Arlen Specter Blinks

Arlen Specter is one of the most liberal Republicans in the U.S. Senate who previously supported card check, the effort to end secret ballots in union organizing drives to make it easier to form a union at a company.

But Specter recently reversed his position, dealing a blow to the prospect of card check passing since it now is much harder to get to the 60 votes needed to overcome Republican opposition.

Why the flip-flop? Specter has an election next year and because of his liberal record, has attracted vigorous primary challenges from more conservative candidates. In particular, Pat Toomey nearly defeated Specter in 2004 and may run again. With Toomey running the Club for Growth, a pro-economic growth group that has become a force in politics by promoting its favored candidates that will no doubt support Toomey, Specter faces another tough primary fight.

So he has decided to appease conservatives with his change of heart on card check.

This is good for the country, and shows the power of principled opposition.

Mr. 7%

After the $787 billion "stimulus" plan passed, the Wall Street Journal reported that government investigators estimate that 7% of government contracting is wasted due to fraud.

Interesting how that story came out AFTER the bill was passed.

That's suggests up to $55 billion may be squandered.

And people are worried about the AIG bonuses? This is taxpayer fraud on a vast scale that dwarfs any bonus payments someone may not like.

The difference, of course, is that many of the activists who protest such bonuses benefit from government spending and don't mind, or hope to benefit from, the government spending - waste and all.

Economics and Environmentalism

If there is a permanent 50% reduction in the demand for paper products (books, newspapers, office paper, etc), what do you think happens to the number of trees in the U.S. and in the world over time?

Your choices are:

a. The number of trees will increase

b. The number of trees will remain the same

c. The number of trees will decrease

Now consider these questions, and see if thinking about them changes your answer above.

If there is a permanent 50% reduction in demand for wheat, does the number of wheat stalks increase, stay the same, or decrease?

If there is a permanent 50% reduction in demand for cars, does the number of cars produced increase, stay the same, or decrease?

The answer to the first question, which is (c), is the same as the other questions: reduced demand will lead to reduced output.

If that seems an odd comment about trees, it is probably because we have been led to believe that rapacious logging companies get access to a forest and cut trees down, and then move on to the next forest.

That can only happen in a world without strong property rights, which has been the case at times in parts of the world and in the past. But today, logging in the U.S. and much of the world is by forestry companies that own the land/forests, and after cutting a tree down plant a new one - for the same reason that a farmer sows wheat seeds after harvesting this season's wheat crop.

So if demand for paper/wood products decreases, forestry companies will plant fewer trees - hence over time fewer trees will grow and exist.

So go ahead and enjoy a book, your wood-framed home, and other paper products. In addition to the pleasure you derive from that product, take heart that more trees will exist because of your demand for paper products.

Blowback

The Wall Street Journal reports that two AIG employees in Paris have resigned, which is causing AIG to find replacements to avoid defaulting on $234 billion of derivatives contracts.

An AIG default on these contracts will force its counterparties, other banks, to raise capital - further exacerbating the financial crisis.

Who doubts that these two employees, who worked in a profitable division of AIG, left out of dismay and fear? How easy do you think it will be to find replacements given the threats that have been made against AIG employees?

These are just some of the consequences of the political, media, and activist assault on AIG.

Barack Obama sure has changed the political culture of the country.

Auto Debacle Continues

The Obama administration's auto task force, which took five weeks to form after the inauguration despite the crisis, is reported to be set to recommend that GM and Chrysler get more aid and not be placed in bankruptcy. The task force has been scrambling to do its work, given its late start, and three of its members specialize in climate change - which means they bring an ideological commitment to having the auto makers build cars that are unprofitable because people don't want to buy them.

How comforting.

The economically rationale approach is for GM and Chrysler to file for bankruptcy, with Chrysler probably closing shop and GM shrinking in size - with bankruptcy tools making this possible.

But because this is about preserving union jobs at a key Democrat supporter, the UAW, and using the government's power to force the auto makers to make green cars when consumers don't want them, politics is trumping economics.

And we, and our children, will all be poorer because of it.

Obama: Bush Was Right Along

While Barack Obama didn't say those words, he might as well have.

