Friday, January 29, 2010

Ellie Light has a Facebook Page

Hey guess what. Ellie Light, the now famous writer of a multitude of pro Obama letters to the editor, turns out to have a Facebook page. Ellie , you may recall, got her letters published in 42 different papers in 18 different states and claimed to be from dozens of different hometowns. She had nothing but wonderful things to say about our president. Congratulations to the Classical Values website for making the find. The website includes a charming picture of Ellie seen on the left (how appropriate). I can't help but feel there's something familiar about that face. What do you think?


Tuesday, January 26, 2010

Dear Abby: What Should I Do? My Senator is a Tool

I got this pathetic e-mail today from my senator's press office.  It's just awful.  I sent them the following  response to tell them so.

Who writes this crap?  It's insulting.  Does anybody proof read this nonsense?  Whoever wrote this must think we are a bunch of kindergarteners.  Senator Carper should read this stuff before it goes out to the public.  It's not like it's two thousand pages or anything.  We know he doesn't bother to read that stuff.  But this is just one page.  And it is Sooooo terrible.  What a disgrace.


January 2010

Dear Fellow Delawarean,
Happy New Year! Like you, I am looking forward to the many important challenges and opportunities we will face in 2010. In the Senate, these will include continuing to debate health care reform, as well as focusing on job creation and the economy, strengthening our national security measures, confronting the increasing effects of global climate change, working to ensure the stability of our banking system and many more. Needless to say, it will be a busy year.
Earlier this month, I sat down to discuss some of my personal priorities for this upcoming year. Listen here.

I am also looking forward to an upcoming hearing I am hosting as chairman of the Senate Subcommittee on Federal Financial Management, Government Information, Federal Services, and International Security on "greening the government."
Federal agencies use an enormous amount of electricity and fuel in their operations whether to heat a government building or to deliver the mail, so President Obama issued an Executive Order last year calling for a reduction in energy use. My January 27 hearing will discuss how the federal government can save energy – and save taxpayer dollars. In addition, I will be holding a similar field hearing in Delaware in February with Governor Markell.
You can watch the hearing live at 2:30 p.m. on January 27 here.


Last month, Copenhagen, Denmark hosted a global conference on climate change attended by 192 countries. The goal of the event was to reach a new international agreement on how to fight climate change that would include commitments to lower greenhouse gas emissions from all countries – especially from the world’s biggest emitters like the United States and China. The conference was successful in producing a voluntary framework, called the Copenhagen Accord, to start reducing global greenhouse gas pollution.
Back at home, my colleagues and I in the Senate continue to debate ways to slow the dangerous effects of climate change, like rising sea levels threatening our coastal communities both in Delaware and around the country.
Learn more about the Copenhagen conference and the upcoming climate change debate…


The 2010 Census is less than three months away. So earlier this month, I hosted a kickoff event for the "Census In Schools" program in Delaware. This program aims to provide educators with the resources they need to teach students about the importance of the census, so they in turn can help deliver this message to their families and improve the response rate.
See pictures and read more about the event here...


Another event I hosted this month celebrated the start of the Nemours Health and Prevention Services "Make School a Moving Experience" program, which is designed to get kids off the couch and increase their physical activity. This is an exciting program that I know will improve the lives of Delaware children. As a strong advocate of physical activity and Nemours' "5-2-1-Almost None" healthy living program, I look forward to seeing the "Make School a Moving Experience" program in our local schools.
Learn more about my trips around the state…


Please continue to stay in touch with me when you have questions, concerns or comments about issues that are important to you. And as always, you can find the most up to date information on issues and ways in which my office can be of service on my website.
Tom Carper

IRA/401K Reform: If Their Lips are Moving, You Know They're Lying

The news this morning is that the Congressional budget office estimates this year's budget deficit at $1.35 Trillion.  That is compared to a total budget of $3.5 Trillion.  In other words, more than a third of everything the government spends in a year is borrowed money.  Man that is a boatload of T-Bonds.  Bad time for the Chinese to be getting nervous about buying our debt.  The administration has got to be searching for some other poor suckers to sell this stuff to.  Well they might have found just the suckers they're looking for. 

