Reading a NY Times story from Frank Rich titled After the Massachusetts Massacre in which Mr. Rich claims It was not a referendum on Barack Obama and  It was not a rejection of universal health care.   Umm, what rock has Mr. Rich been hiding under?

For days heading into the election, we heard over and over how Brown was campaigning as the 41st vote against health care and Coakley was campaigning as the 60th vote for health care.  I even heard Brown has a nickname “41″ because he claimed to be the 41st vote against everything Obama wanted.

I’m not sure what fantasy world Mr. Rich is living in, but it’s hard to trust the analysis and opinions of anyone who is able to make up their own view of reality so easily.

gk

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I mentioned this a few weeks ago, but it seems to be getting more and more likely that the Dems may be in for a replay of 1994.

In general, Americans don’t like politicians who go to extremes, and when any one party is in control, they ALWAYS go to extremes.  Clinton tried pushing through health care and it was a disaster for the Dems.  Bush got it in 2002 and pushed through the Iraq fiasco – which led to the current Dem majority.   Now it appears that Obama is heading down the same path.

You know things are bad for Democrats when the NY Times opinion page has 3 stories – and they are all complaining about Democrats.  Check them out.

The Lady and the Arlen – Gail Collins

They Still Don’t Get It – Bob Herbert

Mobs Rule – Charles Blow

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I was reading a Reuters story about the proposed budget in California tonight when I saw this:

Wheelchair-bound Christina Mills, 32, of Sacramento, California said disabled workers could not afford to have subsidies for assistants cut as the governor proposed.

“If they didn’t have home-care workers to help them get dressed in the morning, they wouldn’t be able to go to work.”

Hey Christina – that sucks doesn’t it?  It’s sad, but true – if you need someone else to pay for you to get to work, you’re not earning enough to make your job worth the investment in you!  It would be cheaper for everyone if you stayed home and we payed to take care of you there.  Plus, you wouldn’t be in denial about how much your work is actually worth.

Yes, it’s harsh.  But it’s also true.

gk

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Ran across this story in the NY Times tonight suggesting that the Dems  are going to have a hard time “defending their large Congressional majorities”  in the 2010 elections.  Interesting….  That’s the first I’ve heard one that subject, and it got me to thinking about the over reaching in Clinton’s first term, which led to the Contract with America and the Republican domination of congress for the next decade.

Could health care (and the resulting loss of individual and states rights) prove to be Obama’s defining moment as it was with Hillary care?  Stay tuned….

gk

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The Berlin Wall came down.  Having spent time in Germany in 1983 and 1984, much of which was time spent preparing to destroy tactical nukes before the Soviets could get them when they came pouring through the Fulda Gap, it was a day I thought I’d never see.

I remember staying up all night, watching CNN live as people tore down sections, as people took sledge-hammers, screwdrivers, even rocks to the hated wall, tearing it down piece by piece.  Amazing.

At least 136 people died trying to cross the wall and get out of East Berlin.  I can’t put into words how impossible it seemed to me back in the early 80’s that the wall would come down without a war.

Reagan called the Soviet bluff – and the Soviet Bloc was exposed as a bluff when Reagan gave the famous speech.  Here’s an excerpt.

Where four decades ago there was rubble, today in West Berlin there is the greatest industrial output of any city in Germany–busy office blocks, fine homes and apartments, proud avenues, and the spreading lawns of parkland. Where a city’s culture seemed to have been destroyed, today there are two great universities, orchestras and an opera, countless theaters, and museums. Where there was want, today there’s abundance–food, clothing, automobiles–the wonderful goods of the Ku’damm.

From devastation, from utter ruin, you Berliners have, in freedom, rebuilt a city that once again ranks as one of the greatest on earth. The Soviets may have had other plans. But my friends, there were a few things the Soviets didn’t count on–Berliner Herz, Berliner Humor, ja, und Berliner Schnauze. [Berliner heart, Berliner humor, yes, and a Berliner Schnauze.]

