EXTRA! EXTRA! Fracking Saves Silver City.  Need For Sustainability Gardens Delayed 50 years — or more.

Hydraulic fracturing of oil and gas wells, called “fracking”, has opened huge new reserves of oil and natural gas in the United States.  This is a good-news story that I don’t think has received the attention in the mainstream media, MSM, that it deserves.

My cynical explanation for this oversight is that the lib-progressives who control the MSM are obsessed with global warming, which they blame on fossil fuels. News about all that oil and gas being found could persuade people we don‘t need the very expensive energy produced by solar panels and windmills. In their eyes, the fracking bonanza is really, really bad news for Mother Earth.

However, it is good news for Silver City. Let me explain. The last couple of years I’ve attended numerous meetings around town concerned with climate change and how that was going to require Silver City to grow its own food, put solar panels everywhere, and so on.

The fact that Silver City has never been an agricultural center, for obvious reasons, has no effect on the true believers and their need to proselytize the sustainability religion, which is a spin-off from the Apocalypse Du Jour: Global Warming.

For the most part, these true believers are very nice folks, just not very quantitative.  For example, a key part of the self-sufficiency argument is that because we are running out of fossil fuels, it is inevitable that the time will come when it will be too expensive to truck food into Silver City.  One pundit said he thought maybe a doubling in diesel fuel prices would do it.

Let’s take a look at the math, assuming not a doubling but a quadrupling of diesel prices from $5 to $20 per gallon. Assume 20 gallons for a 120 mile round trip from Deming, and $50,000 of goods per truck. Fuel costs go from .02% to .08% of the cost of the shipment, i.e. fuel costs are still less than one percent even after a quadrupling of prices. My assumptions may be wrong, but it‘s of no importance in the aftermath of fracking.

The really big expansion from fracking has been in natural gas reserves, now estimated to be over 100 years and growing.  The rule of thumb is that a barrel of oil has about six times the BTUs of an MCF of natural gas. (British Thermal Units, a measure of energy; MCF = thousand cubic feet.)

With oil at $100 per barrel, divide by six and natural gas has a BTU worth of about $17 an MCF.  Since natural gas sells for only $4 per MCF, or $24 per barrel of oil equivalent, there is great economic incentive for users of oil and oil products to switch to natural gas.

Sure enough, the headline from a April 22 story in the New York Times read: “Trucking Industry Is Set to Expand Its Use of Natural Gas. —-This month, Cummins, a leading engine maker, began shipping big, new engines that make long hauls on natural gas possible.”

The article quotes T. Boone Pickens, well known oil and gas billionaire and long time natural gas proselytizer, as predicting the majority of the nation’s long-haul truck fleet will be fueled by natural gas in seven years. “Natural gas will always be less than diesel,” he said.

If Pickens is right, expect to see the letters CNG pop up frequently from now on, shorthand for “compressed natural gas.”  Truckers will save about $1.50 per gallon of diesel equivalent using CNG, and because it burns much cleaner than diesel oil, evil greenhouse gas emissions will be reduced, too.

The bottom line for Silver City: Transporting food here will be both cheaper and cleaner. Now we can expect to see a stop to all this nonsense about growing our own food to save the planet, right?

If you think so, I have this bridge in Brooklyn for sale —-

6/13/13

Have you ever noticed that you can tell a great deal about people based on their opinions on only a topic or two?  If you give me your opinion on food stamps, or global warming, or affirmative action, I can pretty much tell which side of the political spectrum you reside on.

Thomas Sowell, in the preface to his book, The Vision of The Anointed, wrote:  “If (people) are liberal, conservative, or radical on foreign policy, they are likely to be the same on crime, abortion, or education. There is usually a coherence to their beliefs, based on a particular set of underlying assumptions about the world, a certain vision of reality.”

One of the things I’ve noticed over the years about liberal-progressives, is that they are very gullible when it comes to forecasts of doom and gloom.  I think it’s because they WANT to believe the end is near. It’s almost as though deep in their souls there resides an old-time, fire and brimstone, born-again preacher screaming PREPARE TO MEET THY MAKER, YE SINNERS, YE FOULERS OF THE EARTH!

A little, or maybe a lot, of Elmer Gantry in every lib- progressive’s soul. A frightening thought!

All this came to mind recently while reading an article by the science writer, Matt Ridley: “We May Live on A Natural Gas Machine.” The article was about the possibility that carbonate sedimentary rock, under the pressure of plate tectonics, undergoes a substitution of hydrogen molecules for oxygen and – Voila! – becomes methane, which eventually finds its way to the earth’s surface, essentially providing us with a never-ending supply of natural gas.

