Americanly Yours

Some people are calling for the US and EU to place sanctions on Russia for its deplorable actions in Ukraine. This is probably the worst thing that the US and EU can do about this situation without resorting to nuclear war. Sanctions are an act of war and should be opposed by all peace loving people.

Sanctions kill.

The Bush-Clinton-Bush sanctions in Iraq are just one example of how horrible of a policy sanctions can be. These sanctions killed an unknown but extremely high number of people. Sanctions also do not punish the offenders in the regime: rather they punish the innocent people who are already suffering under an oppressive regime. Estimates range from around 170K to around 600K or more children who were killed by these sanctions. I am willing to bet that not one of these children was a high ranking government official. In contrast: as terrible, as immoral, and as violent as the Iraq War was, estimates of civilian deaths range from around 100K to around 600K. In other words, sanctions killed as many or more people than did a massive military invasion followed by a bloody civil war.

Besides all this, some estimates put Putin’s personal wealth at $70 billion. Do you think that sanctions are more likely to hurt him or impoverished Russians?

I have often used the Constitution as one way of justifying my opposition to “laws” passed or proposed by Congress and the President. After all, the US Constitution is touted by many people as the “supreme law of the land.”

But, very few people ever ask why it is the supreme law of the land, or why it even has any power at all, and almost no one asks if it is the supreme law of the land, or if it has any power at all.

In fact, it is the Constitution that calls itself the “supreme Law of the Land.”  So if you ask someone why the Constitution is the supreme law of the land, they are likely to respond by telling you that it says so right there in the Constitution.  If you were to then respond to that by asking what gives the Constitution the right to declare that it is the supreme law of the land, they are likely to respond by saying that it is the supreme law of the land (or something to that same effect). This is what philosophers call a tautological argument, and what everyone else calls a circular argument.

Is the Constitution the supreme law of the land?

Well, the Constitution was a contract.  It was signed by 39 men at the Constitutional Convention (out of the 55 delatates).  Following this, the States held their own votes on ratification in which 1071 men voted in favor of adopting the new Constitution. But, all this tells us is that 1,100 men agreed to the Constitutional Contract.  What of the 16 delegates who refused to sign the Constitution?  What of the hundreds of men who voted against the ratification of the Constitution in their State legislatures.  And most importantly, what of the people who were not given the opportunity to vote for or against the Constitution?

Would it be right to assume that the people who explicitly refused to sign a contract should be forced to abide by it?

But, the vast majority of Americans were not allowed to vote at the time of the Constitution.  This included children, slaves, women, indentured servants, and (in many States) those who did not own property.  They had no say in their local or State governments, and thus no representation in the Constitutional Convention (which—by the way—was authorized by the Congress to amend the Articles of Confederation, not to replace it). The Revolutionary War, which ended less than 5 years before the Constitutional Convention, was fought over the issue of “taxation without representation.”   We must ask ourselves if being governed without one’s consent is substantively different than being taxed without one’s consent/representation.  And no, these arent just the musings of a lone libertarian.  According to recent polling, only 23% of America voters believe that the United States government has the “consent of the governed,” while 62% say that it does not.

Imagine if Verizon offered to provide you with wireless service in exchange for a fee, but for whatever reason, you EXPLICITLY DECLINED to sign the contract (even though most of your neighbors agreed).  Could anyone rightfully assume that Verizon would have the right to declare itself your provider? Of course not.

Lysander Spooner brilliantly pointed out that those who support the Constitution often use the right to vote as a method of justifying the legitimacy of the government. A simple examination of these arguments reveals that this argument falls into a severe tautological trap as well. For eaxmple:

• If I vote for the winning candidate, I have given my consent to his actions because I have sanctioned his platform. Furthermore, I have given sanction to the Constitution by participating in its institutions.
• If I vote against the winning candidate, I have still given my consent to the Constitution because the act of voting implies that I agree to the process outlined in the Constitution and that I would expect the losers of the vote to abide by the results of the vote had my candidate of choice won.
• If I choose not to vote, then I have no right to complain about the government because I have declined to participate in a “valid” process which could have yielded different results had I participated.

Thus, whether or not I vote, and whether or not I vote for the winner, I am giving sanction to the Constitution and to the actions of the government. We can easily see how this is a circular argument, akin to the expression “damned if you dont, damned if you do.” You dont have to be a trained philosopher to realize that this argument isnt a sound one.

Lysander Spooner argued that the Constitution actually bound no one. I agree with his logic, but have reached different conclusions.  I will argue that the Constitution does not bind very many people, but it does bind those (and only those) who have expliticly agreed to the Contract.

