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Taking a break from huffing and puffing populist rhetoric, Obama had the following to say about the profit-motive he has so often and so ebulliently excoriated.

Obama told reporters on Tuesday that while bankers shouldn’t get rich on the taxpayers’ dime, “the rest of us can’t afford to demonize every investor or entrepreneur who seeks to make a profit. That drive is what has always fueled our prosperity, and it is what will ultimately get these banks lending and our economy moving once more.”

Of course, it was Obama’s headline-grabbing “outrage” over compensation packages at AIG (like the one earned by Mr. DeSantis) that induced the House to scramble banana-republic-headless-chicken style to pass a sniper-like ninety percent tax on employees earning more than $250,000 at companies that have accepted more than $5,000,000,000.00 in bailout funds. Excuse me, but has Obama lost his mind? Is it reasonable… is it sane to expect that violating contracts at the eleventh hour by enacting draconian ex post facto laws that tax compensation to the brightest and most talented employees at the troubled firms Obama needs restored to profitability would in any way encourage such employees to stay? According to Obama, such experts are central to the feasibility of repaying taxpayers the hundreds of billions of dollars, and yet why would such people believe that the government will honor its contracts with them? Would you? Mr. DeSantis has left the building and he’s not leaving alone.

Apparently, professional politicians like Obama wouldn’t want to squander the opportunity to grow their political capital by deploying eat-the-rich soundbytes in the midst of an economic downturn. Politicians clearly are motivated by profits too, and what is more profitable to them than to appeal to the vast majority of voters by ridiculing an unpopular minority, the haves, the wealth creators. We will hear all about the courageous stands politicians took against big business bonuses in the next election cycle. Will they remember to mention that they voted en masse to give big businesses trillions of dollars without which the bonuses would simply not have been possible?

Obama’s tax policy is based on pure political profit: he gains by authorizing a tax policy that penalizes the top-income earners while providing the majority of the country with a tax break (even people who don’t earn income will get tax rebates… hey, look, another UNEARNED BONUS Obama is apparently in favor of!). It’s despicable that Obama has the audacity to be proud of his anti-profit policy. Obama’s specious rhetorical reminder that under his presidency the rich need to pay “their fair share” is just a big damn lie.  As of 2006, the top 1% of income-earners already pay over 40% of income tax revenue (top 5% pay over 60%, top 25% pay over 86%!). The only people who don’t like flat taxes are people with prejudices against those who earn more money than they do. If Obama wants to make the tax code fair, he should implement a flat income tax so that all income earners pay a set percentage, no more, no less. And, if he believes profits lead to job creation and innovation, he should eliminate the capital gains tax.

If Obama really believed that the profit-motive produces prosperity, if he truly grasped that profits must be produced solely by voluntary exchanges not wealth redistribution, then he would also know that prosperity results from a competitive system of profits and losses, and therefore he would have rejected (instead of embraced) W.’s bailout bonanza policies. It is precisely because Senator Obama voted for and then President Obama spear-headed and authorized government-mandated wealth transfers that some people are, as you read this, making money “on the taxpayers’ dime” by engaging in work that other people are unwilling to patronize of their own free will. Obama doesn’t like unearned bonuses, but what else does one call it when a company that has failed to create values that people are willing to pay for suddenly receives billions of dollars? It’s an unearned bonus, right?

Thus far, the shameful and barbaric main theme of Obama’s young but ultrabusy presidency is his eager use of the federal government’s power to tax and to print money out of thin air to enrich people at failing enterprises via galaxy-sized seizures and re-allocations of private wealth.


Dear A.I.G., I Quit!

Published by NYTimes: March 24, 2009

The following is a letter sent on Tuesday by Jake DeSantis, an executive vice president of the American International Group’s financial products unit, to Edward M. Liddy, the chief executive of A.I.G.

DEAR Mr. Liddy,

It is with deep regret that I submit my notice of resignation from A.I.G. Financial Products. I hope you take the time to read this entire letter. Before describing the details of my decision, I want to offer some context:

I am proud of everything I have done for the commodity and equity divisions of A.I.G.-F.P. I was in no way involved in — or responsible for — the credit default swap transactions that have hamstrung A.I.G. Nor were more than a handful of the 400 current employees of A.I.G.-F.P. Most of those responsible have left the company and have conspicuously escaped the public outrage.