President Obama and Vice President Biden announced proposals yesterday that they claimed would help the middle class weather the storm of the current economic downturn.  I expect we'll hear these ideas repeated in the State of the Union Address on Wednesday.  One of their proposals had to do with some so called "reforms" to the IRA/401K rules.  You can hear what they had to say from the C-SPAN coverage at this link.  The part about IRA/401K reforms is between 5:31 and 7:40 minutes.  The language sounds innocent enough, but the details, when they finally emerge, will likely reveal just what unprincipled villains our politicians really are.

Here's what Vice President Biden said:
1)  Thousands of workers today don't have a good option to save their hard earned money.  We want to mandate that employers who don't already offer a retirement plan at work provide an automatic (direct deposit) IRA vehicle to their employees.
2)  We want to offer a 50 % match on the first $1000 saved.
3)  We want to strengthen and update 401K regulations so they can save with greater confidence.

Just on the surface of it, there are a few things that might set off alarm bells.  First of all, no conservative worthy of the name would welcome yet another mandate for employers in the requirement to set up the IRA.  And secondly, the 50% match on the first $1000 saved will cost the government up to $500 per saver per year.  But while these policies might be contrary to our libertarian principles,  few of us would raise too much of a fuss about these proposals as they stand.  But what if we flesh out the plan with a few details? 

First of all, is it true that workers don't already have good savings options?  No, that is clearly not true.  Many workers have access to tax deferred 401K plans at work, and many of those offer an employer match to some extent.  And even if they don't have a 401K, every working American can open a tax advantaged IRA account.  These accounts have a tremendous appeal and offer a distinct advantage over many alternatives in that they belong to the individual and he has total discretion as to how the money is invested, from the most conservative money market to the riskiest stocks and bonds.  Do we need the nanny state to drag us into a savings plan and then most likely mandate how we invest within that plan?  Maybe it's not a big deal if the plan is voluntary, but what if it isn't.  Teresa Ghilarducci, a Professor of Economic Policy Analysis at The New School for Social Research Department of Economics testified (read transcript), or (watch video 31:55 to 37:04 minutes) before the House Committee on Education and Labor on her idea for a mandatory government run savings plan where workers would be required to save 5% of their total earnings each year.  This is over and above the money already taxed away as Social Security premiums.  The money would be invested in "safe" government bonds (are you starting to smell a rat yet?) and the saver would be guaranteed a 3% return above inflation.  (Read a brief synopsis of the plan in her NY Times Op Ed)  "Well gee," you say.  "That doesn't sound too bad.  I might be happy with 3% above inflation.  And government bond are guaranteed by the full faith and credit of the United States.  What could be safer than that?"  Well look at it this way.  If the government forces you to fork over 5% of your earnings, that's like an additional 5% tax on those earnings.  "But you'll be getting a return on that money," you say.  Yeah, maybe.  But, perhaps you have a better idea of how to invest.  Perhaps you feel you can earn 5% above inflation if you invested on your own.  Or maybe 15%.  Whether you can do it or not, shouldn't it be your decision whether or not to try?  Should the government be able to compel you to invest the way they want you (or need you) to invest?  And what happens to the value of existing stocks and corporate bonds when savings are suddenly diverted into government bonds instead of other asset classes?  What happens to the value of existing IRA's and 401K's that are invested in those newly orphaned stocks and bonds?  And how will businesses raise capital for growth and investment if the market for corporate stocks and bonds suddenly dries up as more and more savings are diverted to government bonds? It's as if the government is saying, "We need the money more than the private sector does and we're willing to break arms and legs to take it."

Furthermore, how reliable is a return of 3% above inflation if the government gets to define what the inflation rate is.  The rate of inflation is a statistic that can be easily manipulated depending on how it is measured.  And just how safe are those government bonds really?  This sounds like a replay of the whole Social Security Ponzi scheme.  You pay social security taxes into a fund, but instead of putting the money to work in real productive assets to grow your retirement nest egg, the money is "invested" in Treasury Bonds.  Or at least that's the story we are told.  The real story is that the government spends the money on entitlement programs for someone else and replaces it with Treasury Bonds.  These are essentially IOU's that say the government will use its taxing authority to repay you your "entitlement" when the time comes.  The problem is our fiscal profligacy will leave us unable to raise enough money by taxation to fully repay the debt.  That's why people rightly claim that the unfunded liability in Social Security and Medicare is an impending train wreck.  And this new "savings program" would simply compound the problem.  It's nothing more than a way to divert the savings of productive Americans to prop up the Treasury markets and to delay the inevitable catastrophe that is coming.  The administration is desperately looking for a way to kick the can down the road a few more years.  Sooner or later, the system will implode unless we face reality and make some hard decisions about entitlement spending.