Wouldn’t that be wonderful!?  Not if you are a lib-progressive. I know how they would view the possibility of such a bonanza for the human race: They would think it a disaster.  It would mean people would continue to burn fossil fuels for heat, light and transportation, and continue to add CO2 to the atmosphere, which will continue to warm the earth which will doom all of  humanity.

All that natural gas would also mean people wouldn’t need to put solar panels on their roofs, or build windmills, or grow their own food, or live in communes, or ride bicycles, etc. etc. ad absurdum.  People would continue to prosper, excel and become (gasp!) unequal, and not need the leadership of the lib-progressives.  Actually, they wouldn’t need lib-progressives at all, which is a suppressed truth down there in the lib-progressive soul right next to Elmer Gantry.

How can I be so sure of this reaction? Just look at their resistance to hydraulic fracturing, or “fracking”, a technology that has been used for over 60 years to increase the production of oil and gas wells.  Only recently have the environmentalists attempted to ban the practice because of its allegedly horrid effects on water supplies and air quality. Why is that?  Because fracking has recently unlocked huge new supplies of natural gas and oil, especially natural gas, where U.S. reserves are now estimated at over a hundred years, WITH LOTS MORE TO COME.

How terrible if you’re convinced global warming is caused by the CO2 mankind adds to the atmosphere, no matter that only a few years ago the global warmists would have welcomed replacing coal with natural gas. How terrible if you’re convinced human prosperity is somehow a sin.  How terrible if you want to destroy the modern industrial society, with all its intolerable inequities.

Apocalypsers have always been with us, and today’s crop is all high tech and modern science. No entrails reading for them. What hasn’t changed is the insistence that the End is nigh because human beings have been doing bad things, and that us ordinary mortals are too stupid to see it coming.  For example, apocalypser Vance Packard wrote in his 1960 best seller The Waste Makers:  “Americans have thus far chosen to suppress awareness (of a) dangerous decline in the United States of its supply of essential resources.”

Gosh, Vance, here it is 2013 and our awareness is still “suppressed.”

The best known apocalypser of the last fifty years is Paul Ehrlich, although he is about to lose the crown to Al Gore.  Back in 1968, Ehrlich wrote a bestseller, The Population Bomb, in which he predicted major, unavoidable food shortages: “The battle to feed humanity is over. In the 1970s and 1980s hundreds of millions of people will starve to death in spite of any crash programs embarked upon now.”

Add fifty years, change a word or two, and welcome to the modern Apocalypse, global warming.

Ehrlich made some other noteworthy predictions. On the first Earth Day in 1970, he sounded the tocsin on pollution: “In ten years all important animal life in the sea will be extinct. Large areas of coastline will have to be evacuated because of the stench of dead fish.”

Well, twenty years later, in1990, the stench of his predictions didn’t prevent the MacArthur Foundation from awarding him a $500,000 MacArthur Fellowship, nicknamed the “Genius Grant”. With geniuses like Paul Ehrlich and those who run the  MacArthur Foundation, who needs damned fools?

6/10/13

I define one per centers as those who want the government to use its power on their behalf.  They want laws that advance their personal fortunes, ideologies, careers, whatever. Examples are all around us and the total of such people is closer to 100% than 1%.

Most are not evil, just putting their self interest first. Public employees want to retire after 20 years with generous benefits; unions want laws that make it easy for them to form more unions; sugar growers want import quotas; car makers want government subsidies for electric car buyers; one issue fascists want laws, pro or con, on abortion, renewable energy, gay marriage, smoking, sugary drinks, genetically modified food, global warming, localism,  etc. etc. ad infinitum.

One area of government abuse often overlooked are the laws that regulate professional standards. Such laws are justified as necessary to protect the public. More often than not though, the primary purpose is to protect the existing professionals against competition.  Becoming a barber, hairdresser, cab driver, realtor, etc., usually requires a government issued license, which can be difficult and expensive to obtain.  Almost always, the people in charge of defining the standards that the government enforces are people already in the business.  How cozy.

Most of us don’t think longshoremen and medical doctors have much in common, but the American Medical Association, like the International Longshoremen‘s Association, is a very effective labor union.  Milton Friedman wrote in his 1961 book, Capitalism and Freedom, “The American Medical Association is perhaps the strongest trade union in the United States.”