His Justice Department recently filed papers with federal courts to justify the continued detention of people we believe are terrorists or support them such as the detainees at Guantanamo. While the Obama administration won't use the phrase "enemy combatant" as Bush did, it isn't the phrase that matters, but instead the substance which is fundamentally the same as Bush's policy.

This further highlights the destructive politics of the Democrats of the past several years: intense opposition to Bush's anti-terrorism policy which weakened our posture against the enemy, but apparently doing so for political advantage rather than out of genuine conviction.

Prison Insanity

The New York Times reports that states are considering closing prisons to cut spending amid budget deficits.

This illustrates perfectly one of the profound problems with the welfare state: not only does the government focus its money and energies on improper activities such as wealth redistribution, but it defaults on its responsibilities to protect us from criminals.

The effort to cut spending by closing prisons and reducing the number of criminals behind bars means more people will be murdered, raped, and assaulted.

Where is the outrage over that certain outcome? Where are the protesters picketing in front of lawmakers' homes demanding that prisons be kept open?

Prisons and Stimulus: Perfect Together

The recent murder of four Oakland, CA police officers by a man wanted for violating his parole highlights a problem that is likely to grow with increased Democratic control of government.

The left has been fighting for years to reduce the prison population in the U.S. by various means, including arguing that prisons are overcrowded. One "success" of such efforts has resulted in a panel of federal judges tentatively ordering California to release 50,000 prisoners, over one-third of the total, due to concerns over-crowding has led to a lower quality of medical care.

One of the key factors that has reduced crime in America in the past 15 years has been the greater number of criminals behind bars. If a criminal is in jail, he isn't committing crimes against the broader population. It's simple: release criminals, increase crime.

So here is a solution: build more prisons. The government should do that anyway, good times or bad, to enable it to carry out its fundamental job of protecting us.

But with all of this "stimulus" money sloshing around, such construction activity would be a form of "stimulus" that would be useful, by keeping criminals behind bars.

Funny how that kind of spending didn't get increased, to my knowledge.

Along with the lack of increased military spending (see here), the lack of additional spending on prisons to prevent criminals from being released early illustrates perfectly that the Democrats "stimulus" plan is really about funding its pet social and welfare causes.

The proper role of government is to protect citizens from criminals and foreign threats. The Democrats are defaulting on their responsibility to do just that, while focusing on wealth redistribution and "saving" the environment.

Outrage

The political and media response to AIG's bonus payments, which appear to be contractually guaranteed, is one of the most outrageous and despicable public acts in recent (and not-so-recent) American history.

Morally, the tax plan is pure wealth confiscation. The 90% excise tax, when combined with state, local, and payroll taxes, is likely to produce a tax rate in excess of 100%. Consider this: during the presidential campaign Barack Obama took umbrage with accusations that his tax policies were a form of socialism, and Joe Biden reacted with disbelief during a TV interview when asked if Obama/Biden's policies were a form of Marxism.

And now the Democratic party wishes to impose taxes that make Obama's tax plans look modest by comparison.

Legally, it is a retroactive tax increase - meaning it is a game of gotcha. There is some debate as to whether it violates the U.S. Constitution's prohibition on Bills of Attainers, which prohibition is designed to prevent the government from imposing specific penalties on specific individuals.

Politically, it represents the rule of the mob. The names of the AIG bonus recipients have been disclosed, which has led to death threats and picketing outside their homes by Acorn "activists".

Is this the activism that Barack Obama cherishes so much?

Worse, the mob may be succeeding in its goals. News reports indicate many of the AIG bonus recipients are returning their bonuses. If you think that is a good thing, consider that now that the mob has won a victory, it will be emboldened for the next issue it seeks to pursue.

Economically, it will reduce the willingness of people to work in the financial sector, particularly TARP firms - making it more likely that the government will lose billions on its TARP investments. The government needs the TARP firms to make lots of money to recoup its investment in them, and the firms need the best talent they can attract and retain to increase profits.

Moreover, the Obama administration introduced today its latest plan to combat the problems confronting the financial sector, after its initial plan a month ago lacked specifics and was poorly received. The new plan entails the government partnering with large investors to purchase assets from banks, with the government providing attractive terms to investors to induce them to participate.

The government will now have to make those terms even more attractive to encourage investors to participate, since the risk of doing business with the government is so high - with the investors having to ask: will they be allowed to keep the profits that they hope to earn from such investments, given the frenzy over the bonuses paid to TARPed firms?