In the 1950s, Khrushchev predicted: “We will bury you.” But in the West today, we see a free world that has achieved a level of prosperity and well-being unprecedented in all human history. In the Communist world, we see failure, technological backwardness, declining standards of health, even want of the most basic kind–too little food. Even today, the Soviet Union still cannot feed itself. After these four decades, then, there stands before the entire world one great and inescapable conclusion: Freedom leads to prosperity. Freedom replaces the ancient hatreds among the nations with comity and peace. Freedom is the victor.

And now the Soviets themselves may, in a limited way, be coming to understand the importance of freedom. We hear much from Moscow about a new policy of reform and openness. Some political prisoners have been released. Certain foreign news broadcasts are no longer being jammed. Some economic enterprises have been permitted to operate with greater freedom from state control.

Are these the beginnings of profound changes in the Soviet state? Or are they token gestures, intended to raise false hopes in the West, or to strengthen the Soviet system without changing it? We welcome change and openness; for we believe that freedom and security go together, that the advance of human liberty can only strengthen the cause of world peace. There is one sign the Soviets can make that would be unmistakable, that would advance dramatically the cause of freedom and peace.

General Secretary Gorbachev, if you seek peace, if you seek prosperity for the Soviet Union and Eastern Europe, if you seek liberalization: Come here to this gate! Mr. Gorbachev, open this gate! Mr. Gorbachev, tear down this wall!

Gorbachev didn’t tear down the wall, but the East Germans did.

gk

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I read a story from England tonight titled In defence of the NHS: I’m glad I didn’t break my leg in the US.  The author (Stephen Bates) recounts his experience with the British health system when he fell off a ladder and broke his leg.

He talks about how he would “without question, query or censure, be treated by the NHS at no cost to myself.”

Really?  Who paid for it Stephen?  Ahh, that’s right, the “government”, so it’s “free” to you – or is it?

Someone still had to pay for the “not one but two ambulance crews“; the “services of consultant orthopaedic surgeons, anaesthetists, doctors, nurses, ambulance crews, physiotherapists, x-ray staff, porters and even chaplains.“; and that so far he has “spent three weeks in hospital, had four operations under general anaesthetic, daily home visits from district nurses and face weeks, if not months, of more care.“  Who is paying for that Stephen?

He talks about what his care would have cost if he had broken his leg in the US.  “$12,000 per operation; up to $3,500 for anaesthetics each time; hospital at $500 a day and ambulance $300 a trip. That’s not counting the cost of medicine. It adds up to more than $76,000” while in the same sentence saying “I can’t tell what my treatment has cost the NHS“.

He talks about paying for service when he was told there was a “nine-month wait to use the new, multimillion-pound NHS-provided MRI scanner at the hospital to investigate my aching shoulder“  and when he paid for it he “was booked in for an appointment – same scanner, same specialist, same hospital, same treatment – within the week.”

And he still doesn’t get it.  He also can’t understand why “Americans always hone in on the state of our teeth?”

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This is what it’s come down to…  An 11 year old asking President Obama “Would you like to become my homeboy?”

That’s what USA Today says in their article about it.

WEAVER: When I interviewed Vice President Joe Biden, he became my homeboy. Would you like to become my homeboy?

OBAMA: Absolutely, thank you man. Great job.

You can watch the “interview” on YouTube here.   Here’s a story from the Miami Herald about it.  And a couple more quotes.

Damon, 11, sat with the nation’s chief executive in the White House Diplomatic Room, asking 11 questions mostly concerning education, according to Brian Zimmerman, Damon’s teacher.

“It was a great experience,” Zimmerman said. “Damon even got to meet the dog.” (He met Hillary too?) 

He also asked whether Obama would play basketball against NBA star Dwyane Wade, who promised him a match if he got the interview: “He’s not sure if he’d let you score,” the youngster said.

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Here we go again….  I just posted about the broken window fallacy on Saturday, and here comes Eric Zencey writing in the NY Times trying to claim that “If you get into a fender-bender and have your car fixed, G.D.P. goes up” and that “Hurricane Katrina produced something like $82 billion in damages in New Orleans, and as the destruction there is remedied, G.D.P. goes up.”