That was over 50 years ago. Has anything changed?  Unfortunately, no. To quote Friedman again, “The essence of the power of a trade union is its power to restrict the number who may engage in a particular occupation.”  The AMA exercises this power as much today as it did 50 years ago with a de facto monopoly on the issuance of  licenses to practice medicine.

This bottle-neck on the supply of doctors, according to study by McKinsey & Co. in 2007, added $58 billion to the nation’s medical bill, an amount probably higher today.  The report noted that U.S. doctors make roughly twice what their European counterparts earn.  Such high compensation should be attracting droves of new doctors but for restrictions on the supply of new doctors, crafted by the AMA and enforced by the government.

Why does it take at least nine years to become an M.D.?  The usual career path requires four years of undergraduate work plus four years of medical school followed by at least three years of residency. Some schools compress the first eight years into six.

As if this wasn’t discouraging enough, the Medical College Admissions Test is a five hour ordeal that rejects about 60 percent of the applicants. The kids who take the test are usually at the top of their classes.

Those who pass must then attend a medical school that is LCME accredited. LCME stands for Liaison Committee on Medical Education, which was formed in 1942 to oversee medical education. It was formed by the AMA, if you can imagine that.

Are all these standards needlessly high? Can the career path be shortened?  How much of the typical M.D.’s work load could be performed by less intensively trained professionals, e.g. nurse practitioners?  Do AMA standards prevent opening more medical schools, prevent more qualified students from becoming doctors?

The biggest problem with the Affordable Care Act, a.k.a. Obamacare, is that it did NOTHING to address supply bottlenecks in the medical industry, and the AMA is a big bottleneck in the supply of doctors. What to do about it?  I’ll have some thoughts in a future article, and please weigh in with your suggestions.

5/25/13 BILLIONAIRE BOZOS
Michael Bloomberg, the Mayor of New York City, is an accomplished and brilliant individual. He made billions in business, and when he decided to enter politics, he didn’t have to raise money from anybody, special interests or otherwise.

Recently, the Mayor decided that New York City should “do something” about obesity, so he proposed banning the sale “sugary beverages” over 16 ounces by restaurants. For this act of moronic hubris, I awarded him my coveted BILLIONAIRE BOZO award.  (If you think it is entirely appropriate for a mayor or other elected officials to micromanage what the public eats and drinks, and you don’t have a billion dollars, I’m afraid you are just an ordinary bozo.)

On Thursday, May 2, I was watching CNBC’s Squawk Box show, and they had as a guest the reclusive billionaire Ronald Perelman.  Perelman is an interesting, very successful businessman.  When asked about the next presidential race, he said he liked both Hillary Clinton and Jeb Bush, but then he said, “I think Hillary is one of the great assets we have in America.”  BOZO ALERT – BOZO ALERT.

Perhaps he was thinking of Hillary’s proven record as a commodity trader. Remember that one?   She turned $1,000 into $100,000 by trading cattle futures.  Three things wrong with that one, folks.
1) Margin accounts required at least $2,000 opening equity back then.
2) She kept her trading prowess a secret.  Hillary not telling the world what a genius she is? Right.
3) Most damning fact: After she turned $1,000 into $100,000, SHE QUIT.

Since Ron Perelman is an investment genius and I’m not, and since he knows Hillary and I don’t, it could be I’m all wrong in my analysis.  So I withheld the award pending additional facts.  Ron was not long in providing them. He believes income taxes should be higher for wealthy people.

“I think wealthy people should be taxed more.  I think if you can afford it, that’s where the money’s gotta come, and they’ve gotta raise the money.”

The problem with this sort of thinking, and since Perelman has $14 billion he sure as Hell should know, is that wealth is measured by a person’s assets, not the income statement filed annually with the IRS.  There are only a couple of items on the 1040 that relate to the assets of the individual, and those items are guarded by an army of special interests.

The most popular is the deduction allowed for mortgage interest.  The bigger the mortgage, the higher your wealth probably is, and the higher your deduction is.  Canada doesn’t have this deduction, by the way, and Canada’s proportion of home ownership is about the same as in the U.S.

The other deduction is the one allowed for property taxes, which are supposed to reflect the value of the real estate assets owned by an individual. People with million dollar homes get big deductions. Apartment renters don’t.

There is one tax, though, that is directly related to an individual’s wealth.  It is the estate tax. Currently, the tax is zero on an estate’s assets up to $5.25 million per person, $10.5 million per married couple, and 40 percent on the assets above those levels.  Since this is unquestionably a tax on wealthy people, you would think Perelman wants to see it raised,  right?

