“You never let a serious crisis go to waste. And what I mean by that it’s an opportunity to do things you think you could not do before.” Rahm Emanuel

If you look around your kitchen and garage you’ll find chemicals and appliances that are used every day that can be ‘weaponized’ into a smoke bomb, flame thrower or even worse. Obviously that wasn’t the original intent of the product, but under the right circumstances and wrong intentions bad results occur. Even something as innocuous as a suitcase can be turned into a ‘dirty suitcase bomb’. Remember after the fall of the Russian Empire we were afraid some of their suitcase bombs made it onto the streets?

A similar comparison can be made regarding social values, competing interests and how they are maintained and managed. James Madison called these special interests ‘Factions’ and warned about how divisive they could be in pitting one group against another, but also how healthy, as they provided the right friction in a Republic for order in the marketplace and a stable society. Madison and the other founding era fathers warned against the abuse and instability of democracy.

This week the Supreme Court has taken up two cases that will greatly impact our society, Liz Goodwin, Yahoo! writes regarding the Supreme Court’s decision to take up two gay rights cases, “Supreme Court gay marriage cases could set stage for dramatic societal changes”. On Tuesday the Court will decide whether California’s Proposition 8 ban on gay marriage denies rights and discriminates unfairly against gays. On Wednesday the Court will take up a case that will look at whether the 1996 Defense of Marriage Act which bars the Federal Government from recognizing gay marriage is constitutional.

Out of the two cases the CA Prop 8, Perry v. Hollingsworth is considered by both Pro and Anti-gay rights groups as having the most far reaching effect. “In Perry, there’s a possibility that the court could declare that gays and lesbians have a fundamental right to marriage just as heterosexual couples do. Such a decision would send a message from the court that both same sex and heterosexual relationships must be treated equally in the eyes of the law.”

The trickledown effect could result in restrictions on religious freedoms, adoption and contract law, personal property rights, health care and every other nook and cranny of society. What the Perry case does it reaffirms the Supreme Court and the Federal Government as ‘the law of the land’ and final arbiter. The irony here is that ‘The Majority’ for years has suppressed the rights of a minority (less than 10% of population) to protect societal norms where today the tables might be turned.

Madison in Federalist Papers #10 defines Factions or Special Interest, “By a faction, I understand a number of citizens, whether amounting to a majority or a minority of the whole, who are united and actuated by some common impulse of passion, or of interest, adversed to the rights of other citizens, or to the permanent and aggregate interests of the community.” Madison goes on to write, “The latent causes of faction are thus sown in the nature of man; and we see them everywhere brought into different degrees of activity, according to the different circumstances of civil society. A zeal for different opinions concerning religion, concerning government, and many other points, as well of speculation as of practice; an attachment to different leaders ambitiously contending for pre-eminence and power; or to persons of other descriptions whose fortunes have been interesting to the human passions, have, in turn, divided mankind into parties, inflamed them with mutual animosity, and rendered them much more disposed to vex and oppress each other than to co-operate for their common good.”

Madison as well as the other framers understood the potential for abuse in a democracy as individuals through special interest will line up behind leaders to promote and protect their interests over the interests of others.

Special Interest groups play into the political dynamics as Madison had suggested, ‘an attachment to different leaders ambitiously contending for pre-eminence and power’ which divides men into parties. The Democrats pocket the Unions, Teachers and African Americans, while the Republicans herd family values, business and the defense industry.

“The two great points of difference between a democracy and a republic are: first, the delegation of the government, in the latter, to a small number of citizens elected by the rest; secondly, the greater number of citizens, and greater sphere of country, over which the latter may be extended.” Madison #10

Democracy if it works at all works best at lower rungs of government as there tends to be more homogeneity and common interests. The Constitution was constructed to restrain democratic rule, as Madison suggested “Factions tend to nullify each other.” This applies to other ‘Weaponized Causes’ like Gun Ownership, Security, Commerce, Education, Abortion, and Welfare as well. Today however, slimmer majorities rule over larger minorities and remove individual liberties for a ‘common good’. Early nationalists like Alexander Hamilton who were leery of individuals to behave correctly, were more in favor of an aristocratic rule but were in the minority,  as the US Constitution protected  state sovereignty and limited delegated power restrained the federal government and the instability of democracy. Factions (Special Interest) fought their battles at the state level and in the marketplace. Today however, at the whim of the next social or economic crisis Washington removes the rights and freedoms of one group in order to provide for another.

In a recent interview, Sandra Day O’Connor recalled fond memories of her colleague Chief Justice William Rehnquist with whom she graduated with from Stanford University and served with on the Stanford Law Review. In the interview she alluded to the progress the Chief Justice had made in ‘ruling for the majority’ when it came to landmark issues, inferring a greater importance of majority rule rather than constitutional rule of law. While the cautions of democracy have gone unheeded over the past century, with power concentrated in Washington, it now has been left in the hands of the democracy of nine to rule over the 315 million.

Recently, Mark Victor a Defense Attorney and Radio Host in Phoenix AZ speaking before a Republican group for Liberty asked, “With a show of hands how many are for Freedom!” Hands went up all around the room with many shouts. Next he started to ask, “How many believe in the freedom to practice your faith!” Again, hands up and screams around the room. After Mark was through the list of freedoms that appeal to Conservative Republicans, he asked, “How many are for the freedom to use drugs?” All of a sudden it fell quiet. Again, “How many are for the freedom to be gay or choose a nontraditional lifestyle?” No one raised their hands. Mark says he does that in Progressive Democrat meetings as well, and no one applauded or raised their hands in support of freedom of individuals to keep their paychecks, choose their schools, choose their health care or the rights of the unborn. Do you see the problem?

Thomas Jefferson put it this way, “I would rather be exposed to the inconveniences attending too much liberty than to those attending too small a degree of it”.

Madison’s remedy was the Constitution which created bicameral powers and dual sovereignty of state and federal governments that avoided systemic failure that was a characteristic of democracies in the past. Through decentralized state powers it allowed for government closer to the people and experimentation in solving social and economic maladies that allowed for failure and success. “The influence of factious leaders may kindle a flame within their particular States, but will be unable to spread a general conflagration through the other States. A religious sect may degenerate into a political faction in a part of the Confederacy; but the variety of sects dispersed over the entire face of it must secure the national councils against any danger from that source. A rage for paper money, for an abolition of debts, for an equal division of property, or for any other improper or wicked project, will be less apt to pervade the whole body of the Union than a particular member of it; in the same proportion as such a malady is more likely to taint a particular county or district, than an entire State.”

At the end of the Constitutional Convention in 1787, a lady (Mrs. Powell) asked Benjamin Franklin, “Well Doctor what have we got a republic or a monarchy? To which he replied, “A republic if you can keep it.”

While the rights of each individual and the natural law freedoms that supersede government are in play through these rulings, an important issue lost in the fray is the federalist system that our nation was created from and maintains those freedoms. Jonathan Alder writing in Reason Magazine in defense of state constitutional power that keeps in check federal power, “The system of federalism is an essential guarantor of individual liberty and constraint on governmental power. As the Supreme Court noted in a unanimous 2011 decision, “federalism secures the freedom of the individual.” It does this by, among other things, forcing states to compete with one another for citizens by providing different mixes of policies (taxes, services, and legal guarantees) in an effort to discover the best mix. Where states get it wrong, such as by imposing excessive taxes or unjust laws, people remain free to “vote with their feet”  and move to a jurisdiction with laws more in line with their beliefs.”

The question to ask ourselves today is ‘Can we restore the integrity of the Republic?’, where most decisions that are made today in Washington would be made in private transactions, through local communities and State Houses. Or should nine jurors in Washington supersede individual liberty and rule for Special Interests?

Christopher Mahon, Editor

editor@ambidextrouscivicdiscourse.com

 

“You don’t become completely free by just avoiding to be a slave; you also need to avoid becoming a master.” Nassim Taleb

In Greek Mythology, Procrustes (who’s name means ‘The Stretcher’) the son of Poseidon, lured weary travelers from Athens to Eleusis to stay with him where he would fit them to his iron bed. He would stretch those too short to fit his bed and amputate the legs of those too long. Procrustes continued his reign of terror until Theseus traveling the same route killed Procrustes, by convincing him to fit himself to his own bed.

A Procrustes bed is used as a modern analogy of an “arbitrary standard by which exact conformity is required“. It has been used as comparisons in literature, math and computer science. In his 2010 book, ‘The Procrustes Bed: Philosophical and Practical Aphorisms’,  Nassim Taleb says that it is not only that many times we try to fit into wrong boxes, but that the emphasis is on the box rather than the object. He also points out the danger of overestimating or under estimating variables as in Modern Portfolio Theory that uses risk assessment like Bell Curve distribution sigmas to gauge investment pairing and balancing. In a sense, Modern Portfolio Theory is a Procrustes Bed as it lops off 3rd or 4th sigma risk as inconsequential, only to find out later as we have with recent financial crises, those variables played a greater role.

A Procrustes Bed analogy of government policy can be made in areas like health care, education and other areas where centralized government tries to create solutions. As Procrustes would stretch his shorter victims and amputate his taller ones, government health care policy would give more health care to the healthy and less to the very sick. Individuals with health care needs ‘out of the bed’ of protocol would either have to look for it on the private or black market while the healthiest would be required an annual exam and other benefits that they don’t want. The same could also apply regarding cost sharing as healthy and unhealthy would be in the bed with the same premiums. Alternative care options which even now are generally only available to those with discretionary income, might under government health care be outlawed or even more expensive. Those who have the money might be joining those already fleeing other nation’s government health care, like a Danny Williams former Canadian MP who flew to Miami, FL  for a heart procedure a few years back.

The Procrustes Bed of public education as it exists today is  particularly cruel. I’d refer to an earlier article on a brief history of US education, that was loosely state regulated, decentralized and adaptable to different regions of the country and even up until the early 20th century was local and neighborhood focused. Today education is highly centralized through the Dept of Education,  federal mandates and state enticements of money and credits to cash strapped states. Public school children are at the mercy of every new lab project coming through teacher colleges like Columbia, that weigh priorities of traditional skills of reading, writing, arithmetic and critical learning against socialization and tolerance which was John Dewey’s goal in the early 20th century, who believed changes in societies have to start in the classrooms. But the experiments are failing dramatically as US test scores have plummeted against other nations and the US has even pulled out of some competition.

If these experiments in healthcare, education and other non-delegated state powers had been done on a decentralized state by state  basis as was the original system, the failures would have been isolated, less impacting nationally and successful models would be adapted in other states.

The Procrustes Bed can be applied in so many areas where federal government in particular creates arbitrary policy with rigid compliance. There is almost a unanimous conclusion that something is wrong in Washington, DC, while some consider the government as being ineffective and needs to be ‘fine tuned’, most believe it is doing too much and needs to do less.

As a fitting (pun intended) end of the mythological story, Procrustes is done in by his own device. Wouldn’t a fitting end to an uncontrollable and runaway federal government be a Procrustes Bed of Constitutional measures?

Statists, Governmentalists, Collectivists for over a century now have lured weary citizen travelers journeying through life, into the secure and comfortable bed of federal government powers to solve all problems, only to find out too late the limits it put on individual freedom.  There is an inverse relationship between Government and Individual Liberty – as government power increases, individual liberty decreases. The framers of the Constitution understood the natural process of government was to grow and that it needed to be limited through constitutional restraint.

Are there Theseus’ in Washington or in state governments who can lure the Federal Government back into the bed of constitutional restraint so we can once again ‘fit it’ so it functions as was intended as a protector of individual liberties and not as a provider of rights and services?

Christopher M. Mahon, Editor

editor@ambidextrouscivicdiscourse.com

Federal Reserve announces Consent Order against Citigroup, addressing their deficiencies and corrective measures.

 

NOW, THEREFORE, it is hereby ordered that, before the filing of any notices, or taking
of any testimony or adjudication of or finding on any issues of fact or law herein, and without
this Order constituting an admission or denial by Citigroup of any allegation made or implied by
the Board of Governors in connection with this matter, and solely for the purpose of settling this 4
matter without a formal proceeding being filed and without the necessity for protracted or
extended hearings or testimony, pursuant to sections 8(b)(1) and (3) of the FDI Act (12 U.S.C.
§§1818(b)(1) and 1818(b)(3)), Citigroup and its institution-affiliated parties shall cease and
desist and take affirmative action as follows:
Source of Strength
1. The board of directors of Citigroup shall take appropriate steps to fully utilize
Citigroup’s financial and managerial resources, pursuant to section 38A of the FDI Act
(12 U.S.C. § 1831o-1) and section 225.4(a) of Regulation Y of the Board of Governors (12 C.F.R.
§ 225.4(a)), to serve as a source of strength to each of the Banks, including, but not limited to,
taking stepsto ensure that each of the Banks complies with the Consent Orders issued by their
respective banking agency supervisors and any other supervisory actions taken by their respective
banking agency supervisors.
Board Oversight
2. Within 60 days of this Order, Citigroup’s board of directors shall submit to the
Reserve Bank an acceptable written plan to continue ongoing enhancements to the board’s
oversight of Citigroup’s firmwide compliance risk management program with regard to
compliance with BSA/AML Requirements. The plan shall describe the actions that the board of
directors has taken since the Consent Orders became effective and will take to improve
Citigroup’s firmwide compliance risk management with regard to BSA/AML Requirements,
including, but not limited to, ensuring that such compliance risk is effectively managed across
Citigroup, including within and across business lines, support units, legal entities, and
jurisdictions in which Citigroup and its subsidiaries operate. The plan shall, at a minimum,
address, consider, and include: 5
(a) Funding for personnel, systems, and other resources as are needed to
operate a BSA/AML compliance risk management program that is commensurate with the
compliance risk profile of the organization and that fully addresses the organization’s
compliance risks on a timely and effective basis;
(b) policies to instill a proactive approach throughout the organization in
identifying, communicating, and managing BSA/AML compliance risks;
(c) measures to ensure adherence to approved BSA/AML compliance
policies, procedures, and standards, and ensure the timely completion of related projects and
initiatives; and
(d) measures to ensure the resolution of BSA/AML-related audit, compliance
reviews, and examination findings.
Compliance Risk Management Program
3. Within 60 days of this Order, Citigroup shall submit an acceptable written plan to
the Reserve Bank to continue to improve the governance, structure, and operations of the
compliance risk management program with regard to BSA/AML Requirements and the
regulations issued by the Office of Foreign Assets Control of the United States Department of
the Treasury (“OFAC”) (31 C.F.R. Chapter V). The plan shall, at a minimum, address, consider,
and include:
(a) The structure and composition of Citigroup’s compliance committees and
a determination of the optimum structure and composition needed to provide adequate oversight
of Citigroup’s firmwide compliance risk management;
(b) enhanced written policies, procedures, and compliance risk management
standards; 6
(c) the independence and authority of the compliance functions and related
compliance committees;
(d) the duties and responsibilities of the heads of compliance for global
business lines, the BSA/AML global program, and legal entities, as applicable, including the
reporting lines within Citigroup, and between Citigroup and its business lines and legal entities;
(e) a process for periodically reevaluating staffing needs in relation to the
organization’s compliance risk profile, and management succession planning for key compliance
positions;
(f) the scope and frequency of compliance risk assessments;
(g) measures to ensure compliance and improve accountability within
business lines and legal entities and their respective compliance functions;
(h) procedures for the periodic testing of the effectiveness of the compliance
risk management program;
(i) consistency with the Board of Governors’ guidance regarding Compliance
Risk Management Programs and Oversight at Large Banking Organizations with Complex
Compliance Profiles, dated October 16, 2008 (SR 08-8); and
(j) the findings and recommendations of the consultant engaged by Citibank
pursuant to Article V of Citibank’s Consent Order with the OCC.
BSA/AML Compliance Program
4. Within 90 days of this Order, Citigroup shall complete a review of the
effectiveness of Citigroup’s firmwide BSA/AML compliance program (the “BSA/AML Review”)
and prepare a written report of findings and recommendations (the “BSA/AML Report”). The
BSA/AML Review shall, at a minimum, address, consider, and include: 7
(a) The structure of Citigroup’s firmwide BSA/AML compliance program,
including reporting lines and taking into account the functions that Citigroup performs for the
Banks and Citigroup’s other subsidiaries;
(b) standards for BSA/AML compliance that apply on a firmwide basis,
including business lines and legal entities;
(c) the duties, responsibilities, and authority of Citigroup’s chief BSA/AML
compliance official, including reporting lines within Citigroup and from Citigroup’s business lines
and legal entities to the chief BSA/AML compliance official;
(d) communication of BSA/AML-related roles and responsibilities across the
organization;
(e) coordination among corporate BSA/AML compliance and the BSA/AML
compliance functions of the Banks, Citigroup’s other subsidiaries, and business lines;
(f) processes for monitoring business line and legal entity compliance with
Citigroup’s BSA/AML policies and procedures and BSA/AML requirements;
(g) policies, procedures, and processes, including, but not limited to, those for
identifying and investigating suspicious activity, and for filing suspicious activity reports;
(h) the scope and frequency of reporting with respect to BSA/AML compliance
within Citigroup, at a minimum, to senior management and board committees, as well as between
Citigroup and its business lines and legal entities;
(i) BSA/AML-related risk assessments;
(j) measures to ensure that any BSA/AML compliance functions, including,
but not limited to, transaction monitoring and suspicious activity reporting, that are performed by 8
Citigroup’s nonbank subsidiaries for the Banks or the Edge Act corporation are performed to meet
regulatory requirements;
(k) independent testing within Citigroup entities subject to BSA/AML
Requirements;
(l) training; and
(m) the findings and recommendations of the consultant engaged by Citibank
pursuant to Article V of Citibank’s Consent Order with the OCC.
5. Within 120 days of this Order, the board of directors of Citigroup shall review the
BSA/AML Report and shall submit an acceptable written plan to the Reserve Bank that includes a
description of the specific actions that Citigroup will take to continue to strengthen the
management and oversight of Citigroup’s firmwide BSA/AML compliance program, taking into
account the requirements of the appropriate federal or state supervisor of Citigroup’s functionally
regulated subsidiaries.
Progress Reports
6. Within 30 days after the end of each calendar quarter following the date of this
Order, the board of directors of Citigroup or an authorized committee thereof shall submit to the
Reserve Bank written progress reports detailing the form and manner of all actions taken to secure
compliance with this Order, a timetable and schedule to implement specific remedial actions to be
taken to address the recommendation in the Report, and the results thereof.
Approval and Implementation of Plans
7. (a) Citigroup shall submit written plans that are acceptable to the Reserve
Bank within the applicable time periods set forth in paragraphs 2, 3, and 5 of this Order. 9
(b) Within 10 days of approval by the Reserve Bank, Citigroup shall adopt the
approved plans. Upon adoption, Citigroup shall promptly implement the approved plans and
thereafter fully comply with them.
(c) During the term of this Order, the approved plans shall not be amended or
rescinded without the prior written approval of the Reserve Bank.
Communications
8. All communications regarding this Order shall be sent to:
(a) Jonathan Polk
Senior Vice President
Federal Reserve Bank of New York
33 Liberty Street
New York, New York 10045
(b) Kevin L. Thurm
Chief Compliance Officer
Citigroup, Inc.
399 Park Avenue
New York, New York 10022
Miscellaneous
9. Notwithstanding any provision of this Order to the contrary, the Reserve Bank
may, in its sole discretion, grant written extensions of time to Citigroup to comply with any
provision of this Order.
10. The provisions of this Order shall be binding upon Citigroup and its institutionaffiliated parties, in their capacities as such, and their successors and assigns.
11. Each provision of this Order shall remain effective and enforceable until stayed,
modified, terminated, or suspended in writing by the Reserve Bank. 10
12. The provisions of this Order shall not bar, estop, or otherwise prevent the Board
of Governors, the Reserve Bank, or any other federal or state agency from taking any other
action affecting Citigroup, the Banks, any nonbank subsidiary of Citigroup, or any of their
current or former institution-affiliated parties and their successors and assigns.
By Order of the Board of Governors effective this 21st day of March, 2013.
CITIGROUP INC. BOARD OF GOVERNORS OF THE
FEDERAL RESERVE SYSTEM

Full Text

“Do you want a government run by majority rule or a government restrained by its own documents?” Senator Rand Paul

The President last week was challenged by Congress to be specific in its ‘Drone Policy’ and other military permissible actions on US soil. Through Attorney General Eric Holder, he admitted it was ‘inappropriate’ and after Senator Rand Paul’s 13 hour filibuster of CIA Director nominee John Brennan, admitted in a letter the next day, “It has come to my attention that you have now asked an additional question: ‘Does the President have the authority to use a weaponized drone to kill an American not engaged in combat on American soil?’ The answer to that question is no.”

Was the President’s answer adequate enough and by what authority is that ‘NO’ tied to?

Senator Paul framed the issue in the first hour of the filibuster, “If there’s a gentleman or a woman with a grenade launcher attacking our buildings or our Capitol, we use lethal force. You don’t get due process if you’re involved with actively attacking us, our soldiers or our government. You don’t get due process if you’re overseas in a battle shooting at our soldiers. But that’s not what we’re talking about. The Wall Street Journal reported and said that the bulk of the drone attacks are signature attacks. They don’t even know the name of the person. A line or a caravan is going from a place where we think there are bad people to a place where we think they might commit harm and we kill the caravan, not the person. Is that the standard that we will now use in America?”

“I will speak today until the President responds and says no, we won’t kill Americans in cafes; no, we won’t kill you at home in your bed at night; no, we won’t drop bombs on restaurants. Is that so hard?”