The President, Vice President, and members of Congress all take an oath upon entering office.  In doing so, they are explicitly giving their consent to the Constitution and agree to act in accordance to this Constitution.

Thus, the President, Vice President, and Congress are required by law to uphold the Constitution and its provisions, whether or not they like what it says. Failure to do so is a violation of their oath and a violation of the laws of the government that they have explicitly agreed to serve. The President’s oath reads

“I do solemnly swear (or affirm) that I will faithfully execute the Office of President of the United States, and will to the best of my ability, preserve, protect and defend the Constitution of the United States.”

Notice the final clause which demands that the President “preserve, protect and defend the Constitution of the United States.” Thus, the President must use his veto power whenever Congress passes a law that violates the terms of the Constitutional Contract. Failure to do so would be an explicit violation of the President’s oath and grounds for removal from office.

Similarly, the oath of Congressmen reads:

“I do solemnly swear (or affirm) that I will support and defend the Constitution of the United States against all enemies, foreign and domestic; that I will bear true faith and allegiance to the same; that I take this obligation freely, without any mental reservation or purpose of evasion; and that I will well and faithfully discharge the duties of the office on which I am about to enter. So help me God.”

This oath differs in that it requires members of Congress to ” support and defend the Constitution of the United States against all enemies, foreign and domestic; that I will bear true faith and allegiance to the same. [Emphasis added]” This is an important difference, as it not requires Congressmen to defend the Constitution against domestic enemies as well. Thus, every member of Congress has a duty to defend the Constitutional Contract from those who wish to undermine it. This must not only include other members of Congress who are bent on undermining the Constitution, but also must include protecting the Constitution against Presidents who rountiely violate the Constitution and their oath to the Constitution.

But if most members of Congress, as well as the President, Vice President, Cabinet, and most of the executive bureaucracy—the people who have taken an oath to the Constitution and who are thus bound by it—refuse to adhere to the Constitution or to their oath, then why should we, the American people have to abide by the Constitution?

Generations of Congresses and Presidents have routinely violated the Constitution and have trampled on the protections afforded in the 1^st, 2^nd, 4^th, 5^th, 8^th, 9^th, 10^th, 14^th, 15^th, and 21^st amendments. Their actions have rendered many of the above amendments nothing more than “dead letters.” The trampling of the Constitution by the very people who have sworn to protect it is not limited to the Constitutional amendments themselves, but also includes the routine violation of many of the protections contained in the body of the Constitution itself.

I have pointed out that members of Congress and the President have taken oaths requiring adherence to the Constitution. We The People, on the other hand have not. This fact alone leads to the logical conclusion that the Constitution does not apply to those of us who have not declared allegiance to it. And yet, many of those who ahve taken official oaths to the Constitution routinely violate it. Thus, the question must again be asked: if most members of Congress, as well as the President, Vice President, Cabinet, and most of the executive bureaucracy—the people who have taken an oath to the Constitution and who are thus bound by it—refuse to adhere to the Constitution or to their oath, then why should we, the American people have to abide by the Constitution?

In addition to Presidents and the Congress, members of the military take oaths of loyalty to protect and defend the Constitution as well:

“I, [name], do solemnly swear (or affirm) that I will support and defend the Constitution of the United States against all enemies, foreign and domestic [emphasis added]; that I will bear true faith and allegiance to the same; that I take this obligation freely, without any mental reservation or purpose of evasion; and that I will well and faithfully discharge the duties of the office on which I am about to enter. So help me God.”

The military oath not only requires that members of the armed services protect America against foreign invasion, but also requires that these members protect the Constitution from domestic enemies (those who have sworn allegiance to the Constitution but violate it) as well.

But, instead of taking their oaths seriously and defending the Constitution which they have sowrn to protect, Presidents, members of Congress, and members of the military have been much more willing to use their authority to force the American people to live under an unconstitutional (and nonconsensual) government.

I ask again: If the government refuses to abide by the Constitution, why should we?

The answer is that we shouldnt.

How long will we continue to allow Congress to rule over us using a “do as we say, not as we do” logic? The truth is that this has gone on long enough.