Wrong. He thinks the estate tax should be eliminated. “I could get to the next thing that really bothers me, which is estate taxes. Double taxation,” he said.  “You’re taxed on the creation, and you’re taxed on the distribution.”

I totally agree with him, but for wanting to raise income taxes, but not estate taxes, as a way for wealthy people to pay more, he gets my BILLIONAIRE BOZO award.

5/24/13
Last Tuesday, May 21, two long-serving U.S. Senators showed the nation why we need term limits. Sen. Carl Levin, D-MI, and John McCain, R-AZ,  used the bully pulpit of a Senate subcommittee hearing to show the world how indignant they are that Apple Corporation uses the tax laws to avoid paying taxes.

Who’s in charge of writing tax laws, Senator Morons?  Apparently the Senators think Apple is in violation of some unwritten Cosmic Fair Tax Code that only Senators are privy to.

Here’s what Senator McCain said: “A company that found remarkable success  by harnessing American ingenuity and the opportunities afforded by the U.S. Economy should not be shifting its profits overseas to avoid the payment of U.S. tax, purposely depriving the American people of revenue. It is important to understand Apple’s Byzantine tax structure so that we can effectively close the loopholes utilized by many U.S. multinational companies—.”

Deprive the American people of revenue? Don’t you mean the American government, Senator? Apple’s Byzantine tax structure? I didn’t know corporations were in charge of tax structures, Byzantine or otherwise.

Here’s a sample of Senator Levin’s babblings: “Apple sought the Holy Grail of tax avoidance.  We intend to highlight that gimmick and other Apple offshore tax avoidance tactics so that American working families who pay their fair share of taxes understand how offshore tax loopholes raise their tax burden — and ought to be closed.”

The Holy Grail of tax avoidance? Do you mean avoiding taxes by the gimmick of scrupulously obeying tax laws, as Apple has done?  Fair Share?  I suppose you have to be an elected official to know what a “fair share” is.  On top of that, it no doubt helps to be really stupid about who pays taxes.

Apple CEO Tim Cook, until now just a guy following in the impossible-to-fill shoes of Steve Jobs, showed himself to be one helluva class act.  Dignified, polite, knowledgeable, and infinitely patient with the Senator morons, he emerged from the hearing the clear victor.

And why not?  His testimony, as follows, was delivered firmly and unapologetically:  “We pay all the taxes we owe.  Every single dollar. We not only comply with the law, but we comply with the spirit of the laws. We don’t depend on tax gimmicks. We don’t move intellectual property offshore and use it to sell our products back to the United States to avoid taxes. We don’t stash money on some Caribbean island. We don’t move our money from our foreign subsidiaries to fund our U.S. business in order to skirt the repatriation tax.”

Four points to consider:
1)  Apple, and all other international companies, must find the lowest cost areas to do business or their competitors, who also seek the lowest cost areas, will under price them and put them out of business. Do bankrupt companies pay taxes, Senator Morons?
2) Taxes are a cost (duh!), just like raw materials or electricity.  In the venerable DuPont formula, the last factor in the equation is one minus the tax rate, or (1-Tax rate).  The higher the tax rate, the lower the return on investment.  As returns on investment are lowered, expect the amount invested to be lower. How many jobs are created by lack of investment, Senator Morons?
3) Corporations don’t pay taxes.  A dramatic illustration of that fact is all the taxes imposed on cigarettes. Has that put Phillip Morris out of business?
4) Lower foreign taxes attract companies to locate their operations there, just like Silver City’s taxes attracted me to move here. Why is the U.S. corporate tax rate the highest in the world, Senator Morons?

Senators Levin and McCain have a combined 65 years of Washington, D.C. experience, and are responsible for the tax code they complain Apple abuses..  Both these despicable demagogues should never have been allowed to be in office as long as they have been. TERM LIMITS!!

5/19/13 Note: “99% vs. 1%” is a metaphor for masses vs. the powerful few, and rarely refers to the mathematical 1% that is richer than the other 99%, or smarter, or luckier or whatever. I define the 1% as those who advocate or benefit from government abuse of power. They total much more than 1%.

“Government is the great fiction through which everybody endeavors to live at the expense of everybody else.”  Fredrich Bastiat (1801 – 1850)

“—- and some succeed.”  El Burro (1939 –   )

Who are the 1%?  Most people assume the 1% are the just the very rich. They’re wrong.  Nobody puts Oprah Winfrey, Clint Eastwood or Peyton manning in the 1%, though surely those three are in the top 1% of Americans as far as personal wealth is concerned.

