So far, the non-extremists pundits are applauding the competence and moderation of the team that Obama is putting together. I’ll try to get around to adding links later.  Or Scott you can help if you like.

Steve

Ben Stein is known for his libertarian/right wing political views.  What many may not know is that he has an undergraduate degree in economics and that his father was a famous economist who advised President Nixon. He seems to have surprised some people by coming out in favor of a bailout of the automobile industry as well as a large fiscal stimulus in this column.

I am certain that he is right about fiscal stimulus.  And I am coming around to agree with him on a bailout of the auto industry.  I am certain of this, as the economy becomes flooded with cheap dollars, the value of the dollar will drop against other currencies and foreign investment is going to shrink dramatically.  It’s a good time to buy gold.

Steve

I moseyed on over to Abu Hatem’s political view page and was pretty amazed by the similarities of our political views.  Abu is a devout orthodox muslim who has been doing some blogging over at Culture 11.

Seth

Another fantastic post from Micheal Yon.

LINK.

Seth

Great Post over at Culture 11 that is saying what I have been thinking.  Neo-conservatism embraced by George W Bush were at the heart of the problems of his administration.  There is nothing “conservative” about them.  I hope that these past years and the spanking that the republicans got serve as a permanent repudiation.

LINK

Seth

A few months ago Scott posted the following:

Good People: This Email is a little long. Written by a Professor of Economics at the University of Georgia, it is very informative. miles

The wealthy pay most of the taxes, so it should be no surprised that they get a larger percentage of the tax cut total back! It is only fair.

——

Suppose that every day, ten men go out for beer and the bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this:

The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.
So, that’s what they decided to do. The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve. ‘Since you are all such good customers, he said, ‘I’m going to reduce the cost of your daily beer by $20. Drinks for the ten now cost just $80.

The group still wanted to pay their bill the way we pay our taxes so the first four men were unaffected. They would still drink for free. But what about the other six men - the paying customers? How could they divide the $20 windfall so that everyone would get his ‘fair share?’ They realized that $20 divided by six is $3.33. But if they subtracted that from everybody’s share, then the fifth man and the sixth man would each end up being paid to drink his beer. So, the bar owner suggested that it would be fair to reduce each man’s bill by roughly the same amount, and he proceeded to work out the amounts each should pay.

And so:

The fifth man, like the first four, now paid nothing (100% savings).
The sixth now paid $2 instead of $3 (33%savings).
The seventh now pay $5 instead of $7 (28%savings).
The eighth now paid $9 instead of $12 (25% savings).
The ninth now paid $14 instead of $18 (22% savings).
The tenth now paid $49 instead of $59 (16% savings).
Each of the six was better off than before. And the first four continued to drink for free. But once outside the restaurant, the men began to compare their savings.

‘I only got a dollar out of the $20,’declared the sixth man. He pointed to the tenth man,’ but he got $10!’

‘Yeah, that’s right,’ exclaimed the fifth man. ‘I only saved a dollar, too. It’s unfair that he got ten times more than I!’

‘That’s true!!’ shouted the seventh man. ‘Why should he get $10 back when I got only two? The wealthy get all the breaks!’

‘Wait a minute,’ yelled the first four men in unison. ‘We didn’t get anything at all. The system exploits the poor!’

The nine men surrounded the tenth and beat him up.

The next night the tenth man didn’t show up for drinks, so the nine sat down and had beers without him. But when it came time to pay the bill, they discovered something important. They didn’t have enough money between all of them for even half of the bill!

And that, boys and girls, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.

David R. Kamerschen, Ph.D.
Professor of Economics, University of Georgia

My friend TNT got this same email from a friend and replied as follows. I thought this was good:

Under the Obama as Bartender plan, instead of reducing the cost of all the beers to $80, he would keep it at $100 (he would really like to increase this amount but knows that he can’t in the current economic climate so he keeps things the same). He does however change the way he charges the 10 guys as follows:

2 of the first four men that didn’t pay anything before would receive $3 each for drinking their beers.

The next 2 that also didn’t pay anything before would would receive $1 each for drinking their beers.

The fifth guy and sixth guy would now pay nothing.

The seventh would still pay $7.

The eighth guy would pay $15.

The ninth guy would pay $21.

The tenth guy would pay $65.