Senator Paul’s response to AG Holder’s letter the day after the filibuster was ‘Hooray!’ as he felt that those who staged the filibuster received the answer they were looking for and the American people are better off in hearing it. But while the Administration was dragged from ‘inappropriate’ to ‘No’, and there may even be an implied constitutional principle rather than arbitrary power that makes that decision, it is vague at best.

A definition of ‘Arbitrary Power’:

“Having unlimited power; uncontrolled or unrestricted by law; despotic; tyrannical: an arbitrary government.”

John Locke, a seventeenth century philosopher that some refer to as the ‘Father of Classical Liberalism’ who’s ideas the founding era fathers called upon in creating the US Constitution said, “This freedom from absolute, arbitrary power, is so necessary to, and closely joined with a man’s preservation, that he cannot part with it”. The mortal sin of government is arbitrary power, while a government restrained by law (constitution) will survive.

This has been the history of the United States, even while constitutional boundaries have been slowly broken down and powers arbitrarily assumed by Washington have become more prevalent, the ‘SS America’ though her belly full with assumed authority in Washington still navigates and protects its precious cargo and passengers to some degree. But what transpired last week is very important in understanding the condition and restoration needed to right this Republic.

While the week started out very interesting as Washington rarely does, ‘aired its dirty laundry’ it became even more so as Senators John McCain and Lindsay Graham criticized Senator Paul and his colleagues that staged the filibuster the next morning. Senator McCain called some of Paul’s comments ‘Ridiculous’ and said,  “So we’ve done a, I think, a disservice to a lot Americans by making them believe that somehow they’re in danger from their government They’re not. But we are in danger. We are in danger from a dedicated, longstanding, easily replaceable leadership enemy that is hellbent on our destruction. And this leads us to having to do things that perhaps we haven’t had to do in other more conventional wars.”

Senator Graham added a rebuke and challenge to why now, “We should be talking about it. I welcome a reasoned discussion. But to my Republican colleagues, I don’t remember any of you coming down here suggesting that President Bush was going to kill anybody with a drone.”

To help Senator Graham’s memory, there were those in Congress (not many GOP) that criticized the Patriot Act and violations of FISA (Foreign Intelligence Surveillance Act) in unwarranted monitoring of emails and cell phone calls as there was a great public shift in tolerance at the time to give up personal freedoms for security. Many of the legislative and executive actions back then have paved the way for more aggressive legislation that could possibly violate state non delegated power and personal liberties like due process today. NDAA 2012 is a good example of that as around 20 states are in the process of creating resolutions and laws to ‘nullify’ it.

Senator Rand’s response to McCain and Graham was, “They are on the wrong side of history on this one. They believe that war is everywhere and there kind of with the President who believes there’s no geographic limitations. They also say that the laws of war apply, what the laws of war apply means is that you don’t get Due Process and I can understand that in a battlefield, you don’t read Miranda Rights, if you are shooting at me, we kill you. But they say America’s a battlefield and that’s a huge mistake. If we bring what is in effect Marshall Law to America, Americans will be really upset. These are the same people (McCain and Graham) that want to detain American citizens indefinitely without a trial.”

While to the ‘untrained eye’ these last few days may seem like a lot to do about nothing and they may automatically tune out politics or just can’t see drone strikes or other military actions on American soil. But consider, in ‘broad daylight’ we have an administration that can only muster up ‘inappropriate’ to describe the act of the federal government killing Americans without due process and many in Congress berating the questioners. If this is the response in public, what could happen in the ‘Fog of War’? Isn’t it important to tie these arbitrary powers to law and a system of authorization?

While filibusters are unique in that they happen infrequently, the filibuster by Senator Rand Paul and others was unique in that it called for less federal military intervention which we haven’t heard from in more than six decades. Interesting, a filibuster in 1917 by Republicans to kill pro-intervention into World War 1 was defeated by senate Democrats through cloture at the urging of President Woodrow Wilson.

Up until the early 1950s, many conservatives were non-interventionists and the ‘Old Right’ was committed to restraining executive powers until the late 1960s when neoconservatives began to endorse interventionism in opposition to the USSR.

The Right were generally dragged kicking and screaming into both world wars and as McCain et al demonstrated this past week, neoconservatives are having a very difficult time justifying the precious lives of our children, the destruction of important military assets and the sacrifice of individual liberty in a futile effort to buy off world support through aid and occupation and the pretense of security at home through paternalism.

As Ecclesiastes 1.9 says, “There’s nothing new under the sun.” What has been done is being done and whether it’s Conservative or Progressive ideology that you think is ‘new’, you are mistaken my friend.

But there is a ‘Plumbline’, a measuring stick that allows these old ideas to be rehashed and it protects liberty in the process. It’s the US Constitution, which says ‘No’ to federal power except for which has been specifically delegated and ‘Yes’ to the states for all other non delegated power.

James Madison writing in Federalist Papers 10 warned against the loss of personal freedoms in a ‘centralized government’, “A pure democracy can admit no cure for the mischiefs of faction(s) (special interests).. Hence it is, that democracies have ever been found incompatible with personal security or the rights of property; and have, in general, been as short in their lives as they have been violent in their deaths”.

Missing from the President’s and AG Holder’s response, as well as the media coverage and the critics of the filibuster is the US Constitution and a discussion of the limits of government power under it. Washington as we know it HAS TO live under arbitrary power to consolidate more power and the money that goes with it. For Individual Liberty to prevail and a healthy society as a result, constitutional authority must be reestablished.

To be blunt, it is the ‘Rand Pauls’ and Ron Wydens (sole Democratic Senator to speak at filibuster) whose job it is to dismantle (not change) Washington and it is the state legislatures around the nation whose job it is to resurrect State Authority in order to bring back Constitutional alignment.

Christopher M. Mahon, Editor

 

Christopher Mahon is the Editor of Ambidextrous Civic Discourse, ‘Where the Right and Left meet’; a place where you can find information about economics, philosophical and political issues that challenge those on the ‘right’ or the ‘left’ on what works best in society. At ACD you can find articles, essays and book classics on the subjects mentioned above that contrast differences like Keynesian vs. Classical Economics or the function of government – Negative vs. Positive Liberty. Please peruse our Library and videos. Chris has a Masters in Accounting and Financial Management. Learn more at –  www.ambidextrouscivicdiscourse.com

 

As the President and Congress face Sequestration, an imposed cut on spending increases of roughly 2% which would amount to $42 billion in FY 2013 according to the CBO (Congressional Budget Office). Most would agree that cutting 2% out of their home budget is no fun, as evenings out and other discretionary spending would suffer but it wouldn’t warrant the reactions coming from the Media, the President and other politicians in Washington.

Some  have argued against federal spending cuts and would say the more important issue is a ‘balanced budget’ and that raising taxes would be the better way to accomplish this, as you can pinpoint those taxes toward the wealthier class of citizens. Economists like Paul Krugman of the NYTimes go even further by inferring that private and government spending in the economy make no difference and that he could argue that money in government hands can be ‘invested’ more fairly. Free market believers on the other hand would make the point that Laissez-faire “an economic environment in which transactions between private parties are free from tariffs, government subsidies, and enforced monopolies, with only enough government regulations sufficient to protect property rights against theft and aggression,” is more efficient, less fragile and as a result of competitive markets allows for success, failure and the reallocation of resources to their most productive positions.

Today, if you are in the ‘Middle Class’ you might be expecting something from Washington as both parties in the 2012 election out did themselves in making promises to this class of people.

In two recent studies by Harvard Professors, they show that levels of public spending affects private markets and the economy in a negative way, (maybe Harvard Economic chairman Greg Mankiw is making some influence in the pro-Keynesian college curriculum). In the studies  ”Large changes in fiscal policy: taxes versus spending“, Alberto Alesina and Silvia Ardagna and “Do Powerful Politicians Cause Corporate Downsizing?” Lauren Cohen, Joshua Coval, and Christopher Malloy (all of  Harvard Business School), the ‘public versus private economy’ is taken into consideration on how they perform and interact. In the ‘Large Changes’ study, they look at OECD countries (Organisation for Economic Co-operation and Development) from 1970-2007 and identified periods of austerity where government was slashed and periods when government grew in proportion to the private market. While there has been criticism of the study, the study supports the Classical Market (Laissez-faire) concept that less government intrusion leaves the private market to ‘self regulate’, while isolating failures (which become systemic in centralized/government dominated markets) and through competition, creative models result that are more efficient and tailored to consumers’ wants and needs. In the second study, they track politicians in the US Congress that become Chairpersons or influential leaders of their party and whether or not that affects the amount of federal spending that flows to their home state and the effects of that spending. The study finds that there’s an almost 50% increase in federal spending that flows to the home state of the Congressman and that the change in public:private ratio (increase in public) has a dramatic negative influence on the state’s private industries with layoffs and economic slow downs resulting many times. In the first study, when public spending has been cut, and there were some isolated incidences of initial slowdowns, vibrant growth has followed. The argument being made by the White House and some in Congress is that if you cut federal spending the ‘fragile US recovery’ will stall. Many believe this has already happened and that the opposite should prove true that if you cut federal spending, putting more money in the hands of the individual and the private market, and if Washington gives clear signals to the credit markets and private capital sitting on the sidelines that Washington will ‘stand down’, that sustainable recovery is more probable.

Over the last Eighty years, Washington has built an intricate ‘Welfare and Warfare’ system that provides regulation and subsidizes to almost every area of society through business, individual and foreign aid. “Government spending at the start of the 20th century was less than 7 percent of GDP. It vaulted to almost 30 percent of GDP by the end of World War I, and then settled down to 10 percent of GDP in the 1920s. In the 1930s spending doubled to 20 percent of GDP. Defense spending in World War II drove overall government spending over 50 percent of GDP before declining to 22 percent of GDP in the late 1940s. The 1950s began a steady spending increase to about 36 percent of GDP by 1982. In the 1990s and 2000s government spending stayed about constant at 33-35 percent of GDP, but in the aftermath of the Crash of 2008 spending has jogged up to 40 percent of GDP.” USGovernmentSpending.com

While many Conservatives have warned of a growing ‘Socialization’ of  US society through federal domestic intervention into commerce, education, family and other areas of civilian life that in their view ‘robs personal freedoms’, Progressives have warned about a growing military complex as a result of protecting the US against terrorism abroad and more recently even domestically as we ‘hunt down’ homegrown terrorists. The US has been transformed from a predominantly ‘private society’ where most transactions happen without government intervention to a ‘mixed society’ where a considerable amount of daily transactions (direct and indirect) include government influence.

Washington has proved what the founding era fathers feared, that the nature of federal power and spending  is to grow and that they can’t police themselves. There are only two likely outcomes:

One is given in this illustration by Stan Druckenmiller a former ‘well heeled’ Hedge Fund Manager, ”The bond market is the banker for the federal government. Imagine if you will, your banker comes to you and you’re making $40,000/yr and lends you money at zero interest – no cost. Later, after you’re in debt $5 million, they realize, ‘He’s making $40,000 and has $5 million in debt!’ Suddenly your interest rate goes to 16% and carrying cost goes through the roof. That’s what will happen to the US government over the next 10 years, and it will happen suddenly like Greece. Greece was in good shape in 2010.” The market eventually gets it’s revenge.

The second, is happening but slowly as several states for various reasons (anti-NDAA and Gun Control legislation for example) are standing up to federal power that the states believe violate constitutional authority and are reclaiming those powers to protect their citizens. As Lincoln era legislation was passed in the 1860s: National Banking Acts, Legal Tender, Morrill Grants (education) and railway acts (early corporate cronyism) intended to nationalize power for a greater purpose of the ‘American Experience’ which was followed years later by FDR New Deal federal expansion of power as mentioned earlier in the article, popular sentiment has started to change as Americans are looking for relief and protection from a capricious federal government that it is out of control.

After World War 1, Presidents Warren Harding and Calvin Coolidge were met in 1920 with one of the worst Depressions in history as prices fell almost 20% (Wholesale by more than 36%). Some blamed it on returning troops from the war, others on monetary policy as interest rates were almost doubled and even some blamed gold and the anticipation of inflation (Federal Reserve policies). Harding and Coolidge cut  federal spending by more than 20%, considering government spending a burden on the private market, and the devastating depression of 1920 lasted approximately 18 months. Economists will point to the austerity cuts of the 1920s and Laissez-faire policies of Coolidge as the path to follow, while some instead will point to the aggressive spending of the New Deal era as the better solution for today. Keep in mind that the 1929 depression didn’t show ‘green shoots’ until 1937 and the stock market took 25 years to recover to its pre-crash levels.

The real question is more philosophical and goes to the core of Platonic and Hobbesian differences. Plato illustrated three classes of citizens in his Republic: A ‘Ruler’ class, ‘Warrior’ class and ‘Worker’ class. Washington today has become that Ruler class, while the courts and law enforcement could be the Warrior class and all others fall into the Worker class. Hobbes believed that ‘all men were created equal’ in the sense of potential and ability of each man to find life, liberty and to pursue happiness. In that philosophy our Declaration of Independence was forged and won, the US Constitution was built upon this principle that ‘men’ can find their way and through the voluntary and free association and exchange in the marketplace society is regulated and healthy, while government can play a small part in a negative position (stands down) to defend man’s property and individual liberties. These rights remain with man until man forfeits those rights when taking them from another. Which will we choose going forward?

Even if we took the advice of Coolidge and the studies mentioned above seriously and were able to make substantial cuts in federal spending and a robust recovery resulted; wouldn’t we find ourselves in jeopardy again as soon as the next crisis appears and the federal government steps in? In order to solve our spending problems we need to be fiscally responsible and we need to mend our Constitutional Fence.

Tell us what you think.

Christopher M. Mahon, Editor

editor@ambidextrouscivicdiscourse.com

 

 

 

In the 1939 Frank Capra fictional movie classic, ‘Mr Smith Goes To Washington’, we find after the death of a US Senator named Samuel Foley of a western state, the Governor of that state Governor Hubert “Happy” Hopper through pressure from his children appoints their Boys Club leader Jefferson Smith played by Jimmy Stewart to ‘go to Washington’ and take on the corruption and to build a boy’s park in his home state. Unfortunately for Mr Smith, being wet behind the ears and not knowing the harsh realities of the Belt Way and how favors and projects are bought and paid for, his efforts are challenged; as his colleague, also of the same state, senior Senator Joseph Pain played by Claude Rains and a powerful media magnate Jim Taylor who ‘runs the state’ plot Mr Smith’s demise through accusations of fraud and self aggrandizement in stealing the Boy’s Club money.

While Mr Smith is vindicated to some extent at the end of the film as the political graft of his state’s senior Senator Paine and media magnate Taylor is exposed, still you turn the movie off thinking that nothing really changes in Washington, DC.

I highly recommend the movie to our younger generation, and while it is in Black & White (for some reason that’s a ‘deal breaker’), you’ll enjoy it very much. But let’s modernize this story for today and address what most think – that ‘nothing really changes’ in Washington. Whether it’s a new President every four or eight years or even a grassroots movement like in 2010 when the GOP picked up many Congressional House and Senate seats, the frustration of most is the same as they see continued: budget deficits, US debt, and monetary policy that Washington uses to unconstitutionally over promise on yet more social, economic and foreign policy intervention at the expense of the Individual.

Enter Ron Paul stage left, arguably a ‘modern day Jefferson Smith’. While Paul raises the volume of conversation on both sides of the aisle and can even dominate a family dinner conversation; love, hate or ambivalence toward him, most would agree he has been consistently promoting the dynamics of applying the original meaning of constitutional limited powers, that there are specific delegated powers that belong to the federal (General) government and the non delegated powers belong to the states, municipalities and the Individual.

Representative Paul, retired last month and while we could discuss his failure/success in passing ‘constitutional’ federal legislation, he was known as ‘Dr NO’ where Washington tried to pass overreaching legislation that tread on state non delegated powers and he brought a voice to the forefront of the need to get back to limited government. Like Smith in the movie, Paul was marginalized by government collusion, insider deals and ‘Greater Good’ promises of national security, healthcare for all, and equality for the good of the ‘General Welfare’.

While it is important to send Congressmen to our US Capitol that understand and will vote pro-Constitution in an effort to protect Individual Liberties, it is even more important to send them to the state houses to resist federal overreach into non delegated powers.
Federal policies like the National Defense Authorization Act, Affordable Care Act and new federal Gun Control legislation are generally written in Washington and while they include invitations to special interest groups that can have influence in ‘authoring’, getting behind and supporting the legislation, the bill drafting rarely include the states or citizen groups of which they will have the greatest impact. The good news is that many states are standing up to these bills that while well intended, take away the non delegated powers of the states and create unintended results as have been seen through education, retirement, healthcare and employment.

The founding generation understood that limited enumerated federal power and all other power left to the states protected against a fragile and monolithic government structure that would be impervious to change and market dynamics. To paraphrase David Brooks, his recent comments on Meet The Press regarding the Newtown, CT shooting and federal gun control bills, “‘in New York City there’s literally a police station around the corner, a few minutes away, while in a small town in Wyoming, it could take 45 minutes to an hour if you are lucky..’” Brooks was emphasizing the differing needs and wants throughout the country and that to create ‘one size fits all’ policies are not practical and can be counterproductive.

Robert Natelson of the Goldwater Institute writing in The Original Constitution (2010), “One of the great achievements of the federal convention (1787) was the idea of dual sovereignty. Previously, people had conceived as sovereignty as an attribute always located in some one place. The Framers, however, drafted a document that divided sovereignty between states and federal government—or more precisely between the American people as a whole and subsets of the American people operating through their state governments.” Natelson goes on to use the Ratifiers’ understanding of what they were signing as delegates of the Colonies (States) at the time. He digs into rare documents of the colonial conventions that expose their fear of a runaway federal government that would eventually create one sovereign government and the rights of the people would be lost. While the states and local governments had the power to create or support churches, currency and covenants on how to live, they did not want that falling into the hands of a ‘General Government’.

Unfortunately for the signers it wouldn’t be long before those constitutional lines would be challenged as both Virginia and Kentucky in 1799 created resolutions written by Madison and Jefferson in opposition to the Alien and Sedition Act in part but also as the seeds of a monolithic process were already at work as the Federal Government proposed that they could regulate their own power through their three branches of Government. These resolutions were a wakeup call that the states had sovereign powers and that it was within their constitutional rights to defend them.

Madison warned, “Though clothed with the pretext of necessity, or disguised by arguments of expediency, may yet establish precedents which may ultimately devote a generous and unsuspicious people to all the consequences of usurped power.” Big Government if sold properly galvanizes a constituency of a majority over a minority only when the states shirk their responsibilities.

At the website Tenth Amendment Center, you can see which states have started to resist federal overreach into the non delegated powers of the states. Between ‘Health Freedom Acts’, Nullification, No Medicare Expansion and outright Rejection there are more than 40 states involved in resisting federal power in the Affordable Care Act. There are 17 states currently in different stages of nullifying the National Defense Authorization Act (NDAA 2012) legislation that allows the federal government to violate Due Process rights and potentially to commandeer state resources without state authorization.

Unfortunately, these success stories of the States standing up for their rightful powers and responsibilities are not covered on national news outlets and there is an obvious need for more resources and involvement in each state to resist a growing federal government and its overreach into state non delegated powers.

If, like after watching the 1939 classic ‘Mr Smith Goes To Washington’ you find yourself saying, “What can I do? Can there really be change?” The answer is yes but it’s not in Washington politics but at your State House or in your local legislative District. The powers of Nullification, Interposition and other Article V tools have lain dormant for years, but today is the day for states to take action. Get involved by getting local in your politics. You can find out what’s going on in your state by visiting the Tenth Amendment Center.

For years Wall Street and Washington has siphoned off our ‘best and brightest’ to concentrate power, isn’t it time through the sovereign powers of the states to diffuse Washington’s unconstitutional stranglehold on society?

Christopher M. Mahon, Editor

A very interesting exchange on Foxnews Sunday with Chris Wallace as Karl Rove, one of the panelists is asked about recent comments from Talk Radio host Mark Levin who said, “He’s also up there with that stupid little third grade white board of his, with his fourth-grade writing style, talking about how they committed $30 million to Tea Party candidates. Bring on your little white board. We’re ready!”

Levin, like many other media critics, grassroots Republican Party groups like the Tea Party are still hurting from the devastating loss the party suffered in 2012 and who blame Rove in part with supporting nominees and a ‘runaway platform’ after the convention last August that many states, local districts and the grassroots like the Tea Party didn’t support.

Karl Rove, a ‘Republican Strategist’ has been involved with the political process since 1968 and has worked with mostly ‘modern traditional’ Republican candidates whose policies generally support a large military footprint and supply side business incentives. Rove has played a part in both George H and George W Bush campaigns and other campaigns like Ronald Reagan’s.

Rove has been in the news lately when it was announced earlier this year that he was starting up the Conservative Victory Project, which is described on Wikipedia as, “the prominent Republican political activist, and the super-PAC American Crossroads. Its purpose was to support “electable” conservative political candidates for political office in the United States. The effort was prompted by embarrassing failures of several Tea Party and independent conservative candidates in the elections of 2012. The project has been strongly criticized by some other conservative activists.”