Part two of the Vice President's plan is the 50% match on the initial $1000 every year.  Where is that money going to come from?  Do we just add it to the deficit, or is there a proposal to pay for it?  Well, I have good news and bad news.  The good news is that they don't plan to add to the deficit.  They plan to pay for it.  The bad news is that in order to pay for it, they propose to eliminate or reduce the tax benefits of IRAs and 401Ks.  So the net effect will be to discourage the individual owned, individual directed IRA or 401K, and shift the money to a government run and government directed Guaranteed Retirement Account (GRA).  Once again, the links above to Professor Ghilarducci's proposals will provide more details.  This just reinforces the shift of investment dollars from private productive uses into wasteful government uses.  It's a treasury market gravy train in the making.

Now I've provided some details of a possible proposal from the administration, but in truth, I don't know just what form the proposal will take.  In fact, I doubt that the government would disclose their true intentions by revealing the whole plan all at once.  They'll introduce the most benign elements of the plan at first, just to get the camel's nose under the tent.  Then over the next few years, the more onerous elements of the plan will be introduced incrementally.  The infrastructure of the ultimate plan will be in place, and we'll be told that we must make the necessary changes or face financial ruin.  If they are careful, maybe we'll never see it coming until it's too late.  Isn't that how Social Security evolved?  FICA  taxes started out low but have gradually grown over the years as has the upper threshold of income subject to the tax.  Eventually, they had to subject payments to income tax and raise the retirement age to keep the program out of bankruptcy.  I expect in the future, we'll see further erosion of benefits through means testing eligibility for payments and inflating away the real value of benefits.  The administration is trying to run the same play with this 401K/IRA scam, but just to the other side of the field.

There has been some serious speculation for years that Congress, and now the White House, wants to tap into the huge reserve of private retirement savings in this country to support the Treasury market and fund our "far as the eye can see" deficits.  And what better time than the present when investors have taken a huge hit to their net worth, and they are nervous about the long term value of their retirement nest eggs going forward.  Didn't somebody in the West Wing say something about not letting a crisis go to waste? 

Part three of the proposal was a vague reference to strengthening and updating 401K regulations to provide savers with greater confidence.  I suspect the confidence piece of that has to do with the guaranteed part of Guaranteed Retirement Plan.  As for the other "updating", here's what I'm betting we'll see based on what I've read.  The administration will move to discourage lump sum distributions from retirement accounts in favor of purchasing annuities which are heavily invested in Treasuries.  Unfortunately, annuities have a bit of a bad reputation due to the often inflated costs and commissions associated with their purchase.  In an 8 January 2010 article in  Business Week the author points out that only 2% of 401K plan participants currently convert retirement savings to an annuity upon retirement, and he cites a study that indicates 7 out of 10 households would object to a requirement to convert retirement savings to an annuity.  Add to all this the fact that requirements to purchase annuities would yield huge profits for insurance companies like AIG, and you don't exactly have a recipe for success with the voters.  And yet our tin eared government presses ahead as evidenced by this quote from the aforementioned Business Week article:

The U.S. Treasury and Labor Departments will ask for public comment as soon as next week on ways to promote the conversion of 401(k) savings and Individual Retirement Accounts into annuities or other steady payment streams, according to Assistant Labor Secretary Phyllis C. Borzi and Deputy Assistant Treasury Secretary Mark Iwry, who are spearheading the effort.

Deputy Assistant Treasury Secretary Mark Iwry published a paper in 2008 when he was a fellow at the Brookings Institution that suggested one means of increasing annuity purchases.  He recommended retirement plan payouts be structured by default as an annuity in the first two years.  Then, unless the beneficiary opted out at the two year point, the annuity option would become permanent.

Any way you slice it, there will be some significant changes offered up affecting the way Americans save for their retirement.  We need to be wary of a hidden agenda disguised within these proposals.  Having been defeated or at least delayed in their efforts to take over health care in this country, this radically progressive juggernaut that is the Obama administration has set their sites on a new target; the $3.6 Trillion in employer based defined contribution retirement plans including 401Ks.  Let's hope we can mobilize the same awareness and outrage in this battle as we did in the battle against ObamaCare. 

