class families, money that theoretically could have been used to cut top rates even more. And his 1981 tax cut allowed all workers to contribute to tax-deductible IRAs, exactly the sort of middle-class tax cut that today’s supply-siders deride.

Yeah. But the truth is that these carveouts for the middle class were bubba-bait, just like President Obama's claims that Obamacare would reduce premiums by $2,500 per year. The real thrust of the Reagan tax cuts was to lower the top marginal rate from 70 percent down to 28 percent, and get entrepreneurs out of their garages. Just like President Obama's plan was to force everyone to get health insurance, whether they needed it or not.

The problem with high tax rates mitigated by deductions and subsidies is that it turns the economy into a valley with high cliffs on each side. As long as you stay in the valley bottom in sight of the politicians you do all right. But to strike out across open country? Well, first you have to find a way to climb the valley walls.

Yes, but isn't it right that government should subsidize people into doing the right thing, saving for medical and education expenses and stuff? Maybe.

But is it really a good idea to subsidize billionaire Elon Musk in his electric car startup and his solar-panel venture? Green energy subsidies are based on the idea that we are running out of fossil fuels and/or that carbon dioxide from fossil fuels is frying the planet. It's all based on current "settled science" or perhaps the latest gentry liberal fad.

My dream is for an America with low entitlements and low taxes, so that people just starting out don't pay 25% of their wages on payroll taxes, but use that money for health care, education, starting a business, saving for retirement.

But we'll never get started if we are all ruthlessly defending our own pet projects and carveouts like the proverbial dog in a manger.

The Wages of Politics is Betrayal

There's a long piece by Israeli pundit Caroline Glick about Israel's multiple betrayals of its allies.

In 1994, Israel betrayed the Palestinians in Judea, Samaria and Gaza who had helped us fight against PLO terrorists for decades. 

That's because when Yasser Arafat and his boys entered the scene they immediately neutralized the folks that had collaborated with Israel.

Then, in 2000, Israel abandoned its allies in South Lebanon.

After 18 years of fighting shoulder to shoulder with the IDF, Israel left the soldiers and commanders of the South Lebanese Army and their families to face Hezbollah alone.

Now, Glick worries, Israel needs to help their old allies, the Druze in the Golan Heights, else they will be wiped out in the aftermath of the Syrian civil war. And then there are the Kurds.

You can make an argument that Israel should have helped its former allies. But that forgets the fundamental axiom of politics, attributed to the British Lord Palmerston.

I say that it is a narrow policy to suppose that this country or that is to be marked out as the eternal ally or the perpetual enemy of England. We have no eternal allies, and we have no perpetual enemies. Our interests are eternal and perpetual, and those interests it is our duty to follow. 

This is too narrow a view. Not just in foreign policy, but in politics in general, there is only expediency, only interest.

So Israel abandoned its Palestinian allies. What did those Palestinians think would happen when they were no longer useful to Israel?

The same applies to US domestic politics. What did the white working class expect when the liberals and the Democrats declared themselves the eternal friends of the exploited working stiff?

What did women expect when liberals and Democrats declared themselves the eternal friends of women? And now liberals and Democrats have destroyed companionate marriage and turned mothers into wage slaves.

What did African Americans think when they elected the First Black President? What blind bit of good has it done them, except to confirm them in a bitter racial and cultural ghetto?

That is what the old Biblical line means: you live by the sword, you die by the sword. Live by politics, die by politics.

Marriage advocate Maggie Gallagher today writes about the lefty notion of the "social construction" of race and gender that the left demands we believe or else. But what about sexual orientation?

Oh no. That's different, and the lefties are attacked reprogramming therapists that propose to help LGBT people of faith reorient themselves towards a heterosexual orientation and traditional marriage.

What does it all mean, you ask?

The answer is that the left is all about politics, all the time. Just like the British Empire, its sole interest is in the eternal and perpetual interest of power. Today its interests include promoting black racism, feminist anti-male activism, social construction of race and gender, and "gay genes" in sexual orientation.

But if you are foolish enough to believe in any of those fantasies, be warned. The day will come when the interests of left-wing power will move on. The political colonels and generals will get in their private jets and scoot off to the next gig. You will be left by the roadside, abandoned and scorned.

That is why conservatives promote limited government and the full flourishing of civil society. Government is force; it only knows how to make war. Politics is division; it only knows how to set brother against sister. But civil society, in our notion, is about the cultivation and the flourishing of friendly relations, anchored in the natural human instinct that to get a friend you must be a friend.

In civil society if you lose a friend, well, there are others. But in politics if you lose your patron you are screwed.

That is why I feel a lot of hope for 2016. There must be a ton of Americans right now that are wondering more and more what happened to all the Hope and Change of 2008?

And the answer is the old one. Put not your trust in princes, for the wages of politics is betrayal.