But, even if Congress, the President, and everyone else within the goverment followed their oaths perfectly, this would not be reason enough to follow their laws. The above statement stems fromt he simple fact that the vast majority of the American people have never sworn an oath of allegiance to the Constitution. A simple example can be used to understand why we are not bound to the Constitution—even if it is perfectly followed. Imagine that someone declares himself to be the new owner of your car without your permission. This man has no legal or rightful claim to your car, but that doesnt stop him from claiming ownership. However, this man is “nice enough” to allow you to use the car whenever you want. Thus, his “ownership” of your car doesnt interefere with your right to use the car in any way. But, does this mean that you should allow him to get away with the crime of claiming false ownership over your car? Of course not. It is true that while he still “allowed” you to drive your car whenever and wherever you wanted you probably wouldnt rebel against him, but that surely wouldnt meant hat you have accepted his claim of ownership over your car.

The vast majority of the readers of this article have taken no oath of allegiance to the Constitution or the the US Government (which itself is guilty of repeatedly violating the Constitution).  I have never read the words of the oath aloud, I have never signed an oath of loyalty to the United States or to the Constitution.  How then can anyone argue that this document binds those of us who have not taken a loyalty oath?

The Constitution itself was nothing more than a well orchastrated coup, designed to centralize the powers of the government into the hands of an elite few. The vast majority of citizens (and all of the slaves held) never had a proper say in the approval of the Constitution. And, as Lysander Spooner pointed out, one cannot sign a contract that binds future generations (wouldnt that be the greatest form of taxation without representation that is possible?). Thus, even if the Constitution somehow did bind all those living under it upon its ratification, it binds no one today but those who have explicitly agreed to it.

The Constitution does not bind those of us who have made no such explicit agreement. Thus, we have no legal or moral obligation to follow the “laws” put forth by Congress, the regulations created by Congress or executive agencies, or the executive orders and decrees made by the president.

I am not advising you to break the law—just because the law doesnt bind us does not mean that the government will not employ the use of men with guns to force you to comply with its laws and regultations. Just as an unarmed person would probably be better off (ie, would have a much better chance of survival) turning his wallet over to an armed robber who demanded the wallet, most people will find it easier to comply with the “laws” of the United States government rather than risk their own death or imprisonment.

But, even as we continue to hand the robber our wallet, this does not mean that we should recognize the legitimacy of the robber who demands tribute and restricts the liberty of so many millions of people.  It certainly does not mean that we should be happy to hand the robber our hard earned wealth.

Recognizing the illegitimacy of the Constitution and the United States government is a very important step. The more that people recognize this fact and speak about it, the more obvious it will become to the populace.

A critical mass of Americans is needed to recognize that we do not owe our allegiance to the Constitution.  Furthermore, this critical mass needs to realize that the United States government is illegitimate and that it has no moral right to tax, rule, or restrict the liberty of anyone who has not consented to be ruled.  Only when the people wake up and realize these facts will we be able to restore our lost liberties.

Americanly Yours,

Phred Barnet

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The news leaked several days ago that in tonight’s State of the Union address, President Obama will speak about the need to curb the government’s out of control spending.  He will announce spending freezes on “non discretionary,” non military spending, as well as pay and bonus freezes on some political appointees.

To put this announcement in context, I want you to imagine a 400 lb man who was eating 3100 calories per day a year ago.  A year ago, the man started eating 3555 calories per day (an increase of 455 calories–14.67%) and gained 64 lbs during the past year and now weighs 464 lbs–an increase of 16%.  Now, the even fatter man realizes that his weight has become an even more serious problem and he hatches a plan to deal with it.  He decides that he will freeze the increases in his caloric intake from most snacks for the next three years.  However, he decides that instead of cutting his meal sizes, he will actually continue to increase their sizes.  He will also increase the sizes of some of his snacks, while freezing the growth in the sizes of other snacks.  He concludes that these meals and snacks are essential to his survival and that therefore he must increase their sizes if he wants to get healthy.

Does this example sound far fetched?  It isnt.  The numbers used above are scaled down numbers from our federal budget.

Our 2009 budget, passed in 2008 under President Bush called for $3.1 trillion in spending.  Of this, $1.89 trillion was “mandatory”–it funded government social welfare programs.  These are the meals described above.  The remaining $1.21 trillion was considered discretionary funding–these are the snacks described above.

But, included in the discretionary funding of that budget was $515.4 billion for the Defense Department, $145.2 billion for the War on Terror, $37.6 billion for the Department of Homeland Security, and $44.8 billion for the Department of Veterans Affairs.  That total is $743 billion.  These are the snacks that the man above will not only continue to eat, but will actually increase the size of.