The tenth guy then goes to another bar (we’ll call it China) where he can drink cheaper because

1) they don’t have to pay for other people’s drinks

2) the drinks are cheaper because the bar owner doesn’t waste all of his money on non-sense spending

When that hapens, the first 4 guys are left wondering why they don’t get paid to drink beer anymore. They then complain to the bartender that he promised them money to drink his beer. He throws his hands up and says “Sorry, I really thought that payment plan for you guys would work. By the way, guys 7-9 now have to pick up more of the tab now that the tenth guy left. And the rest of you guys need to get a job so you can pay for at least some of yours.” They all riot and the bar is torn to shreds. The bar that the tenth guy went to (remember, its name was China) takes over Obama’s bar ( they got it for a good price too since they were the majority debt holders of the Obama bar anyway).

Just to play both sides fairly, the McSame plan would be as follows:

He would still lower the costs of the beers to $80, even though it still costs him $100 or more to serve them, the difference of which he borrows from the other bars down the street, mostly the China bar. Every one would pay a little less for their beers as they did in the original story.

The story still ends with the tenth guy taking his business to the China bar and the China bar taking over McSame’s bar. The only difference is the bar didn’t get destroyed in the process. I’m not sure that is all that much better, but I’d rather NOT have to spend my nights posting watch with a shotgun on my roof if I didn’t have to.

All the while there are 3 other bartenders out there that could actually fix the problems the bar is having, but most of the patrons are too drunk and think they only have a choice between McSame and Nobama.

I wonder which dialect of Chinese I should try to learn first?

TNT

Seth

Megan McCardle has written a beautiful post on why we ought to let the Big Three fail.  It is both lyrical prose and a fabulous explanation of the opportunity cost of bailing out failing industries.

But it doesn’t matter.  These vital towns, where generations of people lived happy lives and raised fat, burbling babies to a middle-class adulthood, are all dying.  Should the government save these places too?  Shall we support Eastman Kodak indefinitely, whether or not it can produce a product anyone wants to buy?  And Xerox, and Carrier, and a thousand companies you’ve never heard of?  Shall we make it illegal to make a better product than American corporations?  Why not just ban new products that make old ones unprofitable?

To do that, we’ll have to take the money from other people, in other cities.  Other businesses will not get the capital that we give to dying firms, so they won’t expand.  Some other families, not yours, will lose their homes because their business failed, or have to move away from home in order to get jobs because their area is in the doldrums.  Meanwhile, everyone in the country will be slightly worse off, because we’ve shifted limited economic resources towards products they demonstrably do not want…

…Moreover, it wouldn’t be right to save it by destroying someone else’s business, killing someone else’s town.  That’s the choice we are facing.  At its heart, economics is not about money; it is about resources.  Every dollar sent to Detroit buys a yard of steel, a reel of copper wire, an hour of labor that now cannot be consumed by a business that actually produces a profitable, desireable product.  It’s not right to strangle those businesses in order to steal some air for the dying giants of an earlier day.

Steve

Greg Mankiw gives very sensible advice to the President-Elect:

• Listen to your economists
• Embrace some Republican Ideas
• Pay attention to the government’s budget constraints
• Recognize your past mistakes

Read the whole thing for the particulars.

Steve

LINK

Steve

Phil Johnson of Team Pyro has this excellent post on Christian political activism.

Steve

In keeping with the spirit of this post, I thought these two paragraphs in this WSJ editorial were informative:

While many voters may think they’ve voted for “change” in Mr. Obama, they also handed power to the oldest forces in the Old Democratic Party. Jimmy Carter campaigned as a moderate and outsider, but Congressional liberals quickly ran his budget director, the economic centrist Bert Lance, out of town. Then they overrode Mr. Carter’s veto of a pork-barrel water bill. Mr. Carter referred to the tax committees as “ravenous wolves” after they transformed his tax reform into a special-interest bouquet. Next came Reagan.

Bill Clinton also campaigned as a moderate, but in his first two years he was unable to govern as Congress pursued liberal priorities, including a big boost in taxes and spending. Recall Roberta Achtenberg as the scourge of the Boy Scouts and Joycelyn Elders calling for the legalization of drugs? Mr. Clinton chose — or was forced — to take up gun control and HillaryCare before welfare reform. Next came Newt Gingrich.