The government will lose far far more money, from further losses on its TARP investments and increased subsidies to investors in the latest bailout plan, then the amount of the AIG bonuses.

And Barack Obama has been AWOL in terms of exerting presidential leadership on the issue. For a man who made his political career by not taking hard stands (witness his huge number of missed votes when he was an Illinois state legislature - if you don't vote, then a constituency who doesn't like your vote can't be upset with you), he now confronts making tough choices.

Yes, he has made tentative comments expressing his concern with the tax plan. But real leadership means speaking out, even if it isn't popular.

The silence is deafening, and disturbing.

Gone Fishin'

Well, not quite fishing, but I am going on vacation and should be resuming my posts on March 23.

Stimulus Spending that Makes Sense

The Democrats' "stimulus" bill that recently passed was noticeably short on added spending in one area where the extra spending could be effective and not increase deficits over the next five years: military spending, particularly arms procurement.

The military plans to purchase weapons systems over time, so a sensible stimulus plan would have been to accelerate weapons purchases that would occur anyway. This would expand defense contractor' employment today, at the cost of such employment several years from now when presumably the economy is recovering.

Moreover, the spending would be on goods that we were planning to buy anyway, as compared to squandering our tax dollars on politically attractive projects or spending for spending's sake.

There is no stronger evidence of the "stimulus" bill being a vehicle to spend money on Democrats' pet projects, causes, and constituencies than this.

Do as the Europeans Do?

In America, the left often uses policies that predominate in Europe as an argument for their introduction or expansion in the U.S.: national health care, labor regulations, and the death penalty top the list.

But when it comes to "stimulus" spending, Europe has taken a much tougher line than the Democrats' spend-till-we-drop approach. The leading European nations have announced "stimulus" plans that are a much smaller percentage of GDP that America's.

Don't hold your breath for our left to suggest we mimic Europe in this regard. In fact, the Obama administration is pushing Europe to spend more, but those nations are resisting such entreaties out of a concern that spending sprees won't do much good but will increase their debt burdens.

Pork Has its Privileges

The Senate voted 62-35 to pass the pork laden, $410 billion spending bill.

Unfortunately, eight Republicans voted in favor of the bill (see who the eight are here); without their support, the bill wouldn't have received the 60 votes necessary to pass. In addition to billions for earmarks, this latest money grab represents an 8.7% increase in discretionary spending over last year - at a time of no inflation.

The spending spree continues, and while most Republicans are doing good work in opposing it, this bill and the "stimulus" plan wouldn't have passed with some Republican support.

Being a Democrat-lite won't help the Republican party regain political support.

The Worst Nominee

Given the number of Obama's nominees who have withdrawn from consideration for administration posts, the worst nominee has really achieved quite an accomplishment.

Charles Freeman takes prize. He is the nominee to chair the National Intelligence Council. His gems include supporting China's 1989 crackdown in Tiananmen Square, making obsequiously positive comments about China's dictator, Mao Zedong, and Saudi Arabia's king Abdullah. And he has blamed 9/11 on America's support for Israel.

Fortunately, after much criticism, Freeman withdrew his nomination. But what's disturbing is that Barack Obama thought he was a worthwhile candidate for any administration post, yet alone such a sensitive and important one.

China Games

China seems to be up to its old tricks. In a recent incident, five Chinese ships surrounded the USNS Impeccable, a U.S. Navy surveillance ship, in international waters. The five Chinese vessels harassed the Impeccable and its crew, before the ships separated.

This is reminiscent of an incident during the first few months of the Bush administration, when in April 2001 one of our surveillance planes collided with a Chinese fighter jet that was pressuring our plane to leave its patrol area. Our plane had to make an emergency landing on Chinese soil, which prompted China to hold its crew and plane hostage before releasing the crew (but they kept the plane).

The incident's significance lie in China's efforts to test the mettle of President Obama. Our response should be to increase our patrols and surveillance activities, to demonstrate we won't be intimated.

I wonder if, in fact, we are doing that.

Supreme Court Debacle

The U.S. Supreme Court has ruled in Wyeth v. Levine that Wyeth is liable for the incorrectly administered drug injection by a nurse who ignored the drug's FDA-approved warning label.