Here are several other references that might fill in some holes in the story.

 Would Obama, Dems Kill 401K Plans?

Argentina Seizes Pension Funds to Pay Debts.  Who's Next?

Are Congressional Democrats Talking About Confiscating IRA and 401K Investment Accounts?

Guaranteed Retirement Accounts

Targeting Your 401K

Obama Administration Wants to Annuitize 401Ks and IRAs - Mandatory "R Bonds"

Just Another Money Grab by the Gov?

Obama's Brilliant Plan to Finance the Deficits:  Force Investors to Buy Treasury Bonds

Converting 401K and IRA Funds Into "Steady Payment Streams"

Will Obama Seize Americans' 401K and IRA Funds?

Next Up:  Obama Wants Your Retirement Money

Dems Target Private Retirement Accounts

401K/IRA Screwjob Coming?
Administration Explores "R Bond" as Option for Retirement Accounts


Friday, January 22, 2010

The Presidents Plan to Reform Banks. So Far I Like It

On Thursday, the president unveiled a proposal to limit the functions of the big banks to less risky financial transactions.  This precipitated a drop in the Dow of over 200 points, and left some conservative pundits with steam venting out of their eyeballs.  I'm sure I'll find lots to hate about the president's plan as the details are fleshed out, but so far, I think this is a great idea.

As I understand the plan, it will create a financial system with several tiers of risk behavior.  At the bottom, with the least risk will be the plain vanilla banks.  They will be the only ones with FDIC deposit insurance.  They will be the only ones who can borrow money at favorable rates from the Federal Reserve.  In other words, the only ones whose activity will have the safety net of government protection.  If you want a safe place to invest your money, although with a lower rate of return, this will be the place for you.  These institutions won't be allowed to invest in riskier assets like credit default swaps or collateralized mortgage obligations.  They'll do traditional banking functions like taking in deposits and lending to qualified borrowers for things like starting and expanding businesses, buying  homes, and purchasing cars and appliances.

Anyone who wants to chase a higher return can do so through investment banks, mutual funds, or hedge funds, but they will have to accept the greater risk that greater rewards inevitably entail.  The only thing guaranteed about these institutions is that if they fail, the government will just let it happen.  No bailouts.

Surely the devil will be in the details.  Every level of risk will have its own level of regulation, and it's here that the fecklessness of the Democrats will likely show itself.  We can't let them tinker with regulatory rules to force bad practices on our financial institutions in the name of social engineering.  No more subsidizing bad loans from Fannie and Freddie to promote home ownership by financial deadbeats.  That's the kind of crap the Dems will try to pull off under the veil of "prudent regulation of our financial industry".

But lets not reject the president's initial proposal without a fair hearing.  If done correctly, this plan essentially reinstitutes Glass Steagal type protections as they existed before 1999.  This is the approach proposed by Paul Volcker, the former Federal Reserve Chairman who defeated runaway inflation during Ronald Reagan's presidency.  This is a reasonable man with sound credentials.  I was quite surprised to see the majority of conservative talking heads react negatively to the administration's plan.  Maybe we should talk this one over.  Just because the president and his administration are the mortal enemies of capitalism and the free market doesn't mean they can't have a good idea once in a while.  Even a broken watch is right twice a day.

Here's a positive perspective on the president's idea from Jim Manzi writing in the National Review blog "The Corner".  At least there is one conservative authority that sees some merit in this plan.


Wednesday, January 20, 2010

It's Morning Again in America

It's Wednesday morning, 20 January 2010, and the world changed last night.  The voters of Massachusetts stood in front of a runaway express train that had been hurdling down the track and headed for the precipice.  A formerly little known state senator named Scott Brown stood up to that train and demanded that it stop.  Kind of like that guy in Tiananmen square standing in front of that tank.  And what do you know.  It stopped.

So what happens now?  Do the Democrats see the writing on the wall and turn toward the center?  Or do they push ahead and forsake their second chance and go barreling off the cliff anyway?  And what about the Republicans?  Do they let this win go to their head, and go back to the old ways that got us here in the first place?  Or do they see reason and change tracks?  Will we see sensible policies from them or will they be the next party to misread a mandate and over reach?  Only time will tell.  We'll know in the next few weeks.

