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As the Private Sector Shrinks, the Public Sector Grows

2010-07-11T16:39:00.001-05:00

I remember the liberal, and even Marxist, teachers and professors I had growing up who talked about how wonderful it was that Russia had "zero unemployment." "Zero unemployment," I thought, "that's amazing!" Little did I know then that the jobs many Soviets were doing was digging holes and refilling them, all at taxpayer expense. This approach of massive government control over private dollars did nothing but create a perennially stagnant and backward society and economy.

It appears that Barack Obama is taking a chapter out of the Soviets own handbook as he pursues a similar policy agenda in the United States. But unlike the Soviets, who saw the virtue of people "working" even if the jobs were worthless, this administration is paying people to simply live off the government.

Dennis Cauchon of USA Today points out that "Paychecks from private business shrank to their smallest share of personal income in U.S. history during the first quarter of this year, a USA TODAY analysis of government data finds." While the private sector's economic muscle was in decline, the government's was moving "full speed ahead." According to Cauchon, "At the same time, government-provided benefits — from Social Security, unemployment insurance, food stamps and other programs — rose to a record high during the first three months of 2010."

This crazy, upside economic world poses several problems for a free society. With all the incentives leaning towards idleness and all the losses in productive endeavors, the future looks dim. How will the growth of the public sector spending continue to expand with a rapidly shrinking private sector to support it? Candidate Obama pledged "no new taxes" for those who are affluent. In his strange world, that will be anyone with a job.

Cauchon's column also notes the findings of the Bureau of Economic Analysis, which "reports that individuals received income from all sources — wages, investments, food stamps, etc. — at a $12.2 trillion annual rate in the first quarter." What are the key changes as far as public and private sector? Cauchon's states that, in the private sector, there was a "record-low 41.9% of the nation's personal income (that) came from private wages and salaries in the first quarter, down from 44.6% when the recession began in December 2007." As this area shrunk, we saw a rise on the government side as "individuals got 17.9% of their income from government programs in the first quarter, up from 14.2% when the recession started. Programs for the elderly, the poor and the unemployed all grew in cost and importance. An additional 9.8% of personal income was paid as wages to government employees."

What is the future of an economy that shifts so heavily to government dependence? The first thing that should come to mind is Greece, as our debt ratio quickly approaches the same levels they have suffered from for the last few years and is now resulting in that country dealing with riots as the government cracks down on previously unchecked social spending. Even if it does not lead to a completely bankrupt economy, it will clearly lead to one that is, simply put, less dynamic. Cauchon quotes economist David Henderson of the Hoover Institution who says that this shift weakens an economy when the "People are paid for being rather than for producing," he says. The "sci-fi" world of Obamanomics continues.

The Neglected Areas in the Constitution due to a Government out of Control

2010-07-11T16:37:00.000-05:00

I feel like a broken record, but the Constitution is explicit about what the federal government can and cannot do. Article I of that document lists seventeen powers that the federal government can do. The Tenth Amendment was designed to dismiss any notion that the federal government had broad powers beyond those laid out in Article I. The founders' agenda was clear -- very restrictive powers for the federal government and vast powers to the states and local governments. Thomas Jefferson may have summed it up best when he wrote in 1816 that "The way to have good and safe government, is not to trust it all to one, but to divide it among the many, distributing to every one exactly the function he is competent to. Let the National Government be entrusted with the defense of the nation and its foreign and federal relations; the State governments with the civil rights, laws, police, and administration of what concerns the State generally; the counties with the local concerns of the counties, and each ward direct the interests within itself. It is by dividing and subdividing these republics from the great national one down through all its subordinations, until it ends in the administration of every man's farm by himself; by placing under every one what his own eye may superintend, that all will be done for the best."

Instead of doing the things it is suppose to do, the federal government has pursued the role of being a panacea in all areas. It has abandoned the few -- but necessary -- elements of a strong government capable of keeping its people safe and free. There are areas in which we daily experience poor governing in several different areas in Article I, Section 8. This article will only focus on a few.

"To promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.." Charles Knobloch, who is a patent attorney in the Houston area (and a partner with the firm, Arnold & Knobloch) is a contributor onmy radio show. Knobloch has stated often on my program that intellectual property rights are among the most neglected areas of the Constitution. "Three years is the average length of time it now takes to get a patent processed," he noted on a recent program. In addition to failing to make the protection of intellectual property a timely process, the US has had a spotty record at best when it comes to defending US IP rights around the world. Intellectual property rights are crucial if you are going to enjoy increased technology, tools, medicines, entertainment, and more.

"To establish post offices and post roads..." Post Offices are on life support and the number of days they are even open or delivering are soon to be dramatically reduced. The federal government has failed to make this a truly competitive institution and its decline is now looked forward to with anticipation by many (if not most) that support the cause of free enterprise.

"To declare war, grant letters of marque and reprisal, and make rules concerning captures on land and water.." The founders never intended the US to become an international police force. Changes in a way foreign policy is conducted has lead to police actions and the deferring to the President powers historically required to be voted on by the legislative branch. The current approach of regularly deferring authority is cowardly and costly (both in dollars and lives). This is not to say that the US can afford to be isolationist and pretend it can be a "fortress America," but it does mean that the nation should choose its battles properly. One way that people will know a war is worth fighting is if Congress has the intestinal fortitude to vote for it.

"To coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures..." Essentially, Congress was responsible for our currency. Because of the genius of the founders, the federal government really had very little to spend on (for a complete list, see Article I, Section 8). Meanwhile, the states had huge powers in many areas, giving them the power to spend freely. But without the power to make money, they were limited in their expenditures. With such a situation, our government wisely made sure the currency was backed by precious metals and not the "good faith and credit" of a government out of control, as it is today. We had virtually no inflation from the end of the 18th century until the 1930s, because our dollar was honest and our expenditures were few. Now the government tries to monetize its irresponsible and unconstitutional expenditures and create a "tax" on all money through inflation.

We were given a very special national government. One that was small, but strong. Its purpose was well defined, its objectives were few, and its accomplishments, substantial. Again, quoting Jefferson, we enjoyed "A wise and frugal government, which shall leave men free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned - this is the sum of good government." We replaced this with a government that is out of control and does a poor job in virtually every area.

Will the US Government take over BP?

2010-07-11T16:35:00.000-05:00

The Obama administration's imagination as to what the government should be doing is without limits. Obama, and those who surround him, seem to honestly believe that the government is the solution to most (if not all) problems. Over the last two years the government has taken over insurance companies, financial institutions, and even auto companies, so why not an energy company? Especially an energy company that is in the process of destroying our Gulf Coast. That is the exact argument being used by former Secretary of Labor (under Clinton) Robert Reich. Reich is also an adviser to President Barack Obama and is the administration's point person for promoting bizarre government agendas. In this situation, Reich is proposing a policy approach Hugo Chavez used in Venezuela of taking over foreign companies in order to meet "national interests." I wonder what BP and the United Kingdom will have to say about this.

Reich seems to be the official tester of strange ideas for the Administration. He comes out with odd policy approaches and writes articles or give speeches in order to see what type of reaction he gets. What a job, but he relishes it. A great example was his comments on the health care reform debate. While speaking at the University of California, Reich talked about what an "honest" politician would say when running for President, if "that candidate did not care about becoming president." Reich, acting as the "sound" leader stated, "Thank you so much for coming this afternoon. I'm so glad to see you and I would like to be president. Let me tell you a few things on health care. Look, we have the only health care system in the world that is designed to avoid sick people. And that's true and what I'm going to do is that I am going try to reorganize it to be more amenable to treating sick people but that means you, particularly you young people, particularly you young healthy people...you're going to have to pay more." This is definitely the case, especially if the government is going to be the one behind the "reorganization." This is also true if it is going to be a government run system, because the only hope for price containment is in competition and there will be none of that in a national health care program. He goes on to say, "By the way, we're going to have to, if you're very old, we're not going to give you all that technology and all those drugs for the last couple of years of your life to keep you maybe going for another couple of months. It's too expensive...so we're going to let you die." Finally he said "I'm going to use the bargaining leverage of the federal government in terms of Medicare, Medicaid---we already have a lot of bargaining leverage---to force drug companies and insurance companies and medical suppliers to reduce their costs. What that means, less innovation and that means less new products and less new drugs on the market which means you are probably not going to live much longer than your parents. Thank you." Nut job? Maybe, but he is also the typical policy type that comes from this administration.

People were not particularly surprised by Reich's speech on health care and I am beginning to question if they will be shocked by what he has to say about BP. In a recent article he wrote, "It's time for the federal government to put BP under temporary receivership, which gives the government authority to take over BP's operations in the Gulf of Mexico until the gusher is stopped. This is the only way the public will know what's going on, be confident enough resources are being put to stopping the gusher, ensure BP's strategy is correct, know the government has enough clout to force BP to use a different one if necessary, and be sure the President is ultimately in charge."

I believe that there is no role for the federal government to own any business. I also believe that it is extremely dangerous for the government to get in the business of taking companies that are from foreign countries. That has a certain "petty dictator" feel to it. I must say, I like Reich's use of the expression "temporary receivership." These words remind me of the late economist, Milton Friedman, who reminded us that "Nothing is so permanent than a temporary government program." A thought to ponder when we contemplate getting the government out of the many businesses it has found itself in.

"Extreme Measures" draws Attention to how Health Care is Improved

2010-07-11T16:34:00.000-05:00

Recently my wife talked me into watching a little movie entitled "Extraordinary Measures," staring Brendan Fraser and Harrison Ford. The film had "made for TV" written all over, although the story is engaging and the lessons learned, significant. Fraser stars as a desperate father with two seriously ill children fighting for their lives. Ford plays a research scientist poised to make a significant discovery in the treatment of a terrible disease. It is inspired by a true story. The children in the story suffer from Pompe's disease, which, according to the film, those who get it as a child usually die in the 9th year. Pompe is an autosomal recessive metabolic disorder that attacks muscles and nerve cells through out the body.

My wife, Stacy, has a heart for these type of movies. We watched it quietly together and were inspired by the story. Fraser plays John Crowley, a biotechnology executive who works in the marketing side of the industry and, in the quest of saving his own children, partners with a scientist at the University of Nebraska who is on the edge of a breakthrough on treating Pompe. In order to do this, Crowley leaves a lucrative job with a major health care company in order to try and help his children. To do so he gives up a lucrative salary and will depend entirely on his entrepreneurial skills.

The movie is inspiring as Crowley first takes the developing treatment to a venture capital (VC) firm to convince them that it can significantly improve the quality of the lives of Pompe patients and that it is a worthy investment. Early stage development will require millions by the firm and assurances from Crowley that the therapy would be subject to Food and Drug Administration (FDA) review within 18 months. He has two children who are dying, so Crowley does not hesitate to agree to the terms and to make the science catch up later. In order to meet the 18 month deadline, Crowley and company hire a team of young scientists to work around the clock to get the drug ready. It becomes clear that, in spite of the amount invested and the huge amount of energy behind it, they would not meet the deadline without additional help. The VC firm then sales the development to a larger drug company and that is when things really begin to take off. With hundreds of millions of more dollars brought to the treatment, the drug finally gets a chance to face FDA review and to be used on actual patients. Meanwhile, Crowley's daughter has suffered a couple of near death experiences, so there was little time to spare.

The goal of a drug company is to have the most effective results, so the firm decides to limit the type of patient used in the tests to infants. No one under three would be allowed to participate. Furthermore, no employee would be allowed to have his or her child participate because it could undermine the objectivity required in pursuit of such science. This is devastating news for Crowley who is now a part of the company and his children are beyond the age of three. He is desperate -- even willing to steal the drugs in order to save his children. Fortunately he doesn not have to as the head of the research makes a pitch to do a "sibling" test as part of the program because it is so rare to have family members with this disorder, than the company fires Crowley to eliminate the conflict of interest.

In the end, the medicine is very successful in treating younger patients and even leads to many having completely normal lives outside the confines of wheel chairs and respirators. Crowley's own children see an end of the disease's progression and enjoy remarkable improvement. This is a real tearjerker.

I turned to my wife who was in tears and said, "that turned out to be a great movie." She agreed, even if she could not express that verbally. I then said, "You know what impressed me most?" She put together the words to say, "the power of love when parents want to save their children." I paused, but had to get my point out. "Yes, that too, but also the power of markets when it is capable of making money to improve the lives of others." Money, and the prospect of making more money, was behind the development of this drug each step of the way. She did not like it, but that is the most important lesson of this movie for me in the times we live in. More than 90 percent of all health care drugs and treatments come from the United States. It isn't because we have more "love," it is because we have more incentives. And, as we see in the movie, "Extreme Measures," incentives really do matter.

Obama Boasts about Jobs Created by Census

2010-07-11T16:33:00.000-05:00

I grew up in Detroit, Michigan and left that city when I was 13 years old. It was bad then. The common joke among "Michiganders" that "flew" South in search of jobs and opportunities is that we hoped that "the last person who leaves turns the lights out." That was back in the 1970s and the situation is even worse now. With unemployment at more than 20 percent, the actual population is now less than 1 million people. In fact, it is roughly half the size it was around 60 years ago. It no longer benefits from government programs designed for large cities and the situation is so bad that they are literally tearing down complete neighborhoods in order to reduce crime and make room for other "opportunities," whatever those end up being. In that city's current tax, regulatory, and labor environment, it is not likely to attract anything except more of the crime that has made it a wasteland.

Cleveland, Ohio is another city following a similar path as Detroit. Over the last year I have become friends with a gentleman named Mark Pogue who has been without a job for two years and is seriously looking at moving South in order to create opportunities for his family. He is like many from that once great city that have no choice, but to leave. If Cleveland, Detroit, and other one time great cities on the Midwest want to improve in the furture, they will have to figure out how to get people to stay there.

Cleveland has always been a blue collar, hard working, town. Although it has never been particularly glamorous, it had been very successful as it employed and took care of families that came there for opportunities for generations. Now it is a city on life support and Nick Gillespie of Reason.comsuggests that saving that town entails keeping the population.

When a chamber of commerce discusses a town's success on websites and brochures, one of the things they use to measure a city's success is its population growth. Gillespie points out that the numbers are not very good for Cleveland. It has experienced a decline that is very similar to Detroit, as the town has gone from almost 1 million residents in the 1950s to less than half of that today.

Yet, Cleveland is not without hope. It was not that long ago that it was a town enjoying renewal. The downtown area enjoyed enormous redevelopment (largely government driven and, therefore, expensive on taxpayers) and was becoming a cultural hot spot with a new sports stadium and the creation of the Rock and Roll Hall of Fame. But let's face it, jobs, not culture, keep cities rich in people. As a result, much of the older venues in the city are ugly reminders of how great it use to be and newer buildings are becoming monuments to the false promises of politicians who told the people that Cleveland was poised for a comeback. Millions of dollars from taxpayers were extracted from activities that make economies grow to things that get politicians reelected and fixed for life. Gillespie calls them "sweetheart deals" that demonstrate disdain towards the real needs of the public.

So how do you revive a city like Cleveland? Gillespie suggests that, since the problems of the city exists on several fronts, so should the solutions. Cleveland needs to lower the cost of government services, anything that can be done by private companies through competitive bidding should happen immediately. When you think of the high cost of government employees versus private ones, this would immediately drive costs down. This competitive attitude should be seen in the way young people are educated. The city should explore charter schools and other "choice" options on a large scale to attract people who will want their children in Cleveland's schools. Cleveland should aggressively lower its tax rates as much as possible to be more competitive to other cities that might be interested in relocating and it should reform regulations to make the city more friendly to entrepreneurs. Saving Cleveland will happen from the ground up, not the government down. Policymakers need to operate from that simple premise.

Cleveland's Plight is Familiar Story

2010-07-11T16:32:00.000-05:00

Economics 101: The Left's Refusal to Embrace Reality

2010-07-11T16:30:00.000-05:00

I am always shocked by the type of policy proposals that come from the political left. As a rule, the left completely disregards the ability of humans to respond to policy in a protective manner -- be it taxation, regulation, or licensure laws. The way individuals and businesses protect themselves is usually in a manner that does harm to the larger economy. For example, when the minimum wage goes up, unemployment always goes up for the very groups such a policy is "intended" to help -- young people and minorities. The law is suppose to increase the quality of life for these low income earners, the result is less jobs, which means there is no benefit at all.

A recent article in the Wall Street Journal by Daniel Klein begins to shed some light on the real reason there is a distance between liberal policies and reality. .The column discusses the results of a simple economics test among people of different ideological perspectives and it shows a huge disconnect among liberals when it comes to the logical consequences of certain public policies.

The article asks the reader to "Consider one of the economic propositions in" a "December 2008 poll: "Restrictions on housing development make housing less affordable." People were asked if they: 1) strongly agree; 2) somewhat agree; 3) somewhat disagree; 4) strongly disagree; 5) are not sure. Basic economics acknowledges that whatever redeeming features a restriction may have, it increases the cost of production and exchange, making goods and services less affordable. There may be exceptions to the general case, but they would be atypical. Therefore, we counted as incorrect responses of 'somewhat disagree' and 'strongly disagree.' This treatment gives leeway for those who think the question is ambiguous or half right and half wrong. They would likely answer 'not sure,' which we do not count as incorrect. In this case, percentage of conservatives answering incorrectly was 22.3%, very conservatives 17.6% and libertarians 15.7%. But the percentage of progressive/very liberals answering incorrectly was 67.6% and liberals 60.1%. The pattern was not an anomaly."

It would be nice if the above was an exception, but these answers epitomize liberal thinking when it comes to the link between policy and consequences.

Klein points out a trend through exploring other questions. 1) Mandatory licensing of professional services increases the prices of those services (unenlightened answer: disagree). 2) Overall, the standard of living is higher today than it was 30 years ago (unenlightened answer: disagree). 3) Rent control leads to housing shortages (unenlightened answer: disagree). 4) A company with the largest market share is a monopoly (unenlightened answer: agree). 5) Third World workers working for American companies overseas are being exploited (unenlightened answer: agree). 6) Free trade leads to unemployment (unenlightened answer: agree). 7) Minimum wage laws raise unemployment (unenlightened answer: disagree)...How did the six ideological groups do overall? Here they are, best to worst, with an average number of incorrect responses from 0 to 8: Very conservative, 1.30; Libertarian, 1.38; Conservative, 1.67; Moderate, 3.67; Liberal, 4.69; Progressive/very liberal, 5.26."

How big was the gap between those with a free market philosophy and those who support excessive government action? Klein notes, "Yet on every question the left did much worse. On the monopoly question, the portion of progressive/very liberals answering incorrectly (31%) was more than twice that of conservatives (13%) and more than four times that of libertarians (7%). On the question about living standards, the portion of progressive/very liberals answering incorrectly (61%) was more than four times that of conservatives (13%) and almost three times that of libertarians (21%)."

When I look at the gap between the left and those who support a view grounded on liberty, the psychologist inside of me wants to come out. I want to evaluate the political left and determine why the link between policy and consequences is not there. It could be they make decisions that are emotional and with little regard to logic. The desire to take away economic and social problems through mandates seem wonderful on the surface, but they do not happen in reality. It is interesting that the left, which seems to make decisions based on emotions, does not understand the role emotions play when it comes to bad policies. Liberals think people are like trees, if they are attacked they will obediently comply. In reality, when people or businesses are attacked by harmful policies, they fight or take flight. Because of this reality jobs disappear (with higher minimum wage), businesses close (because of excessive regulations), and people suffer from policies that simply do not work in the real world.

The Uninsured and Emergency Rooms

2010-07-03T22:21:00.003-05:00

Rarely would one expect to find anything interesting from an agency called the National Center for Health Statistics (NCHS), but a report on how emergency rooms are used and by types of groups is creating quite the stir among advocates of government health care and ammunition for opponents of socialized medicine. NCHS is the nation's primary health statistics agency and its new report suggests that the perception of our emergency rooms being dominated by the uninsured is based more on fiction and propaganda than on fact and reality.