It takes more than “rich” to make the 1% as I define them.  Rich or poor, my 1% have to advocate a misuse of government power, for either personal enrichment or to pursue some ideological goal.  Mayor Bloomberg of New York, a perfect example, wants the government to ban 16 oz. servings of “sugary” drinks, showing the whole world he’s a one percenter.

He’s also a hard-working, brilliant business man and a multibillionaire.  He is definitely a superior individual in many ways, yet all too common when it comes to abusing power.  Thomas Sowell has written books about elitists like Mayor Bloomberg e.g. Vision of the Anointed  (1995), Intellectuals and Race (2013).

Government employees are not often thought of as belonging to the 1%, but as enthusiastic recipients of government favoritism, they are at the top of the list.  Remember the noisy, trashing mobs that took over the capital building in Madison, Wisconsin, when governor Walker proposed public worker reforms?

As more and more state and local governments face bankruptcy because of the overly generous pay and pensions of public employees,  we can expect more such demonstrations.  What these public employees are really saying as they march, trash and threaten, is that they are ENTITLED to be overpaid, underworked, impossible to fire, retired too early and retired too generously.

All of us know people in their fifties, or even in their forties, who are retired public employees.  I don’t put all of them in the 1%, just those who think it’s perfectly fair to work thirty years and comfortably retire for perhaps another thirty, and all on the taxpayers’ dime.

The most egregious public employee abuse I can think of was in Bell, California, a city of 37,000 with, according to Wikipedia, 25% living below the poverty level.  The city manager, Robert Rizzo, was squeaking by on an annual salary of $787,637 and was no doubt dreading the thought of retiring on only $600,000 per year.

His assistant city manager was being paid $376, 000 per year, the chief of Police $457,000, and four of five city council members were getting $100,000 for their part time jobs. I wonder about the fifth council member: Stupid or honest? Google up Bell, CA, for the details. The last I looked, nobody was yet in jail, but Rizzo’s pension had been cut to $50,000.  That’ll teach him!

Also, you’ll have to look very, very hard to discover what political party all these benighted one percenters belong to.  The media gurus no doubt thought such a detail was unimportant. Right.  Hint: It wasn’t the Libertarian Party.

Unfortunately, what went on in Bell, CA, is going on all over the country, just not as audaciously. To borrow from the Declaration of Independence, our government has erected a multitude of new offices, and sent hither swarms of bureaucrats to harass our people and eat out our substance.  Another swarm is on the horizon marching under the banner of Obamacare.

Paul Gessing, President of the Rio Grande Foundation, a Libertarian think tank in Albuquerque, noted in his  newsletter on August 11, 2010, that a study from the Bureau of Economic Analysis showed federal workers earn over twice their private sector counterparts.

Gessing’s memorable conclusion:  “John Edwards was right about one thing when he ran for president several years ago. There are indeed ‘two Americas’. The two Americas are not specifically rich and poor, but government workers vs. the rest of us.”

The 99% vs. the 1%, Part Three  5/14/13 Note: “99% vs. 1%” is a metaphor for the exploitation of the masses by the powerful few, and rarely refers to the mathematical 1% that is smarter than the other 99%, or richer, or luckier, or whatever. I define the 1% as those who advocate or benefit from government abuse of power. They total much more than 1%.

People often accuse corporations of abusing their “power“.  This rarely refers to a violation of written laws, but some violation of Cosmic Justice, such as not paying workers “enough“, or selling products that are “bad” for us, such as Big Macs.

It is true that some people in business will, if given the opportunity, screw their employees and customers with great abandon, but this sort of behavior is not inherent to just business enterprises. People tend to act in their self interest, and if that means cutting corners and doing it the easy way, ethics and laws be damned, it will happen. Unions, churches, charities, armies, universities, el al and ad infinitum, people will be people, not angels.

Milton Friedman, the famed Libertarian economist, was once accused of being pro-business. He took great umbrage and replied that he was not pro business, but pro free markets.  He then went on to say that businessmen have always been the biggest foes of free markets, and always will be.

When businesses try to do things the easy way, and do it legally, it always involves getting the government to do thier dirty work, impose tariffs or import quotas against foreign competitors. I can’t think of examples of corporations abusing their power, however defined, that doesn’t really mean government abuse of power.