After 12 months of hard work dismantling the company — during which A.I.G. reassured us many times we would be rewarded in March 2009 — we in the financial products unit have been betrayed by A.I.G. and are being unfairly persecuted by elected officials. In response to this, I will now leave the company and donate my entire post-tax retention payment to those suffering from the global economic downturn. My intent is to keep none of the money myself.

I take this action after 11 years of dedicated, honorable service to A.I.G. I can no longer effectively perform my duties in this dysfunctional environment, nor am I being paid to do so. Like you, I was asked to work for an annual salary of $1, and I agreed out of a sense of duty to the company and to the public officials who have come to its aid. Having now been let down by both, I can no longer justify spending 10, 12, 14 hours a day away from my family for the benefit of those who have let me down.

You and I have never met or spoken to each other, so I’d like to tell you about myself. I was raised by schoolteachers working multiple jobs in a world of closing steel mills. My hard work earned me acceptance to M.I.T., and the institute’s generous financial aid enabled me to attend. I had fulfilled my American dream.

I started at this company in 1998 as an equity trader, became the head of equity and commodity trading and, a couple of years before A.I.G.’s meltdown last September, was named the head of business development for commodities. Over this period the equity and commodity units were consistently profitable — in most years generating net profits of well over $100 million. Most recently, during the dismantling of A.I.G.-F.P., I was an integral player in the pending sale of its well-regarded commodity index business to UBS. As you know, business unit sales like this are crucial to A.I.G.’s effort to repay the American taxpayer.

The profitability of the businesses with which I was associated clearly supported my compensation. I never received any pay resulting from the credit default swaps that are now losing so much money. I did, however, like many others here, lose a significant portion of my life savings in the form of deferred compensation invested in the capital of A.I.G.-F.P. because of those losses. In this way I have personally suffered from this controversial activity — directly as well as indirectly with the rest of the taxpayers.

I have the utmost respect for the civic duty that you are now performing at A.I.G. You are as blameless for these credit default swap losses as I am. You answered your country’s call and you are taking a tremendous beating for it.

But you also are aware that most of the employees of your financial products unit had nothing to do with the large losses. And I am disappointed and frustrated over your lack of support for us. I and many others in the unit feel betrayed that you failed to stand up for us in the face of untrue and unfair accusations from certain members of Congress last Wednesday and from the press over our retention payments, and that you didn’t defend us against the baseless and reckless comments made by the attorneys general of New York and Connecticut.

My guess is that in October, when you learned of these retention contracts, you realized that the employees of the financial products unit needed some incentive to stay and that the contracts, being both ethical and useful, should be left to stand. That’s probably why A.I.G. management assured us on three occasions during that month that the company would “live up to its commitment” to honor the contract guarantees.

That may be why you decided to accelerate by three months more than a quarter of the amounts due under the contracts. That action signified to us your support, and was hardly something that one would do if he truly found the contracts “distasteful.”

That may also be why you authorized the balance of the payments on March 13.

At no time during the past six months that you have been leading A.I.G. did you ask us to revise, renegotiate or break these contracts — until several hours before your appearance last week before Congress.

I think your initial decision to honor the contracts was both ethical and financially astute, but it seems to have been politically unwise. It’s now apparent that you either misunderstood the agreements that you had made — tacit or otherwise — with the Federal Reserve, the Treasury, various members of Congress and Attorney General Andrew Cuomo of New York, or were not strong enough to withstand the shifting political winds.

You’ve now asked the current employees of A.I.G.-F.P. to repay these earnings. As you can imagine, there has been a tremendous amount of serious thought and heated discussion about how we should respond to this breach of trust.

As most of us have done nothing wrong, guilt is not a motivation to surrender our earnings. We have worked 12 long months under these contracts and now deserve to be paid as promised. None of us should be cheated of our payments any more than a plumber should be cheated after he has fixed the pipes but a careless electrician causes a fire that burns down the house.