Rove goes on to make the point later in the Foxnews show, “Right. And our (Conservative Victory Project) object is, to avoid having stupid candidates who can’t win general elections, who are undisciplined, can’t raise money, aren’t putting together the support necessary to win a general election campaign, because this money is too difficult to raise to be spending it on behalf of candidates who have little chance of winning in a general election.” Wallace then goes on to ask this question to Bob Woodward, “Bob, what does it say about the Republican Party when you have Karl Rove stepping in there to say we have got to try to police those Republican primary voters — I mean, it’s part of the process, I’m not saying there is anything wrong with that, but they are trying to police who Republican primary voters are going to pick to go up against Democrats (interrupted).. and let me just finish the question. And, when you have Marco Rubio, who is pretty conservative and a Tea Party favorite giving the Republican response and the Tea Party thinks they have to have somebody else to give a response to the response?” Woodward then responds, “My last book is going to be called “Some People Never Go Away,” and Karl is going to get his own chapter (LAUGHTER) because he never goes away.”

Woodward goes on to point out, “I think the problem in the Republican Party is really not money. I think they’ve got lots of it. I think it is – theory of the case, why are we here, what is our message, how to connect to the real world and this idea about 30 million here, we’re going to do that, I think is the wrong track…you’re going to set yourself up as a kind of politburo, vetting these candidates …I mean the whole theory of Republicanism is to let the local state or a district decide.”

Is Karl Rove or other party advocates needed to sift out ‘unelectable’ candidates or can that be done through the ‘primary marketplace’ (as Rand Paul suggested) or from the ground up through local and district support for candidates and issues? If Rove is a problem is he merely a symptom of a greater problem that lies at the feet of the Republican National Committee (RNC)?

Many have tried to pin down a reason for the GOP’s victory in the 2010 election results: An economy in crisis, a rejection of Obama and the Tea Party and other grassroots movements that were calling for ‘limited government’ and ‘fiscal responsibility’. While incumbents were fair game, it was generally a big year for Republicans. Among record turnout, the GOP saw increased numbers in most categories and young people in particular.

The college students that were turning out for Tea Party and other grassroots movements that centered on ‘Liberty’, ‘Limited Government’ and the Constitution seemed to strike a chord with the message. But then they saw their candidate Ron Paul vilified and marginalized in both the news media and the debates. The issues that were important to them – limiting federal power, free markets, keeping federal government out of social issues and a ‘constitutional compass’ weren’t taken seriously. But they were told, even though their candidate was battered and bruised all was not for nothing as the Convention in August (2012) would show that they were heard loud and clear and that some of those issues would make it onto the RNC platform.

In ‘RNC Rule 12: The Death of The GOP?’ during the RNC Convention last year I wrote about the latest RNC rule change to control the national platform. “The RNC Rule 12 that was enacted yesterday gives the ability of the GOP establishment in Washington the power to change rules and regulations quickly to destabilize grassroots movements that have less funds and influence in order to centralize power and the platform. Tea Party-type fires will be extinguished way earlier and if you happen to be in a majority interest today, good luck when the majority changes tomorrow due to special interest winds – platform will follow favor and money. Any creative grassroots movement going forward unfortunately will occur outside the GOP brand.”

The history of the Republican Party starts in 1854. The history of the RNC starts in 1856, launched with the goal of equal representation throughout the states through one representative from each state. The idea was that through local and diverse representation the people would be heard and constitutional liberty would be protected and ideas and solutions would germinate locally and arrive in Washington to create a national platform. As years have passed that representation has changed and power has moved from the rural and urban locales to Washington, DC. Ironically, Woodward unlike some of the GOP panelists picked up on that.

If the Republican Party can solve their problem of representation and the irresistible urge to centralize power in Washington, maybe that can be reflected in their national platform that puts the authority of the Constitution first in governing under the delegated powers and protecting the non delegated powers that were to remain in the states. Is the fate of the ‘Grand Ole Party’ the fate of a Nation?

Christopher Mahon, editor

 

Federal Reserve Governor Elizabeth A. Duke spoke At the Southeastern Bank Management and Directors Conference at the University of Georgia today commenting on the state of and future of the Community Banking system. In her speech this morning she said, “Just as the seeds of a crisis are often sown in earlier boom times, strength can be forged during the tough times that follow a crisis. As we did in the early 1990s, bankers and regulators today have learned from the lessons of the crisis and are determined not to repeat the mistakes of the past.”

She also refers to the 1991 Savings & Loan crisis and the federal banking regulations that followed. “I hear from a lot of community bankers who are concerned that the community banking model might not survive. Many paint a picture so bleak that they see only personal retirement or sale of the bank as viable strategies. I completely understand how tiring it is to fight a financial crisis and survive a deep recession followed by a weak recovery only to confront what seems to be a tsunami of new regulations.

I felt all of those same emotions in 1991. I was a community banker then. We had survived the savings and loan crisis with some bruises, but we were still standing. The Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) had been followed by the Federal Deposit Insurance Corporation Improvement Act (FDICIA) in 1991. I had more new regulations stacked on my desk than I had employees in the bank. My bank had just reached the $100 million mark in total assets through the purchase of two branches from a failing thrift. Even more daunting for me personally, was the sudden death of my bank’s chief executive officer (CEO), leaving me as the new CEO. Frankly, I didn’t know how I was going to tackle all that lay in front of us. But those dark days in 1991 were followed by 15 years of exceptionally strong performance for all banks, including my own. And those experiences–the good and the bad–give me confidence in predicting a bright future for community banking today.”

What she fails to recognize is the affect that interest rate and monetary policy manipulation have on ‘less regulated’ and ‘less centralized’ entities like credit unions and other community banks. The supply of credit and the understanding of risk in evaluating the underwriting process is greatly skewed.

She goes on to say, “The Consumer Financial Protection Bureau (CFPB) recently released final rules defining “qualified mortgages” that include safe harbors for mortgages that meet specific loan term and pricing criteria, including certain balloon loans made by community banks in rural or underserved areas.2 At the same time, they issued a new proposal that contains additional community bank exceptions, as well as a question about the treatment of loans to refinance balloon payments on mortgages that community banks may already have on their books.3 Noting that smaller institutions have already demonstrated that they generally do a good job of servicing the loans they originate and that the investments necessary to meet the requirements would be unduly onerous for institutions that service a small number of loans, the CFPB also exempted most community banks from many of the provisions of new servicing requirements.4 I think such exceptions are especially important because, as I discussed in a recent speech and will touch upon later in my remarks, Federal Reserve research has shown that (1) community banks are important lenders in the mortgage market, (2) those mortgage loans represent a significant portion of community bank lending, and (3) community banks are quite responsible in their practices.”

These recent changes and the capricious nature of government in general and Federal Reserve policy specifically stalls capital on the sideline as investor groups are hesitant to make long term commitments while government has the power to change policy almost at any moment.

For the complete text of Board Governor Duke’s address or additional FRB publications click here

Christopher M. Mahon, Editor
editor@ambidextrouscivicdiscourse.com

On the heels of the Sandy Hook shooting, New York State becomes the first to issue new gun legislation. “The Secure Ammunition and Firearms Enforcement Act, or SAFE Act, gives New York the toughest gun laws in the nation and touches on the mental health issues that both pro-gun and anti-gun activists say should be part of any new legislation.“

Many pro and anti-gun control advocates saw New York’s decision as a model for the President and Federal legislation, which he just signed moments ago as Executive Orders, which include: Mental Health requirements, Universal Background Checks, restore ban on military style (restrict manufacturing) and 10 round limit on magazines, tougher laws on sale of guns (possibly enforced by BATF) and federal funding to ‘put more cops back on streets’. But here’s where it gets both historically interesting and potentially dangerous for individual liberties and the unintended consequences that always follow in the wake of federal intervention into markets.

The Second Amendment that has been quoted by both sides of the gun control issue is unfortunately sorely misunderstood. Part of the Bill of Rights, the second amendment like the other amendments address specific rights based on natural (Divine) law that restricts federal power and emphasizes the delegated and non-delegated powers between the federal government and the states. The Bill was in part due to Virginia and other states that needed better clarification that protected state sovereignty and also two colonies that hadn’t ratified the Constitution yet, North Carolina and Rhode Island weren’t convinced that state sovereignty was protected by the document well enough. The Bill was proposed in Congress September 25, 1789 and North Carolina later that year ratified the Constitution and Rhode Island (the last to ratify) in June 1790. Regarding the Bill of Rights, most ratified the Bill through 1791 with, Massachusetts, Georgia and Connecticut ratifying in 1939 as part of the Bill of Rights sesquicentennial celebrations.

Does the 2nd Amendment (Bill of Rights) have power over all government or specifically written to restrict federal power?

The founding era framers and ratifiers feared that what they were creating in a document to protect individual liberty and to limit the power of the state would later be destroyed through ‘unpacking’ its language and interpretation. Words like ‘Welfare’ which defined the proportionality of the ‘Benefit Principle’ and restricted federal power and not the egalitarian intentions to ‘create equality’; or ‘Commerce’ which had a narrow intent in refereeing state interrelationships and not the broad interventionist meaning of today, which would undermine a federative republic and dissolve into a centralized system of Monarchy/Democracy, from which they fled from earlier.

In creating the Bill of Rights, left on the writers’ floor was proposed language from James Madison, “No state shall violate the equal rights of conscience, or the freedom of the press, or the trial by jury in criminal cases.” In some ways this language (while not all encompassing) was uncharacteristic of Madison who in Federalist Papers #39, very adeptly laid out the balance of power (sovereignty) between federal and national governments inferred in the Constitution. The avoidance in the final Bill drafted of the language was purposeful as they understood both the importance of a federal government that oversaw conflicts between the states and the involvement of the states in foreign relations, but they also saw the value of a decentralized system (federation) of government in the states and municipalities that had their own charters/constitutions, closer to the people in handling social and economic issues that go hand in hand. David Brooks of the NYTimes recently on a Sunday talk show commenting on gun control said that the needs of a small rural town in Wyoming are different than the needs in New York City. In NYC a police station is literally around the corner, while in rural Wyoming they may arrive in an hour.

It was understood early on that the Bill of Rights, like the Constitution, specifically addressed federal power and not the States. Even up until 1833 in Barron v. Baltimore, the Supreme Court specifically ruled that the Bill of Rights provided “security against the apprehended encroachments of the general government—not against those of local governments.” But unfortunately that all changed with a Civil War, an Amendment and new courts. In 1925 in Gitlow v. New York, the Supreme Court ruled that the 14th Amendment allowed that the Bill of Rights applied to the states as well. What the founding era generation feared was starting to unfold, as America headed toward a centralized Democracy, monolithic, fragile and impervious to competition or change.

A Constitutional Republic that was created to protect the liberties of the individual and the market for free and voluntary association and exchange which leads to social cooperation is being replaced by a Platonic society of visionaries and experts in a centralized government that plans for social cooperation through limiting the freedoms of the individual and focusing on ‘collectives’ and managing markets toward outcomes instead. That’s why an issue like gun control makes sense to the latter: ‘limit the freedom of the individual in order to create a better outcome of ‘less gun violence’ and a ‘better society’. What they don’t account for is the unintended consequences that result instead. Rather, the founding era if they could speak to us from their graves would say, ‘Government closer to the people works better’ and that gun control legislation at lower levels of government (in a decentralized system) even when they fail can be profitable as failure is cast aside while success can be adopted by others. Also, there’s different needs and wants in Texas versus New York.

Finally, there is good news. As with other federal infringements like the Affordable Care Act and the changes in the National Defense Authorization Act (2012) many states are taking positions of resisting the effects on state sovereignty. Through pragmatic state actions that can be interpreted as ‘Nullification’, ‘Interposition’ or there’s even been discussion of ‘Article V’ Convention of the States as in the Founding Era period as states rushed back then to protect the Constitution and it’s integrity that they created. If gun rights are to be infringed upon, the states (their constitutions permitting) can experiment with that and we’ll all benefit indirectly, but a federal government which uses the ‘if we can save one life’ straw dog argument to promote a collective equality or freedom is way, way, way out of bounds and should be challenged by the states.

Christopher M. Mahon, Editor
editor@ambidextrouscivicdiscourse.com

While I’m not a professional fly fisherman, I have slept at a Holiday Inn Express. I’m obviously joking and appreciate Holiday Inn’s commercials. But I was on a trip last year with a couple of fly fishermen and I’ve been in a social gathering where the sport has been discussed.

What has stood out to me is the hypnotic stare and elevated excitement as the stories unfold of catching fish and the different techniques. The interesting thing is to hear about the fly lures they put at the end of their fishing rods depending upon the type of fish they are after. Some look like literal flies, while others like worms or mimic the environment where they hang out. You almost can’t see the hook hiding behind the design. Also they’ll tell you where to wade – ‘over by that rock’ or in ‘deeper current’ in determining ‘best location’ for different fish.

Politics is very much similar to this. The hypnotic stare and elevated conversations that can happen around a holiday table, bar or even a senior citizen centers as you and I give our opinions and expertise on what Washington needs to do and what the important issues are; which of course generally run along side our particular proclivities: Pro Life/Pro Choice, Education, Social Security, Entitlements, Social Issues, Defense, etc.

Both the national Republican and Democrat parties like professional fly fishermen also choose specific fly lures (issues) and look to wade in specific areas of our nation in order to find you and I and ‘hook’ us, drag us into their boat or box to be filet, gutted and cooked later on. OK enough word pictures, I’m hoping you’re following this.

Except for Defense and squabbles that arise between the states and the states and foreign entities in which the Federal Government takes on the role of agent, all the issues above were intended to be functions of the states/colonies and even more importantly the function of a free market. A central system becomes monolithic, fragile and resistant to ideas and change; and when (not if) failure results it is catastrophic. Decentralized systems (the states retaining most powers) on the other hand, allows for competitive models to social and economic problems, failure is actually beneficial as unproductive resources are reallocated and success is imitated. Also, democracy can exist in the lower levels of government as the potential for homogeneity and similar interests are more likely ‘closer to the ground’ than at ’40,000 ft in Washington’.

When you and I drool like a fish and leap for nationalizing social issues of banning drugs, homosexuality or economic issues of ‘tax the rich’, wealth redistribution, universal healthcare or promises of better government Social Security and Medicare we really are leaping for a disguised hook of central government control of our lives that will limit individual freedom and just like the mirage of the hook will never deliver the promises made. It’s the free market of voluntary association and exchange that best accomplishes the goals (proclivities) you seek. Even in the controversial areas of Drugs, Marriage and even Abortion (which I believe is murder at some point) should be decided at the state, local and personal levels as was the intent of the Constitution. The Constitution delegated very few powers to the federal government but the feds have usurped more power through our weakness in seeing our beliefs ‘nationalized’.

In the movie ‘Finding Nemo’ the warning was to watch out for the nets that the commercial fishermen lowered from their boats. But for some it was irresistible as they swam into captivity. You and I MUST resist the ‘captivity’ of more central power even if the mirage seems so real.

I think my new slogan for 2013 is, ‘Don’t Get Hooked!’, and if you are currently dangling from a GOP or Democrat party promise of Equality, Justice, World Peace or whatever your proclivity, I hope that you can set yourself free. This starts by understanding the ratifiers intent in the US Constitution and why a ‘runaway’ federal government is dangerous to Liberty.

Christopher M. Mahon
editor@ambidextrouscivicdiscourse.com

As America returns to work today, nursing hangovers, fatigue and wincing at FaceBook pictures, so Washington and the media return to figure out what exactly happened in the wee hours of the night of the ‘Fiscal Cliff’.

If the Chinese Zodiac proclaimed 2012 the ‘Year of the Dragon’, politically it was the ‘Year of the Donkey’ as Progressives and the Democrat Party celebrates a pretty good year: Affordable Care Act upheld by SCOTUS, a vanquished GOP Presidential candidate, winning most national congressional challenges and a potential budget deal (sequestration aside) that raises taxes on 77% of Americans and virtually no spending cuts.

As we entered into 2012 and considered the consumer confidence level, unemployment, debt and a sluggish economy it seemed more likely the ‘Year of the Elephant’ but, that was a year that wasn’t. Just as Tony Romo or a Mark Sanchez were able to clutch defeat from the hands of victory, so at the beginning of 2013 after approving what one analyst called a ‘Hobson’s Choice’ in the budget bill in the midnight hours closing out the year, GOP politicians run for cover, and the Republican Party ponders not only it’s future but also it’s purpose.

Contrary to Jay Leno’s skit ‘Jaywalking’ where Leno asks people questions about current news and other topics in public areas around Los Angeles and get answers like: ‘Abraham Lincoln was the first President’ or are stumped when asked, ‘What color is the White House?’; the ‘Man on the Street’ is a lot smarter and intuitive regarding what’s pertinent to his/her world and what is on their life’s ‘windshield. While they find most of Washington irrelevant, they will make the necessary adjustments to react to a ‘Gamed system’. Welfare recipients will stay on Welfare regardless of any public condemnation because the math tells them that the effort expended through employment has no net benefit than receiving cash and benefits through government subsidies. But it is not only the individual who is intuitively smarter than Washington, it is the small employer groups too. As they watch big business, industry groups and unions cut deals in Washington through their invitations to K Street, the smaller business owner/investor seeks out shelter and creative accounting to avoid paying growing levels of tax and regulations. Just today I witnessed a conversation on a social network of avoiding the Affordable Care Requirements and increases in payroll taxes by creating ‘Independent Contractor’ (1099) relationships with their current employees. Even under reporting revenues is becoming increasingly morally acceptable.

In an article in the NYTimes by columnist Maureen Dowd, The Man Who Said ‘Nay’ that references Senator Michael Bennet’s (D-CO) tough decision to part with his party’s support of the last minute budget deal in the Senate. Bennet says, “The burden of proof has to shift from the people who want to change the system to the people who want to keep it the same,” he said. “I think if we can get people focused to do what we need to do to keep our kids from being stuck with this debt that they didn’t accrue, you might be surprised at how far we can move this conversation.

“Washington politics no longer follows the example of our parents and our grandparents who saw as their first job creating more opportunity, not less, for the people who came after. My mother’s parents were refugees from Warsaw who came here after World War II because they could rebuild their shattered lives. But the political debate now is a zero-sum game that creates more problems than solutions.”

While we can understand Senator Bennet’s frustration in Washington as power and the game goes back and forth from one side of the table to the other with little accomplished, as the GOP wins in certain years (1968, 1980, 2000) while the Democrats win in other years (1992, 2008, 2012). The frustration of the ‘Jaywalker’, small business owner, ‘Man on the Street’ is that power and choice remains in Washington and that ever increasing Federal power and potential to intervene into his/her life further is readily apparent with no evidence of abatement.

Washington power elites scoff at individuals and small businesses as they tin foil and duct tape their lives around the latest Federal Laws that threaten to encroach their personal liberties, threatening fines and incarceration; meanwhile there’s a growing resentment around the country as more and more are figuring out that the ‘Utopian Promises’ of both parties aren’t being delivered, only excuses and demands for more money and more control. The Right’s promise of a ‘Moral America’ and a better ‘World Order’ through laws like Defense of Marriage Act, stronger Drug enforcement and foreign Military intervention has wrung at best hollow while the unintendeds are readily apparent. The same is true on the Left as Progressivism of the late nineteenth century through private initiatives like: the Settlement Houses, Mutual Aid and other private charities went a long way to solving social problems as workable solutions were funded and others either adapted or failed. However, this drastically changed as Progressivism became entrenched and made it’s home in the political process; the idea was, what works on a local level in Chicago, should work on an even grander scale through Washington. Of course the disappointment and failure of this theory continues to come home to roost as Progressive goals of Education, Poverty and Equality continue to be missed with the excuse: ‘More money and control needed’.

The good news going into 2013 is that just as people outside of Washington go about their business and figure ways to ‘creatively’ cope and adjust to overreaching policies in Washington, so the States are becoming more proactive in the process. Controversial concepts like: Nullification, Interposition and Article V Conventions are being bantered about more and more. While even more encouraging is that many states are actually exercising those powers, as Michigan’s state house approved 151-0 to not comply with NDAA 2012 that allows for the Federal government to commandeer state resources and many states refuse to create an Insurance Exchange as required by the Affordable Care Act and draw up language in their state’s charter/constitution to prevent further federal intervention.

A year from now how will we close out 2013? Will it be the ‘Year of the Elephant (GOP) or the Donkey (Democrats)? Or could this be the ‘Year of the Eagle (Individual Liberty) through state initiatives and individual’s who refuse to comply with federal mandates, taxes and regulations?

Wishing you a great year!

Christopher M. Mahon, Editor
editor@ambidextrouscivicdiscourse.com

Yet another unfortunate and terrible shooting incident that brings to the heart the fears of so many parents – the loss of a child.

The shooting in Newtown, CA December 14th 2012 was heart breaking as families and a nation have been grieving.

Unfortunately, while many focus on the incident in consoling those who’ve lost so much and examining the security and whether procedures were followed correctly, others are using the ‘crisis’ as opportunity to push a polemic agenda of more (or less) government involvement.

As our country’s founders understood that the ‘natural process of Government was to grow’, this is particularly cogent when a ‘crisis’ occurs. But how do we as Individuals and citizens of municipalities, states and a Federal Government sleep at night knowing that we could be at the mercy of the next crisis which through well meaning public policies could further limit our freedoms for a ‘Common Good’?

While many understand that the Constitution was designed with two systems of government in mind, Federal and State powers, there is disagreement on what powers each possess. Does Federal trump State and if there is belief that the Federal or a State has ‘overstepped’ and abused it’s power as in the recent conflicts with ‘Obamacare’ or in Arizona’s battle with SB1070 on immigration, who or where is the governing body to make an impartial decision on which party is correct?