A current example is the recent  natural gas boom in the U.S.  Dow Chemical opposes exporting any of this new-found bonanza because Dow uses a lot of natural gas, and cheap gas gives them a cost advantage in world markets.  Dow has lots of support from the environmentalists, and both of these one per centers want THE GOVERNMENT to ban natural gas exports. How typical.

On their own, businesses don’t have any “power”.  For example, two of the most successful businessmen in America are Bill Gates, founder of Microsoft, and Warren Buffett, head of the holding company Berkshire Hathaway. Both are worth $40-50 billion, and neither has a scintilla of power over you or me.

If Gates came into my office, could he force me to erase the Mozilla Firefox browser on my computer and force me to use his lousy Windows browser? Hardly. Berkshire Hathaway has long had a big position in Coca Cola, but could Warren Buffett come into my house and force me to throw out my Dr. Pepper? Of  course not.

Neither one of these billionaire liberals, by themselves or through their corporations, has the power of a Meter Maid when it comes to ordering anybody to do anything. Both men may be in the top one per cent of the top one percent in terms of wealth, but that alone doesn’t put them on my 1% list.  To make my list you need to show a dictatorial impulse.

WalMart, for instance, makes the 1% list of the Occupy crowd for things such as “worker exploitation“ or “causing unemployment” by putting local retailers out of business. In fact, nobody is forced to work at WalMart, and nobody with a gun and a badge keeps customers away from stores that can’t compete with WalMart.  (I note people outraged by WalMart’s sins never start competing stores and hire employees for a “fair” wage, and they all want laws that prevent Walmart from opening new stores, effectively putting government guns and badges in front of Walmart’s doors.)

This is not to say that WalMart is always on the side of the angels. They make my 1% list when they support minimum wage laws. WalMart typically starts workers at more than the minimum, so they support the government increasing minimum wages because it’s more of a negative for their competitors.

Now that the President has proposed increasing the minimum a whopping 24%, from $7.25 to $9.00, nary a peep from  WalMart’s front office. Obama’s proposed increase, you see, is big enough to hurt Walmart, too. Does this mean Walmart will stop supporting the government mandating minimum wages?  Only as long as it’s in their self interest.

The 99% vs. the 1%, Part Two 5/9/13 by Peter Burrows – elburropete@gmail.com Note: “99% vs. 1%” is a metaphor for the exploitation of the masses by the powerful few, and rarely refers to the mathematical 1% that is smarter than the other 99%, or richer, or luckier, or whatever. I define the 1% as those who advocate or benefit from government abuse of power. They total much more than 1%.

In the ongoing battle of the 99% against the evil 1%, corporations are always at the top of the evil list. As mentioned last week in Part One, in September, 2011, Occupy New York, “to express a feeling of mass injustice”,  came up with 23 grievances against corporations which range from poisoning the food supply to keeping people misinformed and “fearful” through  control of the media.  (As an aside, when the occupy geniuses are watching MSNBC, do they know where the “MS” in MSNBC came from?)

Google “Declaration Occupy New York” and you can enjoy the list for yourself. Don’t be  alarmed by all the corporate atrocities.  If any American corporation is even suspected of breaking a law, tons of attorneys will be eager to take them to court.  Our contingent fee tort system guarantees it.  The tobacco lawsuits and settlements are a prime example.

However, If corporations are breaking laws that don’t exist but instead are in violation of some Cosmic Justice as perceived by the Occupy movement, than lawmakers should be blamed, not corporations.  But that wouldn’t be any fun.  That wouldn’t get the juices of righteous indignation flowing.

I see the Occupy people, many of them over 40, and I wonder how they can live amidst our unprecedented prosperity with no clue as to how that prosperity has come about.  At some point such willful ignorance morphs into just plain stupidity.

I suspect most of the occupy crowd have never worked in private enterprise and associate corporations with the pursuit of profits, a word that means “exploitation” in their little minds. “People Not Profits” is a popular slogan amongst the benighted, yet few can define “profits”.

In the real world, there is no conflict between people and profits.  Every economic system must have profits or it stagnates.  When farmers started to plow and irrigate some 10,000 years ago they began to produce more than they consumed. They had PROFITS to buy/trade for the fisherman’s extra catch, the weaver’s extra cloth, etc. etc.

The more profits, the better off people are.  In the last two hundred years, more profits/wealth have been created than in the entire previous 50,000 years or so of human existence.  We can thank democracy, free enterprise, and that great legal tool that allowed “everyman” to accumulate capital, limit his risk, and pursue his dreams: The corporation.