Many of the employees have, in the past six months, turned down job offers from more stable employers, based on A.I.G.’s assurances that the contracts would be honored. They are now angry about having been misled by A.I.G.’s promises and are not inclined to return the money as a favor to you.

The only real motivation that anyone at A.I.G.-F.P. now has is fear. Mr. Cuomo has threatened to “name and shame,” and his counterpart in Connecticut, Richard Blumenthal, has made similar threats — even though attorneys general are supposed to stand for due process, to conduct trials in courts and not the press.

So what am I to do? There’s no easy answer. I know that because of hard work I have benefited more than most during the economic boom and have saved enough that my family is unlikely to suffer devastating losses during the current bust. Some might argue that members of my profession have been overpaid, and I wouldn’t disagree.

That is why I have decided to donate 100 percent of the effective after-tax proceeds of my retention payment directly to organizations that are helping people who are suffering from the global downturn. This is not a tax-deduction gimmick; I simply believe that I at least deserve to dictate how my earnings are spent, and do not want to see them disappear back into the obscurity of A.I.G.’s or the federal government’s budget. Our earnings have caused such a distraction for so many from the more pressing issues our country faces, and I would like to see my share of it benefit those truly in need.

On March 16 I received a payment from A.I.G. amounting to $742,006.40, after taxes. In light of the uncertainty over the ultimate taxation and legal status of this payment, the actual amount I donate may be less — in fact, it may end up being far less if the recent House bill raising the tax on the retention payments to 90 percent stands. Once all the money is donated, you will immediately receive a list of all recipients.

This choice is right for me. I wish others at A.I.G.-F.P. luck finding peace with their difficult decision, and only hope their judgment is not clouded by fear.

Mr. Liddy, I wish you success in your commitment to return the money extended by the American government, and luck with the continued unwinding of the company’s diverse businesses — especially those remaining credit default swaps. I’ll continue over the short term to help make sure no balls are dropped, but after what’s happened this past week I can’t remain much longer — there is too much bad blood. I’m not sure how you will greet my resignation, but at least Attorney General Blumenthal should be relieved that I’ll leave under my own power and will not need to be “shoved out the door.”


Jake DeSantis


Who Pays Corporate Taxes

by adam on March 11, 2009 · 3 comments

The simplistic left-wing view that corporate tax rates should be higher is fairly well rebutted here, despite the silly Russian bride goofiness. Given that corporations pass their tax costs to the masses, if a highly motivated political activist wants to attack “those evil corporations,” then advocating increases in their tax rates is a damned ineffective approach. Of course, the simplistic right-wing view that being pro-business necessitates subsidizing industries and even protecting some with tariffs… tactics that also result in higher costs to you and me… is similarly ass-backwards.

But do left-wingers and right-wingers tow these lines consistently anymore? Not really. With the lefty messiah, like W. before him, signing off on epic wealth transfers… hundreds upon hundreds of billions of the people’s dollars… to corporations, we’re absorbing what is technically known as a double-whammy. And Obama’s imminent tax increases may aim high, but they’ll hit everyone, which, during a recession, is maybe not so smart.

Advocating the criminalization of corporate welfare and the elimination of all corporate taxes would be profoundly beneficial to everyone, but Obama and this Congress aren’t likely to do either. Then again, Obama professes to care about “what is practical” and has also reiterated the importance of learning from mistakes… so maybe, just maybe…. there’s hope.

Here’s a link to a radio version of the ad, which I actually prefer.


What does it mean to say government is “the purchaser of last resort?” Never mind that this role is not mentioned in the U.S. Constitution. “And government shall buy stuff when the citizens cease buying stuff at levels the politicians deem adequate.” Nope, that’s not in there. You’ve probably heard this “last resort” notion bandied about by advocates of the fourth round of stimulus currently being spearheaded (through taxpayers’ hearts to the tune of over $2,000,000,000,000.00) by President Obama’s administration, which apparently doesn’t give a damn if members of either party read the bill’s 700+ pages allocating the equivalent of the entire budget of the U.S. government in 1984 before voting to approve it.