The prominent use of the emergency room by the uninsured was one of the most frequently heard arguments for the President's socialized medicine program. Since people know they can get treatment there without paying immediately (if at all), they would fill up the room regardless of how small the need. The argument goes on that this care costs so much more and when done for non-emergency needs, it creates a disruption of care for those who really need emergency treatment. Devon M. Herrick, a health economist and senior fellow at the National Center for Policy Analysis, believes the data from the NCHS paints a very different picture.

So who are the biggest users, those most likely to misuse, and even abusers of emergency rooms? According to NCH,S it is a group that already has government health care...individuals in the Medicaid system. Here are some other findings:

Approximately 32 percent of these Medicaid enrollees used the emergency room at least once during a 12 month period in 2007. Meanwhile, those with private health insurance were only about half as likely (17 percent) to go to an ER, and a similar number (around 20 percent) of the uninsured did the same in that time frame.
Medicaid enrollees were three times more likely than those with private insurance and twice as likely as those who are uninsured to go to the ER twice in that past year.
There are approximately 120 million ER visits made in the United States each year. These make up approximately 11 percent of all ambulatory visits.

One thing that there is little debate among health care professionals is that many of these 120 million ER visits could be better handled in other environments (such as a doctor's office, emergency clinics, etc.). Dr. Stephen Nichols, a regional medical officer for Schumacher Group, says "In general, 5 percent to 25 percent of patients who visit an emergency department in a community hospital have non-urgent complaints that could easily have been addressed in an outpatient setting," The Schumacher Group contracts for emergency department services at community hospitals.

The Heartland Institute in its report on the uninsured and their use of emergency rooms, quotes Dr. John Dunn, an emergency room specialist from Brownwood, Texas who noted that "Thirty percent to forty percent are emergencies or urgent care and deserve treatment within a reasonable time. But it is care that could be seen to in an urgent care clinic or a well-equipped office, though the patients probably are better off in the emergency department."

Why are Medicaid patients the most likely to use the ER in a less responsible manner? It simply comes down to the economic way of thinking. People with private insurance pay significantly more in co-pays for using an emergency room over a clinic or doctor's office. Therefore, avoiding the Emergency Room makes economic sense to them as consumers. Obamacare will essentially have all Americans treated similarly to the current Medicare patients. As a result, one can expect ER abuse to explode once socialized medicine goes fully into effect. This NCHS study not only weakens the argument for socialized medicine, but would be a devastating blow if facts still mattered in public policy debates.

How Would Federalism Work?

2010-07-03T22:20:00.002-05:00

"Restoring the Constitution" is a phrase that is catching on with people. So is "federalism" as people lament a national government that has become out of control and is spiraling our nation into a downfall. But many also wonder what, exactly, do these concepts mean?

Many have dropped the term "conservative" altogether, because there is really very little left to "conserve" these days. Taxes, regulation, and spending are out of control and the other institutions that have supported our liberties are either being abused or are in decline. The US is on the fast track towards socialism. We need a different paradigm to put our nation back on track. That is where the term "restoration" comes to mind. The United States has lost sight of the things that have made it the most free and prosperous country in the history of the world.

To "restore the Constitution," we would have to review at the things the government can and cannot do according to our founding document. Article I, Section 8 lists the seventeen powers specifically enumerated to the federal government. All of these things are important and the government's function in these areas was suppose to be strong, in order to protect the liberties of every American. Some of the things allowed include standard weights and measures, coining money, post offices and post roads, the protection of intellectual property, and a national defense. Beyond these and a few other very specific items, there was not much for which the federal government was responsible.

So how did new medicines get regulated? How would certain industries be licensed? What about the many other things done today by the federal government, who would do them? This is where we get to the idea of "federalism." You see how it was designed to work clearly in the Tenth Amendment of the Constitution: "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people." That word, reserved, speaks of exclusivity. This was not a preferential view of public policy ("it would be best if the states and people took care of these things"), but a mandate (if it is not listed in the US Constitution, it is for the states and the people).

The vast majority of regulations that exist through out state governments came into place from states watching the works of one another. With the many states, our country had a vibrant laboratory with new ideas being brought to the surface and each state emulated those laws that worked best. This system worked very well. As the rest of Western civilization largely limped through the 19th Century with stagnant economies and governments in excess, the US was a vibrant powerhouse that focused on industry and innovation. Government did not get in the way, but largely cleared the way for progress.

The ideas behind this system are both simple and profound. The state governments had virtually unlimited powers, but limited amounts of money. It could not "print money" to fund its programs, because only the federal government had the power to do such. On the other hand, the federal government only had 17 powers and it had no reason to use inflation as a vehicle to fund its programs. This contributed to the value of the US dollar remaining constant from the era of the founding until the early part of the 20th century (during the New Deal we began to devalue our currency to pay for "extra Constitutional" or unconstitutional government programs).

Money was not the only restraint put on the states, but also good old fashion competition. If any one state became too excessive in its regulations, taxation, generosity in social spending, or in any other way, people could (and would) vote with their feet to go to places with more fiscally responsible environments. During the early 19th century, the Whig Party's "internal improvements" program (very similar to earmarks today) had a devastating effect of state budgets around the country and led to massive migrations nation wide because of the high taxes that followed. In no time every state, except for Massachusetts, had prohibitions against such programs placed in their constitutions. Since people could leave states because of policies that were economically harmful, all states tended to demonstrate much more restraint in their spending and regulations, which led to greater prosperity for the nation as a whole.

Federalism works. It is in decline today only because of the appetite of the federal government. The national failures seen through out the federal government today -- inflationary monetary policies, unemployment out of control, and a debt growing exponentially -- are all very eloquent arguments for restoring both the Constitution and federalism.

Obama Seeks Another Bailout

2010-07-02T22:46:00.001-05:00

In early 2009 the Obama administration informed us that, without more subsidies, the US would see unemployment of eight percent. In a little over a year the government has spent trillions of dollars in bailouts and unemployment is now at ten percent. Furthermore, there is no sign of relief in sight. With that, Obama is trying to do what he does best...ask for more bailout dollars.

FoxNews.com reports that "Congressional leaders received a letter from the president asking for almost $50 billion for distribution to state and local governments, saying that increased spending is 'urgent and unavoidable,' the (Washington) Post reported. The money would protect the jobs of teachers, police and fire fighters. 'Because the urgency is high-many school districts, cities and states are already being forced to make these layoffs,' Obama wrote, 'these provisions must be passed as quickly as possible.'"

Many clichés come to mind when you see this scenario. With a Bush bailout, Obama plan, and now this current effort, one thinks of "three strikes and your out," or "third time's a charm," but I think the most accurate might be that the "definition of insanity is to do the same things over and over again, expecting different results."

Instead of pursuing more government dollars, the administration should learn the lessons of these type of expenditures to date:

Bailouts of industries actually have an adverse effect on business behavior. For example, there is a growing view that government bailouts of banks have made them less likely to give loans, since such money came with numerous strings (which include prohibitions for some loans, regulations, etc.) and other factors that make lending less attractive. Generally speaking, the amount of loans generated has seen very few changes since the bailout of 2008 or any of the other actions since then.
The reason public employment is particularly vulnerable is because these jobs cannot support themselves without more tax dollars. They are not self sustaining. When Obama did his little dog and pony show in 2009, in which he had photo opportunities in front of law enforcement officials in cities around the country, many economists, pundits, and writers warned that such was unsustainable without more tax dollars. Proof is in Obama's new request for another $50 billion dollars.
Real job creation is sustained through tax, regulatory, and market environments that encourage such. Lower corporate tax rates or lower rates on anything that can stimulate economic activity, leads to employment that is self sustaining. In fact, these jobs lead to the creation of more employment through the engine of free enterprise. Every one of these type of jobs that are created are through voluntary exchanges and not the government confiscation of wealth.
One of the reasons unemployment is so high is because every time the government pursues bailouts, there is a destabilizing impact on the business environment. These bailouts do not happen in a vacuum as businesses ponder future tax increases, inflation for printed money to pay for such programs, new regulations and conditions that come from the bailouts, and other issues that hinder -- rather than spur -- economic growth and job creation. These bailout foster more caution rather than spontaneous economic activity.

Real economic growth comes from having the lowest corporate taxes in the industrial world (instead of the second highest, like it is today). The government should also create a regulatory environment that is competitive (in terms of ease of doing business) with any other industrialized country. Business should be allowed to face the negative consequences of failure (and enjoy the restoration of moral hazard) in order to encourage companies to behave more efficiently. Finally, the government should provide incentives to work rather than be dependent on the government. Such steps would actually make it possible for Obama to increase the revenue coffers, rather than ask for more money that is simply not there.

The Next Major Financial Concern Could be College Tuition

2010-07-02T21:56:00.001-05:00

For decades the cost of college has roughly been double or even triple the pace of inflation. The increases in recent years have been so fast and high, many are concerned that we are about to witness another bubble in America similar to the housing one that we have yet to fully recover. Recently, I saw from theNational Center for Policy Analysis (NCPA and they quote extensively, Naked Law) that there are many indicators that this bubble is about to burst.

The cost of going to college is now doubling every nine years, on average, because there are typically eight percent increases each year.
Because the government has made it extremely easy for students to get money (and even "more money" in increases) thanks to the government, supportive parents and immediate gratification, colleges have made frequent tuition hikes their primary vehicle for solving their money problems. While fund raising has flatlined and investments have plummeted, students have quietly turned over more and more money to Uncle Sam.

Students are accomplishing this expensive right of passage called college by borrowing more now than ever in the history of higher learning. In fact, according to NCPA, the number of students who graduate with over $25,000 in debt has tripled in the last decade alone. Furthermore, 2/3rds of today's college students borrow money to pay for college and they take on a debt of $23,165 on average.

Some of the behaviors being deployed by for-profit colleges in their quest for dollars are disturbing. Some have gone so far as to paying homeless people to take out federal loans to enroll with no intention of attending. These loans are very easy to acquire because of the government's backing, clever schools are getting these people to enroll and giving them 10 percent of the action. In the end, what you have, is a $20,000 loan paid to the school and a $2,000 "stipend" for the homeless person -- thanks to the generosity of the federal government in the form of tuition payments.

Colleges and universities are continuously arguing that they "need more dollars." Yet it appears that these institutions have spending problems that are similar to the government's. This is seen in the fact that university presidents have a salary that is sky high, while we have a historically weak economy. USA Today has reported that 23 presidents of private colleges made more than $1 million in 2008, while 110 more made over $500,000. This is a new phenomenon, linked to the "trough" mentality pervasive in these schools in the way they look at the federal government. As of 2002, there were no "million dollar" university presidents.

Higher education is a perfect example of government out of control and how public dollars artificially increase demand and leads to enormous waste without accountability. Market sensibilities need to be brought to colleges and universities today.

How Bad is the National Debt?

2010-06-25T15:47:00.002-05:00

We have known for years that our debts and deficits have been out of hand, but the Congressional Budget Office (CBO) is painting a picture that is almost sci-fi in its proportions. It is the kind of picture that we would assume would come from the Third World or, at least, from Greece or Spain in the EU.

The founders of this republic designed a uniquely American political model that promised fiscal integrity. Simply put, the federal government was limited to 17 specific powers, none of which would cause the kind of financial strain our country faces today. Meanwhile, all other powers were left to the states, but the inability of those governments to print money made them fiscally healthy and naturally small. Because of this, it took almost 200 years for the federal debt to reach $1 trillion. Many found that alarming at the time, but since then we have arrived to the point that we add a $1 trillion to the debt every year.

The CBO is now arguing that the US is facing a crushing debt and this nation is being forced into the position of having to dramatically cut social spending in order to stay afloat. Other findings include that:

Federal spending will grow to 26 percent of gross domestic product (GDP) within the next ten years and reach highs of up to 35 percent by 2035.
Take growing health care costs and add an aging population and you have a significant increase in federal spending and the national debt that will grow worse unless there are serious policy changes.
The national debt is projected to grow as high as 87 percent of GDP in the next decade. To make matters worse, it will reach 109 percent by 2025 and could peak at 185 percent by 2035.
The CBO politely calls the long-term outlook of the budget as "daunting," and argues that growing costs will limit the choices policy makers have and force draconian cuts in spending.

There are huge debates on all sides of the political spectrum on how spending has grown out of control The political left argues that "expansionary" military policies have led to a costly "military-industrial complex" that has put us in this dire situation. The political right argues that it is the outrageous growth in domestic spending (which is more than 3 to 1 to defense spending) that has caused our financial crisis. Bottom line, our financial crisis is linked to the simple fact that our government seems to no longer be bound by the rule of law. Without Constitutional restraint, there is no fiscal restraint. Until the former is addressed, we can expect our financial situation to only get worse.

Prosperity in Texas makes a Case for Federalism

2010-06-25T15:46:00.004-05:00

Article I, Section 8 of the Constitution makes it clear -- the federal government is limited to 17 specific powers and nothing more. To make sure the people understood such, the founders gave us the Tenth Amendment, which states: "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people." The founders wanted a weak federal government and strong states for several reasons, among them:

The delegates to the Constitution Convention were sent there to represent the interests of the states. There was no national government and it had no representation at that event. It was entirely about the interests of state governments.
The states knew it was better to have problems solved in specific states, instead of making any issue a national problem. The concept is simple, "divide and conquer."
Competition among the states were designed to maximize liberties. Regulations would be modest, as would taxes, in all the states in order to prevent the exodus of unhappy citizens.
When problems are solved on a state level, other states get the next idea on how to tackle the issues they face.

Today, states could learn from Texas, which has led other states in job creation. The Texas office ofAmericans for Prosperity, notes the Workforce Commission found the state added "43,600 nonagricultural jobs in May. This marks the largest over-the-month increase in employment in the nation and is the largest monthly gain in more than three years."

"Individuals and businesses are flocking to Texas during these tough economic times," said AFPF State Director Peggy Venable. "The reason for this is clear - our business environment is competitive, taxes are low, and we have no income tax. All of the right elements are in place to ensure prosperity and opportunity in our state."

States are competing for businesses. Some states, like Michigan and Ohio, are not even contenders because their tax, labor, and regulatory environment are hostile to job creation. Those that are still "players," like Texas, recognize that taxes and regulations are simply a fixed cost of doing business. These things are very similar in the eyes of decision makers as the cost of office space, labor cost, and other factors. Just like companies have a choice on these factors, they also have a choice as to where they do business. They will look for the most cost effective pricing in order to be more competitive.

Since Texas has among the lowest costs for labor in the country, among the most friendly regulatory environments, and among the lowest in business taxes, Texas is very hot for business. The federal government, on the other hand, is providing a huge weight on all businesses to such an extent that other countries -- regardless of the virtues of Texas -- are looking more attractive daily. The current economy and the example of Texas makes a great case to restore the founders' idea of federalism.

The Truth about Taxes

2010-06-25T15:46:00.003-05:00

Recently I have been chronicling the development of a specific and even systematic economic policy in the Obama Administration. It is a program that is based on the simple idea that a bad economy is a good thing, because of the long term "reforms" such can produce.

This policy was articulated early in the Obama administration as seen in an interview White House Chief of Staff Rahm Emanuel had with the Wall Street Journal, stating that "You never want a serious crisis to go to waste, and what I mean by that is an opportunity to do things that you didn't think you could do before." Emanuel was noting that it is difficult to make major public policy changes when the economy is strong and healthy. In other words, if everything is well, why do you need “change?” When things are bad, however, you have some justification.

This view was further reiterated recently by Attorney General Eric Holder, who told graduates at Boston University that "Positive change is the consequence of unfavorable and not favorable circumstance. Progress is the product of darkness, not light. Whenever you look into our past, this is true... It was economic turmoil that brought us the progressive era and the New Deal." In other words, the Great Depression led to 25 percent unemployment, but look at the amazing Leviathan called big government we received from it. In the end, "the Great Depression was a good thing." This is a hard concept for most Americans to buy.

The theme continued with one of the President’s key allies in the Senate, Christopher Dodd (D-Conn.) who, upon passage of a very controversial and far reaching banking bill, is quoted by the Washington Post (with tears in his eyes) as saying that "It's a great moment. I'm proud to have been here. No one will know until this is actually in place how it works. But we believe we've done something that has been needed for a long time. It took a crisis to bring us to the point where we could actually get this job done” (emphasis added). This bill could damage the lending abilities of banks, could take away the ability of the middle and lower income groups to even be able to get a checking account, and have even greater implications on individuals and businesses. With a crisis though, you can do things you cannot do under normal circumstances. In fact, you can even make sweeping policies, without knowing their implications, as seen in this far reaching banking legislation.

I have never been comfortable with conspiracy theories. After all, a conspiracy theory looks at the types of choices that are made and (particularly if the results are negative) the theorist makes conclusions on the intent of the policy. We are naturally uncomfortable with such, because no one wishes to judge the motives of others. The Obama Domestic Doctrine is neither a conspiracy nor a theory, but a stated policy intention reinforced by senior officials in the administration and its allies in other areas of government. The administration has made its view clear: economic hardships and the bad policies necessary to achieve such, are a "good thing" for the economy in the long term, because of the "positive" long term effects. Furthermore, policies that would actually relieve economic hardship may be "harmful," since such could undermine the need for government expansion. I wonder how many American had such in mind when they voted for this President and this Congress.

The Continued Development of the Obama Domestic Doctrine

2010-06-12T17:00:00.005-05:00

The "Macro" Could Learn from the "Micro"

2010-06-12T17:00:00.004-05:00

The headlines that dominated the news from Congress this week could be summarized by one seen at Bloomberg.com: "Republicans Thwart Bill With Unemployment Aid." That dastardly GOP, always hurting America's poor! The fact the national debt is now growing at a rate of $1 trillion annually, has finally become an issue to Republican members. Bloomberg notes: "The latest version would have added $33 billion to the budget shortfall...Republicans said the cost-cutting didn't go far enough." The Obama administration initially sought $50 billion in aid.

But the cost was not the only concern. The truth is, Republicans are worried that, after months of financial assistance, those on these benefits may be getting too used to getting 'something for nothing" and are concerned about what affect such plans are having on job searches. It is not much different from the forty something sons in the movie "Step Brothers," you have to give these guys an incentive to take care of themselves. Sure, in the long term, subsidy of adults makes for a funny movie, but also for a disastrous domestic policy. Such policies foster long term dependence and poverty, when people are needing economic freedom and the prosperity that comes with it.

I have spoken before of my father-in-law from Minnesota, whom I consider a friend and really enjoy his company. We both love golf, classic rock, and my family, but when it comes to politics, we tend to have to keep our conversations short. One time when, he and I were both golfing we began discussing his future retirement, at that time he noted that he planned on moving to South Dakota. I knew he was from there originally, but I also knew he loved his adopted home. So I asked him why he was leaving and he said, "that's easy, South Dakota has a much better tax situation for retirees than virtually any state in the country." I cannot begin to state the many times he had told me how unpatriotic businesses were to leave the country because of tax and other laws.

Obviously I couldn't resist, "so here you are, the average American, who is smart enough to change where you live to protect your wife and you from higher taxes, but you don't expect businesses to do the same thing with often large numbers of employees and even greater tax implications?" It is very rare to get him to get quiet once we get started (and he would say the same about me), but he had that knowing look on his face that this conversation was now done.

The United States has the second highest corporate tax rates of any industrialized country in the world and could be number one in this dubious area as early as next year. Businesses are about efficiency, profit, and looking out for the interest of its stockholders. Taxes, like regulations and licensure laws, are just a fixed cost of doing business. If the costs get too high, businesses have no choice but to move to better places for commerce. It isn't personal, it is just business and now it is easier than ever to do such.