Does this mean that corporations should pursue profits regardless of consequences? Absolutely not.  Have corporations ever pursued profits in disregard to the well being of customers, employees or the environment? Many, many times.  Corporations are run by human beings, and no organization is free from the foibles of the people who run it, whether it is a church, a charity, a union, a government or a corporation.

Consequently, corporations must be constrained by laws, which is to say, THE PEOPLE WHO RUN CORPORATIONS MUST OBEY THE LAWS.  While we frequently read about some corporation being in violation of a law, this is essentially a legal technicality which obscures the fact that there is some person or persons working at the corporation who broke the law.

If the penalty is to go to jail, it won’t be a “corporation”  that does time.  There is no jail cell somewhere in Texas incarcerating Enron Corporation. A couple of the SOBs that ran Enron have jail cells, but there is no cell holding the corporeal corporation, so to speak. (I couldn’t resist.)

Corporation haters have lost sight of the reality that corporations are simply people, and apparently think of them as disembodied specters doing evil to one and all.  This is contrary to what common sense and experience should have taught them, namely, that corporations have benefited society, top to bottom, more than any government run economy ever has or ever will. That’s the “occupier’s” real beef.

In conclusion, the Occupy movement doesn’t represent the “99%“. In fact, they are a movement of the  “1%”, the totalitarians who would rule us if we let them.

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4/25/13

The 99% vs. the 1%. Abuse of Power, Part One

It’s hard to believe that less than two years ago the Occupy Wall Street movement started. It was instantly  lionized by the mainstream media as well as by quite a few politicians.  As you may recall, the OWS crowd, with the modesty typical of grandstanders everywhere, claimed to represent the “99%”  of us in an epic battle against the oppressive “1%” epitomized by Wall Street.

To the extent that OWS was a protest against bailing out private businesses with taxpayer dollars, or the “crony capitalism” of government favors bestowed on private enterprises, maybe for a brief instant OWS did represent the ninety-nine percent of us.  Some initial proposals, such as reinstating the Glass-Steagle Act, were sensible ideas. However, OWS soon morphed into a typical left wing protest: down with corporations, tax the rich, blah, blah, blah.

There was an unofficial list of “demands” posted on an OWS website that “demanded”, amongst other things, a minimum wage of $20 per hour, free college, free health care and, my number one knee slapper: Guaranteed living wage regardless of employment. (My emphasis.)

As Fredrich Bastiat wisely observed a very long time ago (he died in 1850), “Government is the great fiction, through which everybody endeavors to live at the expense of everybody else.” It seems some things never change.

The Occupy New York website listed 23 grievances against corporations that was almost as nonsensical. You’ll have to read it to believe it. (Google: Declaration Occupy New York.) My favorite: They have donated large sums of money to politicians who are responsible for regulating them. Wow!

In typical myopic fashion, they blame corporations for things that corporations can only do with the backing of the government.  In fact, It is the GOVERNMENT that is abusing power, something it is prone to do on behalf of all sorts of constituents, e.g. unions, seniors, veterans, “poor” people, and on and on and, yes, corporations, too.

I once had a union official tell me that since WalMart received so many taxpayer subsidies, governments should be represented on WalMart’s Board of Directors. he was highly critical of WalMar for the subsidies given to them by governments. What a moron.

For a while, pundits tried to equate the TEA Party to Occupy Wall Street.  This is a fundamentally flawed comparison, because the TEA Party is a reaction to abuse of power by government, an abuse OWS has a hard time seeing.

A perfect example is the housing crisis which caused the recent recession.  Wall Street investment banks, main street banks, mortgage originators, rating agencies, community organizers, et al, all had a hand in it.  However, the number one villain was the Department of Housing and Urban Development, HUD, and HUD‘s legion of political enablers, e.g. Barney Frank and Chris Dodd.

HUD was the supervisor of the two government sponsored agencies that were the engines of destruction: The Federal National Mortgage Association, and the Federal Home Loan Mortgage Corporation, known as Fannie Mae and Freddie Mac.  I would bet few, if any, of the Occupy protestors know the role former HUD Secretary and now Democratic Governor of New York, Andrew Coumo, had in the housing meltdown.

In fact, I don’t think any of the Occupy crowd has ever picketed the huge HUD headquarters in Washington, D.C. No, most of the Occupy crowd would rather picket the local Bank of America office, holding up placards that, regardless of what is written on them, secretly convey the message: “Look at me. I’m morally superior.”