Thomas Woods writes in his book ‘Nullification: How To Resist Federal Tyranny in The 21st Century’, “When the Constitution was ratified, the people were assured that it established a government of limited powers (primarily related to foreign policy and the regulation of interstate commerce), that the states retained all powers not delegated to the new government, and that the federal government could exercise no additional powers without their consent, given in the form of constitutional amendments. This is not a peculiarly conservative or libertarian reading of the historical record. This is the historical record.”

Today, we see many States resisting what they perceive as Federal overreach in prescribing policies for social and economic ills through Washington. Almost thirty states have either said no to creating Insurance Exchanges or have taken a wait and see approach regarding ‘Patient Protection and Affordable Care Act (2010)’ (Obamacare) and just this week Michigan’s House voted unanimously to defend itself against NDAA 2012 which it deems unconstitutional regarding the commandeering of State assets. Add to that the Sheriff Initiative Act and other individual States acting through ‘assumed’ Nullification powers have decided on their own not to enforce certain Federal laws.

Washington and many in the media challenge the constitutional legitimacy of Nullification and it’s even more evil sister ‘Secession’. For the last eighty years the universities have taught that these issues were decided through Civil War and subsequent court precedent. However, Robert Natelson in his 2010 book, ‘The Original Constitution’ approaches the split powers of the Federal and State governments slightly different as he draws upon what the ‘Founders-era’ intents were and their understanding of law, reason and the dialogue of the state conventions that the ‘Ratifiers’ understood when signing the Constitution.

Natelson, brings out an important question that would help to define better the relationship of the States and Federal governments and the proper recourse when Federal power abuses the States as many have come to believe is happening today. While ‘Nullification’ is the buzz on twitter and other social networks, Natelson takes us through the Founders-era understanding of the Constitution and how the states defended their sovereign powers through ‘Article V Conventions’ which were different than a ‘Constitution Convention’; Article V allows for specific issues and text to be addressed while not jeopardizing the whole document. He points out, “To be sure, the question of whether there was an “American people as a whole”—or only the peoples of separate states—has been the subject of much debate. Some contend that the Constitution created merely a compact (contract) among the thirteen states—or, more precisely, a compact among thirteen separate political societies. According to this “compact theory,” each of those societies gave up certain aspects of sovereignty to the federal government, retaining the rest. Advocates of this theory point out that the states ratified through individual conventions. Some have employed the compact theory to argue that if the federal government breaks the terms of the contract by exceeding its powers, the states have the right to void (“nullify”) the offending federal actions or even secede from the union. Others argue that the Constitution was less an interstate compact than a popular grant—that is, a grant from the American people of certain powers to the new central government. Powers not given to the central government and already lodged in the respective state governments remained there. What was left was retained by the people. Advocates of this theory contend that ratification by state conventions was merely a concession to practicality, not to imply that states were the parties (or at least not the only parties) to the Constitution.”

As dark clouds of economic and social crisis’ gather, the threat of the abuse of Federal power looms but the silver lining in those clouds is that many States are becoming proactive in blocking what they perceive as harmful and unconstitutional Federal legislation through Nullification and Interposition which has historical precedent, but will the real war engage when we define the relationships of the States and Federal government as Mr. Natelson has suggested, through ‘Compact Theory or Direct Grant’?

Christopher M. Mahon, Editor
editor@ambidextrouscivicdiscourse.com

For those of us old enough to remember ‘Supply-side’ Economics during the Reagan years can appreciate the nostalgia as it is being bandied about in the media as either an economic pariah or last hope in solving the ‘Fiscal Cliff’. In some ways as most other public policies for either party, this is the other side of the tennis match for Republicans.

The two economic philosophies at play in the budget/tax/spending negotiations is ‘Demand-Side’ economics or Keynesianism (John Maynard Keynes) that the Democrats believe if you stimulate demand by putting money in the consumers’ hands you can spend your way out of a recession. The other philosophy as mentioned earlier is ‘Supply-Side’ economics that believes if you instead put money through tax breaks, credits, subsidies in the producers hands that they will produce more product and presumably less expensive which will in turn cause the consumer to show up in the marketplace.

Both of these philosophies and economic principles are flawed and here are some reasons why:

First, the presumption that belies these beliefs is that government can manage the complexities of the market and has the knowledge of both how much and what the market needs and what the demands and wants are from the consumer.

Second, neither system accounts for malinvestment and human behavior responses, that results from market intervention and neither allows for the correction that the market provides which leads to a healthier economy.

Third, both systems and beliefs are latched onto by the parties precisely because they support the need for larger government that oversees all market activity, rather than the federal government playing a more passive and negative position that ‘stands down’ until the freedoms of the individual and the markets are violated. The private sector through competition, success and yes – failure, does a much better job in regulating economic activities and where necessary states and local government could get involved with the Fed as a far away ‘watch dog’ mostly interceding where there’s disputes between the states. The recessions and depressions of the past where there were no centralized banking or financial systems saw failure but they were decentralized, diffused for the most part and allowed for the market to clear resources more efficiently.

Finally, the `Fiscal Cliff’ and the choice in solutions offer an interesting dialogue regarding ‘Tax Cuts, Credits and Deductions’. As was mentioned earlier, Supply-Side uses incentives through tax cuts but also credits and deductions to pass money through to Producers and Higher Income Earners with the philosophy that they would do better with it than the consumer. So a $2,000 car purchase credit would make consumers show up at the local dealerships or a mortgage deduction on Schedule A would make consumers purchase homes. This month around the nation, clients are showing up in Accountants’ offices seeing what new equipment needs to be purchased in order to take advantage of ‘Section 179’ deduction, which allows for certain asset purchases to accelerate depreciation as a ‘onetime expense’ instead of over the life of the asset.

The problem with Section 179 and other deductions is that it creates malinvestments, as market dynamics are temporarily thwarted through government planning and intervention. Just like you and I show up at Costco and buy tins of stuff we don’t need or over purchase, when this is done collectively it leads to malinvestments. Businesses misread the market and see demand rise so they build bigger facilities (tying into long term debt) and start to hire. This can be seen through the housing market crisis as consumers and investors purchased homes, builders built, lender lent, as prices skyrocketed and lost their fortunes as the market (which it always does) brought correction. Both the builders and purchasers suffered greatly as they signed onto long term debt agreements while both prices and demand were artificially inflated. Unfortunately the government which created the mess rather than allowing for the market to clear, thinks it has another solution.

Of course we haven’t touched on spending which is a function of the size of government and should be constitutionally aligned and restrained but that’s for another article. Tax Policy in general should be based on a low (flat) rate, with no deductions or incentives which distorts the markets as we’ve seen. If the GOP could understand this and present lower marginal rates for individuals and corporations but the elimination or phase out of deductions this would go a long way to signaling to the marketplace that a capricious runaway government has been at least for now restrained. This would free up capital on the sidelines (which there’s a lot of) to consider risk and long term investments once again.

Tell us what you think.

Christopher M. Mahon, Editor
editor@ambidextrouscivicdiscourse.com

In an article in the Wall Street Journal, In European Crisis, Iceland Emerges as an Island of Recovery Charles Forelle describes an unlikely phenomena, a national recovery inspite of the EU crisis. But why isn’t the media covering it more and everyone talking about it?

“In 2008, Iceland was the first casualty of the financial crisis that has since primed the euro zone for another economic disaster: Greece is edging toward a cataclysmic exit from the euro, Spain is racked by a teetering banking system, and German politicians are squabbling over how to hold it all together. But Iceland is growing. Unemployment has eased. Emigration has slowed.”

The Iceland dilemma was well covered in 2008 as we witnessed bank runs and young people fleeing the country for other opportunities; but today the reverse is happening, the young are returning, businesses are humming and jobs are more plentiful. Now, don’t be mistaken, this is a ‘European style’ recovery where inflation is high and there’s still substantial debt costs, but it is a very positive scenario in a bleak region as Greece teeters on solvency while the EU caves to lending it more money and other nations like Spain are close behind.

“Iceland—with its own currency, its own central bank, its own monetary policy, its own decision-making and its own rules—had policy options that euro-zone nations can only fantasize about. Its successes provide a vivid lesson in what euro countries gave up when they joined the monetary union. And, perhaps, a taste of what might be possible should they leave.”

In some ways Iceland and Greece’s problems could be compared to California and other state hampered budgets in the US and bond defaults and bankruptcies at local levels. Where Iceland made a bold move to allow the banks ‘to fail’ and had its own currency (whether wise or not) to devalue, the reality is that it gave clear signals to investors and the market what its intentions were – less government intervention and the allowance for clearance of malinvestments and resources.

That rescue, in turn, weighed on the financial system. But unlike Ireland, for example, Iceland let its banks fail and made foreign creditors, not Icelandic taxpayers, largely responsible for covering losses.

Iceland also imposed draconian capital controls—anathema to the European Union doctrine of open financial borders—that have warded off the terrifying capital and credit flights that hit Greece, Ireland and Portugal, and now test Spain and Italy.

While Iceland is an unusual example of financial recovery of a nation and as their 320,000 citizens is a very small sampling to apply across broader populations, that’s just it; what works there may or may not work here or other places. Financial systems that are centralized are inherently vulnerable to monolithic elements of corruption, fragility and fatal failure. Failure of a city does not have the effect of a gigantic centralized structure, though tragic and harmful just the same. But competitive elements and options are open in a decentralized system that are closed off to a centralized one.

Finally, is the reason you won’t hear this success story on the nightly news, the Daily Show or Colbert because it exposes the real villain in our financial and social problems – government itself?

Policies and Philosophies like Keynesian Economics and Plato’s Utopia which elevate collectivism and government as the underpinning of social harmony grabs the attention of the powerful, while the importance of the Individual and that the ‘inequalities’ in society itself create opportunities for real social cooperation are discarded quickly as nonsense or fairy tales. The true ‘Romantics’ in US history were not the writers of a Constitution who designated limited power to the Federal government and those who followed in defending the restraint of centralized federal powers but instead the believers in a Utopian society and Nationalism, where through a benevolent government all are equal but none are free.

Christopher M. Mahon, Editor
editor@ambidextrouscivicdiscourse.com

In Obama’s Soak-the-’Rich’ article in Cato Institute, the writer Daniel J. Mitchell says,

“Tax Hikes are Worse than the Fiscal Cliff

America actually will fall off two fiscal cliffs in January, but only one of them is bad. The good fiscal cliff is the so-called sequester, which is the inside-the-beltway term for automatic spending cuts. These aren’t really spending cuts, just reductions in the growth of spending. If the sequester takes place, total federal spending will climb by $2 trillion over the next 10 years instead of $2.1 trillion. But anything that restrains the growing burden of government spending is a good idea, so a small step is better than nothing.

The bad fiscal cliff is the automatic tax hike, which exists because the 2001 and 2003 tax cuts are scheduled to expire at the end of the year. This means higher tax rates for all taxpayers, as well as increased double taxation of dividends and capital gains.”

What many economists and politicians don’t recognize is that there is a difference between money saved or spent in the private sector versus the public sector and the ‘unintended consequences’ of behavioral changes by the individual and the marketplace as a result of public policies that increase taxes, create more regulations and which usually means tax avoidance and spending decisions that are short term and counterproductive.

Unfortunately, as government does with most ‘hard political decisions’, politicians in Washington after much saber rattling will compromise on the important decisions of redefining the role of the Federal government and making some significant spending cuts and policy changes in Defense, Social Security, Medicare and other entitlement programs that for the most part should be remanded back to the states. Instead there will be a mirage of spending decreases from the baseline budget as mentioned earlier and there will be a phase out of tax deductions at an income level of $250,000 or so, which like the AMT was never bracketed or indexed and eventually inflated its way into the ‘Middle Class’ where most of the money is. As a result the market response will be to hide more income and investment strategies that moves more capital into the ‘shadow economy’ and overseas.

This past week in a ‘Farewell to Congress’ retiring Rep. Ron Paul took some time to reflect on his 40 year contribution to raising a warning of abusive federal power, “Dependence on our government is the worst it has been in US history..Why does the changing of parties and politicians not change policies, could it be that both parties are essentially the same?..Real Patriotism is challenging the government (and your party) when it’s wrong.”

While we appreciate past generations like those who grew up during the Great Depression and fought in WW2 and Tom Brokaw nicknamed the ‘Greatest Generation’. With deference to that generation, I believe the Greatest Generation is ahead of us, growing up before our eyes, rejecting today’s Historicism being taught of our past and embracing instead the original underpinnings of Individual Liberty that were forged in the US Constitution and which sailed a great Republic.

Hip Hip Hurrah for Elections and Representation! The Status quo won again and as Rep. Ron Paul slips out of public office, will there be a GOP or Democrat party that realigns itself to the Constitution and will there be new voices crying in the wilderness, “This is the way to Liberty, Walk Ye in it!” or are we inevitably headed down the slippery slope of more centralized government?

Christopher M. Mahon, Editor
editor@ambidextrouscivicdiscourse.com

In the movie ‘The Wizard of Oz’ a book written by L. Frank Baum and first published in 1900, there’s a scene at the end of the story in which the main character Dorothy Gale from Kansas is trying to get back home unsuccessfully only to be told that she had the answer all the time, it was the ‘Silver Slippers’ (Ruby Red in the movies, Silver in Novel) on her feet. As the US wraps up contentious elections that after billions of dollars produced a ‘Status quo’ result with maybe even more centralized government power and less Individual Liberty there’s been expressions of great disappointment and radical talk of secession. As of this writing the White House website that invites petitions has fulfilled requests from all 50 states petitioning for ‘secession from the Union’. It harkens back to the Civil War movie classic, ‘Gone With The Wind’ and Rhett Butler bidding his abusive relationship with Scarlett good bye after she asked, “Where will I go? What will I do?”, he retorts, “Quite frankly my dear, I don’t give a damn.”

Some in the media have pointed out that we’ve become a ‘divided society’ with the Left expressing it in racial terms that a ‘White Majority’ no longer exits and what has been traditional, cultural and acceptable in the past will no longer, going forward. While many on the Right see it more as an attack on the traditional values that have governed the nation since its inception. Where both groups come together ironically is on the legitimacy of Secession, a State leaving the Union, which they believed is not possible.

Much of today’s anti-Secession belief held in the minds of leadership in Washington, the media and taught in the Universities stem from the result of the Civil War and SCOTUS rulings in the aftermath. In ‘Texas v. White’ 1869, the court ruled over the sale of US Bonds and in their decision (for expediency) determined that unilateral ‘ordinance of secession’ is ‘absolutely void’.

The irony of this ruling in the wake of Postbellum Reconstruction is that the US through it’s States (Colonies) less than a century earlier ‘Declared their Independence’ and seceded from Great Britain. Are there within this sacred doctrine the seeds for secession? Declaration of Independence:

“We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.—That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed,—That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness.”

Anti-secessionists might argue, “Well OK, but theoretically you would need the consent of the majority of the nation (governed) and the consent of the Federal government.” This is where the Constitution and its design speaks and if you wonder why many in Washington today emphatically call America a ‘Democracy’ rather than a Republic you can see why it is important and not semantics. A lot happened as a result of the Civil War to not only suppress ‘rebellious States’ but also to attempt to redefine the structural design of our Republic and ‘States’ Rights’. In Federalist Papers #39, Madison eloquently sums up at the end of the publication the design and powers of the States in relation to the Federal government. If you recognize the sovereign powers of the States as originally determined, you can see that each state can through democratic vote, if you will, decide to secede. But if instead, partly as the result of war plunder that the States no longer have those sovereign powers and are in effect agencies of the Federal Government, then you would side with the anti-secessionists.

“The fact is that our Union rests upon public opinion, and can never be cemented by the blood of its citizens shed in civil war. If it cannot live in the affections of the people, it must one day perish. Congress possesses many means of preserving it by conciliation, but the sword was not placed in their hand to preserve it by force.” James Buchanan, State of Union Dec 3 1860

Former President Thomas Jefferson, in a letter to William Crawford, Secretary of War, under President James Madison, on June 20, 1816: “In your letter to Fisk, you have fairly stated the alternatives between which we are to choose : 1, licentious commerce and gambling speculations for a few, with eternal war for the many ; or, 2, restricted commerce, peace, and steady occupations for all. If any State in the Union will declare that it prefers separation with the first alternative, to a continuance in union without it, I have no hesitation in saying, ‘let us separate’. I would rather the States should withdraw, which are for unlimited commerce and war, and confederate with those alone which are for peace and agriculture.”

Secession seems antiquated and more of a theory than ever practiced, this isn’t really true, from Australia to Malaysia to Yugoslavia, it is well documented and numerous in history (While I don’t recommend Wikipedia for research it can be a good start or lookup). In 1990, after free elections, the Lithuanian SSR declared independence. Other SSRs followed and consequently the Soviet Union collapsed. (Wikipedia)

While Secession is a serious matter and like War a last resort, it is an important tool of the State just like its other underused relative ‘Nullification’. “The natural progress of things is for liberty to yield, and government to gain ground.” – Thomas Jefferson to Edward Carrington, Paris, May 27, 1788.

I don’t want to take too much time here in this article on Nullification and would like to expand on it in a separate article as it is arguably the most important tool of the States in fighting federal encroachment. During the ‘Nullification Crisis’ in the 1830s South Carolina refused to support the federal tariff act and used Nullification as a tool to protect its citizens and their businesses, eventually the Federal Government capitulated with a compromise. This has happened in more recent times like with national ID legislation through uniformity of Driver’s Licenses which are regulated through the states; the Feds have attempted to coop that power but states have nullified these efforts through noncompliance, the Feds like in the past when forced to lay their cards on the table have passed (bluffed). It will be interesting to see how Nullification plays a part in recently passed state laws on Marriage and Marijuana (which are legitimate powers belonging to the states), and the `roll out’ of Obamacare ‘Insurance Exchanges’ in the States. It is vital that you play a part in contacting your state representatives to fight against creating exchanges that compromise state power and to see how vulnerable the program is and what you can do visit `Obamacare is Still Vulnerable’. Also, future elections of state representatives will become even more important. For a very good exploration of Nullification I recommend a book by Thomas Woods of the Mises Institute, ‘Nullification: How To Resist Federal Tyranny in The 21st Century”.

Here’s a different perspective on your vote and government power, “Voting, however, is at best, an inefficient instrument for self-defense, and it is far better to replace it by breaking up central government power altogether.” Murray Rothbard

If States were to take their proper roles in ‘regulating federal power’ in light of the limited powers ascribed to it under the US Constitution there would be much less conflicts between factions (special interest) which Madison while proposing factions as good and serving a vital purpose, warned against their abuses when enforced through centralized government (Federalist Papers 10, 51) and not exposed to competitive forces.

Individual Liberty and social cooperation are threatened by an unregulated Federal public sector and need to be met head on by State Nullification challenges regularly where Federal policies and law tread into State domain, and when all else fails Secession.

Christopher M. Mahon, Editor
editor@ambidextrouscivicdiscourse.com

So what do you get when you combine an eleven year 9/11 hit on an American Embassy where you lose 4 lives, implications of moral failure by two well respected military leaders in Central Command in the Middle East, add in a female confidant with military experience who’s writing a book on one of the Generals and has access to sensitive information (some of which has been found on her computer) and add in another woman who hosts social soirees to support the troops, happens to be of Middle Eastern origins (Lebanon) and is involved with the other General? A great mystery book or Harlequin Romance? 50 Shades of Washington? Or are we about to see centralized corruption that will take down years of well respected and time honored military heroism but in the process expose what our founding fathers warned, that centralized systems of government lead to nefarious and egregious acts that result from unlimited and unchecked power?

Besides the affair and stunning fall from grace of General David Petraeus and his lover and biographer Paula Broadwell, we find out this morning that current in command General John Allen has been linked to a possible affair with Jill Kelley a socialite in Tampa, FL and that the nominating process for him to replace General Petraeus would be put on hold.

These new revelations come to light as we find out that an unnamed FBI agent and friend of Jill Kelley’s reported harassing emails from Paula Broadwell to Mrs Kelley accusing her of hitting on General Petraeus. The unnamed FBI agent is also under scrutiny as it has been found out that he sent inappropriate emails to Mrs. Kelley, including shirtless pictures.

Questions have been raised since this story first broke just a few days after the election as to whether this was a cover up to protect the election results but also regarding General Petraeus’ position on the video that was being initially promoted as the cause of the Libya, Benhgazi attack, when it was found out that the CIA knew very early that the attack was most likely premeditated and trained forces were involved.

The addition of Jill Kelley into the story makes it even more intriquing as her family originally from Lebanon, settled in Philadelphia in the 1970s where her and her twin sister Natalie Khawam lived. The story gets more interesting as General Petraeus had written a recommendation to the courts regarding a custody battle for Khawam’s 4 year old son in which Khawam was being evaluated as ‘psychologically unstable’. Khawam often accompanied her sister Jill in her Socialite events and planning.

While this story continues to unfold, and with the elections still fresh in our minds, many media pundits explain the tea leaves of the past election as ‘Americans want bigger government’ but this should make us take pause as big isn’t always better and centralized, monolithic systems are prone to fragility and fatal errors.

While the GOP licks it wounds and some flee what they perceive as a ‘sinking ship’, the son of the ‘Father of NeoConservatism’ (Irving Kristol), Bill Kristol says on FoxNews Sunday November 11, 2012:

“The leadership in the Republican Party and the leadership in the conservative movement has to pull back, let people float new ideas…Let’s have a serious debate. Don’t scream and yell when one person says, ‘You know what? It won’t kill the country if we raise taxes a little bit on millionaires.’ It really won’t, I don’t think…I don’t really understand why Republicans don’t take Obama’s offer to freeze taxes for everyone below $250,000 — make it $500,000, make it a million…Really? The Republican Party is going to fall on its sword to defend a bunch of millionaires, half of whom voted Democratic and half of them live in Hollywood?”