Obama is a great politician if nothing else.  Maybe, just maybe, his great political survival instinct will kick in and he will come out of the moderate, centrist closet.

Steve

I am not a huge fan of Fox News but I have always liked and admired Brit Hume.  JT at Between Two Worlds blog reports that Hume is changing his role at Fox News which will reduce his work to 100 days a year.  His purported reason:  “Bible Study”.

Steve

UPDATE:  With Seth’s encouragement, I changed the title of the post (from The BS of Brit Hume) because it was unfunny and confusing.

Ross Douthat channels Seth and I here, here and here on the issue of Obama and abortion.  Ross asserts:

Look, there are a variety of not-unreasonable ways for Americans who believe the unborn deserve legal protection to justify a vote for Barack Obama. But to claim that a candidate who seems primed to begin disbursing taxpayer dollars in support of abortion and embryo-destructive research as soon as he enters the White House somehow represented the better choice for anti-abortion Americans on anti-abortion grounds is an argument that deserves to met, not with engagement, but with contempt.

This is the exact same argument I made in this post.

Steve

LINK

Seth

This letter by Steven Horwitz, Professor of Economics at St. Lawrence University, beautifully rebuts the notion that the current economic meltdown was a failure of free-markets.  He indicts five government interventions in the market as being largely culpable:

• Fannie Mae and Freddie Mac insured loans that would never have happened in a truly free-market while forcing banks to underwrite loans to “distressed areas” that never would have gotten approved using traditional underwriting standards.
• With the  1994 renewal and revision of the Community Reinvestment Act, “Congress explicitly directed Fannie and Freddie to expand their lending to borrowers with marginal credit as a way of expanding homeownership.”
• The worst hit areas in the country are characterized by significant land use regulations which drove up the prices of homes and contributed to risky borrowing.
• The Federal Reserve, “nominally private but granted enormous monopoly” powers to regulate the currency, drove down interest rates and fueled the borrowing binge.
• Finally, in 2004 and 2005, as penance for an accounting scandal, Fannie and Freddie agreed to expand their lending to low income customers.  “Both agreed to acquire greater amounts of subprime and Alt-A loans, sending the green light to banks to originate them. From 2003 [corrected on 10/19/08] to 2006, the percentage of loans in those riskier categories grew from 8% to 20% of all US mortgage originations“

Horwitz letter does not deny or mitigate the place that “greed” played in this crisis.  Indeed, profit seeking and maximization are like the air we breathe or gravity, ever-present and unavoidable.  He opines:

No free market economist thinks “greed is always good.” What we think is good are institutions that play to the self-interest of private actors by rewarding them for serving the public, not just themselves. We believe that’s what genuinely free markets do. Market exchanges are mutually beneficial. When the law messes up by either poorly defining the rules of the game or trying to override them through regulation, self-interested behavior is no longer economically mutually beneficial. The private sector then profits by serving narrow political ends rather than serving the public. In such cases, greed leads to bad consequences. But it’s bad not because it’s greed/self-interest rather because the institutional context within which it operates channels self-interest in socially unproductive ways.

Near the end of the letter Horwitz states:

We can disagree in good faith about what to do next, and we can disagree in good faith about the degree to which government intervention caused the problems, but blaming a non-existent free market for a crisis that clearly was to some extent the result of government’s extensive interventions in that market is unfair. So if I have persuaded you of nothing else, I hope deeply that I have persuaded you of that.

In the end, all I can ask of you is that you continue to think this through. Explaining this crisis by greed won’t get you far as greed, like gravity, is a constant in our world. Explaining it as a failure of free markets faces the obvious truth that these markets were far from free of government. Consider that you may be mistaken. Consider that perhaps government intervention, not free markets, caused profit-seekers to undertake activities that harmed the economy. Consider that government intervention might have led banks and other organizations to take on risks that they never should have. Consider that government central banks are the only organizations capable of fueling this fire with excess credit. And consider that various regulations might have forced banks into bad loans and artificially pushed up home prices. Lastly, consider that private sector actors are quite happy to support such intervention and regulation because it is profitable.

Horwitz also superbly explains why industry often supports regulatory regimes (it reduces competition) and often tend to “capture” the regulatory mechanisms that are supposed to be overseeing their activities. Read the whole thing.

Steve

HT to Don at Cafe Hayek