We are reminded daily that we live in desperate times. Times that politicians insist require government measures of last resort!

The phrase “… of last resort” is inherently romantic and Obama, a savvy politician and gifted orator, uses it to heroic effect. What he is saying that resonates with most Americans is that he will lead a last effort to rescue and create jobs, and he would do this right away, if only Congress would let him by voting for his program immediately. He pledges to ride as our champion headlong into the battle to save the U.S. economy at its most desperate juncture, with the forces of righteousness on the brink of failure (approximately $7,000,000,000,000.00 spent and nothing to show for it because of the way that the previous administration went about it!). Obama does not bring particularly new strategies or tactics to the battle, only an undaunted will to triumph. To those who call out to him to slow down, to allow due diligence and scrutiny of the byzantine and gigantic spending plans throughout the bill, he shakes his head and replies that there is no time for thoughtful criticism.

But Mr. President, according to the Congressional Budget Office only about 21% of the bill’s spending would be set to begin 2009. Can’t we vote on that now, see how it goes, and vote on the rest of the bill later? “No,” Obama thunders, “because last resorts are all or nothing, or they’re not last resorts.” To believe Obama, to be on his side on this issue, one must believe that there is not a moment to spare for patient investigation and inquiry when pledging taxpayers to absorb debt that is nearly the equivalent of all of the money currently in circulation in the United States. Action, pure and simple action, is what is needed. Obama has done the thinking for us.

Is Obama an advocate of democracy or monarchy? Of legislation subject to checks and balances or legislation via dictates? Of the rule of law or the rule of men? How is rushing this massive program through Congress without allowing time for careful consideration consistent with the spirit of his campaign promises about transparency in government? How is doing this even remotely justifiable to him and to those who hail him as the harbinger of sane and practical politics?

Obama is basically saying, Empower me to act as your champion. Free me to act and save us all. To oppose letting my government be the purchaser of last resort is to oppose your own salvation and the salvation of our country’s economy. Obama’s frustration with those who oppose him on this stimulus package is tangible. The following video should be linked to from definitions of “derision.”

YouTube Preview Image

President Obama believes big government is an absolutely necessary solution, not a source of costly problems or a threat to people’s freedoms. He found the deficits wrapped in a big bow? He didn’t vote for any of the spending that resulted in them? That would be risible if it weren’t so fundamentally dishonest. Four minutes into this video, Obama expresses incredulity that there would be objections to spending in a stimulus bill. To his way of thinking, when consumers aren’t spending their money, it’s the morally necessary and justified role of the government to spend their money for them. Which is preposterous. Obama simply prefers government expansion and spending, in general. The growth of government is how he knows a society is doing well, apparently regardless of what it costs the rest of us in lost freedom and wealth.

On the surface, Obama’s premise is that our current economic woes result from a consumer demand problem, specifically, low to nonexistent spending by people like you and me and also low rates of lending by banks. People are worried about their job security, about paying down large credit card debts and mortgages, and they’re saving their money right now, which to Obama means that their earnings are not being used by the market even though technically their savings are held by banks which use the deposits for investment. Meanwhile, banks are worried about losing more capital than they already have lost to bankruptcies and foreclosures, so they’re keeping capital in their banks and significantly raising the standards they use to determine credit-worthiness of loan applicants. All of this nonspending and nonlending, so the theory goes, leads to lay-offs and business failures and a downward spiral that the private sector on its own is powerless to reverse.

Enter President Obama and the U.S. government in shining armour, swords drawn! Only the government has the resources to save the economy in this situation, Obama asserts. The government must act as an agent of demand creation, again, a purchaser of last resort. Obama emphasizes that conventional, mainstream wisdom is that government spending is the key to saving the economy.

We’re supposed to ignore the fact that big government spending has never correlated with bona fide, sustainable economic growth. We’re supposed to ignore the government interventions that produced the current economic crisis in the first place. And we’re not supposed to mind the fact the government, posing as a purchaser of last resort, itself has a massive debt problem: over ten trillion dollars and counting in operating debt, not including approximately one hundred trillion dollars and counting in as yet unfunded liabilities (ie, pay-out promises like Medicare and Scoial Security and the Prescription Drug Benefit Plan that it is obligated to meet but cannot afford based on current revenue). So Obama’s and his lieutenants’ repeated claims that only it has the resources to act as a purchaser of any sort would seem to amount to wishful thinking, if not outright fraudulent misrepresentation.