Diane Levine received the drug via an injection, despite the label saying in all caps: "INADVERTENT INTRA-ARTERIAL INJECTION CAN RESULT IN GANGRENE OF THE EXTREMITY." She then developed gangrene and lost her arm.

The hospital was held liable, but since Wyeth is a deep pocket, the plaintiff went after Wyeth despite the FDA-approved label.

What exactly could Wyeth have done to prevent this? Put one of its employees in every dispensary, further exploding health care costs?

The result will be reduced profitability for the biopharma companies, which means less money will go into R&D - and fewer lives will be saved in the future.

But of course no one will see the life not saved by the drug not developed. So trial lawyers and their political patrons know they will be insulated from the life-and-death results of this outcome.

France, Here We Come

Barack Obama recently endorsed card check legislation, which would make it much easier for unions to organize a work place by doing away with a secret ballot. Instead, voting would be public and occur over time, so workers could be intimated by union advocates to vote for the union. Given the history of union violence in this country, this is both a profoundly unjust effort to coerce employees to vote a certain way and an economically destructive path.

It only exacerbates the capital strike occurring in the country, where businesses and investors are refusing to take risks with their money due to deep concerns over the ability for such investments to be profitable given Obama's plans to raise taxes significantly, engage in a radical restructuring of the health care and energy sectors, spend vasts amounts of money, and run budget deficits at unprecedented levels forever.

To the extent increased unionization leads to higher wages, that would be the fast track to job losses and higher unemployment, particularly in a recession. If workers are too expensive to hire, employers will hire fewer of them or lay them off. Studies of the Great Depression, where FDR pursued a policy to raise wages and to support aggressive unionization, indicate a significant part of the unemployment was due to wages that were above market.

Card check will lead to higher unemployment, reduced business investment, and weakened confidence. A terrible policy at any time, yet alone during a recession.

Cult of Sacrifice

Barack Obama has been saying that sacrifices are needed in the time of our economic troubles.

I don't see much sacrifice by those advocating higher government spending; by those pursuing a costly and deadly creeping nationalization of our health care system; by those seeking to impose draconian costs on power producers, companies, and all consumers in the pursuit of a radical environmental agenda; or by labor unions who want to pass card check legislation to make it much easier for them to coerce employees into unionizing an employer.

Instead, Obama's calls for sacrifice entail: the imposition of higher taxes on individuals and companies and the multiple burdens that Obama's reforms will produce.

Obama is seeking to make people feel guilty for their success, to weaken their resolve in opposing his plans to take their money to give it to him to spend as he wishes.

Three Cheers for Bayh

Democratic Senator Evan Bayh wrote in the Wall Street Journal an op-ed piece criticizing the 2009 budget plan passed by the House for increasing spending by nearly 9%.  Even some Democrats are realizing the risks inherent in their party's efforts to increase spending at prodigious rates.

Republicans unity in opposition to the bill, with the support of Democrats like Bayh, can stop this spending splurge.

The Doomsday Clock Continues to Tick

The UN's International Atomic Energy Agency (IAEA) reports that Iran has 1,000 kilograms of low-enriched Uranium, enough to make one atomic bomb after further enrichment. The Chairman of the Joints Chiefs, Michael Mullen, also believes Iran has enough nuclear material to make a bomb.

Iran continues to make progress on multiple nuclear projects: adding centrifuges to enrich uranium, planning to begin operating its Russian-built nuclear "power" plant in April, and making further progress on its heavy water reactor.

Iran's continued progress toward the development of nuclear weapons represents the gravest risk of nuclear war in the world today (see previous columns here and here).

Let's hope Barack Obama, while making his diplomatic moves to engage Iran, is ready to destroy Iran's nuclear programs with an American military attack before it is too late.

Obama's Choice

William McGurn of the Wall Street Journal reports on what ought to be a major news story. Congressional Democrats are working to end the Washington, DC school voucher program, a program which is supported by the head of the DC school system.

Two of the program's beneficiaries go to the same private school that Barack Obama's daughter attend, and they may not be able to attend the school without the voucher (unless of course the school or a donor "solves" the political problem by making up the funding provided by the voucher).