The fact that no B of A official has ever been indicted for a crime involving the housing collapse is something ignored by the marchers.  Doesn’t matter. I doubt if any of them know the difference between an income statement and a balance sheet, or what an MBS is, or have ever heard of the Community Reinvestment Act.  Pesky facts only get in the way of a good old-fashioned display of righteous indignation.

What do the picket signs say when I read them? “Look at me. I’m stupid.”

4/23/13

Why Government Programs Almost Always Become Corrupt and Wasteful.

Obamacare, objective observers said, would be a financial disaster, and it looks like they were being optimistic.  It was an easy call. Government programs have a long history of being “sold” with cost projections far below what the actual costs turn out to be and, sure enough, Obamacare cost estimates have risen 40% from only two years ago.  There will be more to come.

There’s precedent. When Medicare was enacted in 1965, the 25 year cost projection was $9 billion. The actual 1990 cost was $67 billion. Are these cost underestimates intentional? I think so. Proponents know that once in place, such programs are almost impossible to eliminate.

This is because government programs quickly develop political constituencies and economic clout, ensuring their survival, often long after their purpose is fulfilled. The “war on poverty” for instance, now spends over $60,000 per year on every “poor” family.  Most of the spending, of course, is on the warriors, not the poor.

Because government programs are almost always monopolies, the discipline of competition is missing. There is no need to economize, innovate, or to be particularly concerned about putting customers first.  The Post Office would not exist if it faced open market competition.

On a personnel level, government bureaucracies always become overstaffed with highly paid, impossible to fire bureaucrats, whose number one job is to preserve their job, regardless of what the original mission was. The best way to do that is to make sure their “mission” gets bigger and more popular.

As Ronald Reagan, once observed, “Government programs, once launched, never disappear. Actually, a government bureau is the nearest thing to eternal life we’ll ever see on this earth!”

Many of our government programs have outlived their usefulness. Some are trivial, like the mohair subsidy started in WW I to ensure enough fiber for military uniforms. Others are not so trivial. The Environmental Protection Agency is a prime example of the latter.

Our environment is essentially cleaned up, and the EPA should be little more than a monitoring agency, but there’s always a few more parts-per-million of something to be removed from the air or water, cost benifets be damned, or there is an old problem to resolve with new regulations, such as storm water runoff. Or, joy of joys, along comes a brand new “pollutant’ that the EPA must regulate to save mankind, e.g. carbon dioxide.

As Captain Red Legs Terrill said in the movie, “The Outlaw Josey Wales“:  “Doin’ right ain’t got no end.”

Other agencies and programs that come to mind as no longer needed or that have proved to be downright toxic, are the EEOC, the entire Departments of Energy, Education, and HUD, the Farmers Home Administration, the Small Business Administration, and on and on. Of course, each of these programs has dedicated employees and ardent supporters.

Probably the biggest problem with government programs is that politicians can’t resist fooling with them. Social Security is a perfect example. In 1961, it was apparent that life expectancies had been steadily rising in the previous twenty years, and it looked like the trend would continue. Plus, the post WWII baby boom was going to put a lot of people onto the Social Security rolls in 50 years.  What to do?

By a vote of 399 to 14, the House voted to allow early retirement at age 62, precisely the opposite of what they should have done.  After all, the problem was fifty years down the road, let’s get reelected now!

Guess what?  It’s 50 years later.  Ironically, people often cite Social Security as an example of a SUCCESSFUL government program, which is like celebrating the Titanic at twenty-one minutes to midnight, April 14, 1912, right about the time the Officer of the Deck was saying, “What’s that?”

The GI Bill and Social Security Disability are two more programs often cited as being proof of the good things government can do. In spite of my Libertarian leanings, I tend to agree, BUT each of these programs also  illustrates the inevitability of  political meddling.  The GI Bill morphed into the student loan program, which has grown into a TRILLION dollar debt problem.  Lots of indebted history majors out there with NO job prospects

Similarly, Social Security Disability Insurance has turned into welfare-on-steroids, with the number of people in the program recently exploding way beyond any justifiable level. It’s a national disgrace. Furthermore, even at it’s best, the SSDI has its dark side.  I had a good friend, recently deceased,  who went on SSDI in his late forties because he suffered from severe narcolepsy.  I once asked him, if he could wake up tomorrow completely cured BUT no longer getting his government check, would he do it?  He said, “I’d have to think about it.”

There can certainly be “too much of a good thing.”