According to the blurb at the end of the article, Eric Zencey is “a professor of historical and political studies at Empire State College”.   Now I don’t know where  Empire State College is (I’m guessing New York) or what it may have as a claim to fame, but basic economics – or common sense – evidently isn’t a prerequisite in order to be a professor at the institution.

According to Mr. Zencey “If you get into a fender-bender and have your car fixed, G.D.P. goes up.” The only way that makes sense is to assume that the person who got the bent fender just happened to have the money to repair that fender lying around.  And by “lying around” I mean that literally.

If it happens to be invested in company stock, it’s already in the GDP.  If it happens to be in the bank in a savings account, it’s already part of the GDP.  Only if it’s in a mason jar buried in your backyard (or the equivalent) could the money you spent repairing a fender be included in the GDP.  Here’s why.

From Wikipedia – The GDP is calculated as: GDP = private consumption + gross investment + government spending + (exports − imports)

The money to fix the fender HAS to come from somewhere.  Let’s say it cost $1000 to fix.  If that $1000 came from your savings account, it decreases the investment amount by $1000 and the net change to the GDP is zero.

Does this change if you have insurance and the insurance company pays to repair your fender?  No.   Where did they get the money?  It was invested – insurance companies call the money you’ve paid them (but that they haven’t yet had to pay out) “float” and Warren Buffett got to be a billionaire by investing that float in places other than your fender.  All his billions are invested somewhere, so when Geico pays to fix your fender, it’s still subtracting from the overall investment total.  The NET EFFECT IS ZERO.

The same is true if the government spends more money with a “stimulus package”.   The only way GDP can increase via government spending is if the money didn’t come from another category.  But government money comes from higher taxes – which reduces the “private consumption” part of the equation – or it can come from borrowed money, which reduces the “gross investment” and/or increases the “import” (depending on where you borrow the money from) part of the equation.

Government spending only appears to increase GDP if it was previously collected but not spent.  In that case it transferred the spending from one time frame to another.  Government spending can increase the current GDP only at the expense of decreasing the GDP at another time.  If the government spent money it had saved, it decreased the earlier GDP.  It the government borrowed money and spent it, it’s decreasing future GDP.  This ain’t rocket surgery.

Money was simply moved from an investment where (it hopefully) could be used to create something valuable – to somewhere where it HAD to be used in order to repair an asset which had already been purchased.

It’s a bit crass, but think of it this way – if destroying an asset (via fender bender or hurricane or earthquake or nuclear war or whatever) CREATED wealth, here’s a solution to all our problems.

Why wouldn’t that work?  Got an answer for that Professor Zencey?

Cash for clunkers is the same concept.  Taking money from one part of the economy and spending it in a different part has a net effect of ZERO.  It may appear that you’ve got a bump in GDP for awhile, but that’s simply because you haven’t had time to see the effect of the loss in the other area.   Every government dollar spent buying a clunker is a dollar that isn’t spent providing health care, or building bridges or highways, or defending the country, or building a subway, or whatever you think the government should be spending money on.

The net effect is still zero, because every dollar the government spends has to come from somewhere – and “somewhere” means taxpayers.  And that’s why government spending (unless it’s from unspent tax surpluses of which the US has none) doesn’t actually do anything.

gk

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Here’s a bumper sticker someone needs to make – “Honk if I bought your clunker”, or “Honk if I bought your new car”.

Just like the “Honk if I’m paying your mortgage” stickers last year, cash for clunkers is simply a way for politicians to take money from one group and give it to another who hasn’t earned it.  It’s a redistribution of wealth, just like the bread and circuses of Rome.  Keep the plebes happy so they continue to vote for the incumbent – and so they don’t revolt.

When are Americans going to say “Enough”?  I don’t think enough of us will ever get to that point, and I think we can look forward to a fairly rapid decline of this country.

gk

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Cash for clunkers seems to be all the rage this week.  Hundreds of news stories and blog posts are telling everyone how successful it is, how it RAN OUT OF MONEY IN ONE WEEK when it was supposed to last until November, and how this will boost the economy.