Most of the things that work or don't work on a micro level, translate the same on the macro level, because in both cases they include human nature and humans tend to respond to incentives (and disincentives) the same way. If the government could eliminate their fantasy and replace it with reality, all of our lives would be so much better. If you work more, you make more in business, but we want a tax system that equalizes the rewards of our activities? If companies do that, they go out of business. As we look at economies all over the world, so do countries. We need to elect public officials who will ask the question, "would the approach of this policy work in my home, my work, or any other part of my life?" If the answer is no, it will not work for the nation. That is economics in the real world and that is exactly what this country needs, a little dose of reality.

G20 Considers Europe's Economic Nightmare

2010-06-12T16:59:00.003-05:00

It is that time of the year again where riots break out in the city that has the misfortune of being the host of the G-20 meeting. The unfortunate city this year is Huntsville, Ontario (Near Toronto, Canada). Most of the protests are in opposition to the blatant capitalism that the participating countries are "guilty of," according to organizers. What "capitalism" they are talking about these days, it is hard to say as these countries reconsider the austerity measures that are the only means many of these nations have to save themselves, according to Ann Mettler of the Lisbon Council.

It is obviously best to make reforms when economies are stronger and are more able to better sustain cuts to services in programs. Unfortunately, European countries cannot afford such a luxury, according to Mettler. For example, France has not enjoyed a balanced budget in almost 4 decades and this includes many years of economic growth, which could have made cutting spending less painful. Meanwhile, members of the European Union have been accumulating debts at a break neck pace and governments are saddling themselves with increased obligations, particularly for pensions, and without any plan for paying for them in the future. Furthermore, these governments have long taken a chapter out of America's book of pursuing social welfare at the expect of what is in the best interest of the economy as a whole. They simply pass the burden on to future generation and future elected officials.

The "writing has been on the wall" for these countries for quite some time. Standard & Poor's predicted back in 2006 that by 2050, the debt burdens in Italy and France would be well above 200 percent of gross domestic product (GDP), and about twice as high in Portugal and Greece. It was also predicted four years ago that the aging European demographic would create serious problems for the "next decade." Well the next decade has arrived and there is no plan or strategy poised to address the problem.

So the people of Europe -- particularly the hard hit country of Greece -- are complaining about the severe "austerity measures" designed to get spending under control. For most of these countries, such is the only serious attempt to look at the financial numbers in decades and is well over due. Mettler argues that the Union has faced a three headed dragon for years: excessive pressure on public spending, an aging population, and a shrinking share in the world economy. These realities require these countries to make decisions that, just a few years ago, seemed unimaginable. Unfortunately, the US is right around the corner from having to make similar choices.

Obama's Controversial Domestic Doctrine

2010-06-05T23:35:00.007-05:00

It seems every President is remembered for something. In recent decades, we recall Ronald Reagan ending the Cold War without a single shot and for making it possible for individuals to control more of their incomes (through tax cuts), and calling that (wisely) patriotic. With George H.W. Bush we saw a dramatic increase in regulations that benefited very large companies and the breaking of a "no new tax" pledge. There are few that wonder why he was only a one term president. Then there was Bill Clinton who, at first, attempted a massive take over by the federal government in health care and other industries, but was savvy enough to read the political "tea leaves" when the Republicans took over the Congress in 1994 to govern as a moderate. In fact, his biggest policy achievement may have been the ending of "welfare as we know it," which led to a dramatic decrease in the number of people below poverty level.

If you fast forward a little you find George W. Bush, who created a controversial foreign policy that became simply known as the "Bush Doctrine." The Bush Doctrine argued that the US could act unilaterally and without regard to other international organizations in protecting its interests from potential terrorists. This approach was used to pull the US out of some relationships (the ABM Treaty and Kyoto Protocol). Some have argued that the Doctrine was used as grounds for a preemptive strike against Iraq. Everyone on both the left and right debate its merits to this day. Bush was also known for setting the stage (with TARP) for a massive take over of the US economy.

So what will be Obama's policy legacy? I believe many will look back at what will be called as the "Obama Domestic Doctrine." Very early in the Obama administration, the President's Chief of Staff, Rahm Emanuel, told the Wall Street Journal that "You never want a serious crisis to go to waste, and what I mean by that is an opportunity to do things that you didn't think you could do before." What "things" was Emanuel talking about? Obviously the massive take over of the health care system is something they would argue because things "are not working" in that area today. More government bailouts would be a part of the Administration's solution to problems the country is facing. How about the restoration of the power of unions at the expense of the individual worker? The list goes on. As long as things are "bad," the case can be made for doing anything. It is when the economy is working well and prosperity is increasing that it becomes difficult to make the case for more government intervention.

This view by the Obama Administration is not isolated to Emanuel. Recently the Attorney General, Eric Holder, gave a speech to Boston University in which he sang the praises of the difficult times we have had in history because of the policy changes that came as the result of them. He said that "Positive change is the consequence of unfavorable and not favorable circumstance. Progress is the product of darkness, not light. Whenever you look into our past, this is true... It was economic turmoil that brought us the progressive era and the New Deal." Interestingly, on the micro level, when something goes wrong in the lives of friends or family, we want to help out temporarily so those people can get on their feet (AKA independent) again. The Obama Administration sees policies that create permanent dependence on the state as good. Those type of policies, according to Emanuel and Holder, are the result of weak economies and not ones that are prosperous. Simply put, "strong economies mean strong individuals, and that is bad." "Weak economies mean weak individuals, and that is good." I did not state it, I'm only reporting it.

With such a view that the expansion of government into areas it never had a role in historically as "good," is it safe to assume the Administration will continue to pursue policies (moratoriums on drilling, increases of minimum wage, higher taxes on businesses, etc.) that will add to our historically high unemployment and economic instability? Obama's senior advisers seem to be making just such a case.

America's Road to Serfdom

2010-06-05T23:35:00.006-05:00

It seems as though millions of Americans have woken up to the reality that the United States is on the fast track towards socialism. The individual is shrinking in importance as we give homage to the collective mob. This is not a new problem. Barack Obama has simply made the situation so bad that Americans have finally begun to wake up and take notice. It is too bad it has taken so long, we have needed awareness for generations.

It is interesting that many of the Founding Fathers found themselves testifying to legislative bodies about what they meant when they wrote the Constitution. Some members of Congress in the early 19th century, who heard James Madison's eloquent testimony that the federal government actually owed its existence to the states, argued that is not what the founders meant. Madison stated in Federalist Paper 45 that: "The powers delegated by the proposed Constitution to the federal government are few and defined. Those which are to remain in the State governments are numerous and indefinite." It is clear what Madison meant.

However, Madison's own colleague and one of the co-authors of the Federalist Papers, Alexander Hamilton, had a consolidated view of government that stood in contrast to Madison. These two views -- the dispersion of power and its collection, have become the two biggest themes and tensions in US history.

From the founding era until the mid 19th century, those who supported the dispersion of power to the states largely ruled the day. Certainly, there were movements away from the Founder's original intentions, but the states remained largely strong and the federal government was mostly very limited. The following are some of the major benchmarks that got the US to the point it is today:

The Civil War. This was the first major paradigm shift from state power to its consolidation by the federal government. Before the war, it was believed that since the states created the federal government, they could succeed if they deemed it necessary. Our history books argue this war was about slavery, but the US is the only major country that required a civil war to end that institution. This war had far more to do with the consolidation of power than liberating slaves. Before the Civil War, Americans would say, in talking about their country, "The United Statesare..." Following the Civil War, they would say, "The United States is..." This reflected a significant change in US politics.
The progressive policies of Woodrow Wilson. Wilson greatly weakened states' rights when US Senators were no longer chosen by state legislatures (through the Seventeenth Amendment) but through direct vote. This may have made the majority stronger, but it weakened the power of the states to protect individuals. Furthermore, Wilson brought us an income tax in the Sixteenth Amendment, which was explicitly opposed by our founders in Article I, Section 8 of the Constitution because of the fact it would harm wealth creation and the government had no business knowing how incomes were earned. Finally, the federal government created the Federal Reserve, which started us down the road to political, rather than sound, money.
The New Deal. Franklin Roosevelt created an entire shift in the role of government from protector to provider. His many "New Deal" programs changed the expression "general welfare" (which is beneficial to all) into specific welfare that harmed the economy and created entitlements. Many of his policies were reversed by the courts, many more changed the role of government forever.
Lyndon Johnson's "Great Society." Johnson's "War on Poverty" ended up becoming a war on the poor as the number of people below poverty level grew. Johnson chilled personal ambition with welfare programs that gave people every incentive to stay poor and, for the first time in US history, the percentage who were below poverty level found themselves growing every decade.

This leads us to where we are today. Barack Obama has utilized "Czars" as a way to have an unaccountable government when it comes to the Legislative branch. He is passing laws that are clearly unconstitutional and against the will of the voters (e.g., socialized medicine). He is developing a foreign policy that rewards our enemies and threatens our friends. He is waging a war on wealth creation that has lead to the highest unemployment in over 25 years and has developed a domestic doctrine that pursues a bigger crisis as a case for more government. Obama is not our first "mover" towards socialism, but he may be one of the most effective. We need to understand where we came from and how we got here, if we are ever going to get this republic on the road to liberty.

BP Disaster makes Contrarian case for more US Offshore Drilling

2010-06-05T23:35:00.005-05:00

British Petroleum's (BP) environmental disaster off the Gulf Coast has dominated the news headlines for several weeks. Unfortunately, the media seems to have limited its focus on the oil spill and not on the ways it could have been prevented.

Since the disaster I have spoken to several energy industry leaders who have told me, on the basis of anonymity, that BP has a reputations of being slack in the way they drill oil and its safety standards do not compare to what US companies enjoy. In fact, a similar accident on the part of a company from the US would have led to an immediate shut off because of the technological and safety standards. I have been told that BP is "impatient" with US companies because in its view the latter "are" slow in their processes and are "obsessed" with safety.

The economic case for increased domestic drilling is simple and with our current economic crisis, it is more important than ever. It will quickly lower gas prices by increasing future supplies. What most opponents of domestic drilling fail to realize is that the mere threat of increased production can lower prices. A simple debate on the subject has had the power to lower the price per barrel by over $30. This is without a vote and without new exploration. This is merely due to rhetoric. Imagine the impact once we increased drilling.

The national security argument makes perfect sense too. In 1970 we imported 24 percent of our oil. Today it is nearly 70 percent, and that number continues to grow. If foreign countries decided to stop supplying us, we would be in a true crisis. Security, as well as prosperity, are wrapped up in our energy future. The shrinking US oil supply is not because of scarcity, but because of poor policies on the part of the US government.

The disaster off the coast provides the moral and environmental case for domestic drilling. Increased US drilling is the "green" thing to do. For years we have been told by environmentalists that this planet is little more than a "big blue marble." Simply put, environmental disasters on any part of the planet has an adverse impact on the entire planet. If that is the case, who better than the United States to increase drilling? Right now, Cuba and Venezuela are eying off shore drilling opportunities near the United States. Some of these are very close to where BP's disaster took place. Regardless of how backward BP is, it is generations ahead of Cuba in technology. Do we prefer their technology, safety standards, and labor over that of the US? Any time the United States can take the lead on drilling; people, animals, and pristine environments are better protected compared to the means of any other country.

International waters -- in the Atlantic, Pacific, and Gulf Coast -- are very close to the shores of the United States. Do we want the pursuit of energy that can be found there to be done by the leader in technology and safety or by countries like Cuba, Venezuela, or even Great Britain? Drilling will happen, but by which countries? The BP disaster makes an eloquent case for the US to take the lead.

The Constitution vs. Health Care "Reform"

2010-06-01T22:22:00.003-05:00

One of the few "funny" stories to come out of the sweeping health care legislation to go through Congress was that the majority who wanted reform -- but did not want it applied to them -- woke up finding themselves subject to those laws. They, too, will eventually find themselves burdened by the same burden of taxes, regulation, and rationed care that the rest of us will suffer. This was not the only thing they failed to notice, but also the fact that this bill is an easy target for attack in the courts.

Investor's Business Daily (IBD) notes that several parts of the law should simply not survive a constitutional challenge. Nancy Pelosi was the subject of many jokes when she essentially said, "we will not know what is in the bill until we vote on it." Many now wish they had looked a little closer at the fine print.

The first and most obvious place for the courts to focus on according to the IBD piece is "the individual mandate that requires those who aren't previously covered by insurance to buy a plan." The federal government has never had the power to require individuals to purchase something from a private or publicly owned company. Politicians lack a fundamental understanding of this principle. Recently I moderated a forum that featured the Democrat's nominee for Governor of Texas, Bill White and I asked him about his view of the President's health care reform and, in particular, the appearantly unconstitutional mandate that indivudals would have to buy something from a company. He, quipped, "like auto insurance?" Auto insurance has been a requirement for decades, but always on a state level. Even then the anology is only true if someone wants to own and drive a car. The federal government's powers are different from the states as seen clearly in Article I of the Constitution. White is a graduate of Harvard and did his law degree at the University of Texas at Austin, he should know better, but like most in public policy today he is clueless when it comes to federalism. In spite of changes in the courts, I do not see this bill holding up.

Another area that is attracting attention on a constitutional level is the expansion of Medicaid, which forces states to increase spending on that program. Add the troubling facts that some states (such as Louisianna and Nebraska) received "sweetheart deals" that benefit their states at the expense of the rest of the nation.

The problem is, even if these provisions were struck down, the bulk of the law would remain intact, as will the burden that accompanies it. But that may not be the case, IBD notes, it quotes Greg Scandlen, a senior fellow at the Heartland Institute. Scandlen notes that "due to a little-known legal concept the entire law would unravel if a single part was found to be outside the Constitution." He goes on to state that "Apparently there was no 'severability' clause written into this law, which shows how amateurish the process was," he wrote. "Virtually every bill I've ever read includes a provision that if any part of the law is ruled unconstitutional the rest of the law will remain intact. Not this one. That will likely mean that the entire law will be thrown out if a part of it is found to violate the Constitution."

Although the legal community seems to be dismissing much hope that this bill will be overturned, it is clear that this legislation is walking on thin ice. With almost 3,000 pages and huge mistakes like those covered above, this bill is begging to have major changes or to be disregarded entirely. The case for "reform of the reform" is stronger now than ever.

The war on the working class continues

2010-05-28T12:31:00.004-05:00

I personally hate conspiracy theories. like most, I hear such and my eyes begin to glaze over and I eagerly wait for the person to stop talking so I can move on to another conversation. However, there is something about the Obama administration that makes it very difficult to not question the intent, as well as the consequences, of their policy choices.

Recently Eric Holder, the Attorney General of the United States, gave the commencement address at Boston University at which he told the students about the wonderful and "progressive" reforms that came out of bad economies. Essentially, he is arguing that major actions by government can only happen under the worse possible economic circumstances, because people are otherwise fine with the status quo. Holder's remarks reminded me of White House Chief of Staff Rahm Emanuel who quipped, "You never want a serious crisis to go to waste," Emanuel then went on to discuss the major changes you can make in just such an environment.

Essentially these high ranking public officials are sounding a mantra of more problems leading to more change. With such a philosophy, it should not be a surprise that we continue to see policies that are contributing to the continued destruction of the economy. Unemployment is at the highest level in over a quarter of a century, the national debt is growing at over $1 trillion dollars a year (in the early 1980s the accumulated debt of the US government was only making that mark for the first time), and inflation looms around the corner as cheap money is being produced to pay for this massive government expansion.

Particularly harmful will be the President's far reaching health care reform legislation, which will require small businesses to provide health insurance to their employees. It is being marketed by the administration as having a minimal adverse effect because this burden will be offset by a tax credit for each of the covered employees. Without such, it is unlikely the bill would have ever navigated through the Congress. However, with the federal government's incredible appetite, that will like be modified as the law is implemented. Even without a single change in the current law, the present credit is already arbitrarily reduced as a business grows, essentially discouraging employers from hiring more workers or increasing their salaries. Devon Herrick and Pamela Villareal (both of the National Center for Policy Analysis) have noted that this bill is going to clearly undermine job growth and be particularly harmful to higher paid workers.

The tax credit is suppose to be helpful to small firms. Businesses in select industries that have 25 or fewer employees will quality for a tax credit worth up to 35 percent of the employer's contribution to health insurance during the period of 2010 to 2014. After 2014 this is how the picture looks:

Although employers may qualify for a 50 percent health insurance tax credit for the first two years, they must pay for at least half of the expense.
Employers will have to make these purchases through newly formed "health insurance exchanges" in order to qualify. It is yet to be seen if these will be competitive. Since they are largely government controlled (and potentially monopolistic), it is highly unlikely.
Than the law begins to get sticky and companies will likely slip through the tax credit cracks when it comes to being qualified as employers must have fewer than 11 workers, earning an average of $25,000 or less, in order to qualify for the full tax credit. Therefore the law is punitive towards individuals who make more than $25,000 a year. This is not affluent by anyone except the government.
Finally, the credit is not available to sole proprietorships and their family members, yet this is one of the most common type of small business in the United states.

The policy implements an ugly trade off for firms that would like to do more for their employees. As the company's average pay goes above $25,000, the credit is withdrawn at a rate of 4 percentage points for every additional $1,000 in average pay. Eventually it is completely withdrawn once the average pay reaches $50,000. In addition to this, the credit is also incrementally withdrawn for each increase in the size of the business beyond 10 workers (regardless of average pay), and it disappears once the firm reaches 25 workers.

Therefore this legislation will mandate businesses to pursue low wage workers and avoid those who enjoy better skills and typically receive higher pay. It may also simply force employers to avoid the costs of having many employees by choosing technology over workers (which has a higher initial cost, but would clearly become cheaper over time in the new health care environment). Another option could find companies pursue vendors (particularly overseas) in order to avoid these prohibitive employee costs entirely.The war on the working class continues.

Kevin Price is a nationally syndicated columnist and host of the Price of Business on CNN Radio. Learn more about him and his activities at www.PriceofBusiness.com.

Finally, a sensible look at bailouts

2010-05-27T23:18:00.001-05:00

Political economy is one of my passions. As a radio host and syndicated columnist I get several free books a month. They are usually unsolicited and not of much interest, every once in a while I get one that is worth reading and spreading the word on. "Too Big to Save?" by Robert Pozen is just such an example. The book's subtitle is "How to Fix the US Financial System" and it offers an agenda to do that and so much more. It offers sanity in an industry that has lost its moral compass and he provides direction going forward. His book is filled with some important facts that cannot help but wake one up to the causes of our financial crisis and how to solve such problems in the future.

Pozen is a refreshing voice on the issues surrounding the bailout. Most of the analysts of the subject have pure academic backgrounds or mere activist experiences. The former cannot have any real idea how such things happen and the latter believes everything requires more government control in order to avoid some from making a profit. Pozen has serious academic credentials. He holds degrees from Harvard and Yale. Furthermore, he is on the faculty of Harvard University. What is more important is that he has an understanding of business and the financial system. According to his website, he "is Chairman of MFS Investment Management®, which manages over $200 billion in assets for over five million investors worldwide. This represents an increase of 50% from the first half of 2004 when Bob was named to his current position."

The book is filled with common sense arguments that are built on the idea of restoring the integrity of financial institutions, rather than promoting political agendas. Furthermore, it points out several important factoids that are designed to simply make you think about where we are and how we got here.

Up until 2008, no housing slump in any country had ever caused a worldwide financial crisis.
Until mid-2008, the Federal Housing Administration offered loans that required just a 3 percent down payment. In spite of this low sum, many nonprofits sprung up (and funded by construction developers and home builders) to cover the cost. It was a house of cards waiting to fall.
The stock market crash became even worse after Congress authorized the Treasury to spend billions of dollars "resolving" the financial crisis. Many rightly argue that the worse is yet to come.