In the mean time, conservatives can breath a sigh of relief.  We've been given a reprieve from what looked like a terrible fate just a few weeks ago.  It's the dawn of a new day.  We get to wipe the slate clean and start again.  We get a do over.  In the words of the 1984 Ronald Reagan campaign ad, "It's morning again in America."


Sunday, January 17, 2010

"We're Gonna Be in the Hudson"

I watched this several times, and it still amazes me.  In general, I have a fairly cynical view of the world.  I never assume that anything works the way our narrative tells us it should.  I'd be the last one to suggest that anyone is as competent at their jobs as we are led to believe.  What a refreshing revelation to see how these guys performed.  Not just Capt. Sullenberger who obviously deserves praise and admiration, but the First Officer and the Air Traffic Controllers too.  No hint of panic in their voices.  No hesitation in their actions.  Just cold, meticulous execution of a series of maneuvers aimed at saving the lives of those passengers.  It's obvious that all involved were serious, trained professionals who each viewed their jobs as a solemn responsibility, and measured up to expectations when it mattered most.  Don't you wish we had people in government with this kind of integrity and dedication of purpose?


Saturday, January 9, 2010

Like the Sixties, but with Gray Hair

 I sent an e-mail to all my friends in Dover.  Thought I'd share it:

There will be a Welcome Back Rally this Tuesday 12 January on the Legislative Mall in Dover, DE from 1:00 to 3:30 pm.  The purpose is to "welcome back" our state legislators and let them know we are no longer the apathetic constituents we were when they recessed last summer.  The sleeping giant has been awakened, and we will be holding them accountable for the actions they take.  I sent the following email to my son to encourage his attendance if he can stay in town 'till Tuesday.  (He'll be visiting this weekend and has a few appointments on Monday.) 


I don't know if you have any interest in attending this rally on Tuesday, or if you can even stay that long.  I'm going, along with Joe and Sue.  Probably mom and maybe Dick.  And anyone else I can convince to show up.  Sounds like it might be a raucous good time.  See the part at the Delaware Tea Party website about "flooding the Legislative Hall".  How cool would that be to see a bunch of fifty, sixty and seventy-somethings getting arrested for  random and futile acts of civil disobedience?  I am Sparticus!!  Love to have you join us.


I'd like to encourage all of you to come out as well.  You don't have to do anything but show up.  If you are as upset as I am about the direction this country has been taking in the past year or two, this is an opportunity to express yourself to the legislators who share some responsibility for it.  You won't be just one person; you will be one more.  Numbers matter.  If we want to make an impression on these people, we have to be a crowd. 

By the way, the civil disobedience part was just a joke.  I'm expecting a peaceful demonstration.  But if anything can get my son interested in attending, that line just might do it!!

Here are a few links to sites with more details.


Flyer for Rally

It might be cold so bundle up warm.  They're promising hot drinks and an occasional trip inside the Legislative Hall.  There's no rule that says you have to stay for the whole rally.  Stop by on your lunch hour.  I'm expecting to have a great time.  If you've never done anything like this before, you might be amazed at how exhilarating it is to join company with like minded patriots, in a cause that is vital to the future of this nation and to the futures of your children and grandchildren.  Not only that, but you will discover that you are not alone.  You're not the only one shouting back at the TV set when the news is on.  Come out and do some shouting where it will do some good!!  And bring some friends!!

Feel free to forward this email to any and all you think might be interested, and even those who aren't.  You never know.


Let Me Tell You a Joke

This health care debate has been going on for months now.  It started during the campaign, carried on throughout all of 2009, and now we're about to witness the endgame here in early 2010.  Unless we see some sort of miracle very soon, Americans are about to suffer one of the largest and most intrusive assaults on their liberty that has ever befallen this country.  Polls show that as the debate has raged on, public opinion toward big government health reform has gotten more and more negative.  And yet the Democrats relentlessly press forward, oblivious to the mood of the country.  Comedian Bill Maher shocked us when he said that Americans are stupid, and they just need to be dragged to this (health care).   The powerful elites seem to have exactly the same opinion of us.  The most recent polls show that Americans are opposed to this health care reform plan by margins as large as 34% in favor to 57% against.  The Democrats act like they don't get it.  They don't understand why they haven't been able to convince the American people that they've assembled the experts, and they know what we need.  With all of the expertise available to the Congress, why don't the American people see that the government can take over one sixth of the economy and do a better job of providing health care than the people can do for themselves?