You’re broke, Mr. President. You can’t afford to be a purchaser of last resort, let alone to pretend to be. You need to focus on reducing government, not on finding ways of increasing it. That’s what your predecessor did. You promised change. What gives?

But President Obama and his followers don’t see it that way. And here is the crux of the issue.

To professional politicians, the fact that the government’s money is in fact our money does not require them to be more responsible in how they spend it, but is instead the reason why they can get away with reckless behavior that profits them politically at costs borne by all of us economically. Because they will always be willing to take more from us. That is what government debt is: a promise by politicians to repay lenders who make up the government’s present revenue shortfall by promising to take our wealth in the future.

From creating new bureaucracies and spending increases, significant short-term benefits accrue to politicians and to those interested parties plugged into their circle of pull. The costs of their reckless and wealth-destroying big government initiatives are dispersed across millions of people and their disastrous effects play out over longer periods of time. Politicians win today at our expense tomorrow.

Open your eyes. The government is not a purchaser of last resort for “the good of the people.” “The good of the people” is the rhetorical excuse politicians use to justify the growth of their power and the government’s scope of operations.

To accept that this is a real phenomenon, people must stop pretending that people like Obama enter politics to serve interests other than their own. Pretending is a big part of how the government’s debt is built and a big part of why, although government programs grow more expensive and less competent over time, taxpayers are not in the streets calling for revolution.

The political class and have enriched themselves by exploiting the deepseated apathy and superficial self-interests of taxpayers and there is no compelling reason for them to stop. Yet.


President Obama, Inexcusable

by adam on February 7, 2009 · 0 comments

Obama Calls Delays on Stimulus
‘Inexcusable and Irresponsible’

President Obama scolded critics of his economic plan on Friday, calling it “inexcusable and irresponsible” to delay the passage of the stimulus legislation in the Senate as he named a new White House economic board to help him respond to the recession.

Whatever your gut may tell you about the appropriateness of this legislation, it amounts to spending over nine hundred billion dollars… $900,000,000,000.00… so you’d think it should take time to perform some due diligence on the contents of the bill. Perhaps, if he wanted it approved faster, he should have included only direct stimulus-related items and saved unrelated stuff for later votes. But that assumes that “stimulus” is his actual goal, not a broad legislative coup that is in fact facilitated by the current crisis.  Furthermore, as Patrick Stephens points out,

It’s simply impossible for the federal government to spend $900 billion effectively, efficiently, or even sensibly. The numbers are too large and the opportunities for graft too numerous. The potential rewards for gaming the system are simply too large for us to imagine–for even a moment–that vast amounts of money won’t be completely and utterly wasted.

If a stimulus we MUST have, then why not a simple moratorium on tax withholding? Why not simply take less from the American public for two months?

Because that leaves no opportunity for graft, and Congress lives on graft.

Add to which, with its already gargantuan debt, where the heck is the federal government getting the money for this bill? According to the counter in my right column, the federal debt is approximately $10,700,000,000,000.00. However, according to President of the Dallas Federal Reserve, Richard W. Fisher, the actual U.S. debt is science-fiction disaster-scenario high.

“Add together the unfunded liabilities from Medicare and Social Security, and it comes to $99.2 trillion over the infinite horizon. Traditional Medicare composes about 69 percent, the new drug benefit roughly 17 percent and Social Security the remaining 14 percent.”

“I want to remind you that I am only talking about the unfunded portions of Social Security and Medicare. It is what the current payment scheme of Social Security payroll taxes, Medicare payroll taxes, membership fees for Medicare B, copays, deductibles and all other revenue currently channeled to our entitlement system will not cover under current rules. These existing revenue streams must remain in place in perpetuity to handle the “funded” entitlement liabilities. Reduce or eliminate this income and the unfunded liability grows. Increase benefits and the liability grows as well.”