While holding the line on taxes by the GOP might be a Pyrrhic victory at best, Kristol’s and other Conservative’s budging on tax policy (increasing) but giving no leeway on social and foreign policy issues belies a much larger problem. Punting on tax policy keeps the ball on the field of big government (federal), while giving up social policies to the states and shrinking US foreign policy engagements and footprint loses the ball from Washington and federal central planning as the canvass.

The history of the GOP is that of having it’s origins in the Progressive movement and it’s nature is to believe in ‘big government’. So while they Mea culpa on increasing taxes which is big government, it still keeps the federal government ball in play; while the GOP leadership resist inevitable changes in social and foreign policies, as states ratify marijuana and marriage laws and the public and US monetary conditions scream for changes in foreign policy. More taxes stays within the auspices of federal power, while decreases in military engagements and on social issues decrease federal power.

The Conservative and Progressive movements today are twin sons of different mothers. Birthed in the late nineteenth century postbellum and with different ‘step dads’ of both parties (in and out of office) siring along the way. The real question and the true sign of GOP capitulation is whether RNC Washington leadership is willing to discuss the purpose and limits of federal power going forward and welcoming Constitutionalists, Libertarians and Classical Conservatives in the vein of Edmund Burke to the table, who believe strongly in the individual and the free market to regulate not only economic values but social values as well.

In Federalist Papers, 10, 39 and 51 Madison eloquently expressed the limited powers of the federal government and the sovereignty of the states. Madison also gave instruction that while factions (special interests) could be dangerous to Individual Liberties, that in a competitive market both private and public (between the states) it allowed for the best ideas and solutions to step forward, failures to be isolated with it’s resources best reallocated and for ‘bad actors’ to be marginalized.

The question today might be asked by John Kennedy’s favorite poet Robert Frost in the 1920 classic ‘The Road Not Taken’,

“Two roads diverged in a wood, and I— I took the one less traveled by, And that has made all the difference.”

The road of ‘Limited, decentralized and constitutional government’ which protected Liberty rather than creating Utopian outcomes was more traveled earlier in US history but the path is today overgrown and distrusted by most in power and in the Universities; can party leadership turn with courage and determination down this path once again? Is there a post-Tea Party Movement waiting in the wings instead?

Please, tell us what you think.

Christopher M. Mahon, Editor

The GOP didn’t just lose the 2012 election. The Democrats ate their lunch, danced with their wives and slept in their beds.

Even in ‘red states’ like Arizona and Florida, results of Democrat wins are still trickling in. As of this writing it looks like Alan West has lost his reelection bid.

The knee jerk reaction of Hamiltonian Conservatives who bring in federal power for their own proclivities and ‘Damn the Constitution’, has to change.

No one likes a bully, whether it’s a Liberal or Conservative.

US Neoconservatism as a world dominant solution (proselytizing of American Excellence) tried over and over again (50+ yrs) is like the NY Yankees thinking they’re going to win the series with ARod, it’s a failed policy and the unintended consequences continue to mount; and Conservatism’s brand of morality has just as much unintended consequences as Progressive values when ‘Weaponized’ by federal power.

The genius of the Constitution was (and should be again) the limited role of the federal government to Article 1 Section 8 (20 planks) with limited interpretations of the ‘Supremacy and Commerce Clauses’, and most importantly leaving all other power to the states to fail or succeed, but not ‘fatally’ as would happen at the federal level. The great social issues of our day Abortion (murder), marriage (lifestyles), drugs, etc should be decided at the state and local levels which follows the wisdom of the Constitution that decentralization protects liberties better and you find greater chance of representative government closer to ground. Our financial systems should be deregulated and decentralized (as before) to protect against moral hazard, cronyism and centralized system failure. The USD should compete in a freer market that would determine true value and protect us against inflation and remove the printing press from Washington.

We are finding that women, Latinos, Independents, Libertarians and even ‘white’ men are walking away from the GOP in greater numbers, the answer is not what Karl Rove and Washington pundits are calling for, “reach out (cater) to these groups for greater constituencies” like the Democrats, because we can’t compete at that level and freedom and big government solutions are mutually exclusive.

The Tea Party and Liberty movements that started after the banking bailout of 2008 point us in the best direction, these were groups of volunteers (thousands), organically organized for the greatest good – Individual Liberty. The Democrats ‘ground game’ is what beat the GOP: there are more registered Democrats than Republicans and through union organizers, special interest that pounded the pavement, they got the vote out, because the workers had a stake in the election. Literally thousand upon thousands who perceived (and were told) their very livelihood and dependence was the State took to the streets and the polling booths. It was as Jefferson and Hamilton (who agreed on very little) would say (paraphrased), “When the voters recognize that the public treasury has become a public trough, they will send to Washington not persons who will promote self-reliance and foster an atmosphere of prosperity, but rather those who will give away the most cash and thereby create dependency.” You can’t compete with that by promising an end to Terrorism and a quasi-Just society through lifestyle prohibitions and abortion regulated at federal levels – butter beats guns, hands down.

We are at 1854 all over again, and as splinter groups like the ‘Free Soilers’ and most of the Whigs walked away from their party due to a prevailing issue of it’s time the Kansas Nebraska Act (Slavery/State Sovereignty), so the prevailing issue of our day which limits all citizens, ‘Individual Liberty’ (self determination and to be left alone) that an unyielding government wishes to suppress; will the outcome be a ‘revamped’ GOP party or will the party like the Whigs be remembered by school children in history books?

Tell us what you think?

Christopher M. Mahon, Editor
editor@ambidextrouscivicdiscourse.com

After a feisty two year run partially as a result of the 2008 bank bailout, several Federal Reserve Stimuli, ‘Monetary Twisting’ and crisis level debt and deficits (unfunded wars, social programs) the 2010 elections produced a backlash against Washington and more government solutions – leaving them on their heals. However, the Tea Party and other grass roots movements within the GOP have met their Waterloo through Rule 12 in August that allows the Republican National Committee (RNC) to call their own ‘audibles’ in order to derail the messy process of state and grassroots challenges. While the RNC (as the DNC) ‘negotiated at the bargaining table with special interests and a banking cartel, insiders (from both parties) spoke quietly with their concerns of an ‘Audit the Fed’ movement, entitlement reforms or the ‘silver bullet’ of State Rights that protects their citizens from a capricious Federal Government. Whichever party wins next month, leadership in both parties are resting easier as to use a Pat Buchanan phrase, “The peasants with pitchforks” for now have gone back to their villages. But where does the movement(s) go from here?

In an article in Reason Magazine, ‘Ron Paul: Man of the Left’ Brian Doherty suggests that as the Right has closed the door to true reform is the Left more of a possible avenue to see it happen?

In the article, Doherty who followed Ron Paul’s campaign this past year compares some of the ‘over the top’ rhetoric of the Occupy Movement to Libertarian and constitutional ideology and ideas held by Paul, the Tea Party and other grassroots movements. What he found was, that even far flung leftist ‘green behind the ears’ young people were open to constitutional restraints that protect liberty and limit federal encroachment. Where the struggle persists however with the Left, was in the Progressive Model of Income Redistribution.

Even in comparisons to President Obama, “Paul thinks it’s inherently illegitimate to arrest people for actions that harm only themselves. The Obama administration has deported a record number of illegal immigrants. Paul mocks border walls as essentially un-American. Obama presided over enormous bailouts of the nation’s largest financial institutions, and his economic planning team has been largely run by Wall Street insiders. Ron Paul is opposed to what both he and the Occupiers call “crony capitalism.” Even the president’s signature legislative accomplishment, Obama­Care (which Paul opposed), forces millions of people to buy health insurance from the very corporations progressives claim to despise.”

Obama, despite his rhetoric, has strengthen the Patriot Act, allowed NDAA 2012 and on the eve of St Patrick’s Day tightened up the ‘National Preparedness Act’ through Executive Order. “Civil liberties and peace are the issues that first made some leftist hearts beat faster when contemplating this curious Old Right congressman. Obama has started new wars unauthorized by Congress and greatly expanded a civilian-killing drone program. Paul opposes drones, calls for an immediate end to all our overseas wars, and wants the U.S. military to withdraw from the world. By taking these positions, Paul has done more than even leftist icon Noam Chomsky to normalize discussion of U.S. foreign policy as the behavior of a criminal empire rather than that of the world’s great defender of liberty.”

The question for the Constitutional and Liberty Movements going forward is ‘where is the ground more fertile’? The Left’s ‘Wall’ that needs to collapse like East Germany’s is both Income Redistribution and Government’s role in social welfare, while the Right’s is Military Interventionism and a preference for centralized banking. Because the Right’s predilection of a ‘Patriotism’ woven military policy of foreign intervention has a basis in defense, they might be hard won to limit that endeavor, while the Left and their penchant for redistribution and welfare might be easier to accept those ‘Great Experiments’ done at a State and Local level rather than the Federal, as the genius of constitutional restraint and decentralization allows for success, failure, reallocation and a robust society. To paraphrase Karl Popper, ‘Society from the ground up is rational, from the top down is not.’

Christopher M. Mahon, Editor

While the President was caught on a tape several years ago saying he favored ‘Redistribution’ it shouldn’t come as a shock; Progressives in the Democrat party for years have favored social engineering policies and tax policies to accomplish a ‘fairer’ society as an outcome. If there is a shock at all it is that the GOP has favored ‘Redistribution’ policies of their own.

Ironically, President Obama is a byproduct of the Progressive journey from post-Civil War Settlement Houses and Community Organizing centered in the largest cities (particularly Chicago) that advocated for inner city immigrant groups to feed them and teach them to read, write and basic economics. The process started out localized through philanthropic means by the children of the industrialists of the day like the Du Ponts, Carnegies and Vanderbilts; even Jane Addams the co-founder of the Hull House came from a wealthy family. Her father John Huey Addams was an Agricultural businessman with large land holdings. He was a founding member of the Republican Party and a friend of Abraham Lincoln’s.

One can argue that Obama has ‘GOP’ in his bloodline; and that’s the bigger point, the past 150 years has been a progression in not only ‘big government’ but ‘big business’ and ‘welfare’ (the evolution of the settlement house movements) interests that are protected by both parties through government policies that no longer protect access or individual freedom but provide outcomes through government intervention.

While Democratic style takes from the high income earners and redistributes in the form of welfare, education, healthcare and other benefits to the ‘lower rung’ of society and manages business through regulations, GOP style rewards behavior through tax credits and deductions (Filing status, Exemptions, EIC, Mortgage Deductions etc) that is to influence moral decisions, to ‘create a better outcome’ for society. Either way both are outcome based and interventionist in their application and of course as we’re finding out today that whether military, agricultural, economic, monetary or tax policy intervention, it leads to distorted outcomes and unintended consequences as individuals and business entities with their private capital will respond to those policies by protecting themselves.

Policies that come out of Washington are more and more being drawn up on K Street through lobbyists of the largest corporations who contrary to public opinion favor federal regulations, taxes and fees as it protects their market share, and costs are passed along to the consumer who has less choice in the matter due to government intervention that limits competition. Both parties just like US foreign policy of ‘favored nation’ status have their own ‘favored Corporations or Industry’ status and promote those interests and demand support from those receiving the benefits.

In our current 2012 Elections environment the GOP and the Dems in their campaign rhetoric throw off ‘talking points’ and hyperbole to draw the differences but it seems more and more like two identical sock puppets who’s only distinction is one is on the ‘Right’ hand while the other is on the ‘Left’.

The flames of ‘Individual Liberty’ and ‘limited government’ that has been expressed through grassroots movements over the past few years and the protests of the abuse of ‘big government’ and ‘big business’ that cohort together may have been marginalized and silenced for now, but eventually will like water find it’s way through what seems like a nonporous political system.

The reason I’m sure of that is the response of both parties this summer as the roughly 30 state GOP parties in particular expressed those ‘grassroots’ preferences and wanted them represented in the national platform, but were eventually nullified at the national level in Washington through Rule 21 and other party manuevers for the GOP and the same is being considered in the Dem party as well. What will become more and more apparent is that ‘great ideas’ and grassroots movements just as in other less competitive markets will go elsewhere to plant their seeds and eventually we’ll see an erosion of the two party system which will diffuse factions while giving individual liberty a greater chance.

Christopher M. Mahon, Editor

Many in Europe said it would never come to this, whereby the European Central Bank would buy the bonds of countries like Spain and Italy who have the potential of going down the road of other debt ridden EU nations with rising borrowing costs and the inability politically to cut spending.

In a NYTimes article this morning, Central Bank Sets Bond Plan Meant to Ease Euro Debt Peril “We will have a fully effective backstop to avoid destructive scenarios with potentially severe challenges for price stability in the euro area,” Mario Draghi, ECB President said at a news conference. “The euro is irreversible.”

While such programs will be managed by other EU governing bodies, the ECB will have the power to make decisions on which nations, bonds and the terms for the transactions. They will most likely have a monitoring mechanism to keep track of bond performances as well.

“By forcing governments to impose fiscal discipline on each other and remake their economies along lines dictated by the E.C.B., power will inevitably drift from national capitals to Brussels and Frankfurt.”

The E.C.B. will buy bonds with maturities of three years or less, and it will maintain a policy of ‘Sterilization’ at least initially, where they will match the buying and removing from circulation in their portfolio in order to minimize inflationary affects.

Mr. Draghi said that the vote for the bond buying policy was not a unanimous vote by the board as Jens Weidmann, president of the Bundesbank was the lone dissenting vote, he warned that this was a bad course to head down as nations become more dependent upon ‘cheaper financing’ and relieves the pressure of real spending cuts.

German chancellor, Angela Merkel, expressed similar concerns and cautioned that a continued move to a more rigidly defined and centralized EU system, that both Germany and the UK fought against at the EU’s inception, is a potential threat to national sovereignty.

One can’t help but draw the comparisons to the US Federal Reserve system, a central bank created in 1913, which has stepped more and more into the role of ‘Lender of Last Resort’ who also has potentially similar hard decisions as city and state governments face rising borrowing costs and spending while decreases in revenues. A few cities in California have recently declared bankruptcies.

Recently over a discussion of the function of government with a good friend of many years we came to a crossroad as he expressed how he didn’t understand my ‘faith’ in Laissez-faire, a marketplace with little to no government regulation. While I think it is a legitimate concern as there are potential abuses in all relationships and transactions including the marketplace, my response back should have been, “While I understand your concerns with individuals taking advantage of one another, I don’t understand your ‘faith’ in government to ‘make it right’ and not to be exponentially more abusive as power is concentrated in the hands of a few and they have the force, law and money to do as they will.”

Whom should we fear more, the millionaire across town who can use his money and influence to deny me and a limited number of other people access or the government with unchecked power that can confiscate our wealth, send our children to war and deplete our livelihoods for a Utopian vision? Even the billionaires we read about have limited powers until they hook that power to government influence and coercion.

There are two assumptions made by both the ‘Left’ and the ‘Right’. The Left believes it has a natural ‘Altruistic’ compass while the Right believes it has a ‘Moral’ compass built in. So that both believe if they as a collective are heading the ship of ‘big government’ that even if for a greater good they need to steer into the cliffs of suppressing Individual Liberties they have the internal fortitude to not destroy the ‘Ship America’. Unfortunately this is either a lie or extremely arrogant and naive.

While my friend’s question ‘how do you have faith in Laissez-faire?’ is difficult to answer because historically societies have had government structure to varying degrees; the settling of the ‘Wild, Wild West’ and the ‘Free Banking Era’ are two good examples to consider in US history. We’ve been lied to by Hollywood and Historians  regarding western expansion and the violence it entailed, a study ‘The Not So Wild, Wild West’ by Montana State University Economics Department shows the opposite to be true; the settlements of the western states were a safer place than almost all our major cities today as well as many suburbs. What was unique is that it mostly was settled through private contract law rather than government systems.

Even law enforcement was through private means as they hired Sheriffs and Deputies directly or through contracts like the Pinkerton Services who pursued many ‘outlaws’ like Jesse James. Cattlemen and Frontier Associations and Fraternities were formed out of common interests (voluntarily) to negotiate property rights and easement agreements.

Laissez-faire “is an economic environment in which transactions between private parties are free from tariffs, government subsidies, and enforced monopolies, with only enough government regulations sufficient to protect property rights against theft and aggression.”

Private banking with less government regulation and less centralization of power historically has also worked better. While there were banking crisis’ prior to today’s US centralized banking system, they were generally smaller and the market was quicker to dissolve failures, realign malinvestment and reallocate assets and labor more efficiently. The ‘Panic of 1819′ which was in part due to monetary expansion and debt from the War of 1812 and all other Panics that followed were due to violations of market principles and where economic conditions were less regulated by government the time period for adjustment and recovery was shorter as the market cleared bad investment while determining value. The ‘Free Banking Era’ of 1836-1864 is a bit of a misnomer as there was state regulations at the time but there was competition in the currency market and between banks regulated by the states. During economic growth some banks took greater risks going off species (gold, silver, etc) and offering more competitive portfolio returns and investors bought those risks. When the economy slowed and the market corrected many of the banks who took risk went under and the investors holding those risks took the losses as well. But with less government intervention, the losses, valuations and reallocation of assets was orderly and recovery was quicker. When you consider more recently the history of US banking and Currency laws and the degree of federal intervention since the Bank Panic of 1907 which led up to the Federal Reserve Act of 1913, the last century of centralized banking reveals economic and monetary crises of a monolithic system that lacks competition and is supported by ‘too big to fail’ versus a decentralized system of competitive banks and currencies that allowed for market failure and correction with the latter evidencing more stability. Even as recently as last week Federal Reserve Governor Jerome Powell described the new ‘Single Port of Entry’ provision and ‘Living Will’ that charter banks determine ahead of time to go through a bankruptcy-like procedure that basically enshrines the taxpayer as on the hook for the cost.

Here’s a ‘Jenga’ exercise we should play from time to time. If our Jenga pieces are government structure to maintain a society to protect freedom, how many pieces of today’s government can we dismantle without it falling apart? How many pieces of federal government have centralized power in Washington and created a monolithic system that is impervious to change and fragile to systemic failure? It’s amazing in the game how many pieces we can remove but I think most would be surprised how much of government we can remove that has only gotten in the way, distorted values and restrained the liberties of the Individual. The US Constitution is a good plumb line and starting point.

Christopher M. Mahon, Editor

 

 

 

This morning in Jackson Hole, WY, Ben Bernanke, Federal Reserve Chairman laid out plans to provide new policy initiatives to stimulate the economy. In an article in the NYTimes, Fed Chairman Pushes Hard for New Steps to Spur Growth by Binyamin Appelbaum, Bernanke says, ” It is important to achieve further progress, particularly in the labor market,” Mr. Bernanke said in his prepared remarks. “Taking due account of the uncertainties and limits of its policy tools, the Federal Reserve will provide additional policy accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability.”

While Bernanke didn’t announce specific policy avenues or dates, he did mention asset purchases like treasuries and mortgage-back securities. A recent FOMC meeting minutes suggested, “Many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery.”

In addition to asset purchases the Fed is also considering even more aggressive actions of cutting interest rates on reserves held by the Fed for the banks which could influence the push of more liberalized credit and money into the market and the Fed is also considering targeting low-cost funding for particular sectors of the economy like housing.

Bernanke quoted a study which suggested that past stimulus has helped, “finding the combined effect of the Fed’s three rounds of asset purchases raised output by 3 percent and increased employment by 2 million jobs.” Although other studies and monetary theory suggests that monetary intervention may produce a temporary stimulative affect, but in the long run it distorts interest rates and other prices in the markets which causes malinvestment leading to further economic troubles.

Christopher M Mahon, Editor

The NYTimes Editorial today criticized the ‘lack of honesty’ in Paul Ryan’s RNC convention speech last night. “Mr. Ryan, who rose to prominence on the Republican barricades with a plan to turn Medicare into a voucher system, never uttered the word “voucher” to the convention. He said Medicare was there for his grandmother and mother, but neglected to say that he considers it too generous to be there in the same form for future grandmothers (while firmly opposing the higher taxes on the rich that could keep it strong). He never mentioned his plan to abandon Medicaid on the doorstep of the states, or that his budget wouldn’t come close to a balance for 28 years.”

The editorial goes on to say, “The reasons for that are clear: Details are a turn-off, at a boisterous convention or apparently in a full campaign. A New York Times poll last week showed that the Medicare plan advocated by Mr. Ryan and Mitt Romney was highly unpopular in the swing states of Florida, Ohio and Wisconsin. As soon as voters find out that the Republicans plan to offer retirees a fixed amount, they disapprove, clearly preferring the existing system.”

The NYTimes should remember the old adage, “for every finger you point there are 4 pointing back”. While it is true that Ryan didn’t mention ‘vouchers’ and specifics on how a transition to a better system would work (assuming that it is best for the federal government to manage Medicare, which is debatable and probably unconstitutional aligned to ‘original intent’), the article doesn’t point out the Ryan plan either, only to distort and hype what it perceives as ‘negatives’ in the eyes of the elderly.

The Ryan plan would like other plans being offered by GOP members create an ‘age line’ of 55, which would give seniors the choice to continue on their current plan or to go to a voucher type system to choose a plan and to participate in choosing their health care options. Below age 55 would go on the new plan, a similar plan that corporate America offers as well as Congress and the President participate in.