Pozner's solutions to the problems surrounding the financial are refreshing and filled with common sense. The crisis we have today is rooted in "geniuses" with political, social and even profit agendas rather than sound financial principles. Pozner points to the better way:

He argues for the restoration of loan securitization as a key to economic and housing recovery. The reason housing had never been a source of major financial catastrophe in the past is the integrity in the process, like due diligence and monetary "skin in the game" that proves one to be a worthy candidate of a home loan.
The federal government's efforts to buy "toxic assets" are not viable and poorly designed to meet goals. A great example is the use of such for loan modifications. To date, 80 percent of all homes that experienced a modification are again in foreclosure.
The federal government has been wild and indiscriminate in it recapitalization of financial institutions. It has bailed out many large banks that did not want the assistance, over 500 small banks that are anything but "too big too fail," and many insurance and credit card companies without explanation.
Far reaching legislative restrictions of executive compensation have clearly made the situation worse. For example, limits on "golden parachutes" have generally increased the cost of most terminated packages. Furthermore, in order to be competitive, companies forced to have strict limits on bonuses have, instead, dramatically increased base salaries. This means the executives can enjoy higher rewards with lower performance.

Pozen's excellent book goes on to evaluate the potential restructuring of the financial industry, the importance of fair value accounting, and the huge downside government actions in the financial industry has had on taxpayers. It is an excellent book and really "must reading" for anyone interested in serious answers to our current financial crisis.

Kevin Price is a nationally syndicated columnist and host of the Price of Business on CNN Radio. Learn more about him and his activities at www.PriceofBusiness.com.

When the problems of Greece hit close to home

2010-05-27T12:10:00.006-05:00

Americans have been in shock watching the images of buildings — and even people — in flames as the government of Greece implements austerity measures to stop the bleeding caused by decades of irresponsible fiscal policies and socialism. We Americans naturally think, "thank God I still live in the US. That could not happen here."

Recently Dale Hurd of CBNNews.com has painted a dark future of our own republic if we do not change our spending priorities. Furthermore, he points out several scenarios — none of them pleasant — if we fail to fundamentally change the direction our country is going.

Hurd points out in his column that the "federal debt as a percentage of the Gross Domestic Product now stands officially at around 60 percent. But with the course the country is on, it will hit 150 percent in 10 years, and 300 percent by 2050" (emphasis added). He goes on to compare our situation with the one in Greece, which began to spiral when its debt reached 115 percent of GDP. We will reach and surpass that number in less than ten years. Because Greece is a member of the European Community and its currency is tied to the Euro like most member countries, other countries have (at least) a short term incentive to bail the country out in order to protect the value of their money. Those countries are, in fact, doing just that. Who will bail out the United States? Considering the disdain by other countries towards the US, one should not have any hope that others will come to the rescue.

The columnist quotes Anne Vorce of the Committee for a Responsible Federal Budget, who said she is not sure when America will enter economic crisis, but noted that "The problem is you don't know when you reach a tipping point until you reach it, but we're well beyond normal peacetime historical experience already." If the US entered into any additional major national security conflicts or faced any series of natural (or other disasters), we could find our situation deteriorate rapidly.

What I found most disconcerting about the article was the words by Hurd about the future of the United States of America. He said we only have to look to our friends in Argentina to find a disturbing window of the future. "Before World War II, Argentina was one of the most prosperous nations in the world. With a strong industrial base and thriving middle class, it attracted immigrants much like America. But within 15 years, Argentina went one of the richest nations to one of the poorest. Argentina President Juan Peron, who some historians say was a fascist, fomented class warfare and bashed business, banks and the wealthy. He made labor unions his allies and unleashed massive social spending that the nation couldn't afford." This sounds eerily familiar as we have a sitting President with certain obvious "corporatist" inclinations and disdain for those in the entrepreneurial (most of whom are middle income) class.

So what does the future hold? Experts point to several possible scenarios, none of which offer much to be optimistic.

Long term economic stagnation. We as a nation simply get use to doing without. High unemployment becomes the rule rather than the exception and the idea of an expanding economy and growing opportunities becomes something for the history books. Many experts see this as one of the better scenarios.

On the opposite end — and the worst case scenario — we have a government that goes into default. This means it cannot fulfill financial obligations, pay its bills, and it leads to a rush on the dumping of its Treasury bonds as countries no longer see us as a good investment.

Another possibility is hyperinflation. On a single day last year the US Government pumped $1.4 trillion into the money supply in order to offset the high cost of bailouts. This "funny money" has the potential of devaluing all dollars that are out there and it appears this approach to monetary policy could become a permanent part of our economic strategy.

The bottom line is that the US is going to have to make tough decisions about the future of our spending or the consequences of our behavior will make decisions for us. "Doing nothing" is a course that was followed by countries like Argentina that was propelled from a major economic player into third world status. There has to be a better way for the United States of America.

Kevin Price is a nationally syndicated columnist and host of the Price of Business on CNN Radio. Learn more about him and his activities at www.PriceofBusiness.com.

A Radical Solution to our Fiscal Crisis

2010-05-21T00:00:00.002-05:00

I have been writing for decades, but I have probably used the word "crisis" more in the last two years in my articles than in all the other years combined. There is a reason for that, the use of such hyperbole gets old. I think such words should be used with restraint or they will eventually fall upon deaf ears. Unfortunately, any word short of "crisis" simply does not make the grade in the times we live in today. The government is doing more (poorly) and spending more (than ever) and it is bankrupting our futures and the futures of those who will not even be born for several generations to come.

Currently the national debt is now growing at a rate annually that originally took almost 200 years for our country to reach for the first time. We are a nation in financial ruin and we continue to spend as if money grew on trees. Desperate times call for desperate measures. It is time for Americans to seriously consider the damage that comes from mob rule.

According to the government's own statistics, less than half of all Americans even pay taxes. This is significant because we now have a country where the majority is lulled into sleep as the minority is essentially oppressed by those who have "no skin" in the political process. They have absolutely no problem with spending growing out of control because whatever they receive is with minimum burden on them.

Meanwhile USA Today reports that well over half of the population receives direct assistance of various types from the federal government. This includes perennial welfare moms and the super rich who enjoy government bailouts.

The terrible situation we are in begs for radical change. The Constitutional type. In the early days of the Republic, people had to be property owners and even taxpayers before they were allowed to vote. Furthermore, the federal government was very limited in what it could do. With only seventeen enumerated powers and those voting having a vested interest, frugal government was much easier to achieve and maintain.

The principles of frugal government can be found on the micro level. If a board of directors of an organization or business has a vote on an item that directly benefits one of those decision makers, that person is expected to abstain. It only makes sense. If that did not happen there would be cries of impropriety and would plant the seeds of financial ruin for any group or company.

The United States is going to have to take a similar approach to solve its financial problems. The classical economist John Stuart Mill advocated the bold proposition that, if people received any government assistance, they would have to turn in their right to vote until they were no longer on the government dole. This policy would apply to the mega rich, the very poor and everyone in between who were getting direct government assistance. People seem to be concerned about "influence peddling." They warn about lobbyists and political action committees throwing money at politicians in order to get their vote on key issues. Yet, influence peddling runs both ways -- it is a two sided coin. Politicians who want to get reelected make all sorts of promises of money, goods, or services in order to buy votes. If the voter became disenfranchised while on the government's budget, politicians would have to find other ways of getting our votes. Maybe they would boast about how frugal they are in the way they represent the voters. A radical approach to government? Maybe, but it seems to me it could be long overdue.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is also host of the Price of Business (M-F at 11 AM on CNN radio). Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

If the Federal Government does not do it, who Will?

2010-05-12T23:18:00.010-05:00

Article I, Section 8 of the Constitution makes it clear that the federal government has very few powers delegated to it. Meanwhile, the Tenth Amendment in the Bill of Rights delegates powers not explicitly granted to the federal government to the states and the citizens. James Madison eloquently noted that "ambitious encroachments of the federal government, on the authority of the State governments, would not excite the opposition of a single State, or of a few States only. They would be signals of general alarm... But what degree of madness could ever drive the federal government to such an extremity." (Federalist No. 46, January 29, 1788). Madison would be shocked to see the state of affairs our nation is in today.

The brilliance of those who founded this Republic was obvious. They gave the national government very limited powers and gave the power to do virtually anything they desired to the states. They did this knowing that, if an individual state exercised too much control — taxes too high, regulations too oppressive — people would be free to leave to find a place with more liberties. This freedom to "vote with their feet" would keep the state governments in check and give the American people the ability to find the type of government that met their needs.

In addition, giving states such enormous powers would lead to a competitive environment in developing the best approaches to solve policy problems. Instead of the national government making the foolish mistake of trying to solve a major national problem and creating an environment where it is too costly for the states to develop innovation, the founders intended for each state to solve problems through competition and the best innovations would eventually rise to the surface. Virtually all states use the same standard procedures in a plethora of areas. They were developed by witnessing the work of other states, not through the coercion of the federal government.

The founders of this country understood that the federal government was no place to address policies like health care because the issues surrounding it would be too complicated and the costs too high. They delegated that to the states and, over time, the innovators would eventually rise to the top. To date, the states have had no success in solving the health care situation, so it is laughable that the federal government would try to replicate failed policies in Massachusetts on a national level. Remember, the federal system our republic is built on intended for issues like this to be addressed exclusively by the states and not the federal government. Without exception, states like California, Oregon, Massachusetts, and Hawaii have attempted major healch care programs and they have all been complete failures. Hawaii's socialized health care program almost put the entire state into bankruptcy and had to be discontinued in seven months.

The states are the best place for solving policy problems. They have limited amount of dollars because they do not have the power to print currency (meanwhile, the federal government had that power but few others and few reasons to print its "funny money"). This would make a certain level of frugality essential in solving policy problems. Furthermore, having problems solved on a state level allows the mistakes in the problem of doing such isolated, rather than becoming a national disaster. Again, those who created our Republic were brilliant and we need their wisdom now more than ever.

How to Become Exempt from new "Monetary Tax"

2010-05-11T00:17:00.002-05:00

The massive bailouts of 2008 and 2009 (and continuing today) not only changed the way our nation conducted its fiscal policy, but its monetary policy also. The enormous amount of spending by our government -- at a pace that increases the deficit annually at a rate higher than our total debt a few decades ago -- has been breathtaking to observe.

As a result of such spending, government is mass producing money to pay its bills. The government loves this approach to solving its problems for several reasons. First of all, since the government prints the money and release it first, it enjoys this "funny money" at its highest value. It is only after it circulates through the economy that it loses its spending power and reduces the value of all other dollars in the market. Inflation is defined as "too much money chasing too few goods." High prices is only one of the many symptoms of such a policy. In addition, inflation plays on the ignorance of a population who has no idea that these increases in prices are caused by the mass production of devalued dollars. Most voters will blame businesses for their "greed" and price raising, not the politicians who make such a phenomenon necessary. Simply put, every new dollar pumped into the economy takes away the value of all the dollars in the market, unless there is a comparable increase in productivity.

In one day in 2009, the United States took a chapter out of Zimbabwe's playbook by pumping $1.2 trillion into the money supply in an attempt to pay off its bills. Many Americans have (rightly) been alarmed by the more than $1.5 trillion we have seen in bailouts. According to the Washington Post, these inflationary efforts have the potential of being much more far reaching, noting that "combined with the billions already deployed by the Fed, the new money dwarfs even the biggest government bailouts of financial companies."

Historically, this type of monetary policy leads to the kind of inflation that we have seen in history books, where it is cheaper to use money for wallpaper than to buy it or it requiring a barrel of money to buy a loaf of bread. Printing worthless money will not make our problems away, but make issues we never imagined.

The purpose of this inflation is to serve as a tax by taking away the value (rather than the actual dollars) of all the money we hold. This is, however, one tax we can fight against, according to Albert Lu of Woodlands Bullion, a leading authority on precious metals and a contributor to the Price of Business radio show. Lu has stated many times that Americans can reduce their "monetary tax" burden with every precious metal purchase they make. Gold, silver, and other precious metals are at an all time high because of the inflation we have suffered over the last two years. It is only expected to get worse. Precious metals are a tool for shoring up the value of money. As the money supply is inflated, those with gold or other precious metals will see their wealth enjoy a greater level of protection and their "monetary tax" burden greatly reduced. Those who do not move towards precious metals either do not fully appreciate our current economic crisis or are as apathetic as the millions of Americans who still sit on the sidelines rather than participate in the most important political battles of the day. People need to make a difference in the national economy through elections and their personal economies through precious metals.

Federal laws are both too numerous and vague

2010-05-09T00:47:00.003-05:00

The vast majority of Americans are unhappy with the working of Washington. The President and Congress have overwhelmed the American people with an incredible number of laws that are difficult for the voters and even policy makers to understand. Many bills are now passing Congress without being read by many, if not any, members. With so many bills coming out of Washington, DC, it should be no surprise that most Americans are unhappy with the results and find much of this legislation confusing.

The National Center for Policy Analysis has brought to my attention the work of two organizations that are working together to try and persuade Congress to stop writing criminal laws in such a manner that leaves innocent people vulnerable to unjust prosecution. One is the Heritage Foundation, which is one of the nation's premier conservative think tanks and the other is the National Association of Criminal Defense Lawyers. Together they prove true the adage that "politics makes strange bedfellows," since the latter organization is better known for its affiliation with liberal groups and causes.

According to a recent report they produced:

Over twenty federal laws that went into effect in 2005 and 2006, to combat nonviolent crime, lack an adequate provision that one accused of breaking the laws must have had a "guilty mind," or criminal intent. Good law has always required such provisions. It is imperative that the government prove "both a guilty act and a guilty mind." Without such, bad judgment and even mistakes could become criminal.
On that rare occasion when the Congress makes a new law that includes a provision for a "guilty mind," it is "often so weak that it does not protect defendants from punishment for making honest mistakes, or committing minor transgressions."

For centuries the legal code of most Western countries have required "criminal intent" as a part of all laws designed to fight crime. This was intended to make sure laws were created to protect the public good and not be used for political agendas, such as punishing political enemies rather than true threats to the general population.

Currently, the more conservative wing of the Supreme Court is beginning to question the legality of many of these laws and has expressed concern on how they can be used. They are focusing on three laws in particular. Justice Antonin Scalia sees these type of laws as a great tool for "headline-grabbing prosecutors" who want to shut down unpopular and maybe even unethical behaviors, but not necessarily criminal ones. These type of laws make populations fearful, prosecutors powerful, and people less free. Scalia has noted that the law is so vague that it could be used against a mayor for using his political influence to get a better table at a restaurant or against a salaried employee who calls in sick, but goes to a beach. These, of course are the kind of laws that are selectively applied and are begging for abuse.

It is interesting that, after centuries of writing laws that protect the rights of individuals and require proof of intent, that the Congress has forgotten this simple, but important, practice. It is time for the Congress to develop specific tests to make sure these laws comply with the letter and the spirit of the law.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is also host of the Price of Business (M-F at 11 AM on CNN radio). Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

Taxes on wealth creation are about "social justice," not revenue

2010-05-07T17:09:00.004-05:00

There is an old saying, one that people of all philosophical persuasions seem to concur with, that "the more you tax something, the less you get of it." Those who support less government and more economic freedom have argued this for years. That was the reason behind the "supply side" tax cuts that proceeded periods of enormous economic growth. They came in the early 1920s, 1960s, 1980s, and at the beginning of this decade. In each case they resulted in huge increases in revenues and widespread job creation. Although "across the board," these cuts have a more immediate impact on those with higher incomes, because those are the ones who pay more in taxes. Why do these type of cuts increase revenue? The answer to that is simple -- such cuts increases taxable economic activity.

Those on the political left seem to understand the impact taxes have on an economic activity as well. One of the first things Obama did as president was raise taxes on cigarettes for the purpose of both getting revenue to pay for government programs and to discourage smoking. In fact, some in the Administration argued there would be a 10 percent decrease in the consumption of cigarettes after the tax increase. We all know this to be true, the more it costs to do something, the less likely we are to do that activity.

The founders of the US government understood this idea as well. They wrote in Article I, Section 9 of the Constitution that "No Capitation, or other direct, Tax shall be laid, unless in proportion to the Census or Enumeration herein before directed to be taken." This clause prohibited income taxes until the Sixteenth Amendment in the 20th century. These much wiser leaders than today believed that the government has no right to know how much an individual makes and even the sources of revenue. They believed taxes were purely for revenue and not any particular political or agendas, they merely taxed imports and did so at the same levels and at a very low rate (since government was very small in the beginning).

To tax the earnings of individuals, especially in a progressive manner in which the rate gets higher as the income grows, will eventually undermined the desire to earn. This is even more the case with businesses. Higher taxes on their activities makes them work all the harder to be less subject to the tax (rather than on the economic activities that benefits everyone). Businesses are not wood, they function with the same "fight or flight" behaviors as humans. When government causes a massive increase of taxes on those companies with 50 or more employees, like that which will come with Obamacare, they will layoff enough employees to avoid the tax. If the US decides to have one of the highest tax rates on businesses of any industrialized country in the world (it is in a battle for that top spot with Japan), businesses will either downsize or move to countries with friendlier tax environments (which are not hard to find).

Politicians get angry when businesses export these jobs to other countries. Governments know that businesses do not pay taxes, they are merely tax collectors. The government prefers to make the businesses do its dirty work. Now more than ever, businesses do not have to tolerate it and they can easily dispose of the burden by moving their activities to more profitable locations. Journalist Thomas Friedman has noted that "The World is Flat" and business can move capital with more ease and speed than in any time in history. Policy makers in Washington know this and they are casually observing and even supporting the greatest depletion of jobs we have since the Great Depression. Furthermore, as those jobs and businesses disappear, so does the revenue. It is how economies work.

This administration seems blinded by these realities because it is driven by ideas such as "social justice" and not in the creating of a wealthy and free nation. Its excessive taxes on the job creators seems to be far more personal than business. It is not about generating revenues or jobs, it is clearly about punishing those who are successful. It is driven by blind ideology and not common sense. Conspiracy theorists surmise that the Obama administration is in the process of creating more poverty, since the poor are among his primary constituents. After all, if incomes of all Americans increased and we had a significant increase in jobs creation, who would be left to support Obama's agenda? Any party that depends on poverty to succeed is dangerous to a healthy nation. This is the liberals' dilemma. If a political philosophy depends on poor voters for success, you need more poverty.

Now even the most reasonable of individuals are asking, "are these crazy conspiracy theories or painfully obvious truths?" What we know that is true is that Obama's policies are not working, unless the goal is move poverty and less prosperity.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is also host of the Price of Business (M-F at 11 AM on CNN radio). Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

Why Economic Freedom Matters

2010-05-06T08:01:00.003-05:00

Economic freedom is one of my favorite topics and the one that is discussed the least by politicians in this country. Everyone on every news channel discusses all types of "freedoms" -- many without Constitutional legs, but the one that is clearly seen in our governing document (by the Tenth Amendment and the limited powers in Article I, Section 8) is largely ignored. Politicians do not discuss economic freedom and those in the media have no idea why such even matters.

The National Center for Policy Analysis (NCPA) brought some excellent information on this topic from several different resources to my attention. The Federal Reserve Bank of St. Louis has released a new study called "Economic Freedom and Economic Growth in the US States." That report notes that there is a definite link between such freedoms and employment growth. Other studies have come to similar conclusions, but Michael D. LaFaive (Director of the Mackinac Center's Morey Fiscal Policy Initiative) notes that the thing that makes the Federal Reserve's study significant is its findings on labor markets. The authors write: "In addition, we find that less restrictive state and national government labor market policies have the greatest impact on employment growth in U.S. states."