I'm reminded of a story.  There is an old joke about a big company that decides to make a new kind of dry dog food. They spend millions on research and development.  They hire world famous veterinarians and pet nutritionists to develop the formula so they can claim that it is the healthiest dog food on the market.  The marketing department spends millions more on dog owner focus groups to figure out the most appealing shape, size and color of the nuggets, and the most attractive packaging alternatives.  It invests even more millions in advertising.  Full page glossy color ads in Time, People, and Field and Stream.  Sixty second Super Bowl spots.  Celebrity endorsements from Oprah, Paris Hilton, and the Queen of England.  Despite all this, the dog food doesn't sell. At first, the company CEO is a bit befuddled, but before long he realizes that his investment of millions of dollars in this dog food is about to go swirling down the plughole.  He gets really pissed off.  He calls a meeting of all the top executives.  He starts shouting at the R&D people.  He demands to know what kind of idiots the marketing folks have working for them, and he flat out fires the guy in charge of advertising.   "How can this happen to us after all we've invested in this project?" he demands to know.  "Why aren't they buying the dog food?"  At first no one answers.  All the suits around the table are just sitting quietly, heads down, trying to avoid eye contact.  Finally, from the back of the room, one of the junior execs from the PR Department, a young man in charge of customer satisfaction sheepishly replies, "Sir, I'm new here.  I don't have as much experience with these things as all of you do, but has anyone considered the possibility that maybe the dogs just don't like it."

This is more than just a good joke.  It is a parable.  Maybe President Obama and the Democrats in Congress should spend less time passing legislation and more time telling jokes.


Tuesday, January 5, 2010

Obama's C-SPAN Promise

During the campaign, President Obama promised that health care legislation would be debated in full view of the American public, and the negotiations would be open to the C_SPAN cameras.  See the video below.

As we all know, these negotiations have been anything but open and transparent. In fact, they have served as an example of everything that is wrong with Washington in general, and the Congress in particular.

Well, C-SPAN has called the president's bluff.  Brian Lamb, the founder and CEO of C-SPAN has sent a letter to leaders in the House and Senate asking them to honor the president's pledge, and let the cameras in for the final negotiations.  Mr. President and leaders in Congress, the ball is in your court now.


Ban Fox Hunting

I got this disturbing photo from a friend and I felt I had to help get the word out about this terrible new development.  As a rule, I support gun rights, and respect the prerogatives of hunters in this country.  But this has gone too far, and has to stop.  Thanks to Mr. P. Cottontail for his efforts in sounding the alarm.


Stop Enabling Failure: Say No to California

 To help alleviate pending state budget crises, forget about bailouts.  Instead, lets remove federal "strings" that prevent states from making prudent spending cuts as they see fit.

A Wall Street Journal opinion piece from 2 January 2010 highlighted a glaring discrepancy between the purported intent of last year's stimulus funding to the states and it real results.  In The States and the Stimulus, (available on line for a limited time without subscription) the Journal points out that much of that stimulus "help" came with strings attached.  The states had to put up matching funds (money that was hard to come by in an already tight budget), or agree as a condition of accepting funds not to cut a broad array of programs from future state budgets.  In some cases, they had to agree to federal Davis-Bacon rules mandating more expensive union wages on projects partly subsidized with federal "free" money.  The article goes on to cite many more examples and is well worth reading, if it is still available when you read this.

The point is, many states now find themselves in an even worse fiscal bind than when this stimulus "gift" was bestowed upon them early last year.  Any prudent manager would reduce expenditures in the face of a widening budget shortfall, but the feds have essentially tied the hands of the state governments with all the strings attached to the previous funding.  The states have little choice but to raise taxes, or come begging to Washington for another handout.  As the article stated, it's not bad enough that the federal government is spending itself into oblivion, but they are determined to force the states into the same profligate ways.  The rules of the game prohibit the states from making prudent spending cuts where necessary.  It's as if the Democrat Congress had it in mind to intentionally beggar the individual states by binding them to larger and larger entitlement spending.  Could that be possible?  See Cloward Piven Strategy in the previous blogpost.