The rhetoric on both sides of the isle and both sides of the political ideology of Government vs Private solutions can’t avoid the economic realities of not only ‘Government Healthcare’, but ‘Government Retirement’ programs through public employee union pensions and Social Security’s as well who’s day of reckoning has arrived too.

Outcome based benefit programs create liabilities for employers (government) today for a future promised benefit tomorrow. The plan, whether pension or health care is actuarially ‘made whole’ each year and as the internal calculations in the plan change (mortality, morbidity, interest rate) the plan requires more or less contribution each year. Unfortunately, the discipline for the plan administrator (employer) to segregate and maintain the reserves to fund the promises has always been a problem and the long term costs of the plan make them prohibitive.

In the late 1980s corporate America started to address the funding and cost problems of their pension plans by moving to ‘Defined Contribution’ plans which work almost the reverse of ‘Defined Benefit’ (outcome based) plans. Instead of defining a benefit in an ‘unknown’ future and creating ‘unfunded liabilities’ they define a contribution based on current factors like a percentage of salary, and make the contribution today removing the potential for unfunded liabilities in a commitment to pay out benefits tomorrow and instead bring the employee into the decision making and risk bearing on his/her future.

At some level this will need to happen because ‘business as usual’ or even worse a burdensome redistribution through taxes on the productive members of society will produce a much worse outcome. The framers had it correct and as Madison described the US in Federalist Papers #39 as a ‘mix’ of a Federal and National system, the intent was to leave to the states the great social experiments like how we treat our elderly and sick and to very much limit federal powers (National) to the well defined enumerated powers of Article 1.8. The tearing down of federalist boundaries within the Constitution over the past 150 years has led to the most profound loss of Individual Liberty and government mischief, a price we can longer afford.

Christopher M Mahon, Editor

The Washington Times on Monday May 7th in its article `Romney rejects Ron Paul-style Austerity‘ reported,

“Speaking Monday at a town hall style-meeting event in Cleveland, presumptive GOP presidential Mitt Romney plunged a fork into the idea that he could come around to embracing (Congressman Ron) Paul’s call for deep cuts in federal spending.

“My job is to get America back on track to have a balanced budget. Now I’m not going to cut $1 trillion in the first year,” he said, distancing himself from Mr. Paul’s plan to slice more than a quarter of the estimated $3.8 trillion being spent by the the federal government.”

Later when pushed further regarding Paul’s budget proposal and the spending cut measures, Romney went on to say, “The reason, is taking a trillion dollars out of a $15 trillion economy would cause our economy to shrink [and] would put a lot of people out of work.”   

Here’s why Romney is wrong in his suggestion that this could harm the US economy, wrong in his historical perspective and most importantly wrong on his understanding of the `American Spirit’.

FactCheck, which generally leans progressive, correctly points out that “The biggest (budget) cut, on a percentage basis, occurred in fiscal year 1920 after two years of steep budget increases to finance World War I. That year, spending dropped from $18.5 billion to $6.4 billion, which is $12.1 billion decline or about 65 percent. The $12.1 billion in today’s dollars would be worth $134.3 billion, according to the Bureau of Labor Statistics’ .

Likewise, there was a sharp decline in spending after World War II. Beginning in 1946, Congress cut spending for three straight fiscal years. The biggest drop occurred in 1946, when spending dropped by $37.5 billion or about 40 percent (from $92.7 billion to $55.2 billion). That $37.5 billion would be worth $425.4 billion in today’s dollars — making it the largest cut in adjusted dollars.”

To further the comparison to the error of Romney’s remarks that to `take $1 trillion Federal spending out $15 trillion US economy’ would cause job loss versus what happened in 1920 and 1946, is that in 1920 and 1946 they removed roughly 17% and 16% of federal spending (respectively) while  Ron Paul’s proposal would shift federal spending by less than 7%. But here’s where Romney, policy makers and most economists get it wrong, it’s the `Unseen’. While Federal spending through intervention in military, education, health care and many other areas of the economy create malinvestment and shift purchasing power from the individual to the state, the reverse allows markets to correct and that money doesn’t disappear as Romney suggests but moves through the economy in a more efficient way. Both 1920 and 1946 illustrate that as you had millions of men and women coming home from wars, you had manufacturing shifting from making weapons and bombs to meet domestic and international demands for other products and services.

Finally, where Romney really gets it wrong is calculating the heart of the American worker-entrepreneur on the same plane as in Greece or France. The US small business owners and those who’d like to be are like race horses restrained and thrown off at the starting gate by a capricious federal government that if instead was restrained would allow like in 1920 and in 1946 for the ingenuity of the `American Spirit’ to soar. The greatness of the United States isn’t inherent in her citizens rather as it has been in her law, protection of individual liberty and the access to succeed and fail through the discipline of the US Constitution.

While Federal power has encroached greatly and has been redefined in a positive matter through intervention and defining social and financial outcomes over the past 150 years, there is still a remnant of Liberty, Self Determination and the desire to not only lift one’s self but to help others.

In 1866 Lord Acton of British Parliament viewed the remains of the Civil War aftermath and in a lecture series he exalted the unique qualities of the US prior to the war, a Democratic Republic restrained by state sovereignty, where the lowest man counted but warned of a new federalism to come that would go the way of Rome and France.

The Federal Government has an important but limited role as a referee between the states, the states and foreign entities and to vigilantly protect our sovereignty as a nation. The question for today framed in the backdrop of the 2012 election, “Are there state and national politicians (like Presidents Harding and Coolidge of the 1920s* and the Congress of 1946, 47) who will aid in the process of restraining Federal power and loosening the Individual and the states to experiment as Madison, Jefferson and many of the framers suggested?

This is why it is crucial that the GOP platform adopts Congressman Paul’s classical economic and constitutional principles of limited federal power, social and financial values determined by the market (free and voluntary exchange and association) and sound money.

While President Obama wishes to impose more centralized federal government power in taking over more sectors of the economy and redistribute wealth, if Mr. Romney wins in November, don’t we still lose? Our financial, social and infrastructure problems will not go away. Just as aerodynamics defies gravity briefly through a 3 point landing or crash, so do markets eventually adjust either voluntarily like in 1920, 1946 or involuntarily like in 1929 and 2008. The global systems of the world are decentralizing one way or the other; the Middle East, Greece, Ireland and potentially France are showing how `not to do it’, Paul’s classical economic principles through constitutionally aligned government as we’ve seen voluntarily applied in our past shows how ‘to do it’. Who’s steps should we follow?

Christopher M Mahon, Editor

 

*Unfortunately, the recovery of 1920-21 was followed by Federal Reserve excess in part by the 1st Fed Chairman Benjamin Strong’s friendship to Montagu Norman, Governor of Bank of England to help in Britain’s parliamentary requirement to go back to Gold in 1925 at a fixed price (which is a lesson for today). Modern day Keynesians point to greed and excess of unrestrained markets  to the Great Depression but the reality is that the monetary policies of the Federal Reserve distorted markets and brought about malinvestment. The 1929 Depression that took 25 years should have been a 1929-30(31) Depression if Hoover and/or Roosevelt had taken the same steps as Harding, Coolidge in early 1920s and the 1946 Congress. Hopefully today classical economics (Austrian) will win out.

In David Brooks’ NYTimes column this morning, When The Good Do Bad, he presents in his view of modern day philosophy-religion that man is born good but some are born evil, “According to this view, most people are naturally good, because nature is good. The monstrosities of the world are caused by the few people (like Hitler or Idi Amin) who are fundamentally warped and evil.”

Brooks illustrates this through the recent slaughter of 16 people (including children) in Iraq by Robert Bales, who those who’ve known him say they are astounded – “Friends and teachers describe him as caring, gregarious and self-confident”.

Brooks digs back into centuries old Christianity and Philosophical thought on Good vs. Evil, quoting John Calvin, GK Chesterton and CS Lewis who believed like the Bible says in Jeremiah 17.9, that the heart of man is deceitful (wicked) above all things and who can truly know it.

The modern worldview of Good vs. Evil is simplistic as Brooks says, “This worldview gives us an easy conscience, because we don’t have to contemplate the evil in ourselves. But when somebody who seems mostly good does something completely awful, we’re rendered mute or confused.” But, in that confusion the modern worldview grapples for answers on how to identify and protect against those external evils in others and isolate them from the good. He identifies the Hitlers and Idi Amin for example.

Brooks ends his article positing this, “According to this older worldview, Robert Bales, like all of us, is a mixture of virtue and depravity. His job is to struggle daily to strengthen the good and resist the evil, policing small transgressions to prevent larger ones. If he didn’t do that, and if he was swept up in a whirlwind, then even a formerly good man is capable of monstrous acts that shock the soul and sear the brain.”

I would take this a step further and propose this question framed within our Presidential election process as the backdrop. Do these two contrasting views of `Man is either Good or Bad’ versus `Man is a combination of Good and Bad’ play a factor in determining the type of Government System we should have?

If you believe that Man is born with different natures of Good and Bad, wouldn’t you try to find `The Best’ to run the country and forfeit the most power to them? On the other hand if Man is a mixture of Good and Bad, wouldn’t you like  James Madison and the other framers of the US Constitution and architect of our Nation, build a government designed not for the best to rule, but to protect against the worst?

Our government was designed by men who believed that Man is a combination of potential Good and Evil, that he could do amazing exploits of courage and patriotism but had the potential for the worst depravity and self interest at the expense of his neighbor. They built a government with that in mind, that allowed for the greatest amount of freedom but punished bad acts and they divided the powers of government between federal offices and State Powers. This was also to prevent the same potentials in Man for the depravity of self interest at the expense of others and the power to lord over another from becoming systematic.

So two final questions:

1. Do you think in modern worldview as David Brooks subscribes, Man is basically Good but there are some that are Bad? Or do you believe like those in our past that Man is a mixture and has the potential for great exploits or the worst depravity?
2. Having decided upon one of those worldviews, do you think that should affect the type of government we should have?

Christopher M. Mahon, Editor

In a March 9th article in Reason Magazine, `Ron Paul Revolution: What Now? Brian Doherty sums up the frustration of Ron Paul supporters as their candidate hasn’t won a single primary or caucus state, and media channels like Politico have written him off. The math of Super Tuesday last week also shows that Congressman Paul has no chance of winning the nomination. So what is left of his candidacy? Who or how can the Constitution and Individual Liberty be brought to the forefront as Washington Insider interests jockey for power with large funding resources and powerful media connections?

Doherty mulls over a brokered convention in Tampa, “Given the general attitudes of the average GOP stalwart, though, it’s hard to imagine Ron Paul coming out of one a winner. Ronald Reagan in 1976 made quite the push to deny leader Gerald Ford the nomination when Ford lacked a clear majority going into the convention, and even Reagan, god-saint of modern Republicanism, failed. Former GOP super-strategist Roger Stone, who lived through those days, reminded me that Reagan actually represented the views and enthusiasms of the mass of GOP activists in his day in a way Ron Paul does not now. This makes it even less likely Paul will succeed with any last-minute Tampa coup.”

But all is not lost. Ron Paul and his campaign support bring a couple of surprises to a brokered convention. First, the media has discounted loyal delegate support for Ron Paul in states where delegates are not bound and can move their support, and in the training and volunteer effort that the Paul camp has made since 2008 in getting their people into key precinct positions in each state will help. While it may be a long, long shot when considering Reagan failed, still Paul’s influence will be felt at the convention.

Finally, when you again run through the numbers and where Ron Paul runs strong: Independents, Reagan Democrats and the Youth (twenty somethings); even without the holdout for a brokered convention, just as the King of Israel contended with Elijah so will the eventual GOP nominee need Paul support going into November. Unlike deals made with past failed candidacies, to get Ron Paul support and a successful national campaign there will need to be tangible evidence of foreign and domestic policy revisions that align with constitutional principles.

If Mitt Romney runs against President Obama with $1billion cut in spending in the first year, a new military footprint and a Defense rather than Military Intervention policy that respects national sovereignty around the globe – until they violate ours;  and an audit of the Federal Reserve with a change in objective from Employment/Inflation to inflation only and creates a committee in his first year to look at role of Federal Reserve going forward, then we can consider the Paul campaign of 2012 very successful.

My friends, don’t give up the good fight! Evangelize those around you to the Constitution and Individual Liberty as vital to a healthy society and the well being of a nation. As Madison suggested in Federalist Papers #39, our success hinges on `Self-Government’.

NOTE: If you wish to be more involved, contact your county party office that you are registered with and find out how you can be involved. You could become a committee member and precinct representative. Each state is vital in the fight against federal power encroachment, the best weapon the states have against that encroachment sits rusty and unused – Nullification. Finally, many are standing up to Universal Health Care. Get involved.

Christopher M. Mahon, Editor

The Iowa Caucus is less than a week away and political rhetoric by all candidates is at a high level, a good part of that is directed at Ron Paul who currently is the leader as indicated from most polls. He not only pulls from Independent and Libertarian voters but also Conservatives who have become disenfranchised with almost 10 years of military conflict at the expense of a balanced budget and debt. The latest accusations portray Congressman Paul as not only out of the `mainstream’ in his ideas on federal powers (even though by all accounts they are constitutional) but also that a Ron Paul presidency would be dangerous for the US as Iran could go nuclear and Paul is an `Isolationist’.

In a November 2011 Cato Institute article Ted Galen Carpenter makes the opposite claim that Military Interventionists and NeoCons like Gingrich, Santorum and Bachmann do us much more harm than good. For interventionists to not realize the beneficiary of a war with Iraq was Iran was a failure….“For neoconservatves to argue that the withdrawal of the few thousand remaining U.S. troops from Iraq significantly worsens that aspect is either obtuse or disingenuous. If they didn’t want Iran t…o gain significant influence in the region, they should have thought of that danger in 2002 and early 2003, instead of lobbying feverishly for U.S. military intervention against Iraq. The United States has paid a terrible cost — some $850 billion and more than 4,400 dead American soldiers — to make Iran the most influential power in Iraq.”

In another article by Per Bylund, Bylund  makes the case how the `Endowment Effect’ theory, (people place more value on things they own versus things they do not) illustrates the shortcomings of economic and military intervention in not understanding human action (Praxeology) and the unintended consequences. Or why Ron Paul’s theories on domestic and foreign policies while more aligned to constitutional principles are also more sound than policies of the other candidates.

Does US military policy of Intervention into the affairs of other nations (occupation, embargo, etc), prop up the dictators of the world like Hugo Chavez or Mahmoud Ahmadinejad who rally their people and crusade against US military might and US monetary policy? What part did Federal Reserve Quantitative Easing (1 and 2) play in the Middle East uprisings and other struggling nation’s financial affairs?  What part did troops in Iraq, Afghanistan and Pakistan play? Tell us what you think?

Christopher M. Mahon, Editor

“There is no economy in the world, whether low-income countries, emerging markets, middle-income countries or super-advanced economies that will be immune to the crisis that we see not only unfolding but escalating,” A statement by IMF head Christine Lagarde. She later went on to warn of “economic retraction, rising protectionism, isolation and…what happened in the 1930s (depression).”

The speech by LaGarde at the US State Department in Washington was partly in response to the infighting and bickering between the Euro nations and the UK regarding who needs to make sacrifices and who’s more solvent and should be downgraded first. Bank of France’s Christian Noyer addressing rumors of a possible French downgrade said that there wasn’t economic data that warranted that move and if there was a downgrade that the UK should be downgraded first.

François Fillon, Prime Minister of France said that Britain’s debt and deficit position has not been fairly evaluated in it’s triple A rating. Britain has become the whipping boy of the EU nations since it vetoed the European Union Treaty last week and Prime Minister Cameron said there was no chance of the UK participating in any newly negotiated European government or financial system. Many inside Britain fear economic and political reprisals as a result of veto and comments made by Cameron.

Conflicting financial positions in France and Germany have made it difficult as well to negotiate in good faith for long term solutions, LaGarde warned against `quick fixes’ and stated that all countries need to work together, “It is really that Gordian Knot that needs to be cracked, that needs to be addressed as collectively as possible, starting with those at the center but with the support of the international community probably channeled through the IMF,” she said.

In other financial news this morning the Credit Agency Fitch has downgraded several banks, which included Bank of America,  Morgan Stanley  and Goldman Sachs, as well as Europe’s Barclays, Societe Generale and BNP Paribas. Germany’s Deutsche Bank and Switzerland’s Credit Suisse were also downgraded. Fitch was the third credit rating agency to downgrade global financial institutions since September.

Meanwhile the Financial Times on some positive notes has come out this morning in a series, Is America Working, an assessment of the US Labor market and it’s technical skills and how `Creative Destruction’  (Capitalism) has turned US financial markets around in the past.

 

Additional reading:

IMF Chief Warns of 1930s Style Threat

No Country Immune From Rising Risks: IMF’s LaGarde

Why Is There A Euro Crisis? 

 

I was recently reading the history of National Review, a magazine started up in the late 1950s by William Buckley and how he and the magazine back then helped orchestrate a `fusion’ movement to pull – classical, neo, social and libertarian-leaning conservatives together to make a political move which helped to bring about the Reagan Revolution. While there’s disagreement on how successful the Reagan Revolution was, they were able to put aside the rhetoric and started to define boundaries and sensible goals at the time while keeping the Constitution in sight. In light of the heated discussion going on today, is a second fusion possible and do you think that it could help the GOP party in the campaign process?

As a `Libertarian-leaning’ Conservative I want a decentralized government system like laid out in the Constitution that was part of the genius of our founders who understood Montesquieu’s Separation of Powers theory which protects against concentration of monolithic power and isolates failure and allows for better governance (closer and tailored to the citizenry) and as Madison pointed out in the Federalist Papers it permits for the `Grand Experiments’ of the states. I also believe that our military intervention has failed but obviously we need a military footprint but the question is where and how big. Having said all that however, I realize that movement in those directions is not unreasonable but not being able to budge/compromise is. The question is can each group mentioned come away with a sense of `progress’ and success, while still falling short of their goals?

Granted it’s complicated as even within each group there’s disagreement, within the Libertarians for example, there are differences between `Rights’ based and Consequentialists. Rights- based support the Individual and his Rights in the marketplace (Laissez-faire) above the State; while Consequentialist Libertarians will accept the use of the State if it can produce an intended outcome more `efficiently’ while ignoring constitutional barriers.

But there is common footing that can be found like between Social Conservatives and Libertarians, where if you’re on a social networking site or watch some of the political debates on the news programs and witness the hyperbole, vitriol and name calling you wouldn’t think so. Where social conservatives want to see traditional values maintained, like in marriage, family and lifestyle choices, many Libertarians have similar views with the difference being how are those values maintained or restored? Where the Social Conservative sees value in government intervention to create appropriate outcomes (Drugs, Pornography, Marriage, etc) the Libertarian believes the marketplace is a better regulator than the government. Where the canyon can be bridged however is through the Constitution in that it permits state and local intervention for those causes (Drugs, Marriage, etc) but disallows it at the federal level.

So with an open invitation to the different groups of the GOP that basically asks `what realistically are you able to compromise on and what are deal breakers?’, could there be a `buy-in’ to a realistic platform for today that cuts taxes and spending (not only growth), rolls back federal regulations (Dodd-Frank, Sarbanes-Oxley), audits but keeps the Federal Reserve (redefined to a single goal of guarding against Inflation), maintains DOMA and other values focused federal laws and to maintain some of the attrition savings in Defense while at the same time a Congressional review with strong input from our military that looks at our Defense policies and deployment `footprint’ going forward, while long term an eye on future plans to phase out federal laws, programs and departments based on relinquishing unconstitutional  powers back to the states?

Can we like Ron Burgundy in Anchorman, `agree to disagree’ but still work together? How important is it for you and your ideals to win a Pyrrhic victory? You are successful in your favorite candidate wins the Primary only to lose the 2012 election and allow for the US to continue down the slide of financial insolvency and the continued loss of Individual freedoms, through a centralized `one size fits all’ collectivist state that Statesmen like Jefferson, Madison, Lord Acton, Eisenhower and Reagan warned against. As disciplined as you are in being passionate for your cause, can you be as disciplined in controlling that passion and channeling it in a way that not only helps your cause but creates better chances at Life, Liberty and the Individual’s pursuit of Happiness?

Christopher M. Mahon, Editor

 

5,4,3,2,1 BLAST OFF! I remember as a young boy in the heyday of the NASA Space Program the thrill of watching on TV the Apollo missions blasting into space. What pageantry, what courage and what technology! The intellectual capital and cooperative effort that it must have taken. The other day while golfing on one of my local courses, I noticed an elderly couple behind me that was enjoying the afternoon. As we moved from hole to hole I was somewhat surprised at how adept the wife was at maneuvering the golf cart. Though somewhat limited in her physical ability she was able to operate the vehicle quite well.

I contrast those two scenes to highlight the degree of difficulty and the prospects of participation in both of those vehicles. Obviously it takes a high skill set to build and or operate a Rocket Ship, while a golf cart was purposefully built so that the broadest amount of people could participate. The question then is, `Did the framers of the Constitution (our government) construct it so that only very few and those highly skilled could represent it or was it built for the greatest amount of participation?

Today in the GOP race to become the Presidential Candidate the news highlights almost each day the gaffs, stammers and lack of knowledge of the candidates. Even Herman Cain’s question `How to say hot dog in Cuban’? As if assuming he didn’t know it was Spanish while he could have easily meant the different dialect and as in UK or US English there are different words to describe a bathroom, apartment and elevator. Even in the United States, Soda and Sandwiches (Grinder, Hero, wedge) have different expressions in different parts of the country. It seems the election process is more of a weeding out of those who don’t know the intricacies of the `Washington System’  and the very specific international information that one would only pickup if a world traveler or through growing up in certain social settings. Is that what we want in a candidate?