Having had come from Michigan originally, I am always saddened by stories of that state's continuous decline. LaFaive states that the findings of the study only translates into more bad news for the Great Lakes State. Michigan has one of the worse labor environments in the country. It is not only a closed union shop state, but the epitome of big labor out of control. It is simply much easier for a business to move capital (and jobs) than to subject itself to the highest wages, biggest employee benefits, and toughest "pro-labor" regulations of any state in the Union. These type of policies have forced businesses to leave the state, which has created a revenue shortage, and has led Michigan to answer that problem by raising taxes even higher. Its $1.4 billion tax increase has made Michigan and even less friendly place for doing business, according to LaFaive.

These factors are among the reasons Michigan has consistently suffered from the highest unemployment in the country. The Fraser Institute and Pacific Research Institute have also chimed in on the decline of economic freedom in Michigan. In 2004, Fraser ranked Michigan 32nd among states in economic freedom. By 2009, it had dropped to 39th. Meanwhile, the Pacific Research Institute pointed out that the state fell from 27th in 1999 to 34th in 2004, and most recent, to 43rd (in its 2008 report). This rapid decline of freedom in Michigan has translated into economic ruin for the once great manufacturing giant.

LaFaive suggests several steps in reversing Michigan's economic slide, including:

Put a halt on the state's new tax increases. Michigan has to develop ways of being more competitive in some areas than other states. Currently, Ontario, Canada does commercials boasting a lower tax rate than Michigan. That has to change if that state is going to attract job creators.
The state should end entirely its repressive business tax and replace that with real spending cuts and other reforms. Again, the state has to develop ways to attract new businesses. Ending such a tax would certainly help.
Forbes Magazine notes that all but one of the ten most prosperous states are right-to-work states. Michigan has to make it easier to fire and control employee expenditures, if that state is interested in businesses hiring more and increasing payrolls.
Finally, Michigan has environmental laws that are among the most aggressive in the country. Michigan has to get its regulations in line with other states, if it is interested in job growth.

Michigan is in a state of crisis. Many other states are following a similar path (as is the nation, seen in businesses taking capital and move to other countries). It is imperative for policy makers on every level of government to recognize the relationship between economic freedom and jobs.

VAT is neither fair nor responsible

2010-04-28T17:35:00.003-05:00

It is interesting how the left will take a politically popular idea and pervert it into something that will only further destroy a country that is already well down the road to serfdom. The latest example is the Obama administration's repeated statements that it is looking into the possibility of a Value Added Tax (VAT). This comes after almost two decades of millions of Americans advocating a "Fair Tax" instead of the current income tax system. Obama's apologists will state that they both are, after all, taxes on consumption. The similarities after that, however, largely evaporate.

The Fair Tax is a system that has been promoted for years by individuals who support limited government and greater voter participation in the political process. Today, less than half of all Americans pay federal income taxes. This reality has been like a continuous cold shower on a population that should be on fire because government is out of control. A "Fair Tax" would be a national sales tax on every good and service. Everyone would know that cost of government at every transaction. Millions of Americans who have been sleeping politically, would come to an abrupt awakening. Centerpiece in this strategy would be that this tax would replace the very destructive and archaic income tax system, which wages a direct war on wealth and job creation.

In addition to waking up a sleeping public to the depth of our fiscal crisis, this law would also allow us to tax illegal aliens in our country and those who are committing illegal activities. Drug dealers, prostitutes, and others involved in illegal actions would now contribute to the government and help pay for the law enforcement designed to keep them in check. Who else should pay for these crimes? Remember, they are all involved in illegal activities; they have their income completely tax free. This reform would allow us to take a financial "bite out of crime."

Then there is the Value Added Tax. Like the Fair Tax, it would tax consumption. In fact, it would tax every single step of the production of every single good. Unlike the Fair Tax, VAT would be in addition to our current income tax system. Furthermore, it is a hidden tax that is included automatically in the price of goods. Where the tax begins and the real price ends, the typical consumer will be unsure.

The National Center for Policy Analysis notes that "The VAT has been in use in European countries since the late 1960s, and has had a strong, negative economic influence, says (Pete) du Pont (former governor of Delaware and current national policy chairman of the organization): Before the European VATs were put into effect, the average tax burden in the European Union (EU) was 28 percent of gross domestic product (GDP), compared with the 25 percent in the United States. By 2006, with the VATs, the EU average tax burden was 40 percent compared with 28 percent in America."

In addition to that,”Average European government spending was about 30 percent of GDP when the VATs were instituted in the late 1960s." Today we see that European "government spending has grown more than 50 percent and now hits 47 percent of GDP." Debt in European government in 2005 "was 50 percent of GDP, compared with under 40 percent in America." The biggest tax of all on Europeans has been on job creation, according to du Pont, "Between 1982 and 2007, Europe created fewer than 10 million new jobs versus 45 million in the United States. Our economic growth was more than one-third faster, says du Pont." That is, by the way, the entire continent of Europe.

Access to revenue does nothing in terms of providing fiscal restraint, as we have seen in the case of VAT or the many tax increases we regularly see in this country. In fact, new taxes and increases in old ones have encouraged governments to tax more. The answer to America's fiscal problems are found in less taxes and, more importantly, less government.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is also host of the Price of Business (M-F at 11 AM on CNN radio). Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

Timing of Health Care Report leads to Charges of Deception

2010-04-27T20:22:00.004-05:00

The Department of Health and Human Services has finally released its controversial report on the costs that will surround the recently passed Obamacare legislation and questions are being asked as to why it was not released earlier, when it might have made a difference during the health care debate. The simple answer is that the report would only further damage a bill that passed by the thinnest of margins and with the most questionable of means.

The American Spectator is reporting in its blog that "The economic report released last week by Health and Human Services, which indicated that President Barack Obama's health care 'reform law would actually increase the cost of health care and impose higher costs on consumers, had been submitted to the office of HHS Secretary Kathleen Sebelius more than a week before the Congressional votes on the bill, according to career HHS sources, who added that Sebelius's staff refused to review the document before the vote was taken." The reason why they would not review it? Because they did not want the results of the report to influence the health care debate. That is very odd, considering that is the reason such reports are produced in the first place.

This should create serious problems for an administration and Congress that has pounding the "cost savings" drum since the 2008 elections. We knew that the way any savings would be obtained were unsettling. They would come through death panels and rationed care, price and regulatory controls on physicians (driving them into other professions), and reducing the rewards for the risks that comes from innovation (which means that health care progress would slow or decline). Now we see that, in spite of the fact this bill promises to turn a visit to the doctor into something that resembles a trip to the Department of Motor Vehicles, we will fail to see actual savings. No wonder why the ideologues in the administration that are more interested in agendas than the public good held this information hostage until it could do little or no good. According to the American Spectator, the information about the timing of the report is from an official of HHS who is remaining nameless at this time. The report is based on the analysis performed by the Medicare's Office of the Actuary, which is described as being a "nonpolitical" office. It was certainly nonpartisan in its content, but not in its timing.

The administration and its Congressional apologists have been arguing, all along, that Obamacare would have immediate savings and, more importantly, long term cost containment. Not so, according to the analysis in the report. The Kansas City Star notes that "The report was controversial because it was a direct rebuttal of President Obama's claims that the bill would 'lower costs for families and for businesses and for the federal government.'" The Star also notes that "The report found that the law would raise costs, as many critics of ObamaCare had argued. The actuary said some parts of the bill would help lower costs, but they would be 'more than offset through 2019 by the higher health expenditures resulting from the coverage expansions.'"

This is just one more scandal that would significantly damage earlier administrations, but is simply business as usual for Obama.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is also host of the Price of Business (M-F at 11 AM on CNN radio). Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

Ugly Rumors Surround Goldman Sachs Investigation

2010-04-25T21:41:00.004-05:00

I am no fan of Goldman Sachs. They have eaten at the government trough and entangled itself with the political establishment in such a way that anyone should be embarrassed about doing business with them. The company took billions in bailouts on the one hand and gave even more in bonuses to its employees. The corruption demonstrated by the firm in the way it conducts itself is breath taking. On the other hand, it is also reflective of a new business and political culture that makes such activities very "legal" (at least until they are challenged in the courts).

This is not a unique sentiment. The vast majority of Americans that have an opinion on the financial firm probably share a similar view. So when it was announced that the Securities and Exchange Commission was going to press charges on the financial firm, most Americans were pleased and thought "they deserved it." Now there are questions about what the charges are based on, since their behavior does not appear any different than the many other financial companies that took advantage of the bailouts of 2008 and 2009.

Charles Gasparino of Fox Business is keeping a close eye on the story and is raising some important questions that we should all be asking. He wrote in his column that the charges against the firm "are widely regarded as the most aggressive enforcement action against a major Wall Street firm in years. They also come as Wall Street has begun one of the most aggressive lobbying efforts in recent memory to kill aspects of Sen. Chris Dodd's financial reform legislation, which has many on Wall Street believing the charges were motivated at least in part to give momentum to the bill, FOX Business has learned."

"Momentum" may be an understatement. It is true, the lawsuit against Goldman Sachs will have dollars spent by the firm on defending itself, rather than lobbying members of Congress. Especially since the actions of the US has had a domino effect and countries around the world are lining up to go after the financial giant. Furthermore, since the company is being treated like a criminal, it is likely that its criticism of the financial legislation being promoted by the administration would fall upon deaf ears.

Gasparino observes that "In Washington, the aggressiveness of the lobbying efforts has been a controversial issue. One senior executive at a major Wall Street firm said people inside the administration are annoyed by the push and that it only strengthened the White House's resolve to keep the Volcker Rule in place. But people at JP Morgan and Goldman say they believe in the end the administration will back off so it can get a financial-reform bill passed. Republicans oppose the bill on the grounds that it allows the government to continue to bail out large banks that bet wrong in the markets." If this lawsuit turns into little more than harassment it could prove to be a major embarrassment for the Obama administration. Unfortunately, these type of embarrassments have become quite common for this president.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is also host of the Price of Business (M-F at 11 AM on CNN radio). Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

Obamacare will Create Doctor Shortages

2010-04-23T19:28:00.005-05:00

Surveys among medical doctors during the health care debate showed that one out of three physicians intended to leave the profession of Obamacare became law. With the law on the books, many in the medical profession are not going to wait for states to sue or courts to over turn, but are going to simply find something else to do.

This is, of course, one of the many ironies of Obamacare. The Plan was suppose to make health care more accessible to the "15 to 30 million" uninsured that we have heard so much about. Instead, health care will be less accessible to everyone, including the uninsured, thanks to Obamacare.

Many doctors are getting ready to move on to other professions. According to the Heritage Foundation, the frustration among medical doctors is at an all time high, noting that "Arizona dermatologist Joseph M. Scherzer M.D. reports in the Daily Caller that he plans to do just that. He cites the impossibility of complying with Medicare's bureaucratic guidelines and paperwork. The fine for failure to comply used to be $10,000. Under Obamacare, it's now $50,000." How will this reduce the high cost of health care?

Another problem is that the government thinks costs first, the patient second, in terms of priorities. This stands in contrast to the mandate that physicians operate under. According to Jerome Groopman, M.D., in The New York Review of Books: "Medicare specified that it was a ‘best practice' to tightly control blood sugar levels in critically ill patients in intensive care. That measure of quality was not only shown to be wrong but resulted in a higher likelihood of death when compared to measures allowing a more flexible treatment and higher blood sugar.
Similarly, government officials directed that normal blood sugar levels should be maintained in ambulatory diabetics with cardiovascular disease. Studies in Canada and the United States showed that this ‘best practice' was misconceived. There were more deaths when doctors obeyed this rule than when patients received what the government had designated as subpar treatment (in which sugar levels were allowed to vary)." So the "best practices" would cost lives. The doctor choosing what was best for a particular patient, would be penalized at the tune of $50,000. Who would have thought we would live in a world with such choices?

This strange approach to health care was previously limited to Medicare and Medicaid. That is no longer the case with the passing of Obamacare. Every American, regardless of where their coverage comes from, will be subject to these laws. So much for "doctor-patient confidentiality." Heritage Foundation notes that "The new law creates an Institute for Comparative Effectiveness Research, which will define best practices using population-based research. This will be used to create government-approved standards for the practice of medicine-deviant physicians will pay a penalty for failure to comply." With such, doctors will cease to be in medical practice, but simply well educated government bureaucrats who are often opposed to the rules they must practice.

It is projected that some 40,000 physicians will leave medicine in the next decade. That is a very conservative estimate.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is also host of the Price of Business (M-F at 11 AM on CNN radio). Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

US beats many European Countries in the Spending Arena

2010-04-23T19:27:00.006-05:00

We all realize that different types of governments cost various amounts to run. Those in which the government does less, typically have stronger financial portfolios. Those in which the government does more have much weaker financial pictures.

Fox News recently asked "How much money does it take for the governments of sovereign nations to do their job?" Those that are socialist or social democratic suffer from huge budgets and looming deficits as they strive to provide "cradle-to-grave" spending programs. Most Americans assume that countries like Sweden and France have massive governments compared to the US. They also think France, Finland, and the UK are much larger in their spending per person. This is not the case anymore, according to economist and author, John Lott. Those who oppose European style socialism do not have to wait for that system to arrive in the US. Lott warns that type of government has already arrived.

Most Americans are probably not surprised that US spending is higher than other countries, but when you factor in cost of living and total population, our budgets "are much lower" than other countries, it is often perceived. In reality, government spending accounts for more real resources per capita than "95 percent of the countries in the world," according to Lott. In fact, only "166 out of 175" countries have smaller real budgets than the US, according to Lott.

The numbers, when it comes to government spending, are frightening. The US government spends 276 percent more than is spent by the average government of another country around the world. This type of spending amounts to about $17,400 per person living in the United States or $70,000 for a family of four.

The one country that is most famous for its "welfare state" is Sweden, yet it only spends about 8.6 percent more per capita than the US. This figure is far less than most Americans would likely assume. How about France? Americans seem to enjoy making fun of France's fame for government dependency. The bad news for Americans is that France spends virtually the same amount as the United States. The difference between the US and France is a mere 1.6 percent when it comes to spending.

It gets worse from here. Finland actually spends 6 percent less than the US and countries such as Germany, Italy, and the United Kingdom do not even compare. Meanwhile, Canada spends 14 percent less than the US per capita and Japan's spending is a fraction of the United State, standing at 32 percent less. What is interesting is that this current fiscal state is before the costs of President's Obama's trillion dollar health care bill was signed into law. After the impact of that law is fully felt, the US could easily find itself close to number one in the "cradle-to-grave" socialism department, compared to its European friends.

The US government has more control of its nation's resources, per capita, than virtually all the other countries in the world This government determines an entire nation's financial future and controls from whom money comes from, who gets that money, and, ultimately, how that money is spent. Lott also points out that "Of course, the money also pays for the enforcement of all the regulations and laws that tell us what to do." The old saying that "the government is out of control" may no longer hold true. Government is in total control of virtually every aspect of our lives and economic freedom is held in very low regard.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is also host of the Price of Business (M-F at 11 AM on CNN radio). Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

What is a "Reagan Conservative?"

2010-04-20T07:03:00.006-05:00

Ronald Reagan became President at a time when the US had become accustomed to being a second rate power and had found itself well on its path towards socialism. The media hated the man and dismissed him as an intellectual lightweight, a “Neanderthal” in his foreign policy, and “Draconian” in his policies toward the poor. In spite of this, he was one of the most popular Presidents in US history. He loved freedom and conveyed optimism at a time most Americans were suffering from government created malaise.

The Wall Street Journal and other surveys rank Reagan as high as number 6 on the list of great Presidents; the only people that beat him in the surveys are individuals who died many years before those polled were even born. This would be people like George Washington and Teddy Roosevelt. It is hard to beat “legends.” Even professional historians in academia rank Reagan as high as ten in surveys, according to MSNBC.

Reagan's greatness is measured by the "copy cat factor" seen in politicians today. The old saying that "imitation is the sincerest form of flattery" could not be truer then what we see in regards to Reagan. Politicians of all stripes -- conservatives, liberals, and many who are in between -- have described their policies as being "Reganesque." I think that Reagan would find many of the comparisons quite shocking, if he were with us today.

So what does it mean to have an approach to governing like Reagan? I actually believe the Reagan model is easy to understand, but quite difficult to practice. Reagan was really simple in his view of the world. There was "good" and "bad," "right" and "wrong," he left the grey areas to the pragmatists or those who lacked the backbone or principle to take a definitive stand. His strong positions made him an attractive leader to a people who had been washed "back and forth" by the liberal policies that came before. He is hard to copy because his approach to governing required integrity in word and deed.

A sample of that simplicity and one of the hallmarks of Reagan's policies was his "three legged stool." Reagan's policies were built on three ideas; free enterprise, limited government, and pro-family social policies. He chose these three because they, of course, reflected his own values, but he also realized that each of these ideas have enormous appeal on their own. I was attracted to the conservative philosophy as a young Christian and noticed that Reagan's philosophy was very strong when it came to traditional family values. Over the last few decades, economics have become my passion and expertise, but it started with a concern in culture (and this remains important to me).

The approach is simple, yet profound. Reagan believed that there are huge sectors of the population that would be attracted to a strong message of free market economics, regardless of where one stood on other issues. The other issues (defense or culture) were not nearly as important to this block, but these voters would not be deterred by the other areas as long as a candidate was very strong on economic policies. Reagan rightly believed that this would be the case when it comes to other legs of the stool, as long as he was very strong and clear on his positions. While "big tent" Republicans argued that Reagan should have "lightened up" when it came to the strong positions he took, voters came to him in larger numbers as he took stronger stands on the issues of the day.

"Reagan conservatives" are the complete package. They recognize that consistency and strength are hallmarks in leadership. They understand that a stool stands on three legs and falls with fewer than that. The less shy conservatives are when it comes to policy issues, the more success they will likely enjoy.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is also host of the Price of Business (M-F at 11 AM on CNN radio). Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

Citizens Against Government Waste Point at Pork

2010-04-18T13:22:00.003-05:00

Each year, Citizens Against Government Waste (CAGW) releases its annual report of government pork barrel spending and this year is no exception. This week, the organization released its 2010 "Congressional Pig Book," which comes during the group's 20th anniversary. As in past issues, the focus is on spending that is out of control. The Pig Book exposes 9,129 earmarks that combined are worth $16.5 billion.

What, exactly, is an "earmark?" The simplest and most concise definition I have seen on the subject comes from FactCheck.org, which describes earmarks as "government funds that are allocated by a legislator for a particular pet project, often without proper review." Spending bills are often full of politically unpopular items and in order to get them passed, they include nasty little pet projects that are designed to make the larger bill more palpable to individual members of Congress in both Houses and parties. According to CAGW, slightly more than 15 percent of earmarks went to Republican members, the remainder went to the Democrats. Considering that the GOP pretends to be the only party with a moral high ground on this issue, this number is still too high.

Rhetorically, things are changing in government today. According to CAGW President Tom Schatz, "Recent actions in the House to stop funding for-profit earmarks and the House Republican Caucus' decision to not request earmarks, indicates that politicians from both parties recognize that taxpayers are enraged about the broken spending process in Washington. They have noticed that it is popular to posture as an anti-earmarker. Unfortunately, the 2010 Congressional Pig Book illustrates that most members of Congress still aren't willing to eliminate the practice and why meaningful reform is necessary."

I'm sure members of both parties are going to cite progress. According to CAGW's press release, "The number of projects declined by 10.2 percent, from 10,160 in fiscal year 2009 to 9,129 in fiscal year 2010, while the total tax dollars spent to fund them decreased by 15.5 percent, from $19.6 billion to $16.5 billion." This is partially attributed to the fact that reforms have been passed that make it mandatory for members of Congress to identify earmarks they requested and those who will benefit from them. In spite of these reforms, Congress still finds itself breaking its own rules in regards to being transparent. CAGW "uncovered 91 earmarks worth $6.5 billion that were funded" outside of the required rules. This was particularly noticeable in the 2010 Defense Appropriations Act, which included 35 anonymous earmarks worth $6 billion, which made up a breath taking 59 percent of the earmarked tax dollars.