This recent article from the San Francisco Chronicle highlights some of the problems that California, in particular,  is facing with an impending budget crisis.  California might be the first and the biggest meltdown on the horizon, but it won't be the last.  Lots of states face similar problems.  Do not be surprised if California becomes the next emergency bailout candidate.  You thought we were done with bailouts after TARP, AIG, Fannie, and Freddie, and the auto companies.  It was awful, but at least it's over, you thought.  YOU WERE WRONG.  Read the Chronicle article, and you'll see the arguments that will soon be made on California's behalf in the next few months.  California's economy is larger than many G-20 countries.  If that's not systemically critical and too big to fail, then what is?  They will not cut spending.  Instead, they will beg for free money from the feds.  It will be dressed up as adjusting Medicaid reimbursement rates or more infrastructure funding, or payments in support of federal  unfunded mandates, but it's basically begging for federal dollars to solve California's problems.  Problems of their own making.  The worst back door trick they will likely employ will be seeking federal guarantees of their debt.  This will essentially let them borrow their way out of their current crisis, and leave us, the American taxpayer on the hook to cover their debts when they default.  You may not realize this, but that's what has been going on with the bank bailouts.  The nominal $700 Billion figure for TARP is deceptive.  That's just the cash injections made available to banks.  TARP is what the magician shows you with the right hand, while the left hand is working the deception.  In this case, the deception is the banks raising money cheaply by issuing bonds with US government guarantees.  If they default, we're on the hook for that. Federal loan guarantees are a cheap fix if the issuer remains solvent.  If not, our costs could be astronomical.  It's like co-signing a loan for your deadbeat brother-in-law.  No problem if he repays the loan.  Big problem if he doesn't.

When the crisis comes, we'll be told we have to put up the money or the results will be catastrophic.  California will become a wasteland, we'll be told, and the ripple effects will take us all down.  If we don't act, this will trigger the next great depression.  When California and the enabling Democratic administration come pleading for a rescue, we should politely listen to their pleas, nod our heads in sympathy, and we should calmly just say no.  There's a less costly way to solve California's problems.  We simply eliminate the federal strings attached to previous funding.  We untie their hands.  California will now be free to cut its budget where it needs to.  Any pain involved with that will be California's to bear.  California will have to suffer for her own poor choices, the American taxpayer will be spared the burdens of the hard working ant rescuing the imprudent grasshopper, and the principle of moral hazard will be preserved for the first time in years.

Oh, while we're at it, this amnesty offered to California should be offered to all the states.  That's only fair.  Plenty of them could use the help, and the principle of states exercising their own discretion in budget matters independent of the federal government is a valuable goal in its own right.  With one policy initiative, we can help solve a financial crisis, strike a blow for states rights, and stick a finger in the eye of the Cloward Piven crowd on the left.  Not a bad days work.


Monday, January 4, 2010

Cloward Piven Strategy

I was watching In Depth on C-SPAN this past Sunday.  It featured a three hour interview (well worth your time if you have three hours to spare) with author and blogger Michelle Malkin.  Either she or one of the call in questioners mentioned the Cloward-Piven Strategy.  I'd never heard of it, so I Googled it last night.  I was amazed at what I learned.  It is based on an article entitled The Weight of the Poor, written by two leftist sociologists at Columbia University in 1966, and published in The Nation .  Their idea was to destroy capitalism by creating an artificial crisis based on welfare policy.  Their premise was that despite the large numbers of welfare recipients, there were an equal or greater number of people who were eligible for welfare but were not collecting.  By mobilizing those people to register for welfare benefits, they hoped to overwhelm the system, bankrupt local agencies, and create chaos that would cause local governments to seek federal help, ultimately leading to a socialized system that guaranteed a living income for all.  Sound familiar?  I believe we are seeing this happening in California today. Some authors credit this strategy with bankrupting New York City in 1975. 

For a more thorough discussion of Cloward-Piven, check links here and here.  Pretty scary.  A word of warning.  Most of the information I found on this subject came from two source websites.  American Thinker, and Discover the Networks.  Both are right wing in point of view, and a bit fringe in their tone.  So consider this viewpoint with the proper level of skepticism. 

Would I be a conspiracy theorist if I admitted that I think the way Obama and the Democrats are managing the economy supports a view that they are intentionally trying to destroy the capitalist system in this country to make way for socialism?