What are the dangers of letting anyone into Office vs narrowing the selection?

Of course the dangers would be scaled to the amount of power available and the potential for critical or even fatal failure. In the UK, the powers of the Monarchy are virtually nonexistent as the Throne is a figurehead position today, so the Brits don’t lose sleep over who’s next in line. The framers discussed this at length as they considered many resources at the time like: Baron Montesquieu’s theory on `Separation of Powers’ which stated that centralized power was more likely to lead to tyranny and cataclysmic failure while decentralized power diffused the impact. They also observed the mistakes made by Europe’s Monarchal and primitive central bank systems. In the Federalist Papers Hamilton and Madison disagreed on the function of government, while Hamilton admired a European Monarchal and Parliamentary system, particularly in banking, Madison preferred the protections of a decentralized Republic.

In a highly `specialized’ system of government that is centralized into a federal system that is far reaching into the intimate lives of each individual and as a result has developed intricate systems of welfare, taxation, regulation and the necessary University structures to support it would have to by nature be very selective and restrictive in candidate selection. On the other hand, in a decentralized system, that has specific and limited powers (enumerated) for the federal system and much broader powers to the states, local and community systems, the selection process can be much broader based, particularly as you get closer to the community levels.

So these two views (Rocket Ship vs Golf Cart) really can change your selection process. If `Rocket Ship’ then as the media suggests, a well educated (in governmental systems), world traveled and leadership-oriented candidate ONLY will do. But if like the founders who understood the potential for the `downside risk’  built instead a `Golf Cart’, isn’t it more of an examination to who can protect that constitutional design and ultimately put the protection of Individual Liberty first?

While the pageantry and beauty of a rocket ship is awesome to behold, unfortunately even in the hands of the greatest minds there’s system errors and they do fall from the sky at a great cost. The framer’s didn’t want to put the fate of a Great Nation in the hands of a few but designed through decentralize powers (in bits) to be put in the hands of many. Think about it, a little grey haired woman (golf cart)  in a small town in Florida as a town alderman could overrule Washington because of constitutional design. Which of today’s candidates and current officeholders are best capable to maintain and restore that design?

 

Christopher M. Mahon

 

 

In bygone days news traveled slowly. There wasn’t an Internet or Mutimedia or even XBox. I remember my grandfather telling me a story of a hillbilly being found on an obscure part of a West Virginia mountain not knowing that WW1 had ended. There were traveling salesmen who’d go into the country and sell `snake oil’ as a cure for anything from cancer to canker sores. The `Big City’ huckster made out big, while the small town `rube’ lost his money.

One of the criticisms that John Maynard Keynes had of Classical Economics was the timing of information arriving into the hands of the comsumer/investor in being able to establish a `competitive’ price. He believed that a Laissez-faire approach to financial markets in establishing prices couldn’t exist because the information needed to make a buying decision arrived either too late, distorted or in parts. Thus the need for a regulated centralized system best done by governments became major policy since the 1930s as an answer to the Great Depression.

Now, depending upon which schools you’ve attended either you uphold and maybe have subscribed to Keynesianism 1.0 or 2.0, 3.0, etc or maybe like many economists (schooled and arm chair) are starting to question modern macroeconomic theory that has relied upon Keynesian theories of monetary stimulus and the importance of `Aggregate Demand’. The results of Quantitative Easing and Federal Stimulus since the 2008 crisis has been an arguable failure and the glaring lack of tools that Secretary of Treasury Geithner and Federal Reserve Chairman Bernanke had at their disposal has caused Austrian (Classical) Economic books, tapes and videos to fly off the shelves and set record downloads on Amazon.

Today’s government has been designed on an old belief that the individual (consumer, investor) is less informed and that pricing, products, wages and markets in general need to be regulated and that in the long run it will cause economic stability. Now without going into a Mises or Hayekian discussion of why Keynes was wrong, even if he was right at the time, do those same dynamics apply to today? And is government today an obstacle or an aid in bringing about economic stability?

The United States has experienced two types of government function throughout it’s history, one based on Negative Liberty and the other Positive Liberty. Negative Liberty is where government `stands down’ until a law has been violated by an individual or entity, JS Mill’s `Harm Principle’ describes it well, where the only legitimate use of coercive force by government is when an individual or entity takes away the Liberty of another. Otherwise, society is left to the voluntary and free exchanges and associations (in trade, friendships, etc) that determine outcomes and at times provides for `self correction’. Positive Liberty on the other hand is where government plays an active role of participation in order to try and achieve a desired outcome or social goal. Societal values are determined ahead of time and government sets laws and policies (which can be altered along the way) to achieve those goals. Negative Liberty affords the greatest amount of Liberty to the Individual, while Positive Liberty through government `managing’ the Individual allows for the least. The framers of our government and the intent of the US Constitution was to restrict federal powers to what are `enumerated’ but also to the philosophy of Negative Liberty, while with heeded warning they allowed the experimentation of Positive Liberty among the States.

Today unfortunately, it is the government itself who is the cause of economic and social instability. Laws and regulations designed to produce social and economic outcomes (employment, housing, family) instead cause unintended consequences, uncertainty and distortion of capital allocations. The government functioning in the role of provider or producer of `desired societal outcomes’ is antiquated at best or has been at the root of economic and social instability in our recent past.

So, just as we upgrade our browser or app programs on our phones from time to time, isn’t it time for a government upgrade? While it may not be government itself that is obslolete, it is the government structure we currently have. How about a Negative Liberty federal government that protects individual liberties and access to open markets? We can leave the experimentation of health care, retirement, and all social behavior to the states, local governments and ultimately between individuals.

Today’s teens, college kids and young adults while mocked on TV by Jay Leno for not being able to identify Vice President Joe Biden can find the music they want quickly and know how to spend their time and money. Positive government, which we have now, wants to change that, while Negative government, the intent of our founders, would leave them free to succeed, fail and through free and voluntary association and exchange come to their own conclusions on `what’s working and what’s not’ in their own lives. In a society where the Individual is free, society `self corrects’, but in a society where the Individual is `managed’, society’s maladies are incubated.

When discussing `Negative’ vs. `Positive’ government I like to use the illustration of two types of basketball games, in one game the referee theoretically runs up and down the sideline and only enters the game when a predetermined infraction occurs by one player fouling another. While one team might have net advantages on paper, the game played better by either team determines the outcome. In the other game rather than the ref `standing down’ and restricted to only engage when an infraction occurs, the ref is allowed to manage the game to determine the outcome. So if team A on paper is more skilled than team B, the ref can call the game to the advantage of team B to create a more `Just’ outcome. In 2007 shock waves were sent through the sport of basketball when Tim Donaghy a professional referee for the NBA was accused of gambling and `fixing’ games. Serious allegations in the state of Arizona contend that Donaghy had miscalled two road games against the Phoenix Suns when they played the LA Lakers and the San Antonio Spurs. The league itself was called on the carpet as an FBI investigation was under way. Sportscasters and fans alike were bewildered and never could imagine that NBA games could be fixed or players and refs becoming actors playing a part like in professional wrestling. There has been disinterest and disenchantment as ticket sales have plummeted and the league has attempted to repair its reputation over the last few years. While sports lovers understand the differences in talent and teams that are favored or lacking, they like the spontaneity of the game and root for the underdog and bristle at league or game favoritism.

In a `Negative’’ government system, government is limited in its powers to `protect’ or `promote’ individuals or groups based partially on JS Mill’s `Harm’ Principle from his essay `On Liberty’, “That the only purpose for which power can be rightfully exercised over any member of a civilized community, against his will, is to prevent harm to others.” Another rather macabre illustration of Positive government is from Kurt Vonnegut’s short story Harrison Bergeron, Vonnegut foresees a dystopian world of government equality, “The plot is set in the year 2081. Due to the 211th, 212th and 213th Amendments to the Constitution of America, all Americans are mandated equal. “They were not only equal before God and the law. They were equal every which way.” In America no one is more intelligent than anyone else; no one is better looking or more athletic than anyone else. In order to stop any sort of competition in society these measures are enforced by the United States Handicapper General”. The very strong were burdened with weights and objects to severely limit their strength, the intellectuals were encumbered with drugs to distort their minds and understanding, and the beautiful wore masks or the appearance of their beauty was marred.

The `US Handicapper General’ today is Cass Sunstein, Office of Information and Regulatory Affairs, who through his legal and behavioral science background determines the best `Positive’ laws to meet the outcome goals of Social Justice and Equality.

While those in favor of a government that manages the game toward a certain outcome and manipulates behavior towards that end, there are others who believe that the outcome and unintended consequences of a Positive government are tragic and result in less liberties and freedom for each individual. Ludwig Von Mises, the author of Human Action proffers that it is because of the inequalities of men that voluntary association, exchange and cooperation can occur. That when we attempt, even if for altruistic intentions (if possible) to rebalance mankind based on skill sets, intellect, physical prowess, etc that it distorts the abilities of free and voluntary exchange and association to bring peace and harmony to society. Class system strife is the result of Positive government interventions and not the socio-economic differences that will always exist in society. A strong man and an intelligent man can pool their resources and work together. A poor man and a rich man can agree upon employment conditions and work together. While this may sound simplistic and I’m sure you can think of examples of exploitation, in a freer market with more choices, bad actors (employers, business owners) are held in check by the decisions of the consumers and workers.  

The budget and debt battle of 2011 has taken on many themes, pitting the rich against the poor, the elderly against young workers, but isn’t it really about the size and function of government? As we’ve discussed, today’s government is Positive in nature, as it looks to manage the behavior of individuals in order to produce societal outcomes – which never happens. Federal US Education budget has grown at more than 2 times the rate of inflation and the US is at the bottom compared to other nations. Poverty is still unacceptably high (as measured by Fed) even after decades of the `War on Poverty’. The question being asked today by many is not only what are the legitimate functions of the federal government but also couldn’t private resources take care of the social ills of society much better than government?

“Planning by the many not the few”.

It’s interesting, like many big influential works, very few have read The General Theory of Employment, Interest and Money which lays out Keynes’ theory on the government stepping in to stimulate markets and create demand. Like Marx’s theory of Communism, it was meant as a temporary or transitional solution where government intervenes (whether you agree with the theory or not). What’s interesting is that Keynes and Hayek became `combative’ friends over time (like O’Neill/Reagan) and met in late 1945 for lunch. Hayek asked him if he was concerned with rising inflation and the appearance that the world economies were printing money and aggressively stimulating the economy with the appearance the policies would become fixtures for years. He told Hayek that although he was watching it, he still had influence and sway with economists and central bankers and would be ready to step in to avert a crisis. Unfortunately, less than six months later Keynes would be dead.

Today, the `best’ Universities have some form of `bastardized’ Keynesian Theory of a State planned economy with central banking authority. As the video below suggests, Classical (Austrian) Economic theory is not widely taught or recognized. The idea that limited government intervention and broad voluntary social and economic associations and exchanges would produce a vibrant economic system that would `self correct’ as Adam Smith suggested in his Invisible Hand theory is collegially laughed off, chalked up as naivety or marginalized in the Universities, `Think Tanks’ and by the Media.

Thomas Jefferson, in his first inaugural address in 1801 said, “Sometimes it is said that man cannot be trusted with the government of himself. Can he then be trusted with the government of others? Or have we found angels, in the form of kings, to govern him? Let history answer this question.” History has answered this question time and time again, and it is answering it so starkly even today. When the `few’ rule over the `many’ it provides for corruption, fragility, instability and the eventual outright rejection of the ruler. Jefferson later in his address says, “Still one thing more, fellow citizens, a wise and frugal government, which shall restrain men from injuring one another, shall leave them otherwise free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned. This is the sum of good government; and this is necessary to close the circle of our felicities.”

Well ladies and gentlemen, it has been the `Circle of our Felicities’ that has been broadsided and burst wide open by encroaching federalist powers that can’t wait to take away every decision and the appearance of risk in our lives. The goal: To minimize the liberties of the individual for the greater good of society.

If you watched the first video of Keynes vs Hayek, you’d have seen a witty rap/documentary of Classical vs Keynesian Economic theory by a group called EconoStories, here’s their second follow up video and in the Genre of successful film series (Godfather, Rocky), they’ve done a great job.

In an article yesterday in Bloomberg, Mark Zandi of Moody Analytics has said that the chance of major defaults in the muni bond market was ‘near zero’. Do you feel better now? Whew!

Before you sit back in your easy chair and turn on reruns of Lou Rukeyser’s Wall Street Week, there’s probably something else you should consider; the same group of soothsayers were spreading the elixir of calm and `happy days are here again’ in 2008 and using pretty much the same message.

Zandi, speaking before the National Governor’s Assn winter meeting in Washington said, “I think that the very loud hand-wringing over the prospects for major municipal-bond defaults is entirely misplaced.”

The Bloomberg article ‘Risk of Widespread Municipal Defaults’ by Mark Niquette and William Selway goes on, “Thomas Doe, founder and chief executive officer of Concord, Massachusetts-based Municipal Market Advisors, said he has seen nothing to change his view that general-obligation debt at both the state and local level is secure.“I don’t want to be Pollyanna about it,” Doe told the governors. “I have great confidence in you all, the markets do have confidence in you as well, and the informed investor, the institutional investor, understands that your debt is good.”

What Zandi and Doe fail to see or recognize is that much of the past year’s state revenues were subsidized in part by the Federal bailout that was a ‘one and done’ stimulus to teachers and other state employees which is now gone. Also as Meredith Whitney of the Whitney Group and other muni bond analysts have commented that 49 out of 50 states have mandatory balanced budget requirements and there needs to be substantial cuts in spending (particularly retirement/health care for govt employees) which is now starting to be addressed as seen in some of the collective bargaining controversies stirring in a few states.

Zandi and Doe and others who are now forecasting recovery and dismissing troubles in the muni market are the same ones who called bottoms too early in the housing collapse and never even saw the financial crisis of 2008. Zandi is a student and believer of Keynesian economics in the same vein as Krugman and Bernanke, that if government steps in to support the economy when private industry and household spending falters then recovery is right around the corner. Ironically, Zandi wrote a report on economic stimulus packages and their effect on the United States economy which was cited in Christine Romer’s report back to President Obama which influenced  bailout legislation (American Recovery and Reinvestment Plan).  Harvard economist Robert J. Barro and many other economists are now questioning Zandi’s model and the need for federal government intervention.

While Whitney and others who forewarned the 2008 financial crisis are hopeful, they are also realistic in gauging the political and wrong-headed economic principles like Zandi’s that governs public policies. There is a way out of this mess but it doesn’t come from creating more debt, quantative easing or any other government led options; it is rather cutting government, reassuring markets that there aren’t any government surprises coming so that prices will stabilize and surpluses (housing inventory) will wind down through private market mechanics.

In another ill forecasted article by Mark Zandi, he proclaimed, “I’m an Optimist!” Are you an optimist when it comes to government stimulus packages or federal reserve quantitative easing schemes? Well just like Burt Lancaster’s character in Elmer Gantry, they are firing up the revival organs to the sound of ‘happy days are here again’ as the message is being preached of government salvation that comes at a great price…your money and your freedom. ‘Do you hear me brothers and sisters!’

Risk of widespread Municipal Bond Defaults

Why Mark Zandi’s 2009 Housing Prediction is Wrong

While new home sales took an ‘unexpected’ drop of 12.6% in January, the jobs report showed promise as new jobless claims dipped below the 400,000 level. But does the jobless number really reflect what is happening in the jobs market? We know that individuals who can’t find employment after a ‘reasonable’ amount of time give up looking and might rotate in and out of jobless numbers, but is there an unregulated, unstructured ‘jobs market’ that is unaccounted for?

In a December 2009 article by Cato Institute’s Richard Rahn,’New Underground Economy’ lays out the characteristics of how underground economies ebb and flow. He starts out, “Here is the evidence. The Federal Deposit Insurance Corp. (FDIC) released a report last week concluding that 7.7 percent of U.S. households, containing at least 17 million adults, are unbanked (i.e. those who do not have bank accounts), and an “estimated 17.9 percent of U.S. households, roughly 21 million, are underbanked” (i.e., those who rely heavily on nonbank institutions, such as check cashing and money transmitting services). As an economy becomes richer and incomes rise, the normal expectation is that the proportion of the unbanked population falls and does not rise as is now happening in the United States.”

Rahn, in his article goes on to say that the underground economy is affected by federal and state tax, regulatory policies and inflation. When Sarbanes-Oxley was implemented in 2003 as a reaction to companies like Enron who didn’t account for off balance sheet liabilities in their reporting, it had the unintended consequences of building huge costs for large and mid-size companies to come into compliance. Most complied but some started to move headquarters out of US. Even today, while new start ups have slowed due to economic environment, there’s an increasing ratio of new companies starting up in Europe or Asia.

The smaller US businessowner has different alternatives than mid-size and large companies that are more public, they can simply take their business offline or underground.The trades and some services are more likely to go ‘offline’ to avoid heavy local, state and federal taxes which can eat up substantial profits and add time consuming additional recordkeeping and compliance. Carpenters, painters, lawn maintenance, home cleaning and many other small businesses who reported income for years are taking risks by pulling if not all their business, a good part out of the above ground economy.  This is reflected in January 2011 federal tax revenues which are up from the previous year. “Total government revenues rose by $21.4 billion for the month (Jan 2011) from a year ago to $226.6 billion, a 10.4% increase. Year to date, revenues are up by $65.4 billion to $758.4 billion or by 9.4%. Total outlays for the month though increased by $28.4 billion or by 11.5%.  Fiscal year to date, spending is up by $53.4 billion, or by 4.8%” Dirk Van Dijk, CFA ‘Federal Red Ink Less Than Expected.

When you look closer at federal revenue for January however, you see that payroll revenue is down even when factoring in the lowered employee tax rate by 2% (6.4 to 4.4), which only took affect in January and that the increase had more to do with liquidation of qualified money out of IRAs and 401(k)s, profit taking and asset repositioning as the estate tax issue wasn’t settled until year end.

In the trades like Carpentry, an owner might take his full business underground and work for cash without reporting or he may take his labor offline by hiring help that they pay in cash. The worker takes the risk of not entering social security and of possibly not building his credit profile and the employer takes the risk on an unlikely audit or insurance claim if payroll not accounted for. These are risks that are considered either consciously or unconsciously everyday as the cost of business continues to rise.

The budget battles happening in Washington and in the states like Wisconsin and now breaking out in other states like IL, OH and NJ is of particular interest to businessowners who hope for spending cuts but weigh the advantages and disadvantages of moving out of states or the country for larger companies and for small business owners, cutting another employee or taking their business underground.

New Underground Economy

Federal Red Ink Less Than Expected

At its core principles, Collective Bargaining is very reasonable and is a part of individual liberty: freedom to voluntary association and voluntary exchange which are also free market principles. A group of employees who work for a company in which some decide after meeting and exchanging ideas can go to management and negotiate their wants based upon their hard work and talents.

Unfortunately that is far from what exists today as worker interests and freedom to choose representation has taken a back seat to large powerful organizations that not only move masses of workers but also move massive legislation and influence elections through worker contributions and turnout. What was born in the 19th century Progressive and Social Reform movements that brought bargaining power to individual workers through numerous union options has been consolidated today through federal legislation into basically two organizations: AFL-CIO and Change To Win Federation.

Beatrice Webb, Socialist, Reformer, Economist and Co-Founder of the London School of Economics, is credited with first coining the phrase ‘Collective Bargaining’ in 1891.

Early US unionization and worker representation existed at local levels and organized more along craft or trade skills. Unions took on the characteristics of the European Guilds which while negotiating worker wages and hours also provided workers with education and training. While some employers fought union efforts many saw the benefits to the quality of their shops and in the products they were able to produce. While friction existed between worker and company ownership at times, companies had the choice to negotiate and workers had choices in who to associate and unite with. The late 19th century, particularly after the War and the depression of 1873 saw organizations like the American Federation of Labor and Knights of Labor open up to workers unprecedented bargaining power and a new focus for national unionism through political organization. Late 19th century and early 20th century social reform through progressive wage, immigration, African American and child labor reform saw the passage of local, state and federal laws that governed business and labor relationships and supported union centralization.

The Railway Act of 1926 and the court case Texas & N.O.R. Co. v. Brotherhood of Railway Clerks in 1930, strengthened union power to negotiate on behalf of workers. But it wasn’t until New Deal ground breaking legislation of the 1930s that put union at the forefront of the blue collar worker’s destiny.

In some ways The National Labor Relations Act of 1935 changed everything. It put regulatory powers in the hands of the federal government over labor and private industry. Ironically, the Act went much further than it’s inclusion in earlier legislation of FDR’s administration, the National Industrial Recovery Act (NIRA) of 1933 that was overturned as unconstitutional by the Supreme Court also in 1935. The result of the NLRA was the formation of the National Labor Relations Board which oversaw union and private industry’s labor contract negotiations. But it didn’t stop there, it also influenced union activities, worker voting and representation and the consolidation of power as unions merged into much larger organizations. The NLRB codified labor law, which would influence some of the largest US industries for the next 70 years.