The Pig Book Summary review some of the most outrageous examples, breaks down pork per capita by state, and presents the annual "Oinker Awards." All 9,129 projects are listed in a searchable database on CAGW's website www.cagw.org. Examples of pork in the 2010 Pig Book include:

$465,000,000 for the alternate engine for the Joint Strike Fighter;
$5,000,000 for the Presidio Heritage Center in California;
$1,000,000 for Portsmouth Music Hall in New Hampshire;
$400,000 for the USA Swimming Foundation in New Jersey;
$300,000 for Carnegie Hall in New York City;
$250,000 for the Monroe County Farmer's Market in Kentucky;
$200,000 for the Washington National Opera in the District of Columbia; and
$206,000 for wool research in Montana, Texas, and Wyoming.

CNN notes that the CAGW also provided several awards for members, based on their spending behavior.

The "Dunder-head Mifflin Award" (from the popular TV show, "The Office") -- Sen. Arlen Specter, D-Pennsylvania, and Rep. Paul Kanjorski, D-Pennsylvania, for "$200,000 for design and construction of a small business incubator and multipurpose center in Scranton, Pennsylvania."

There is also the "Thad the Impaler Award" -- Sen. Thad Cochran, R-Mississippi, "for $490 million in pork, including $200,000 for the Washington National Opera for set design, installation and performing arts at libraries and schools, and $500,000 for the University of Southern Mississippi for cannabis eradication."

Then there is the "Hal Bent on Earmarking Award" -- Rep. Harold "Hal" Rogers, R-Kentucky, "for $10 million for the National Institute for Hometown Security."

Other awards included the "Little Engine That Couldn't Award," the "Narcissist Award," the "Steak Through the Heart of Taxpayers Award," and the "Sapping the Taxpayers Award." My personal favorite is the "Jekyll and Hyde Award" -- Rep. Leonard Lance, R-New Jersey, received it for being a moving target on earmarks. "He first signed a no-earmark pledge, then received $21 million in earmarks, then supported the Republican earmark moratorium." I believe there are probably many other members that walk one thing and talk something entirely different. Review the list of other awards and find out if your member of Congress is a "winner" and how bad of a loser you are in the type of representation you have in Washington, DC.

The Future of the Tea Party

2010-04-16T16:05:00.004-05:00

There is a debate when it comes to the future of the Tea Party movement. There are arguments raging over whether the Tea Party matters, will matter in the future, or be a mere footnote in US history. It is our tendency to get caught up in the moments of time. Right now, it seems like the Tea Party movement could be a major player in the policy debate for years to come. For that to happen, several issues will need to be addressed.

What, exactly, is the Tea Party? It started as a simple protest movement when an angry reporter said that the American people should be disgusted over the corporate bailouts and they should fight back with a Tea Party movement. In no time, that became a reality. Its membership, however, is very interesting and raises many questions about unity. Forty percent of those who call themselves Tea Party "members" are also self described Democrats and independents. A loud, if not significant, minority are of the libertarian variety. There are also those who describe themselves as "Truthers" (believe the US was behind September 11th), which seems to be largely ignored by the vast majority in the movement. The single largest group ranges from traditional conservatives to those who call themselves "Constitutionalists." It is difficult to call this a "united movement." However, there could be enough "critical mass" to make a difference.

Are the members of the Tea Party too worried about "being used" to be useful in the cause of liberty? There is no doubt that the members of the Tea Parties have every right to be offended over the abuses in government that exist today. However, most of these abuses accumulated while the "giant," now called the Tea Party, slept. Yes, shame on government for going on autopilot, but shame on the American people for not keeping them in line. Virtually everyone in the Democratic Party has open disdain for the Constitution and most of Republicans are filled with hypocrisy. That leaves few options for a group of Americans that have felt disenfranchised. A mere "throw the bums out" strategy is filled with problems and America cannot afford to wait for a viable third party. It will be a truly wasted opportunity if this movement fails to accomplish anything of lasting value.

I think it is imperative for those who are interested in having an immediate impact on the political process, but do not want to be taken advantage of by the political parties, to take a strategic approach when it comes to their activities. Conservatives should aggressively support the best (AKA constitutionally sound) candidates in primaries. They should go door to door, make phone calls, and give money to these type of candidates. If they do not exist in your district, work in a nearby district that has a candidate that shares your values. You can also help these candidates outside of your district, if the candidate you supported does not get the party's nod. Don't waste time, energy, and resources on candidates who do not share your values...that is, America's value. If such principles are applied consistently, you will naturally have better candidates over time. I would argue, in a very short time.

So what happens when you get to November and your choices are various degrees of "bad?" My view is one that is both pragmatic, but lends to the wisdom of the Founding Fathers. The United States is one of the only governments in the world that can have a head of government that is different from the legislative branch of government. For example, the Prime Minister of England is a mere member of Parliament, whose party enjoys a majority. Our Founders did not believe that a government that could create policy with ease was necessarily a good government. In our current state and with a President pushing this nation towards a socialist wasteland, I can comfortably vote for obstruction. To vote for a Republican for Congress in the general election is a vote against Nancy Pelosi or Harry Reid as leaders (depending on the House). At this point, it is unconscionable to vote for a third party or to not vote at all in the current political environment. With the fast track towards socialism we are moving on today, I can comfortably support obstruction all day long.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is also host of the Price of Business (M-F at 11 AM on CNN radio). Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

Good Government Requires a Civic Minded Population

2010-04-15T15:55:00.003-05:00

Recently I was a speaker at the Young Conservatives of Texas annual convention in Austin, Texas and, as I waited for my opportunity to present, I had the opportunity to hear Dr. Rich Brake of the Intercollegiate Studies Institute (ISI) discusse the status of America's civic education. Brake eloquently reminded the audience that our country has a republican form of government. That means that we must have a population that understands individual responsibility and is capable of making sure the government stays within the limits so clearly stated in the Constitution. We are not a nation that is ruled by the mob, but by the law. The people must hold those who govern accountable to that law. So how are the American people doing?

ISI, through its American Civil Literacy Program, produced a report entitled "Failing our Students, Failing America." It's purpose is to hold "colleges accountable for teaching America's history and institutions." The survey was of "some 14,000 freshmen and seniors at 50 colleges and universities. Students were asked 60 multiple-choice questions to measure their knowledge in four subject areas: America's history, government, international relations, and market economy." The finding of the report are very disturbing, including:

College seniors failed a basic test on America's history and institutions. According to the report, these students made an "F" on all four basic areas, with a score of 54.2 percent. Harvard seniors did best, but their score was only 69.6, which was a mere "D+."
Colleges actually slow down, and even stall, student learning about America. The report found that from K-12, the "average student gains 2.3 points per year in civic knowledge, almost twice the annual gain of the average college student." Worse still, some students actually lose civic knowledge as they go through school.
Ironically (considering the costs and other factors), America's most prestigious schools were the worse performers. In fact, colleges that perform well in popular rankings (such at US News & World Report) are actually quite poor at advancing civic knowledge. Seniors from four of the top 12 schools in US News had weaker scores on the test as they left school, compared to when they entered.
Not surprisingly, the study indicated that inadequate college curriculum contributes to failure. Obviously the number of civic oriented courses (and their quality) a student takes will have a bearing on how well they would perform on such a test. The average senior only takes four such courses while in college.
Finally the more people learn about government, the more active they will likely be as citizens. Simply put, those who know more are going to be more likely to vote and be involved in other civic activities.

The average score of these students was 53.2% and the simplicity of the questions these test takers failed on, is disturbing. For example the takers of this multiple choice test could not provide a simple chronology of the most important events in US history (what came first, the Constitution or the Cuban Missile Crisis?), the purpose of Martin Luther King, Jr's "I Have a Dream" speech, and they could not define the free enterprise system.

Parents are spending thousands of dollars helping their children to make a living and to make a life. They clearly deserve a refund from their colleges when it comes to the type of education these students are receiving to prepare for the responsibilities of protecting that quality of life.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is also host of the Price of Business (M-F at 11 AM on CNN radio). Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

Taxes on Wealthy lead to Pain for All

2010-04-10T18:58:00.003-05:00

"Soak the rich" is a favorite battle cry for politicians seeking reelection and advocates of social justice, but in the end, it creates injustice for all. This will clearly be seen as a consequence of the recent health care bill, as well as with the President's ambitious efforts to dramatically increase the tax on capital gains.

Numerous major corporations have announced projected loses in the hundreds of millions of dollars due to Obamacare. These tax hikes will have an adverse effect on the capital stock and will undermine job creation among small businesses. You would think the Obama administration, which is presiding over the worse unemployment this nation has seen in over a generation, would do everything in its power to keep unemployment down. To look at the obvious consequences of Obamacare, however, one would think that increased job losses is a policy objective. But the damage does not end with the President's ambitious health care agenda, but is also seen in his desire to change the taxes on capital gains.

Pamela Villarreal, a senior policy analyst with the National Center for Policy Analysis, notes that:
The 2001 Bush tax cuts reduced the lowest marginal income tax rate from 15 percent to 10 percent and the highest from 39.6 percent to 35 percent. This tax situation led to a job creation environment that was one of the best in recent history and brought the US unemployment down to around 5 percent. Simply put, the cost of using an asset got smaller and the profit got higher. This led to business activity taking place that resulted in more jobs and more tax revenue (because revenue comes from business activities that take place, like the selling of assets).
President Obama proposes to raise the two top marginal rates to 36 and 39.6 percent beginning in 2011 for the highest-income earners while leaving the other tax brackets unchanged. This will be temporary, however and will be followed with additional changes in the brackets and the amount taxed.

Starting in 2013, Obamacare will impose an additional 0.9 percent Medicare tax on wage income for individuals earning more than $200,000 a year and couples earning more than $250,000.
To make matters worse, the new law imposes a 3.8 percent Medicare tax on unearned income, such as "rent, royalties, dividends and capital gains for the same high-income earners."
The Obama administration also wants to increase long-term capital gains tax rates from 15 percent this year to 20 percent in 2011 for the two highest tax brackets, and taxing dividends at ordinary income tax rates for those earning $200,000 a year or more.

So what kind of impact will this have on the most affluent? Villarreal suggests we should "suppose an individual owns $50,000 worth of stock that has accumulated an 8 percent capital gain and 3 percent dividend after one year:"

By 2013, the tax on the $4,000 gain (just after one year) would be as much as $1,309, compared to $825 if we simply left taxes at the current rate.
With the current tax rate on capital gains (15 percent), the tax on the sale of $50,000 in stock would be $825, and the after-tax rate of return would be 9.35 percent.
If President Obama's proposed capital gains and dividends increases of 20 percent go into effect, along with the excessive new taxes that will come with Medicare, the tax bill rises to $1,352 and the after-tax rate of return falls to 8.38 percent (a drop of almost 1 percent).
For ordinary dividends, a higher marginal tax rate and the new Medicare taxes could nearly double the individual's effective tax rate from 15 percent to more than 29 percent, essentially doubling the tax burden.

The US already has the unwelcome distinction of having one of the highest tax rates of any industrialized country in the world. After Obama's pro-tax, anti-prosperity, agenda, we will likely be the world's number one tax collector among modern countries. For those who are more affluent, this will result in an after tax rate of return on this type of investment that would have the return on the profit be reduced by approximately 10 percent. The ironic result of such is that increasing the capital gains tax could actually lower government tax revenues (as witnessed in the past), because people will hold on to assets in order to avoid the tax. Remember, unlike the vast majority of people who sell things because they need to move, or they need a different vehicle, or there is some other cost driving necessity, the rich simply sit on the asset and wait until the tax environment changes. They can afford to do that and it is in their self interest. For much of the country, however, it leads to the depletion of jobs and even the hope of jobs.

Instead of increasing taxes on wealth creation (e.g., capital gains, taxes on businesses, etc.), this administration should consider dramatically reducing such barriers between people and jobs.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is also host of the Price of Business (M-F at 11 AM on CNN radio). Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

Conservatives talk Policy Priorities for 2010 Congressional Races

2010-04-09T12:49:00.004-05:00

Recently I asked Facebook friends and Price of Business Show Fans what their policy priorities would be if they were running for Congress in 2010. There is no question about it, people are ready for meaningful change and many of their opinions are quite perceptive, in my opinion.

Steve Yeager of Arkansas said, "Quit spending money on anything except for national defense and economic recovery, period. No more pork barrel spending, I am sorry if your district does not get your small municipal airports re-paved, but the buck has got to stop here and now!" In my view, do not spend another penny on economic recovery, but instead create a tax and regulatory environment in which businesses can thrive. I certainly think that Steve has us heading in the right direction.

One popular "love to hate" theme among conservative activists is health care. Brandon Dupont of Louisiana said that we should "repeal health care, go after fraud In Medicare and Medicaid...drug test for welfare and food stamp recipients." I believe the "drug test" theme might become a populist theme among Americans who are disgusted by the lack of accountability when it comes to government spending. Of course, welfare should be left entirely to the states and the citizens thereof. That, too, will be a popular mantra in 2010.

Another big concern is the amount of money the government is taking from its citizens and the type of things being taxed. There is an old saying, "the more you tax something, the less you get of it." With that, why would one want to tax wealth and job creation? The US is about to have the highest tax rate of any industrialized country in the world and our job growth numbers continues to show weakness. In fact, the continuously stagnant economy of England has lower unemployment than the US. With that, Dee Dobson of Oklahoma calls for a "FAIR TAX! They take our freedoms through taxes!" Taxes also take our wealth and productivity. A Fair Tax would stop taxing wealth creation and instead tax consumption. This type of policy would go far in restoring our economic greatness.

One issue I often beat the drum on is corporate welfare. This form of fascism is destroying America's economic fabric and is waging a war on entrepreneurship. Dave Smith of Texas noted that "Corporate welfare: end it. No subsidies, no special treatment, no tax credits for specific behaviors -- just a simple, fair, efficient flat tax that is easily understandable and doesn't favor or restrict businesses." Those who do not favor a Fair tax, tend to support a flat tax of around 10 percent. Either one would have every person contributing to government spending and holding that government accountable in a manner we have not seen in generations.

One of the most important issues facing America is the restoration of constitutional government. Larry Sherman of Minnesota says we should "return to a republic." Today, democracy and republican government are largely treated as synonyms, but the Founding Fathers clearly understood that true freedom is preserved in rule by law that protected the minority and even the individual, rather than through any form of dictatorship, be it popular or by a few.

Finally, Herschel Evans of Georgia may have put it best when he said, "Freedom! Freedom to succeed, freedom to fail. It should be all about Freedom!"

2010 should be about restoring limited constitutional government and restoring the rights of individual. It is time to replace the fast track to mob role (which invariably leads to oligarchy) with one of rule by law.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is also host of the Price of Business (M-F at 11 AM on CNN radio). Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

What Pro-life Democrats got for their Vote

2010-04-08T20:53:00.004-05:00

The vote seemed suspicious enough. At the 11th hour of the notorious health care vote, 11 "pro-life" Democrats who were adamant in their opposition of the President's legislation decided to vote with him. The stated reason for the shift was assurances from the Administration that the law would not be used to federally fund abortions, even though the legislation clearly allows for such. In order to bolster his claim, President Obama even signed an Executive Order prohibiting such funding. However, Congressman Bart Stupak (D-MI), the leader of the pro-life Democrat coalition, knows that the same pen that prohibits abortion funding can just as easily sweep it away, and it is likely Barack Obama will do just that. After all, the most famous vote of state Sen. Barack Obama in Illinois was to be the lone member of that body to vote against a bill to rescue victims of a botched abortion. His position was to simply let such victims to die. To think the funding of abortion is not a part of the Obama agenda is ridiculous and those who oppose abortion, but supported this bill, leads many critics to believe they must have received something in return for their votes.

Judas Iscariot only received 30 pieces of silver for being a traitor. He could have learned a great deal from the Stupak 11. It appears these members made several deals through the earmark process, which is a favorite of politicians. In the past, crafty members would sneak appropriations for the home district in massive spending bills with little notice since they would receive final approval after the vote (in this case in June or July by the Appropriations committee). However, Bill Allison of the Sunlight Foundation and other spending critics are watching expenditures as they relate to the health care bill. There will be no simple "pass" this time.

FoxNews.com reveals what the eleven members requested:

Rep. Jerry Costello of Illinois.: $1,418.7 million ($256.4 million in 2010)
Rep. Solomon Ortiz of Texas: $618 million ($726.1 million in 2010)
Rep. Stupak of Michigan: $578.9 million
Rep. Marcy Kaptur of Ohio: $294 million ($305.7 million in 2010)
Rep. Kathy Dahlkemper of Pennsylvania: $236.8 million ($54 million in 2010)
Rep. James Oberstar of Minnesota.: $207 million ($226 million in 2010)
Rep. Brad Ellsworth of Indiana.: $115.4 million ($82.3 million in 2010)
Rep. Charles Wilson of Ohio: $84 million ($62.3 million in 2010)
Rep. Paul Kanjorski of Pennsylvania.: $67.1 million
Rep. Steve Driehaus of Ohio: $33.2 million
Rep. Joseph Donnelly of Indiana: $19.8 million ($11.65 million in 2010)

Regardless of whether these members get the prize for their vote, their "sacrifice" may not be over when it comes to the health care bill. For example, Bart Stupak's race has gone from an "easy" election in 2010 to someone who is now facing a serious challenge. The GOP challenger, Dan Benishek, was limping along and was hoping to put together a campaign in the six digits by November. Politico reports that, after Stupak voted for the health care bill, the Republican challenger saw $125,000 in donations on one day alone. It is now a completely different ball game. It is likely that many of these "pro-life" members will be fighting to avoid extinction. For many voters it is no longer revenge. It is a reckoning.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is also host of the Price of Business (M-F at 11 AM on CNN radio). Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

Companies of all Sizes fear National Health Care

2010-04-02T21:03:00.003-05:00

Obama's massive health care proposal has far reaching implications, many of which we are now only beginning to learn about. One of the biggest areas of concern is the cost to businesses of every size. Higher government costs on business leads to several negative effects, including these businesses becoming less competitive (or leaving the US to avoid the costs), laying off employees to avoid certain regulatory thresholds or simply to remain competitive, and higher prices for consumers (since businesses will be forced to pass on the higher costs of doing business).

The Associated Press is reporting that "In the first two days after the law was signed, three major companies — Deere & Co., Caterpillar Inc. and Valero Energy — said they expect to take a total hit of $265 million to account for smaller tax deductions in the future. With more than 3,500 companies now getting the tax break as an incentive to keep providing coverage, others are almost certain to announce similar cost increases in the weeks ahead as they sort out the impact of the change. Figuring out what it will mean for retirees will take longer, but analysts said as many as 2 million could lose the prescription drug coverage provided by their former employers, leaving them to enroll in Medicare's program."

One of the first and most important rules I learned in economics was this little concept called the "secondary effects." Public policy is virtually always full of good intentions, but they are often damaged by the unintended consequences. The government thought they were going to be able to get businesses to pick up the load of its socialized health care programs. Unfortunately, many of these businesses will not be able to (nor have to), because they will be exempt due to their losses. These results are similar to the Massachusetts experience with government health care, where there was suppose to be huge health insurance relief by business, that instead resulted in a large increase in government coverage and the costs that come with such.

The problem does not end with big businesses though. According to the Pittsburgh Business Journal, "Employers with 50+ workers that do not offer health insurance will pay $2,000 per full-time worker (not including the first 30 workers) if any of their employees purchases government-subsidized coverage through an exchange. Employers with 50+ workers that offer unaffordable coverage or coverage that does not cover at least 60 percent of allowable costs will pay $3,000 for any employee who receives a tax credit in the exchange" Again, myopic policy makers who do not understand basic human nature, do not see the obvious consequence of these type of policies. These still small, but aspiring to be larger, businesses will simply layoff enough employees to make sure they fall beneath the 50+ threshold. They will likely make up the loss through outsourcing and vendors, including the utilization of companies overseas. This latter result is something people of most political stripes hate to see happen, but will be the natural result of Obamacare.