Bullshit.

Here’s an excerpt from the Daily Reckoning.com explaining why it’s bullshit.

And as Bill has been pointing out, this is just another example of the government promoting the idea that the future doesn’t matter – just spend for today. He wrote in Friday’s essay: “Instead of letting the consumer buy a new car when he is ready, the feds give them money to buy now. So, he buys in 2009 and not in 2010. What good is accomplished? It is as if they didn’t expect 2010 to ever arrive…”

The Wall Street Journal backs us up here: “The subsidy won’t add to net national wealth, since it merely transfers money to one taxpayer’s pocket from someone else’s, and merely pays that taxpayer to destroy a perfectly serviceable asset in return for something he might have bought anyway. By this logic, everyone should burn the sofa and dining room set and refurnish the homestead every couple of years.”

This is what’s known as the “broken window fallacy” that I posted about in February 2008.  It’s a classic story and you can read all about it on the link, but here’s the main part as told by Henry Hazlitt’s classic “Economics in One Lesson” (Which I urge you to read.) It’s copied from my earlier post -which was copied from Lew Rockwell’s post on Mises.org.

A kid throws a rock at a window and breaks it, and everyone standing around regrets the unfortunate state of affairs. But then up walks a man who purports to be wise and all knowing. He points out that this is not a bad thing after all. The man fixing the window will get money for doing so. This will then be spent on a new suit, and the tailor too will get money. The tailor will spend money on other items, and the circle of rising prosperity will expand without end.

What’s wrong with this scenario? As Bastiat put it, “It is not seen that as our shopkeeper has spent six francs upon one thing, he cannot spend them upon another. It is not seen that if he had not had a window to replace, he would, perhaps, have replaced his old shoes, or added another book to his library. In short, he would have employed his six francs in some way which this accident has prevented.”

You can see the absurdity of the position of the wise commentator when you take it to absurd extremes. If the broken window really produces wealth, why not break all windows up and down the whole city block? Indeed, why not break doors and walls? Why not tear down all houses so that they can be rebuilt? Why not bomb whole cities so construction firms can get busy rebuilding?

It is not a good thing to destroy wealth. Bastiat puts it this way: “Society loses the value of things which are uselessly destroyed.”

It sounds like an unexceptional claim. But herein rests the core case against everything the government does. Perhaps, then, we can see why the allegory is not better known. If we took it seriously, we would dismantle the whole apparatus of American economic intervention.

If you are with me to this point, perhaps you have a hard time believing that anyone really believes that wealth destruction is actually a good thing. Let me try to show that the fallacy is as pervasive as ever.

After every natural disaster, we at the Mises Institute start what we call the “Broken Window Watch.”

After hurricane Katrina, the Labor Secretary said, “[W]hat will happen — and I have seen this in previous catastrophes and hurricanes — there is a bright spot in that new jobs do get created.”

And The Economist said, “While big hurricanes like Katrina destroy wealth, they often have a net positive effect on GDP growth, as the temporary downturn immediately after the storm is more than made up for by the burst of economic activity that takes place when the rebuilding begins.”

And the New York Times said, “Economists point out that although Katrina has destroyed a lot of accumulated wealth, it ultimately will probably have a positive effect on growth data over the next few months as resources are channeled into rebuilding.”

That’s what we’re doing with Cash for Clunkers.  We’re diverting capital from where it would naturally go into a program to destroy valuable assets and replace them.

Why not apply the concept elsewhere? How about cash for houses? Cash for liquor? Cash for newspapers? Cash for trips to Europe?

Yes, there will be a temporary boost to the economy, but it comes at the expense of next year, and the next year, and the next year.  WHO IS PAYING FOR IT?  We all are, and all we’re actually doing is postponing the day of reckoning.  You cannot borrow your way out of debt, and that’s what this program is trying to do.

gk

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