Now, lets look at the 2010 budget which was proposed by President Obama last February.  This budget had $3.55 trillion in spending.  Of this, $2.184 trillion was “mandatory.”  This is an increase of 15.6% in only one year.  As you can see, the costs of Social Security, Medicare, and other programs are rising rapidly.

The remaining $1.368 trillion was considered discretionary.  The cost of these snacks increased by $13.1% in that single year.

In other words, while discretionary costs are rapidly rising they are not the biggest problem.  Our mandatory costs are not only bigger than our discretionary costs–but mandatory costs are increasing at a much faster rate than are discretionary costs.

But,this budget included $663.7 billion for the Defense Department, $52.5 billions for the Department of Veterans Affairs, and $42.7 billion for the Department of Homeland Security.  The total here was $758.9 billion.  This is an increase of about 2.14%.

If President Obama were proposing to cap the annual growth in the total budget at 2.14%, the majority of Americnas would be pleased.  However, as mentioned above this spending freeze will not include mandatory spending–the biggest and fastest growing part of the budget.  But, just like the fat man described above, our national debt increased by 16% in President Obama’s first year–and just like that fat man, we are going to increase what we eat.

The government is cooking itself bigger meals as well as increasing the size of its snacks.  This is not the way to get in shape.  Using our analogy of the overweight man, we see that at best, this will only slow the rate at which the man gets fatter.

And, we would be fools to think that the President’s freeze on discretionary spending actually means a freeze on discretionary spending.  The news of the spending freeze was leaked the other day, but this morning news leaked that the President was going to request a 6.2% increase in the education budget.

Of course this money will come with strings attached.  Federal money always comes with strings attached and efforts to increase federal control.  Federal funding for education is nothing more than a move by the federal government to expropriate the money from Americans through taxes and then sell that money back to State education departments and local districts in exchange for influence.  The Carter Administration nationalized education in 1979 and the effect has been disastrous: steady declines in education all across the nation and sharp increases in costs of education.  These federal actions have made the American people pay more money for less education.  But, we cant be surprised by the Obama Administration’s efforts to further erode local and family control over yet another aspect of our lives.

On top of this, President Obama will announce an $8 billion high speed rail initiative in Florida tomorrow.  This sounds nice, but the fact of the matter is that the high speed rail systems proposed by the government is a horrible idea that will be extremely costly, bad for the environment, and will not be high speed!  This isnt actually a new plan, but rather a rehashing of a plan that President Obama put forward last year.

The good people at the Georgia Public Policy Foundation put together a report on this plan last year.  You can find that report here.  Here are a few excerpts:

“The FRA is not proposing to build 200-mph bullet trains throughout the U.S. Instead, in most places it is proposing to upgrade existing freight lines to allow passenger trains to run as fast as 110 mph – which means average speeds of only 55-75 mph. This would actually be slower than driving for anyone whose origin and destination are not both right next to a train station.” (Page 6)

“Even with these optimistic assumptions, high-speed rail reduces corridor transportation energy consumption by only 8.3 percent. This means the operational energy and greenhouse gas savings fall to zero if we assume instead that automobiles and airplanes are, by 2025, just 8.3 percent more energy efficient than they are today. If automakers meet Obama’s fuel-efficiency standards, autos will be more than 30 percent more efficient in 2025 than they are today, so high-speed rail will actually be wasting energy.” (Page 21)

“the FRA system will carry each person an average of 58 miles per year.” (Page 25)

But, these are just the two spending increases that have been leaked today.  If we factor in the “mandatory” increases in social welfare programs, the increases in defense and intelligence budgets, and the new jobs/stimulus programs that Congress is almost sure to pass, we are still looking at heafty budget increases.

The man in my analogy would be stupid to not go on a diet.  Our government should do the same.  It needs to stop eating snacks where it can and begin to reduce the size of its meals to a sustainable level.

If President Obama is serious about preventing the looming debt crisis from wiping out decades of economic growth, he needs to change his tone.  Instead of just freezing spending in certain areas while allowing the already bloated budget to expand, Mr. Obama should cut the budget where possible.  He should also look for ways to stop the increases in the costs of mandatory spending before it is too late.

But of course, it may already be too late.