Currently the US is in the middle of what is being called the "Great Recession," with the highest unemployment numbers in over a quarter of a century. The Obama administration's irresponsible health care policy could move the country closer to seeing the original Great Depression as the second worse economy in US history. Actually, the ones who should fear Obama's health care policies the most is not the employers, but the people who will ask these companies for a job.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is also host of the Price of Business (M-F at 11 AM on CNN radio). Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

The Simplest Guide to what the US Government can do that You will Ever Find

2010-04-02T20:50:00.003-05:00

More Americans are aware of the huge problems facing are republic than at any time in recent decades. Our unemployment is approaching Great Depression levels, our deficits are growing annually at a rate similar to what our entire national debt was just a few decades ago, and the government is pumping dollars into our money supply in the trillions of dollars, putting us on pace for hyperinflation. Everyone seems to be aware of what is wrong, but are unaware as to why and, more importantly, how to fix it. That is why I developed this simple guide.

There is nothing original in this article. In fact, that is what makes it unique. It goes back to the original source, which is the US Constitution, to guide us back to where we belong. There is an old saying, "if you lose something, go back to the place where you last remembered having it." We have lost our liberty and the place we can find it is in the US Constitution. Every member of Congress swears to defend the US Constitution and to fulfill the powers listed in it. What are those powers? How many are there? The answer to those questions will surprise most Americans today.

Seventeen powers. That is all. None of them are particularly sexy and combined would cost a fraction of what we pay today. If they only did these functions, taxes (which obstruct job creation) would be much lower, the dollar would be much stronger (since we would not need "funny money" to fund excess government), and we would simply be more free. Here are those simple items:

"The Congress shall have power To lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common defense and general welfare of the United States; but all duties, imposts and excises shall be uniform throughout the United States;"

"To borrow money on the credit of the United States;"

"To regulate commerce with foreign nations, and among the several states, and with the Indian tribes;"

"To establish a uniform rule of naturalization, and uniform laws on the subject of bankruptcies throughout the United States;"

"To coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures;"

"To provide for the punishment of counterfeiting the securities and current coin of the United States;"

"To establish post offices and post roads;"

"To promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries;"

"To constitute tribunals inferior to the Supreme Court;"

"To define and punish piracies and felonies committed on the high seas, and offenses against the law of nations;"

"To declare war, grant letters of marque and reprisal, and make rules concerning captures on land and water;"

"To raise and support armies, but no appropriation of money to that use shall be for a longer term than two years;"

"To provide and maintain a navy;"

"To make rules for the government and regulation of the land and naval forces;"

"To provide for calling forth the militia to execute the laws of the union, suppress insurrections and repel invasions;"

"To provide for organizing, arming, and disciplining, the militia, and for governing such part of them as may be employed in the service of the United States, reserving to the states respectively, the appointment of the officers, and the authority of training the militia according to the discipline prescribed by Congress;"

"To exercise exclusive legislation in all cases whatsoever, over such District (not exceeding ten miles "square) as may, by cession of particular states, and the acceptance of Congress, become the seat of the government of the United States, and to exercise like authority over all places purchased by the consent of the legislature of the state in which the same shall be, for the erection of forts, magazines, arsenals, dockyards, and other needful buildings;-And"

"To make all laws which shall be necessary and proper for carrying into execution the foregoing powers, and all other powers vested by this Constitution in the government of the United States, or in any department or officer thereof."

Over the years that last clause ("necessary and proper") has become a license to do virtually everything. This is wrong, because the clause makes it clear that it applies only to the "foregoing powers" (the seventeen items listed above. Some of the Founding Fathers feared that this could lead to an abuse of power, which led to the first ten amendments being added to guarantee our rights, including the 10th Amendment, which states "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people."

Stop arguing with friends, family, loved ones, neighbors, and even idiots. Tell them their elected officials are breaking the law and have them read this simple document which will give them the tools they need to determine whether or not a policy is proper and whether or not their member of Congress should change careers.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is also host of the Price of Business (M-F at 11 AM on CNN radio). Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

Congressional Budget Office has new Numbers

2010-04-02T11:12:00.008-05:00

About two weeks ago the Obama Administration was blushing as it boasted about the "favorable" numbers its administration received from the Congressional Budget Office (CBO). The fact that the CBO is appointed by members of the President's own party (the majority in Congress are Democrats) made some skeptical. However, the experts outside of the CBO and the White House looked at the numbers and said, "wait a minute!" The numbers are scary and the budget is pointing at a direction that will make the US appear to be little more than a typical debtor nation. This is not something "down the road," but just a few years away.

Now, the Congressional Budget Office itself is releasing new numbers that make it appear it has had its own rude awakening. The Hill is reporting "The federal government would record total deficits of 9.8 trillion between 2011 and 2020 under President Obama's fiscal 2011 budget, according to an analysis released Wednesday by the Congressional Budget Office. The deficit would be $1.5 trillion in 2010 and and would decline to 8.9 percent of gross domestic product or $1.3 trillion in 2011, $346 billion more than the deficit that CBO projects in its March 5 baseline, based on current policies and laws not changing." Ironically, the Administration made the case for health care reform on the March 5th numbers. The "mistake" could not have been at a better time for Obama, Speaker Pelosi and Sen. Reid, and I'm sure the corrections will be used to make the case for more tax increases. "Isn't that convenient."

The article also goes on to point out that "under the president's budget debt held by the public would grow from $7.5 trillion or 53 percent of GDP at the end of 2009 to $20.3 trillion, or 90 percent of GDP, at the end of 2020, about $5 trillion more than under the assumptions underlying the baseline." These numbers have horror picture written all over them and show huge weaknesses in the fundamentals of our economy in the very near future.

The timing of the initial release of numbers on March 5th helped Obama get his socialized medicine program passed. I doubt he would have promoted these new numbers a few weeks ago. Questions of politics will certainly come up and should. Did Pelosi and Reid put undue influence on the CBO? Was the mistake a mere accident or perfectly times to help the Obama agenda? I am waiting for Republican members of Congress to raise those questions.

I have always worked to articulate what is going on in politics and the economy in the context of "results" rather than "intentions." Those who focus on the latter are dismissed as conspiracy theorists and nut jobs. Furthermore, they typically have no credibility in the eyes of the media or even the general public. However, with stating that, I have never seen an administration raise suspicions about politics, agendas, and deceit than that of Barack Obama.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is also host of the Price of Business (M-F at 11 AM on CNN 650). Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

"Give me Liberty or Give me Death" Rings True Today

2010-03-27T12:20:00.007-05:00

March 2010 marks the 235th anniversary of one of the most important speeches delivered in US history as the colonies prepared to shed its chains from the British tyrants. The rhetoric used by the great statesman, Patrick Henry, resonates very well today as this nation faces tyrants of its own.

The atmosphere in 1775 was tense. The colonists, who were outraged by a British government that was drunk with power, responded by dumping 342 containers of tea into the Boston harbor in 1773. This became known at the Boston Tea Party. The British Parliament responded with a series of laws known as the "Intolerable Acts."

By early 1774, the British backed up its harsh taxation with military action, sending General Thomas Gage and, after that, four regiments of British troops. In response to these growing hostilities, the first Continental Congress met in the fall of 1774 in Philadelphia, with 56 American delegates, representing every colony, except Georgia. On September 17 this Congress not only made it clear they had no intention to follow these law and took the important steps to form local militias to prepare to fight.

By early 1775, economic and military tensions reached an all time high and a provincial congress was held in Massachusetts. At this event, John Hancock and Joseph Waren began to prepare the state to go to war. Meanwhile, in Britain, the English Parliament declared war on Massachusetts for its rebellion. With only one state on England's list, the war should be an easy victory for the British. Other colonists became increasingly aware that the only way the colony of Massachusetts could win its war is if it became all of the colonists' war. Enter Patrick Henry.

The largest colony in America, Virginia, held an important meeting on March 23 for the colony's delegates. It was held in St. John's church in Richmond. Resolutions were presented by Patrick Henry putting the colony of Virginia "into a posture of defense...embodying, arming, and disciplining such a number of men as may be sufficient for that purpose." Before the vote was taken on his resolutions, Henry delivered one of the most important speeches in the history of our republic and one of its most important lines became a battle cry for the colonists.

In spite of his eloquence and the words he chose, it came very natural as he did not use a single note. As the speech went on, he became louder and louder and by the end, a measured and some what timid group of delegates took the major step of supporting Henry's resolutions by a narrow margin, placing Virginia in the Revolutionary War.

The speech should be read by every American in its entirety. However, the following lines alone should stir even the most complacent of Americans to appreciate the great country we have enjoyed and that we certainly need to restore. It should be no surprise that even Time Magazine ranks this speech among the ten greatest in human history.

"For my own part I consider it as nothing less than a question of freedom or slavery; and in proportion to the magnitude of the subject ought to be the freedom of the debate. It is only in this way that we can hope to arrive at truth, and fulfill the great responsibility which we hold to God and our country. Should I keep back my opinions at such a time, through fear of giving offense, I should consider myself as guilty of treason towards my country, and of an act of disloyalty towards the majesty of heaven, which I revere above all earthly kings."

"For my part, whatever anguish of spirit it may cost, I am willing to know the whole truth -- to know the worst and to provide for it. I have but one lamp by which my feet are guided; and that is the lamp of experience. I know of no way of judging of the future but by the past. And judging by the past, I wish to know what there has been in the conduct of the British ministry for the last ten years, to justify those hopes with which gentlemen have been pleased to solace themselves..."

"Is it that insidious smile with which our petition has been lately received? Trust it not, sir; it will prove a snare to your feet. Suffer not yourselves to be betrayed with a kiss. Ask yourselves how this gracious reception of our petition comports with these warlike preparations which cover our waters and darken our land. Are fleets and armies necessary to a work of love and reconciliation? Have we shown ourselves so unwilling to be reconciled that force must be called in to win back our love? Let us not deceive ourselves, sir. These are the implements of war and subjugation -- the last arguments to which kings resort. I ask gentlemen, sir, what means this martial array, if its purpose be not to force us to submission? Can gentlemen assign any other possible motives for it? Has Great Britain any enemy, in this quarter of the world, to call for all this accumulation of navies and armies?"

"They are sent over to bind and rivet upon us those chains which the British ministry have been so long forging. And what have we to oppose to them? Shall we try argument? Sir, we have been trying that for the last ten years. Have we anything new to offer on the subject? Nothing. "

"If we wish to be free -- if we mean to preserve inviolate those inestimable privileges for which we have been so long contending -- if we mean not basely to abandon the noble struggle in which we have been so long engaged, and which we have pledged ourselves never to abandon until the glorious object of our contest shall be obtained, we must fight! I repeat it, sir, we must fight! An appeal to arms and to the God of Hosts is all that is left us!"

"Shall we gather strength by irresolution and inaction? Shall we acquire the means of effectual resistance, by lying supinely on our backs, and hugging the delusive phantom of hope, until our enemies shall have bound us hand and foot?"

"Three millions of people, armed in the holy cause of liberty, and in such a country as that which we possess, are invincible by any force which our enemy can send against us. Besides, sir, we shall not fight our battles alone. There is a just God who presides over the destinies of nations, and who will raise up friends to fight our battles for us."

"Our chains are forged! Their clanking may be heard on the plains of Boston! The war is inevitable -- and let it come! I repeat it, sir, let it come!"

"Gentlemen may cry, "Peace! Peace!" -- but there is no peace. The war is actually begun! The next gale that sweeps from the north will bring to our ears the clash of resounding arms! Our brethren are already in the field! Why stand we here idle? What is it that gentlemen wish? What would they have? Is life so dear, or peace so sweet, as to be purchased at the price of chains and slavery? Forbid it, Almighty God! I know not what course others may take; but as for me, give me liberty, or give me death!"

I have watched politics and the trends of this nation for three decades and I have never seen a message such as this ring more true as it does towards our own government. Americans are angry and I think their capacity to restore liberty is greater now than we have seen in generations.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is also host of the Price of Business (M-F at 11 AM on CNN 650). Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

A Look at Obamacare by the Numbers

2010-03-24T20:53:00.005-05:00

Critics of the President's health care agenda are always looking for the "right words" to convince others about the danger that will come with Obama's radical agenda. Maybe the most effective rebuttal is not in words, but in numbers. It is through reviewing the impact, in numbers, that Americans for Tax Reform (ATR) is tackling this sweeping and far reaching legislation.

One of the major promises of the Obama campaign during his run for President was to show "restraint" when it came to taxes. No one making less than $250,000 would see an increase at all, we were told. The vast majority who made more than that would see very few tax increases of their own, we were assured. According to ATR, the number of new tax increases in the health care bill is 19.

I guess it would not be too bad, if you felt campaign promises (and not the Constitution) is all that mattered and all of these tax increases were directed towards the "super rich" who make more than $250,000. Unfortunately, the number of tax increases that "unquestionably violate President Obama's 'firm pledge' not to raise 'any form' of taxes on families making less than $250,000" is a significant number at 7. In fact, people making as little as five digits a year will find themselves subject to new tax increases.

The number of new taxes is disconcerting and the disregard to promises made by the President in getting elected is enough to make a person's blood boil, but the amount that will be collected through the health care bill is enough to strike fear in even the most liberal tax lover. According to Americans for Tax Reform, "the tax increase over the first decade if the health care bill becomes law" will be "$497 billion."

Two of the weaker countries in the industrialized world -- when it comes to jobs, GDP growth, and other indicators of economic expansion -- are Japan and the United States. They also have the highest top tax rates. This is no coincidence, but the natural consequence of excessively taxing those who create jobs. Number one has been Japan, but when Obamacare becomes law, we will have the dubious distinction of being the "leader" in high tax rates. According to Americans for Tax Reform, "the top federal tax rate on wages and self-employment earnings under this bill: 43.4%" This will translate into an "annual tax hike for every man, woman, and child in America" of $165.

Oddly, Obama's health care bill even takes damaging aim against those who are least able to defend themselves. According to Americans for Tax Reform, "the most parents of special-needs kids" will be able to "save tax-free for tuition in FSAs (currently, the amount is unlimited): $2500."

ATR does not discuss the rationing that will come with this sweeping move towards socializing medicine or the negative impact it will have on innovation, since over 80 percent of all new technologies and drugs come from the US due to our profit system. What it does provide, however, is some serious numbers that show that Obamacare will certainly cause enormous and far reaching damage to our nation's economic health.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is also host of the Price of Business (M-F at 11 AM on CNN 650). Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

Health care debate leads to talk of impeachment

2010-03-21T19:36:00.003-05:00

The health care debate has been a spectacle to watch. Democrat members of Congress that are opposed to the legislation are being threatened by the President and by leaders of the Senate and the House. Some of it is subtle, like President Obama telling members of his party that he has no plans to campaign for them unless they vote for the health care bill. These days, in light of the incredible low he is experiencing in the polls, that is probably good news for Democrats. Other threats are less subtle, including some being warned if they do not vote for the bill, they are going to face well funded primary challenges. The arm twisting that members are experiencing is unprecedented and the tactics being used by Democrat leaders is being described by some as unconstitutional.

"Unconstitutional" and "impeachment" are fighting words for members of Congress and are dangerous when you are talking about the Speaker of the House. That is the type of language Michele Bachmann (R-MN) is using in light of the actions going on in the Congress.

One of the primary responsibilities of the media, known as the "fourth estate," is to hold those in power accountable. Congresswoman Bachmann argues that the media has dropped the ball by ignoring the Constitutional violations that are taking place in DC today.

Bachmann had the media in its crosshairs recently when she was in on Sean Hannity's program, stating, "Where is the mainstream media in all of this not telling this story? This is a compelling story - that the Speaker of the House would even consider having us pass a bill that no one votes on?" When she says that, the thought is a little shocking. The Speaker of the House is using an illegal procedure to pass a bill that will move one-sixth of the economy to government control and the media is more interested about whether the bill will become law than in the tactics being used to make it happen.

The procedures being used by Speaker Pelosi are so horrible, Bachmann says, that they alone serve as grounds for impeachment. Of particular concern is the "Slaughter Rule" or "deem and pass." The Wall Street Journal describes the situation well: "We're not sure American schools teach civics any more, but once upon a time they taught that under the U.S. Constitution a bill had to pass both the House and Senate to become law. Until this week, that is, when Speaker Nancy Pelosi is moving to merely 'deem' that the House has passed the Senate health-care bill and then send it to President Obama to sign anyway... Under the 'reconciliation' process.. the House is supposed to approve the Senate's Christmas Eve bill and then use 'sidecar' amendments to fix the things it doesn't like. Those amendments would then go to the Senate under rules that would let Democrats pass them while avoiding the ordinary 60-vote threshold for passing major legislation. This alone is an abuse of traditional Senate process." So abusive are the tactics, in fact, that Bachmann is talking impeachment.

Bachmann goes on to say that members of Congress should "laugh her out of the House and there should be people that are calling for impeachment off of something like this," Bachmann continued. "That's how bad this is. I mean, trust me - (former Speaker of the House) Dennis Hastert could have never gotten away with this. President Bush never could have gotten away with it."

At the very least, Bachmann hopes that voters will receive an important civics lesson. She argues that this is the type of thing that happens when one party dominates the entire political process. In the case of the Democrats, it became a temptation to abuse Constitutional power at a level we have never seen in the history of our country.

How serious is the impeachment threat? Right now it is only one member of Congress that is part of a legislative body dominated with members with a rather casual view of the idea of rule of law. But elections are in November and the political landscape could change rather quickly. It seems very obvious that voters will be watching what unfolds closely.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is also host of the Price of Business (M-F at 11 AM on CNN 650). Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

Quantifying the shift to government dependence

2010-03-18T21:49:00.004-05:00

I love lists, indices, and other interesting compilations of information. However, a recent report by the Heritage Foundation called the Index of Dependence on Government was very disturbing indeed. The numbers numbers this report certainly makes one look and they should be most alarming to even the most casual observer.

The index looks at several indicators when it comes to the growth of dependence on government. For example, how much have federal social programs grown? To what degree have such programs "crowded out" what were once social obligations and services carried out by the family, community organizations (e.g., churches), and local governments? In sum, William Beach, Director of the Center for Data Analysis at the Heritage Foundation, asks, has the civil society yielded significant ground to the public sector? After all, problems are solved by friends, neighbors, family, and religious groups, they are simply maintained when they fall into the hands of government. Quantifying the size of the shift to dependence is exactly what the index attempts to do.

The index currently stands at 240, based on data running through 2008. That is up three points from the 237 points from 2007. The growth in the index has been astonishing since 2001, growing by 31.2 percent when it stood at 183. The growth is even more profound when you look at the orgins of the indes in 1980, in which the base year for the index started at a mere 100). This enormous growth has happened over 30 years.

The rapid increase in the number of dependents has been accompanied by a comparable increase in the number of people who do not pay taxes. That number has grown from 21.3 percent in 1980 to 34 percent in 2008. 20 million tax filers did not pay a penny in taxes, 48 million Americans paid nothing at all.

Beach believes this shift to government dependence should be alarming to Americans. In addition to providing a huge financial drain on social service programs and the probability of long term dependence without consequences or shame (after all, recipients are mere "numbers" in the bureaucratic game); this harms civil society of its traditional and necessary role in providing assistance and the path towards independence through relationships that are closer to home. These include the family, community groups, religious organizations, and local governments. Local governments are far more effective than the federal government in breaking dependence because of their much more limited budgets and greater accountability, because they are closer to voters. Although the focus of the index is on the shift from society to government, this study also indicates the decay of civil society itself as reflected in its declining role in this most important area of life.

