Americanly Yours

When people like something you write, its called an article or an editorial. When they dont, its called a rant.

When people call someone divisive, they are really expressing their dismay with the fact that that person is influential and does not agree with them.

Many people who did not attend last months “Tea Parties” ridiculed the parties and those who attended. Hundreds of thousands of your fellow citizens engaged in a peaceful protest. I think its safe to say that this was the largest set of demonstrations not directed against a war since the Civil Rights rallies of the 1960’s. You can agree or disagree with the message of those protesting, but you have to admit that the Tea Parties were a very well coordinated series of hundreds of protests across the Nation attended by those with legitimate concerns about the state of affairs. Writing off the Tea Partiers as rednecks or extremists is only going to make them feel more alienated.

Big government liberals and conservatives have gradually expanded the size, scope, and powers of government for decades. When people like me advocate reducing the size, scope, and powers of the government back down to its Constitutional principles, we are told that its “too drastic” of a change to make. It was much more drastic to change our government from a small, limited, Constitutional Republic to a massive, bloated, wasteful, Byzantine bureaucracy.

Many people who love to start political arguments will immediately shut down when a counterargument is made. They tend to do one of three things: change the subject, end the conversation, or launch a personal attack.

More people seem to pay attention to the newest reality tv show, the latest single, the personal lives of celebrities, or whatever sport or sports are being played at the moment than pay attention to the news and politics. With all of the news and information that is readily available these days, you really have to make an effort in order to be ignorant of what is going on. Sure, sports are great (I could care less about the rest of that stuff though), but in 10 years this stuff really wont matter to most people who werent directly involved in them. In 10 years, trillion dollar bailouts, the economy, individual rights, and government spending will continue to be extremely important.

Americanly Yours,

Phred Barnet

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Florida, Texas, Louisiana, and California are lobbying the government for up to $80,000,000,000 [$80 billion] in loans to bolster their flood insurance programs.

Providing residents of these areas with flood insurance lowers their costs.  This amounts to a federal subsidy for those living in hurricane zones.

Subsidies, like taxes are inducements to change behavior.  You can think of a subsidy like a negative tax–or a rebate.  A tax is a fee charged to someone for doing something.  A subsidy is a payment made to someone for doing something.

Subsidizing flood insurance for those who live in hurricane zones makes it cheaper for people to live in those zones.  This attracts more people to these areas then would naturally choose to live there.

When a hurricane inevitably destroys these areas again, the government will have to pay billions of dollars in insurance claims.  Then they will spend more money redeveloping the area.  Then they will again offer subsidized flood insurance to the residents of the area, lowering the cost of living, and thereby encouraging more people to move there.  Then another hurricane will hit the area…

This has happened so many times before.  It will likely happen again and again in the future.

While the money is being asked for in the form of loans, the terms of the loan proposals are explicitly clear that if there is a disaster, the federal government will have to pick up the tab.

The government should not subsidize people to live in disaster prone areas.  Doing so does not make sense.  It provides financial incentives for people to make a bad (or at least life threatening) decision.  It forces the rest of society to pay for these bad decisions.

The government should get out of the private insurance business.  It should let the market determine where people should live.

The Republican governors of two of the States, Louisiana and Texas have rejected some of the funds from the “stimulus” bill, but they have no problem in asking for larger handouts from the federal government.

Scientists believe that global warming will lead to an increase in the number and intensity of hurricanes.  This makes subsidizing people for living in hurricane zones a much more reckless proposal.

Americanly Yours,

Phred Barnet

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There has been a lot of public outrage against AIG for paying some of its executives retention bonuses.  The logic here is that AIG is a struggling company that has accepted well over $150,000,000,000 [$150 billion] in federal government aid, and therefore should not be giving its employees bonuses.  Before we all grab out pitchforks and torches, we must remember that it is not legal for the federal government to create a new tax targeted towards AIG’s executives.

Retroactively taxing AIG employees’ bonuses is an unconstitutional act.  Article I, Section 9, Clause 3 of The Constitution reads as follows:  “No Bill of Attainder or ex post facto Law shall be passed.”

The prohibition on passing bills of attainder means that it is illegal for Congress to pass a law that punishes AIG employees (or any other specific group of people) without granting due process.  The prohibition on passing ex post facto laws means that Congress cant pass a law declaring something to be illegal and then punish people for committing the act before it was illegal.

Congress is currently debating passing a bill that would tax AIG executives’ bonuses at 90%.  The House of Representatives overwhelmingly passed a bill that would do preciously this last week.  This bill is unconstitutional and should not be passed by the Senate.  If it does pass the Senate, then President Obama should stand up for the Constitution and veto it.