The AFL-CIO has over 56 key Unions that represent several hundreds and over 11 million workers according to a 2008 survey. The Change To Win Federation is a collection of 4 major unions: The International Brotherhood of Teamsters (IBT); Service Employees International Union (SEIU); United Farm Workers (UFW); and United Food and Commercial Workers (UFCW), as of 2008 they had 4.8 million members. These organizations have the financial resources and votes to affect elections and legislation passed through Congress. Unfortunately, just like federally protected industries and companies like auto and banking, they result in monolithic centralized entities that lack competition and lose sight of their goals: individual workers.

The current Labor environment has become interesting due to the ‘uprising in Wisconsin’ where Governor Scott Walker and the legislature of Wisconsin, in addition to looking for wage and benefit concessions has also included in SB 11 changes in collective bargaining in the state for municipal and state workers; which at first blush might seem ominous for Wisconsin union workers and other state and federal workers. The legislation limits collective bargaining to wages with a CPI cap and in addition it reduces contracts from 2 years to 1 year. Also, and most importantly for union workers it includes a clause that would open up worker choices of union representation and the ability to ‘fire’ unions or replace management every year. The state would also require certification and re-certification of union entities:

Under SELRA and MERA, a collective bargaining unit elects a labor organization as its representative once a majority of the employees in that collective bargaining unit who are actually voting votes for that labor organization; that labor organization remains the representative unless a percentage of members of the collective bargaining unit supports a petition for a new election and subsequently votes to decertify the representative. This bill requires an annual certification election of the labor organization that represents each collective bargaining unit containing general employees. If, at the election, less than 51 percent of the actual employees in the collective bargaining unit vote for a representative, then, at the expiration of the current collective bargaining agreement, the current representative is decertified and the members of the collective bargaining unit are nonrepresented and may not be represented for one year. This bill requires an initial certification election for all represented state and municipal general employees in April 2011.

In some ways the condition of the union system and the individual worker placed into that system is similar to the US government system which has become too centralized, powerful and sacrifices the interests of the individual for the collective. The US Constitution stands as a plumb line to correct government, which hopefully is what some of today’s state conflicts reflect - change (even when it is good) is seldom without pain. . Unfortunately for union workers there is no ‘constitution’ to look back to specifically, but understanding that representation is more effective when it operates at local levels. Also, decentralized systems through state and local organizations allow for the recognition of unique differences and through experimentation, expose ideology and operations to success and failure. As there’s a call around the country for ‘Workers Unite!’ mostly by union operatives, workers should really study history and then ask themselves, ‘am I getting a fair shake from my union and, is what my employer asking of me fair’?

The Walker Bill – SB 11  To read Full Bill

 

 One summer my brother and I stayed with relatives in a tony area of Connecticut; our family was middle class from a suburb of NYC and not schooled in the finer things, we were however, very good in sports. We’d show up at the tennis courts in mismatched shorts and tees, torn sneakers (high-tops not Tennis) but we’d kill anybody we’d play. The elites at the club tolerated us for a time, but refused to recognize our skills and couldn’t wait for us to leave.

In a recent interview with Bill O’Reilly, Charles Krauthammer commenting on CPAC (Conservative Political Action Committee), and their year after year top vote for Ron Paul in their straw Poll, belittled Paul’s support for ending the Federal Reserve, calls for substantial cuts in the defense budget and his constitutional discipline of separating federal and state power that would extremely realign not only government but also political fortunes.

While Krauthammer is my favorite elitist and intellectual he does unfortunately suffer from a condition, ‘Elitist Intellectual Ailment’ (EIA), which is characterized by ideas and policies that emanate from a small group of schools and think tanks that has a love for information and the need to connect causality. I call it the ‘Joe Frazier’ Socio-political style of `leading with your head’. This group believes that there isn’t a problem that can’t be intellectually worked out in a lab on an Ivy League campus through the hands of elitists (sons and daughters of the same) who then can through government management of society process their answers. To elitists, Government has never been the problem, the problem has been either differing elitist theories on the use of government or the improper use of government by the rare occasions that Commoners (non-elitists) have been in power. While Progressives favor the government as a re-distributor of wealth and income and Conservatives favor government as a protector of traditional values, they both favor government. They reject the ideas of Ron Paul and true free market believers who suggest that in an open society, through voluntary exchange and association, societies don’t necessarily collapse but ‘self-correct’.  

Krauthammer who honored in political and economic studies, has a degree from Harvard Medical School in Psychiatry and practiced until 1978 when he went to work for the Carter Administration is like many Conservative and Progressive elitists, they at times can move back and forth between political philosophies and political parties. While they may hang out in different areas of the ‘Country Club’, at the end of the day they still sit down at the same table and enjoy hot toddies in front of the same fire. Both believe that society is better managed by experts (another name for elites) who can steer resources, labor and values for the greater good.

To Krauthammer and other elitists, Ron Paul is the most peculiar of anomalies; he is bright, well educated, understands Washington like elitists, but yet he doesn’t see government as the overriding solution to society.

In a NYTimes best seller, ‘The Black Swan’, Nassim Taleb (University of Paris, Wharton School) wrote about the fragility that was inherent in financial, economic and public policy models coming out of the best schools and think tanks, that didn’t account for unknown variables. He says unlike nature which protects against exponential growth and centralization, the hybrid derivatives built in the financial markets and the government built banking behemoths would lead to a financial crisis. “If I shot an elephant, the biggest animal on earth you’d be unhappy. I will probably get some bad press as well. Will it impact the ecology of the planet though? No. If, before the financial crisis 2 years ago, I shot a company called Lehman Brothers, would it have had an impact on the world economy? Yes. The lesson learned here from the elephant is that it is not too big. Companies get too big” Taleb.

The reason that companies get too big, is the same reason that values like home prices, USD and drugs are distorted because of public policies built upon flawed interpretation of data and not properly accounting for risk. You could never have monopolies or the size companies we have today without government regulations that protect industries and corporations from competition and provide subsidized capital. But monolithic structures become prone to stress and create system failures when they fall. Nature allows for the largest tree in the forest to fall with little impact, while if the largest entity in almost any industry failed it could cause substantial impact to a community, state or a nation’s economy.

In another book, ‘Open Society’, Karl Popper traces the elitism of Conservative and Progressive theories back to Plato. Plato saw societies as machinery that would decay and become obsolete over time if not managed and planned for, he felt decay could be forestalled by ‘managing’ society to an ideal that would need to be reinterpreted over time. This would be done by a special class of individuals called ‘Philosopher-Kings’ who would set the vision. They would need to go to special schools for training and most likely come from a select (elite) group of people. He envisioned a second class of people, ‘The Warriors’ who would enforce the vision of the ‘Philosopher-Kings’, these would be police, politicians and judges; and then there would be a third class, ‘The Workers’ who followed the rules and allowed themselves to be managed and receive the benefits of a better society. As today, it would be unconscionable to move from class to class for the most part, and there would always be a need for the philosopher (political) class to manage society.

To quote Popper, “Our knowledge can only be finite, while our ignorance must necessarily be infinite.” In Popper’s theory of Falsification, he says every theory and policy is prone to failure and must be assumed so until proven so. Theories ‘cooked’ in the lab, proven on a very small data sample, could have tremendous unintended downside consequences or at a minimum – distort values.

Elitists don’t like ‘old fashion’ ideas of limited government and constitutional principles that separate government powers between the individual, states, and the federal government. Which allows for currency, food and values to self-regulate through voluntary exchange and association. To them it is too much power in too many hands. The idea of everyone doing whatever they wanted, would destroy a society, the very thing that Plato, Hegel and Marx warned against.

A truly free society, where government merely intervenes to protect individual liberties and men and women are free to succeed or fail? No, no, society must be managed and even though we have times of crisis, the boys and the girls in the labs of Princeton and Harvard will have the next great public policy solution and with a little more government control in their hands (and less in yours), elitists will enable Plato’s vision to continue.

To quote the movie ‘Anchorman’ the 2004 parody of 1970s TV Anchormen starring Will Farrell, “That escalated fast” referring to a group of competing network anchors getting together to talk about their difference and suddenly someone pulls out a trident and someone else is missing a limb. I guess you have to watch the movie to appreciate it. In some ways that’s where the Tea Party movement has come to. The differences are now becoming apparent.

Within the Tea Party movement there’s much diversity: Income, age, ethnicity, religions (or not), personal interests, philosophies of government and social values to name a few. Because there were few identifiable leaders andit was an organic ‘bottom up’ movement, the media grew frustrated trying to find whose head they could pin the phenomena on andhow they should cover it. The Tea Party has changed the s0ciopolitical landscape, but has the movement become a victim of its own success?

I remember the first meeting I went to here in Phoenix, AZ at the state capitol; I engaged old, young, hippies, married, unmarried, those with different sexual orientations, bikers, liberals, conservatives and libertarians. We were excited at the prospects of a grassroots change in Washington and were willing to put our differences aside and focus on what at the time we perceived to be the ‘uniting’ problem: Federal Government was growing too big, taking on unconstitutional powers and crowding in on our personal rights. The challenge to Washington by Rick SantelliCNBC, February 2009, “Mr. President, are you listening?”, rung out around the country as an organizer to confront federal government powers that were spending money they didn’t have andusing power they were not granted. America showed up at Tea Party Rallies around the country and then showed up November 2nd 2010 at the ballot box.

Recently, as the newly elected congressional members converged on DC for orientation there has erupted factions within the movement as the same diversity that caused synergy toward change is now threatening to tear the movement apart.

The Tea Party’s salvation is in the US Constitution itself and the philosophies of our founding fathers. Even after the failure of our first Constitution, The Articles of Confederation, at the end of 1788 and the adoption of our new one, the biggest issue was how much power to give to this newly formed federal government and how to hold it at bay. Jefferson warned of ‘unrestrained’ government, while others like John Adams beckoned for a monarchical republic like Europe was turning toward. In some ways the TP movement possesses similar traits to the failure of the first constitution and the need for a new one. While the AoC lacked teeth in raising finances and representation, there were those at the time who didn’t want to see its demise and there were other forces at the time that were pushing for a constitution with more federal power: banking, military and social. The Federalist Papers expressed the thinking at the creation of the second constitution and the works of Montesquieu’s philosophy of governance (Separation of Powers), the Bible, John Locke, Thomas Hobbes and the events of the ‘Enlightenment’ period and its effects on Europe, guided the Constitution that we accept and defend today.

There were provincial and person interests that conflicted at the time but were put aside at least momentarily as this nation signed a document and set forth on a journey based on strong self government that negotiated openly in local (state) affairs through state (colonies) government and deferred to a new federal entity only on specific matters between states, foreign affairs and the specific items laid out in Article 1 Section 8 of that document. Men were free to pursue their own interests without the burden of the Crown or another abusive government robbing them of their labor and freedoms, except for the limited responsibilities they committed to the federal government to maintain a nation (only those few things that were held in common) and their local commitments to the state (localities) based on its charter or constitution. Because of the theory, Separation of Power, while most power resided in the state, they were free to choose where they wanted to live. So while some territories decided on state churches, others did not, and while some decided on state schools, there were others that did not. The Constitution gave its citizens the greatest potential of individual liberty but still maintaining a nation under a ‘collection’ of eventually 50 individual States that reflected the interests and will of its citizens.

For those of us who have identified with the TP movement realized somehow America had lost its vision and constitutional intent. In a series on Constitutional Liberty, I’ve distinguish between two types of philosophies of governance: Negative vs. Positive Liberty and how they impact our freedoms and the types of legislation that it creates. Here are a couple of excerpts:

“Recently Pierre Mandelbrot passed away at 85, the mathematician who came up with fractal geometric theory in the form of the Mandelbrot Set. Mandelbrot coined the term fractal and was able to show that objects that seemed ‘smooth’ were actually `rough’ and divisible into smaller units of the whole, like mountains, clouds, coastlines and arteries. He once wrote, “Clouds are not spheres, mountains are not cones, coastlines are not circles, and bark is not smooth, nor does lightning travel in a straight line.” So how do you measure a coastline? Wouldn’t it depend upon the resolution or scale you are looking for; which brings us to the point of government or public policies that are designed nationally or on a state or local level to govern the lives of their citizens. In some ways Individuals are fractal-like (in their relationships, motivations, decision-making), there appears to be a ‘self similarity’ and `smoothness’ that Mandelbrot refers to but upon closer observation you see the `differences’ and ‘roughness’. This is partly why social policies and financial systems become fragile and fail, they are unable to account for the immeasurable differences or variables of the dynamics in human behavior in their economic or social models. Out of the crooked timber of humanity, no straight thing was ever made.”(Immanuel Kant)”

“In his 1958 essay, “Two Concepts of Liberty”, Isaiah Berlin lays out the two basic philosophies of government based on ‘Negative and Positive’ Liberty. Berlin’s opening paragraph says, “If men never disagreed about the ends of life, if our ancestors had remained undisturbed in the Garden of Eden, the studies to which the Chichele Chair of Social and Political Theory is dedicated could scarcely have been conceived…Where ends are agreed, the only questions left are those of means, andthese are not political but technical, that is to say, capable of being settled by experts or machines like arguments between engineers or doctors.” Unfortunately, this is not how mankind works, we essentially are not equal (size, intellect, interests, strength, personality), we don’t have common goals, common interests and our desire for outcomes can be very different. Ludwig Von Mises in his classic, ‘Human Action’ says that it is because of man’s inequality that it allows for cooperation and a healthy society: one man’s strength and another’s intellect can work to produce more in cooperation than singular effort. We are therefore more like the fractals that Mandelbrot described than automated systems to be engineered by social and economic scientists who if they can just collect more monies and data will solvethe human viruses in the applications. The theory of NegativeLiberty in reference to governance can be illustrated in JS Mill’s ‘Harm Principle’, “The only purpose for which power can be rightfully exercised over any member of a civilized society, against his will, is to prevent harm to another.” Berlin puts it this way, “The first of these political senses of freedom or liberty, I shall call the `negative’ sense, is involved in the answer to the question `What is the area within which the subject–a person or group of persons–is or should be left to do or be what he is able to do or be, without interference by other persons?’” Berlin goes on to describe PositiveLiberty, “The second, which I shall call the positivesense, is involved in the answer to the question `What, or who, is the source of control or interference that can determine someone to do, or be, this rather than that?” So, NegativeLiberty steps in when man forfeits his ‘right’ to freedom based on a rule or law (treads on another’s liberty), while PositiveLiberty sets behavioral standards that must be met by man’s performance with an ideal outcome of justice, peace or prosperity, for example. PL (PositiveLiberty) limits man’s freedom from the outset, while NL limits a man’s freedom only if he violates a law. The US Constitution was designed giving the Federal Government powers specifically enumerated with Negative Liberty in mind, while those powers not specifically enumerated where left to the States, who through each of their Charters or State Constitutions could allow for Positive Liberty, open to success and failure and the ability of its citizenry to exercise its freedom, whether to flee or stay.”

In other words, centralized power and policies based on large scale projects like those coming out of think tanks and Universities by both sides of the political aisle are inherently flawed because their data is incomplete. The results are what we have today, programs that don’t work and awful unintended consequences, which has led to the Tea Party movement. The constitution protected against this, but over the last century through new interpretations of constitutional power like, ‘Supremacy’ and ‘Commerce’ Clauses, it is like a lock has been picked and individual freedoms are being stolen.

Today’s TP faction seems to be between social conservatives, libertarian and liberals and centers around social value differences . The constitution allows for these issues to be addressed on the state level where public policies can be designed to reflect the interests and lifestyles of its citizens and as the Mandelbrot Set showed above, large scale social policies that assume collective interests, collective equality, and collective justice are exposed to large scale failures. While smaller up close social policies within family, friends and local government allows for smaller scale success and failure and the ability to adapt quickly just as in decentralized economic markets. This is the great flaw in the two dominant parties: Progressive and Conservative philosophies. Modern Progressives believe in ‘managing’ national economic markets to produce an outcome of a society that is Just, Peaceful and Equitable. The Conservatives believe in ‘managing’ national social values to produce an outcome of a society that is Just, Peaceful and Equitable. What modern Conservatives and Progressives miss is that both economic and social values move in tandem and respond in similar ways to freer markets of exchange and association – decentralized (states) small successes and failures don’t destroy the system but strengthen it, while centralized (federal) public policies become fragile and susceptible to catastrophic failure.

The zeal for conflicting desires of freedom and social change that we have today existed at the founding of our nation. As people we are not equal, nor the same, but as Ludwig von Mises said in his book, Human Action, “It is because of the inequalities of man that cooperation can occur.” One man’s strength and one man’s intellect can produce more together than each man’s singular effort. Unfortunately, most political groups are more about ‘harmonizing’ life through arcane centralized federal power which limits liberty, rather than restricting federal powers to constitutional intent and allowing the states (really the individual) through free exchange and association to work on cooperation.

Tea Party friends, let’s get back to the business of dismantling federal power and remanding it back to the states (ultimately the individual) where government can work or even if it fails you and I have recourse whether to flee or stay. The next step is an action plan to bring government into alignment with the Constitution.

The Supreme court began oral arguments this morning in an important case regarding school choice, private/religious education and the sovereign power of the States to set their own tax policies. In the case, Kathleen M. Winn, et al. v. Arizona Christian School Tuition Organization, et al, the plaintiffs allege that Arizona Christian School Tuition Organization (ACSTO) while qualifying as a vendor under Arizona’s statute allocates 90% of its resources to Christian schools. The plaintiff is claiming that this violates the Establishment Clause in the First Amendment. The defendants are claiming that this is outside the jurisdiction of the Federal Government and that the Establishment Clause speaks to Federal Law and not State Law and in additon that the monies are donated freely by citizens and that there are no known injuries suffered by plaintiff except as Arizona Taxpayer status.

In an earlier case the same plaintiff Kathleen M. Winn et al sued the Arizona Department of Revenue for private/religious education tax credits in 2002 and lost.

This case is a canary for Federal-State challenges of Constitutional power to come.

Video: AZ School Choice Case Goes to Supreme Court

Kathleen M. Winn et al vs. Arizona Christian School Tuition Organization et al

PDF of Supreme Court Case

So where is the Christian Moral Majority movement today?

What started out thirty years ago as a crusade to drive Christian morality into politics and thus into the laws of our nation and statehood, has ended not with a bang but in a puff of vapor. Its leadership is gone or faded into the social background and where as political parties desperately courted the movement, today there’s a definite disassociation. So what happened and what has it left behind in its wake? I would suggest that the antithesis of the Moral Majority is the Progressive Movement that now shepherds universal health care, environmental legislation and re-distributive policies designed (in their minds) to bring about social justice and equality. Being a part of the Moral Majority Movement in the 1980s and 1990s, and reflecting on what the movement was trying to accomplish, I unfortunately today realize it was misdirected. Some of it might even seem obvious now: ‘The majority forcing its will on a minority’ (like censorship) or ‘limit personal freedoms for the greater good’ (homosexuality). The gospel message starts small like a seed and grows; it changes the life of an individual who then can effect change in his family and community. Christianity to be effective changes mankind one individual at a time, and individuals change society. With a wind at its back and a great candidate in Ronald Reagan, the Moral Majority tried to use its political capital to enforce its moral will on American Society through the use of State powers and it was ugly and shameful. Through the gospel we preached and tried to demonstrate love in our personal relationships, but in our political affiliations and support of heavy handed ‘Pro-Christian’ legislation we demonstrated intolerance for personal freedoms under the law. Our motives might have been for the well being of the ‘sinner’ but in our disregard for the US Constitution and personal freedoms we hardened more hearts than we helped and in my opinion helped to mobilize the progressive movement in opposition.

While the progressive movement dates as far back as Plato and Aristotle and the modern movement from Hegel, Marx and Stuart in response to the Industrial Revolution which embodied itself in US politics with Theodore Roosevelt, Woodrow Wilson and FDR’s ‘New Deal’; it had become dormant in the 1970s, but revived partly in opposition to the Moral Majority Movement in the 1980s, you can read the history of the progressive movement that I wrote on my blog at (The Progressive Movement: Individual Regressivism) for some additional insight. While the philosophies of the Progressive and Moral Majority movements may be different, their delivery system is very similar. The Moral Majority starts out from the perspective, ‘God is not fairly represented in society’, while the Progressive Movement says, ‘There are inequities and abuses in society’. The Moral Majority and Progressive movements are Collectivists in their approach to ideas and in using government, by identifying groups or classes in society. Collectivism is grounded in Holism which believes that the individual is part of a system and inseparable, so in Collectivism the state is emphasized over the individual – ‘the greater good’. Both the Moral Majority and Progressive movements believe that the government was to be used to carry out their policy agendas. The government would use its power to force the will of the many onto the will of the few. Neither one of the movements has shown success at accomplishing their goals; the prohibition movement of the 1920s was a disaster (Alcohol Prohibition Was a Failure) as are drug laws today at promoting morality, and many of the wealth redistribution and government social programs from FDR’s New Deal have produced unintended consequences and huge deficits.

So, the Progressive Movement which unlike the Moral Majority movement has some political capital left in its arsenal. The question is, will it go the way of the Moral Majority and other socio-political movements of the past, which gain power and try to force its will on its subjects only to be eventually rebuffed? Or will it (where I believe the Moral Majority failed) try to protect all freedoms (left and right) and encourage social change (as Moral Majority should have) through society privately with government as a ‘defender’ of freedoms instead of playing an `offensive’ role as a provider. There’s an old idiom, “You can lead a horse to water but you can’t make it drink”, that could be upgraded to “You can lead a horse to water but not only can you not make it drink but you can make it hate water and you as well.” Social movements that use state control and force, even those well intended and containing admirable goals will create more unintended consequences, raise suspicions of the state with possible overreactions and eventually will be turned away by the people in the end.

Christopher M. Mahon, Editor 2009