The biggest concern of all that comes from this index, in my opinion, may be what is around the corner -- the huge number of Baby Boomers that will bring the largest retirement of people in the history of the world. This phenomenon is taking place at a time when the number of people who do not pay taxes is growing rapidly. America has been on the path towards economic ruin for years. Now it seems we are in the process of fast tracking that process.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is also host of the Price of Business (M-F at 11 AM on CNN 650). Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

Government Chooses Green Policies over Job Creation

2010-03-18T21:31:00.004-05:00

Every day we see news stories that discredit the hysteria of "Global Warming." Winters have been colder for the past five years and those of us who grew up in the 1960s and 1970s remember when the fear was another "ice age." To make matters worse for "green" advocates, thousands of discovered emails written by Global Warming scientists show the agenda was more about control and politics than improving the environment. Add to the fact that the barriers between people and jobs are so numerous, the last thing you would think that policy makers would want to do is add regulations and taxes in pursuit of a green economy, but that appears to be the priority of the Obama Administration.

President Obama has made the creation of green jobs one of the biggest priorities of his energy and environmental agenda. Becoming the "leader in developing the clean energy technologies that will lead to the industries and jobs of tomorrow"' is described by Obama and his Administration as "'critical to the future of our country." They are investing billions in pursuit of this goal, according to Carrie Lukas of the Independent Women's Forum.

The stimulus bill of 2008 and 2009 had huge amounts allocated to "'green"' enterprises, including:

$6 billion for a loan program targeted for "green" industry.
$5 billion for weatherization aid, and $11 billion for "'smart grid"' technology and modernized high-tech transmission lines
$500 million to help train workers for "green-related" careers.
The new budget doubles down with similar "'green"' investments.

In addition, the subsidies allocated hundreds of millions for the research and development of new technologies in the energy field. There are also billions of tax breaks for companies investing in projects that pursue clean energy. Finally, you will find $74 million for initiatives to encourage young people to pursue careers in clean energy.

Taxpayers should be warned that creating a "'green job"' is not affordable, says Lukas:

State and local "green job" creation efforts have cost in excess of $100,000 per position.
Instead of creating domestic "green job" industries, much of the dollars for such projects are actually being sent overseas. For example, ABC News has reported that nearly 80 percent of the almost $2 billion in the stimulus bill dedicated to wind power, went directly to foreign manufacturers for wind turbines.

In the end, what may be of greatest concern are policymakers who know that direct government spending alone will not usher in a new "'clean"' economy, so they are also pursuing a more deliberate path to "'green"' job creation -- driving up the costs of traditional energy sources either through regulation or a costly cap-and-trade system that acts as a carbon tax. Essentially, the government will try to force businesses to use "green" fuels at the expense of their international competitive edge. This will mean that average American families will find that these policies cost them thousands of dollars as the price of everything from food (transported by gas power vehicles) to fuel itself, rises. Something with this kind of cost should generate "green" jobs, but will likely do so at the lost of many traditional jobs. Businesses will be forced to put more resources into cutting energy costs rather than on business expansion or job creation. The US already has the highest unemployment it has experienced in a quarter of a century. One has to wonder what our economy will look like after the radical health care agenda and an environmental plan that is simply not needed.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is also host of the Price of Business (M-F at 11 AM on CNN 650). Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

Obamacare will Harm Working Americans

2010-03-15T12:18:00.004-05:00

There is something that is clearly seen in the policy changes that will come with Obama's radical health care agenda, but is largely being ignored by the mainstream media. It is being called by some health care watchers as "the President's dirty little secret." Essentially, Obama's policies will wage a war on America's labor markets, says Benjamin Domenech who was a political appointee at the Department of Health and Human Services and is now the managing editor of Health Care News.

The United States is suffering from the highest unemployment in a quarter of a century and in such an economic environment you would think the government would do everything in its power to soften or eliminate the barriers between people and jobs. Instead, Obama's health care legislation will place millions of American workers out of work or move them to contract employees. This, in turn, will only create turmoil for families that are already concerned about one of the weakest economies in US history.The President promised a health care bill that would allow one to keep their private insurance and give business owners some needed relief (such as in taxes and mandates) to make it more affordable. Thanks to record deficits and the largest percentage of government spending in the Gross Domestic Product since the Great Depression, there will not only be any additional relief, but there will be a dramatic increase on the costs for business owners when it comes to health care.

In fact, the President's legislation is full of pitfalls and paradoxes when it comes to the President's goal of making health care more available. These include:

Obama's proposal actually punishes employers for not providing health insurance. These type of provisions will lead to layoffs or the shifting of employees to contract status.

Meanwhile, the president will subsidize the health care of employers without employer-provided insurance. These dollars will largely come from employers, which will further create barriers between people and jobs.

This strange series of policies will essentially allow workers to receive the same compensation package they have today (assuming they can keep their jobs), but with Uncle Sam paying the health benefits of the bill, employers will have neither the need or the incentive to make up the difference in cash.

On paper, this proposal looks great for low income workers (those making less than $17,000 a year), but there is a terrible thing called reality, because the layoffs and other issues that will follow.

The heart of liberal policies is that they are filled with, what appears to be, good intentions, but are plagued with terrible consequences. Domenech notes that small businesses that employ lower-income workers will not find it sensible, economically, to offer health insurance. Any business that does so will virtually always fail because of the higher costs they will suffer compared to competitors.

Obama's health care agenda is full of paradoxes and odd agendas that, in the end, will make health care cost more, or lead to higher unemployment, or foster a less stable economic environment, or all the above. Solutions to health care problems continue to be found in the market and not in government.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is also host of the Price of Business (M-F at 11 AM on CNN 650). Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

The Decline in US Economic Freedom

2010-03-12T12:26:00.003-06:00

Since 1995 the Heritage Foundation and the Wall Street Journal have monitored the economic freedoms of countries around the world and have published their results in the 2010 Index of Economic Freedom. Ideas like "economic freedom" are a little subjective, but I like the stated view of the publication. According to the editors, economic freedom is defined as "the fundamental right of every human to control his or her own labor and property. In an economically free society, individuals are free to work, produce, consume, and invest in any way they please, with that freedom both protected by the state and unconstrained by the state. In economically free societies, governments allow labor, capital and goods to move freely, and refrain from coercion or constraint of liberty beyond the extent necessary to protect and maintain liberty itself."

As far as methodology, the editors "measure ten components of economic freedom, assigning a grade in each using a scale from 0 to 100, where 100 represents the maximum freedom. The ten component scores are then averaged to give an overall economic freedom score for each country. The ten components of economic freedom are: business freedom, trade freedom, fiscal freedom, government spending, monetary freedom, investment freedom, financial freedom, property rights, freedom from corruption, and Labor Freedom."

We Americans like to believe that we live in the "land of the free and the home of the brave." Yet, most Americans note that our country is in decline. The top ten list of the 183 considered in the survey, gives you an idea of how bad it has become.

The US does not appear in the top five. Using school standards and 90 plus is an "A," no country on the list meets that criteria. With that, number 1 goes to Hong Kong at 89.7, declining 0.3 percent from 2009. The country reached this high status because of its "competitive tax regime, respect for property rights, and flexible labor market, coupled with an educated and highly motivated workforce, have stimulated an innovative, prosperous economy. Hong Kong is one of the world’s leading financial and business centers, and its legal and regulatory framework for the financial sector is transparent and efficient. Business regulation is straightforward. Despite the global economic slowdown, Hong Kong has maintained its status as Asia’s second-largest destination for foreign direct investment, attracting over $60 billion in 2008."

The other countries in the top four are Singapore (number 2 at 86.1 percent, down .1 percent), Australia (number 3 at 82.6 percent, with no change), New Zealand (number 4 at 82.1 percent, up.1 percent), and Ireland (number 5 at 81.3 percent, down .9 percent). New Zealand is only one of two countries in the top ten list to go up. According to the editors, "New Zealand continues to be a global leader in economic freedom, performing well on most of the components measured in the Index. The economy has an impressive record of market reforms and benefits from its openness to global trade and investment. The banking sector is characterized by sound regulations and prudent lending practices, and well-implemented structural reforms have allowed the New Zealand economy to weather the recent global financial and economic crisis relatively unscathed."

Countries six and seven round up the top tier of economic freedom (those with a "B"). The US fails to show up again. Switzerland (number 6 at 81.1 percent, up 1.7 percent) and Canada (number 7 at 80.4 percent, down 0.1 percent) occupy those spots. Switzerland is the other in the top ten to actually go up over the last year.

The United States (number 8 at 78.0 percent, down 2.7 percent) is one of three countries that rounds up the top ten with Denmark (number 9 at 77.9 percent, down 1.7 percent) and Chile (number 10 at 77.2 percent, down 1.1 percent). These countries did not even make it to the top tier, being below 80 percent and the United States had the dubious distinction of seeing the biggest decline in the past year (2.7 percent) among the top ten. In the arena of economic freedom, the US has a low score of "C+" at 78.0 percent.

The study notes that the "U.S. government’s interventionist responses to the financial and economic crisis that began in 2008 have significantly undermined economic freedom and long-term prospects for economic growth. Economic freedom has declined in seven of the 10 categories measured in the Index." It also states that "Uncertainties caused by ongoing regulatory changes and politically influenced stimulus spending have discouraged entrepreneurship and job creation, slowing recovery. Leadership in free trade has been undercut by 'Buy American' provisions in stimulus legislation and failure to pursue previously agreed free trade agreements with Panama, Colombia, and South Korea. Tax rates are increasingly uncompetitive, and massive stimulus spending is creating unprecedented deficits. Bailouts of financial and automotive firms have generated concerns about property rights."

Imagine, the US is a "second tier country" on the fast track of decline after only one year of one of the most anti-free market Administrations in US history. It will be interesting to see if the US is still in the top ten after the Obama presidency comes to an end.

Will the Real Robert Byrd Please Stand Up?

2010-03-10T21:49:00.004-06:00

Sen. Robert Byrd (D-WV) is the Liberal Lion of the US Senate. The longest serving member of that institution, he has been a champion of big government and spending programs for years. He is also a philosophical ally of President Obama, an ally who has been at odds with that President.

In addition to his love for big government, Byrd also has a history of demonstrating a great passion about the protocol of the US Senate. Few members of Congress understand the unique role that body plays in the legislative process and he is infuriated by an Administration that is so passionate about its policy agendas that it is disregarding legislative integrity.

About a year ago, in a statement, Byrd made it clear that he agrees with the President when it comes to policy, stating, "I like this budget. I support many of the policies that the President's budget embraces - including middle-class tax relief, and badly needed investments in our nation's infrastructure." In spite of his agreement with the President when it comes to policy, he has great concern when it come to tactics noting that he "cannot, and...will not, vote to authorize the use of the reconciliation process to expedite passage of health care reform legislation or any other legislative proposal that ought to be debated at length by this body."

His statement as to why members of the Senate should be opposed to this legislation is both eloquent and forceful. He notes that "Using reconciliation to ram through complicated, far-reaching legislation is an abuse of the budget process. The writers of the Budget Act, and I am one, never intended for its reconciliation's expedited procedures to be used this way. These procedures were narrowly tailored for deficit reduction. They were never intended to be used to pass tax cuts, or to create new Federal regimes. Additionally, reconciliation measures must comply with Section 313 of the Budget Act, known as the Byrd Rule, which means that whatever health legislation is reported from the Finance Committee or legislation from any other Committee that is shoe-horned into reconciliation will sunset after five years... This is a very messy way to achieve a goal like health care reform, and one that will make crafting the legislation more difficult" (emphasis added).

Many liberal members of the Senate or talking revenge. They believe the legislative process had been used to force legislation down "their throats" in the past. They are not getting much sympathy from Byrd, who said "Whatever abuses of the budget reconciliation process which have occurred in the past, or however many times the process has been twisted to achieve partisan ends does not justify the egregious violation done to the Senate's Constitutional purpose. The Senate has a unique institutional role."

Advocates of mob rule will also find little sympathy from the West Virginia Democrat. He notes that the US Senate "Is the one place in all of government where the rights of the numerical minority are protected." This is not by accident, but by design, stating that, "As long as the Senate preserves the right to debate and the right to amend we hold true to our role as the Framers envisioned. We were to be the cooling off place where proposals could be examined carefully and debated extensively, so that flaws might be discovered and changes might be made."

He has an ominous warning for myopic colleagues who would disregard the rules and ram this legislation through. "Remember, Democrats will not always control this chamber, the House of Representatives or the White House. The worm will turn. Some day the other party will again be in the majority, and we will want minority rights to be shielded from the bear trap of the reconciliation process."

Unfortunately, Byrd is back tracking on his convictions and is now coming out in support of reconciliation to finish the health care bill. This goes against the grain of Byrd's career, but is typical of the politics of the day. It does make one ask, will the real Robert Byrd please stand up?

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is also host of the Price of Business (M-F at 11 AM on CNN 650). Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

Liberals, the Super Rich, and Strange Allies

2010-03-07T11:12:00.004-06:00

If you read the fairy tale weaved by the major media and our history books, we would believe that liberal policies are beneficial to everyone, whether if those policies are popular are not. The upper classes can complain all they want, but they sleep better at night knowing that the government is generous with their wealth, even if those wealthy are actually "quite greedy." The middle class who aspire to be rich might have to face tougher regulations and taxes that might prevent them from meeting their dream, but at least they know their "fundamental needs" are being met. This would never happen, we are told, without the benevolent hand of the government. Than there are those who are poor and they are obviously the biggest beneficiaries of a big and generous government. These people would surely be found lying dead in the street without the generosity of a redistributing government.

The reality is, the only ones who benefit at all from a government that is growing out of control are the super rich and, if you consider getting "something for nothing" a "good thing," the poor. The rest of us are squeezed by the pressures driven by the highest income groups.

Liberals want us to believe that conservatives are "for business" while they are for "the people." It is correct that, true conservatives, support bills that encourage economic freedom. But businesses support liberal candidates as well. Liberals want us to believe that Obama raised almost ten times more than McCain in the last Presidential campaign by getting coupons and food stamps from the homeless and the destitute. According to the FEC, the top 1 parent income group gave three to one more to Barack Obama than John McCain. How is that possible for a President who is bent on being the "Peoples' President?" The reason for this is simple, the mega rich are the only ones that can actually afford big government.

I worked for a member of the US Senate and learned how the super rich and the liberals work hand and hand. For example, major energy companies and environmental activists (yes, odd bedfellows) decide that it was time to upgrade the environmental quality of gas pumps in the early 1990s. So, they send their team of lobbyists upon Washington, DC to persuade members of Congress to pass legislation that would cost -- $10,000 per gas pump on average in order to bring them up to code.

Now, the liberal members of Congress are sitting in their office and the lobbyists visit them. They see a "business man" who represents an energy company saying that forcing the upgrade of gas pumps is a good thing for everyone -- including business. It will "create new jobs" for those who make these better pumps. More "important," this legislation will make a "cleaner and safer environment," because fewer gas fumes will be pumped into the environment. The liberal, who is inclined towards expanding government any way, loves this. It is "pro-business" and "pro-environment, what can we lose?" What was lost was thousands of jobs, untold numbers of "mom and pop" gas stations that could not afford the upgrades, and consumers lost choices for buying gas. This epitomizes government at its worse. Big business has partnered with big government to mug small businesses for years with regulation and tax laws the latter cannot afford.

There is a similar situation when it comes to excessive, progressive, taxation. The super rich find this to be a laughable situation, since most of these taxes only apply when money is being used in economic activities. A great example is the capital gains tax. When you look at history, and when this tax was very high or in the process of increasing (like now), the result is a dramatic drop in economic activity and the jobs they created. The rich would sit on the largess they enjoyed and accumulated, while those who want to be rich find themselves unable to afford to take risks because the rewards were so damaged by the tax. The super rich actually get a break from the upper middle class that aspires to be rich when all taxes are high. In a way, these high taxes are an actual insurance program against those who would want to displace them on the economic ladder.

Big government, and its proponents, have always been funded and supported by the super rich. Although more than 80 percent of all jobs are created by small business, major corporations and the people that benefit from them, dictate government policies that keep the wealthy on top and increases the numbers of the poor (by destroying job creation among small businesses and providing increased incentives for choosing a life of poverty). So, the next time you meet someone who says they are liberal, ask them why don't they give the "little guy" a break and support freedom instead.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is also host of the Price of Business (M-F at 11 AM on CNN 650). Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

Who Loses from Minimum Wage Increases?

2010-03-05T17:50:00.003-06:00

We have all heard the saying that "The Road to Hell is paved with good intentions." This saying could not be more true than when it comes to minimum wage. Liberals determine whether a policy is "good" entirely on what it should do, rather than what it actually does. Liberal policy makers decide they want to raise the incomes of individuals (salaries), when they should seek to increase the spending power of individuals (which would happen from increased productivity and the lower costs that follows).

Increasing the minimum wage, which is intended to raise the living standards of millions of Americans holding unskilled and entry level positions, finds itself playing a much different role. Instead of making individuals more financially well off, minimum wage increases always lead to massive layoffs. In fact, a new study from Ball State University suggests that the most recent minimum wage increase may have led to the elimination of 550,000 jobs. This level of lost jobs makes an eloquent case for opening up the possibility that such wage levels should be reconsidered.

Part-time workers monitored by the Bureau of Labor Statistics (from 1999 to 2009) found that raising the minimum wage to its current high of $7.25 during this recession, contributed to many businesses reducing the number of jobs they have available through attrition or to eliminate them entirely, according to Michael J. Hicks of Ball State's Center for Business and Economic Research (CBER).

The findings of the study did not end there:

The youngest and least qualified Americans are those who suffer the most from minimum wage laws. Approximately 67 percent of teenagers and young adult minimum wage workers are members of households with incomes that are at least twice the poverty level (for example $44,000 for a family of four). This means that the vast majority of these jobs do not "make or break" a household's income, but are important ways for people to get the tools they need to get better jobs in the future. But if the job costs too much due to the government, the opportunity will never arrive.

Adult workers working at minimum wage have limited skill. Raising the salary, in many cases, will force employers to consolidate many positions and eliminate many of these jobs. No one benefits from this kind of result.

About two-thirds of all adult minimum wage workers have a high school degree or less. Frankly, the preparation of these workers are commiserate with their skill, training, and abilities.

One benefit of a lower minimum wage is that it provides individuals the incenive to be more compeitive in the job market. Artificially high wages would reduce incentives to improve ones situation, would lead to higher prices for goods made, and leads to the elimination of many jobs. Minimum wage has many down sides, but not many causes for enthusiasm.

The study goes on to make several "real world" recommendations:

The development of a "sub-minimum" wage that would lead to the creation of lower minimum wages for students and new hires would be assisted in keeping jobs.

A student minimum wage would allow employers to hire seasonal workers without having to pay the full cost of adult employment.

Introducing a tenure-scaled minimum wage would give employers an incentive to "take a chance" on less skilled and unskilled workers.

In addition, there are several aggressive steps that could be taken on the minimum wage front. The most important, in my opinion, is eliminating the current minimum wage entirely, but instead have he federal government mandate the states to have minimum wages of their own. This would allow states like Michigan, Ohio, and Nevada to be able to tackle their massive unemployment problem in creative ways that make sense to their particular circumstances. For example, they could have a different minimum wage for cities with disproportionately high unemployment, in order to make them more competitive.

Surveys show that unemployment is the most pressing issue facing voters today. Our current double digit unemployment puts us at a level we have not seen in a quarter of a century. The American people are looking for Congress to take serious steps to eliminate the barriers between people and jobs. Reforming minimum wage is an excellent place to start.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is also host of the Price of Business (M-F at 11 AM on CNN 650). Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.