Americanly Yours,

Phred Barnet

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In its infinite wisdom, our government has once again decided to bailout AIG by giving them billions more in tax payer money.

The government had already spent $150,000,000,000 [$150 billion] bailing out and nationalizing AIG before this latest bailout was announced.  But, now, the governments newest plan has loaned AIG an additional $30,000,000,000 [$30 billion].  That of course gives us a total of $180,000,000,000 [$180 billion], yet many analysts are saying that AIG will probably “need” another bailout and that total money “loaned” to AIG could top $250,000,000,000 [$250 billion]!

Even if the loans were to stop now, AIG would have immense difficulty ever paying them back.  $180,000,000,000 [$180 billion] even without interest is a substantial sum to have to pay someone back.  Even if AIG’s profits were to return to what they were before this whole mess started, it would take AIG over 20 years to pay back not including interest if they were to take every penny of profit and throw it at their debt.

Joseph Stiglitz, a nobel prize winning economist who has advised both President Clinton and President Obama has spoken out against these bailouts of AIG and the banks–he argues that not only will throwing this kind of money at the banks will create an investment bubble even bigger than the one that just burst, but doing so could also downgrade our standard of living for the next 20 years.

Enough is enough!

We should let this company fail, rather than continue to subsidize its failures and stupidity.

The real free market solution here is not to continue to throw unfathomable sums of money at AIG hoping that this money will eventually stabilize it.  Rather, the real solution here is to let AIG fail.  AIG’s assets should be auctioned off in the open market under the guidence of a bankruptcy court.  No, their assets and businesses wont get anything enar their “book values.”  Investors and business, however, will pay something for AIG’s name, businesses, real estate assets, and receivables.  In a real free market solution, investors would put up their own money and buy these pieces of AIG at a low enough price that they will believe that they have a good chance to make a profit.  This price would probably only be pennies on the dollar, but repricing “bad” or overvalued assets is a very important aspect of the free market system.

Under this solution, AIG’s pieces would probably become parts of other insurance and financial companies, or they would end up being owned by large investors.  With assets and receivables being bought at rock bottom prices, AIG’s new owners would be able to operate with confidence that good decisions will lead to profit, as they wouldnt be saddled with such an enormous debt.

This would also prevent the credit markets from further locking up by allowing AIG and its parts to continue to operate, although most likely as parts of other companies.  And, most importantly, all of this is accomplished without creating a new “bubble” that will inevitably burst in the not so distant future, causing yet another financial crisis and risking our future.

Americanly Yours,

Phred Barnet

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This past weekend, President Obama announced that he wanted to cut the deficit in half by the end of his first term in 2013.  You would think that this would make a deficit hawk like me happy.  It would–if it werent so misleading.

President Obama says that he wants to cut the $1,300,000,000,000 [$1.3 trillion] deficit that he inherited from President Bush down to a deficit of $533,000,000,000 [$533 billion] by 2013.  While this seems like a tough goal that will cut spending, this will actually result in increased spending.  The reason for this is simple:  the present massive deficit is an aberration from the normal, including hundreds of billions of dollars in spending that was supposed to be one time spending.  For example, included in the $1,300,000,000,000 [$1.3 trillion] deficit is the $700,000,000,000 [$700 billion] spent on the bank bailout, the additional billions spent on the bailouts of Bear Stearns and AIG, and last years stimulus plan that sent most Americans a $600 check.

In fact 2008’s deficit was $438,000,000,000 [$438 billion] a massive number, but a number that is dwarfed by the $1,300,000,000,000 [$1.3 trillion] deficit that is to be expected in 2009.  The vast majority of this money was supposed to be for one time things.  In fact, without adding the increased spending from the “one time items,” the deficit for 2009 looks a lot like the deficit for 2008.

President Obama’s 2013 budget deficit figure still represents an increase of over 21% from 2008’s number.  This “cut” looks more like an increase to me.

And Mr. Obama’s own numbers still admit that he will have a deficit of over $1,000,000,000,000 [$1 trillion in both 2010 and 2011].  No numbers were given by his office for 2012’s predictions, but lets give him the benefit of the doubt and assume that 2012’s deficit equals 2013’s deficit of $533,000,000,000 [$533 billion].  This means an increase in the national debt of at least $3,000,000,000,000 [$3 trillion]–equal to $10,000 per American.  I think the numbers will be much higher.

More on that later.

Americanly Yours,

Phred Barnet

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