Americanly Yours,

Phred Barnet

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The phrase “you never get a second chance to make a first impression” works for Presidents too.  President Obama’s first year in office has been marked by failure after failure.  His only remarkable legislative success, last year’s “stimulus” bill is itself a failure.  But just how has the  first year of Mr. Obama’s Presidency been a failure?  Lets take a brief look:

Economy:

The economy continues to deteriorate under President Obama’s leadership. When President Obama pitched the “stimulus” bill to the skeptical American public, we were told that if this “crucial” bill was not passed soon (ie, before Congress had ample time to read the bill) then the economy would face devastating consequences.  This was of course a well calculated and bold faced LIE.  The fact of the matter is that the majority of the spending in the “urgent stimulus” bill were not going to be spent for over a year.  We were warned by the Administration that failure to pass the bill would cause unemployment to skyrocket and could cause it to reach as high as 9%, but passing the bill would keep unemployment from raising above 8% (see this chart put out by the Obama Administration to urge support for the “stimulus”).  So, we passed the bill and despite (or because of) this, the official unemployment rate surged past 9% and currently sits at 10%.  Of course, the 10% figure is a lie as well.  Previous administrations changed the way that the unemployment rate was measured in order to disguise how bad things really were.  This U-6 unemployment figure is still reported by the government, however, the government now uses U-3 as the official unemployment number.  While U-3 unemployment is 10%, U-6 unemployment is 17.3%.  This figure was 13.5% one year ago.  Simply put, things are bad.  But, government data collection is shady and should not be trusted as definitive.  Shadow Government Statistics, a private data collection/analysis website places unemployment at over 22%!

Ben Bernanke failed to see the impending collapse even shortly before the economy tanked.  While a candidate for President, Mr. Obama repeatedly criticized the economic policies of the Bush Administration.  By choosing to reappoint Ben Bernanke as Chairman of the Federal Reserve, President Obama was giving his tacit approval to the policies of the Bush Administration.

The administration has also increased the national debt to dangerous levels.  The US is now in serious risk of having its credit rating downgraded.  Any hopes of an economic recovery would be shattered if this were to happen.

Foreign Policy:

Candidate Obama repeatedly attacked the Bush Administration on three fronts: the economy, the wars, and foreign relations.  President Obama has failed to correct the errors of the Bush Administration on any of these areas.  As mentioned above, President Obama has continued the “stimulus” and bailout policies initiated by President Bush.  His reappointment of President Bush’s Federal Reserve Chairman Ben Bernanke confirms the fact that President Obama’s economic policies are not notably different than those of President Bush.

The second area where candidate Obama frequently attacked the Bush Administration was his handling of the wars in Iraq and Afghanistan.  Mr. Obama criticized President Bush’s Iraqi surge, falsely claiming that it was not a success.  If I were a candidate who ran on a platform of change and who repeatedly criticized the previous administration’s military policies, I surely would not have allowed the previous President’s Defense Secretary to continue serving.  Furthermore, if I had attacked the former President’s Iraqi surge strategy, I would not have employed a similar strategy in Afghanistan.  However, President Obama has done both of these things.  He kept Defense Secretary Robert Gates in his position, and he has sent an additional 68,000 troops to Afghanistan since taking office (many of those troops were sent in the weeks following the President’s claiming of the Nobel Peace Prize).

Candidate Obama promised to have all of the combat troops out of Iraq within 18 months after taking office.  That leaves him less than six months to remove over 100 thousand troops from Iraq.  Id put the chances of this happening right at zero.  More likely, President Obama will declare that the troops in Iraq are no longer combat troops (despite the fact that they will almost surely be engaging in combat).

President Obama missed a historic opportunity to improve relations with Cuba.  Since taking over, Raul Castro has introduced many positive reforms, introducing notions of private property, increasing wages for productive workers, and allowing Cubans to take advantage of certain technologies.  Raul Castro’s Cuba still has a very long way to go, but any movement in the right direction should be seen as positive.  Candidate Obama pledged to improve relations with Cuba.  Instead, President Obama has continued to support the same policies towards Cuba which have failed for the past 48 years.  Of course, this si just one example of this administration’s failed foreign policy.

Candidate Obama pledged to repair our strained relations with foreign nations.  President Obama has failed at this as well.  He has been publicly scolded by Russia’s Putin, Israel’s Netanyahu, France’s Sarkozy, and other allies.  In fact, I would argue that our foreign relations have not noticably improved with a single foreign nation since President Obama’s inauguration.

Agenda:

President Obama has almost completely failed in his efforts to push his agenda during his first year.

Remember, this President was the candidate who vigorously campaigned on a platform of “change.”  There have been few noticeable changes in the previous year.