So will Obama stand up to the teachers' unions to insist the bill preserve the voucher program? Or will he demonstrate to everyone, including his own children, that quality education is less important than satisfying a key Democratic constituency?

Markets Adjust, but at a Price

UBS has increased the salaries of its top investment bankers, in reaction to limits governments are placing on bonus payments. Bonuses have the virtue of attempting to reward performance, so a move to increase the proportion of compensation from salaries and limit bonuses means the incentive to perform better is weakened.

Financial firms are fighting back against restrictions on their business practices to try to retain key personnel, as governments are creating perverse incentives in the marketplace.

EU to Eastern Europe: Drop Dead

The European Union rejected pleas from Eastern European governments for aid to deal with the crisis effecting their financial system. In contrast, recall that the United States came to Mexico's rescue in 1994 during a financial crisis.

Yes, the wealthy Western European nations who rejected such aid are having their own problems, and yes, such aid rewards bad behavior.

But such aid can also help prevent Eastern Europe, less than 20 years after being liberated from their former Soviet masters, from succumbing to Russian pressure.

This continues the pattern of Europe's inability to take strong measures in support of freedom and against tyranny. From the wars of ethnic cleansing by Serbia in the 1990's that were only addressed by American intervention after Europe dithered, to the appeasement of Russia in the face of its war against Georgia last year, Europe continues to demonstrate, in a tragic twist of the Marine slogan, that there is "no worse friend, and no better enemy" than Europe.

Atlas Continues to Shrug

Executives continue to flee financial services firms under government control or influence. The CEO of Freddie Mac, David Moffett, resigned after six months on the job. He was brought in after the government took control of Freddie, and apparently is leaving out of frustration in having the company micro-managed by government regulators and in being forced to pursue political, rather than business, goals.

This comes on the departure from Freddie of three experienced investment managers in January alone.

Talented executives continue to flee the TARP firms and other heavily regulated financial firms, making it more likely that these companies will flounder and that taxpayer losses on their investments in these firms will grow.

The demonization of the financial industry by the media and politicians, led by the Democrats, is taking a profound toll on the country.

Iran's Worst Nightmare?

Hillary Clinton, in meetings with Arab leaders, is reported to have said, "The worst nightmare for Iran is for the international community to be unified and the U.S. willing to engage."

Hmm. I think Iran's worst nightmare is an American military strike that succeeds in destroying much of its nuclear program.

State of Hope

Barack Obama has now decided he has pushed the doom and gloom scenario for the economy too hard in his efforts to get the "stimulus" bill passed and now wants to tell Americans things will get better. The economy will certainly recover, with or without the "stimulus" bill, but the fear mongering by Democrats, first to win election and now to pass their spending priorities, has hurt investor and consumer confidence.

One canard in Obama's speech bears focus. He criticized the Bush administration, claiming "regulations were gutted for the sake of a quick profit at the expense of a healthy market".

Really? Which ones? The most profound regulatory failure was the opposition by Democrats to restraining Fannie Mae and Freddie Mac, whose politically guided attempts to expand home ownership contributed to the financial crisis.

But Obama and the Democrats have been successful in pushing this Big Lie, so why stop now?

The Tax Man Cometh

Barack Obama campaigned, and his recently released budget purports to reflect, his commitment not to raise taxes on those making below $250,000 per year.

Aside from the fact that his proposed spending spree can't be funded without much higher taxes than the already higher taxes he has proposed, his budget plan DOES include higher taxes on all Americans.

Obama wants to introduce a "cap and trade" system to reduce greenhouse emissions, in which companies buy permits allowing them emit a certain amount of greenhouse gases. The budget plan envisions raising $646 billion from 2012-2019, or $80 billion a year, from this plan. This amount of money may severely understate the taxes that such a tax can raise, since when Congressional Democrats considered such a tax last year, it would raise $300 billion per year.

Companies will have to raise their prices of energy and energy-dependent products (i.e., everything) to offset the higher cost of doing business.

That's effectively a tax increase, akin to a sales tax but hidden from public view because it is built into a business' cost structure.

The hidden part makes it worse, since it is easier for politicians to claim they didn't raise taxes when in fact they did.

Obama's plan contemplates returning most of these revenues to workers through a tax credit, which is the President will claim is a tax reduction, but reflects a continuation of Obama's efforts to call income transfer payments tax cuts.