With sizable majorities in Congress and a public eager for change, President Obama should have had a relatively easy time pushing through at least some major parts of his agenda.  The only major bill that President Obama was able to push through Congress during his first year in office was the “stimulus bill.”  This was a bill which was passed by using intimidation, threats, fuzzy math, erroneous estimates, and down right lies.  The “stimulus” bill was a costly mistake that did little if anything to stimulate the economy but will cost taxpayers around $1 trillion when the time comes to repay the costs of financing this bill.

Congressional Democrats pushed various health care reform bills for well over 6 months.  During this time, President Obama showed almost zero leadership on this issue, basically promising to sign any bill that came out of Congress.

Had President Obama taken a leadership role and urged Congress to pass a series of smaller health care reforms instead of trying to push a sweeping bill down the throats of an adamantly opposed American public, he could have signed several of these reforms months ago and moved onto other pressing issues.  Instead, Democrats wasted the better part of a year, alienated a large portion of American voters, and came up empty handed.  Democrats might now adopt the strategy of pushing through smaller, incremental reforms, although it could even be too late for that approach.

Opponents of government controlled health care can thank President Obama’s complete lack of management abilities for preventing the nationalization of health care that seemed to be a foregone conclusion several months ago.

The President’s inability to lead has also prevented the passing of cap and trade and several other government intrusions into the lives of individuals.  He has placed his coalition in danger time after time, and now seriously risks losing the House of Representatives in November.  Things also look increasingly likely that the Senate may be in play in November as well.  More ont his in a future article, but it is beginning to look very likely that Democrats will lose President Obama’s former Senate seat, Vice President Biden’s former Senate seat, Harry Reid’s Seat, and possibly Hillary Clinton’s seat.  This would have been unthinkable only one year ago, but then again so would a Republican winning Ted Kennedy’s former Senate seat.  President Obama has alienated Democratic voters to a degree that even the most optimistic Republican would have thought to be impossible a year ago.

President Obama should follow the lead of Domino’s Pizza: soak in and address the valid criticisms, revamp his “product,” and use his rhetorical skills to sell his new image to the public.  Failure to do so can only lead to a changing of the guard in the 2012 Presidential election.

Americanly Yours,

Phred Barnet

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How exactly did we get to the point where government owned banks started charging credit card holders fees for paying off their balances every month?

The government passed laws like the Community Reinvestment Act which essentially mandated banks to loan to people who would not have been able to obtain loans otherwise.  Then, the government and the Federal Reserve created money out of thin air and lent it to banks at absurdly low rates.  Flush with new and cheap money, these banks massively increased their lending to “sub-prime” borrowers (begin bubble).  With the money supply growing at unprecedented rates in the 1990’s and this decade, there was always enough money for banks to make loans.  Borrowers were able to take out second mortgages at very low rates.  Home builders rapidly built houses to meet soaring (bubble-induced) demand.

As with all bubbles, this one burst, leaving home builders unable to sell newly built houses and borrowers unable to meet their obligations.  Banks had sold off the rights to their lender’s payments so they would have more money to make new loans.  This left the banks in the same boat as homeowners who could not make their payments.  But, while homeowners and home builders had to file for bankruptcy and sell off their assets to pay their debts, the banks used their lobbyists, fear, and their ownership of the Federal Reserve to convince our government to bal them out.

The government and the Federal Reserve then printed up a bunch of money–they simply created it out of thin air–and gave it to the banks in exchange for ownership.

This happened on October 3rd, 2008.  I can understand the government’s perverse rationale that led it to bail out these banks.  What I can not understand is why, over a year later, the government continues to own large stakes in these banks.

The government has now taken to regulating the salaries of banking officials, as well as the actions and practices of these banks.

So, it comes as no surprise to the observant that the government would use its power and control to create perverse incentives.

Bank of America and Citigroup–two firms now under the ownership of the federal government have begun implementing new fees.  These fees are not on late payments, gong over one’s credit limit, or cash advances.  Instead, these government owned banks have announced fees for customers who regularly pay off their balances.  Customers who leave monthly balances on their cards will not be charged the fees.

A fee is similar to a tax (especially if t is levied by a government owned entity).  Both taxes and fees use pricing to create incentives to change behavior.

Because Bank of America and Citigroup are owned by the government, a fee on those who pay off their balances regularly can be viewed as a tax on them.  Because those who leave monthly balances on their cards are exempt from these fees, this can be viewed as a subsidy for those who leave balances.

Our government is creating perverse and dangerous incentives: they are incentivizing debt and discouraging good and proper financial habits.

But, you cant hardly be surprised by this.  After all:  our perverse government’s perverse actions do tend to lead to perverse incentives.

Americanly Yours,

Phred Barnet

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