“Let’s say you and I and Bruce Ericson and every U.S. citizen who is alive today decided to fully address this unfunded liability through lump-sum payments from our own pocketbooks, so that all of us and all future generations could be secure in the knowledge that we and they would receive promised benefits in perpetuity. How much would we have to pay if we split the tab? Again, the math is painful. With a total population of 304 million, from infants to the elderly, the per-person payment to the federal treasury would come to $330,000. This comes to $1.3 million per family of four—over 25 times the average household’s income.”

In plain common sense terms, a policy of spending increases coupled with tax cuts makes absolutely no damn sense, but is an utterly predictable government tactic. How do you think we’ve accumulated this terrifying debt? The government keeps promoting the lethal pretense that free lunches are possible and Americans keep placing faith in that pretense. We’ll see where that leads. Meanwhile, the answer to the question of how Obama and Congress will pay for the $900,000,000,000.00+ “stimulus plan” is grotesquely, inexcusably familiar: they will raise the debt limit, borrow some from whomever they can, and print the rest out of thin air.

The exact excuse Obama offers for the current push to spend money the government doesn’t have is that action must be taken immediately “to jumpstart the economy.” Obama alleges that virtually all economists agree his stimulus bill is necessary (pernicious nonsense).

The economy does need rescuing, no doubt, but from titanic government expenditures and interventions not by them. The only sustainable path to economic growth is for the government to retract its claws and stop interfering with markets. The way to real prosperity is to allow the profit and loss system to function, restoring the job-creating vitality that only competition with accountability can generate. Markets create and markets destroy according to dynamic, constantly evolving factors, such as the development of more cost-effective production and distribution technologies or the adaptive insights of a single entrepreneur about a new way to solve a problem or meet a demand.

What would you or I have done with the wealth we earned but were deprived of so that politicians can diddle with it? Governments don’t create wealth; every government project costs us money on the one hand and opportunities on the other. President Obama and Congress cannot legislate discovery or insight or risk taking or voluntary trade. Wealth creation emerges from free human action not coercive bureaucratic planning.

But there are things Obama and Congress can and should do: repeal laws that artificially distort market prices, repeal taxes that penalize sales and income and hiring and investment, and stop making winners of losers and losers of winners.

Get the government the hell out of the way, President Obama, and you’ll receive the credit for having the courage to recognize the limits of government. Continue down the well-trodden path of those who came before you, and you will betray the promise of your presidency, which was always supposed to be about being practical instead of being partisan.

What possible excuse exists for perpetuating W’s policy of propping up failed firms? By doing so, Obama is overriding the will of consumers whose decisions about which businesses they will or will not patronize are the only “votes” that ought to count.

What is Obama’s excuse for the tragically inept response of his administration to the ice storm in Kentucky? And where is mainstream media on this story?

What is Obama’s excuse for not leveraging his personal experience with drug use to lead the way on reframing the drug war in this country? Would his life have been better if he had been incarcerated for the drug use he has admitted to? Of course not, and yet, there are hundreds of thousands of human beings rotting in U.S. jails for nonviolent crimes involving drug posession and use. What are you waiting for, President Obama?

What is Obama’s excuse for expanding grant support to W’s faith-based initiatives?  Religious groups generally have a hard time raising money from secular people, for obvious reasons, and yet Obama will increase grants to religious groups… as long as what they do with the grants is secular?!? This is completely unnecessary and it’s insulting. Let religious groups, like all other charities in this country, raise money from those willing to donate to them.

And again, what is Obama’s excuse for railing against Congress for not rushing to approve a massive inherently pork-laden spending bill designed with obsequiously partisan political opportunism at its core immediately after winning an election based on the promise of hope and change and the rejection of politics-as-usual?

President Obama’s self-righteous airs are inexcusable if he’s the leader he promised to be, and inexcusable if he’s merely an exceptionally skilled but otherwise typical professional politician.


Apparently President Obama has a strange sense of humor. That’s the only way I can explain his bombastic reaction to executive compensation on Wall Street.

“The American people understand that we’ve got a big hole that we’ve got to dig ourselves out of, but they don’t like the idea that people are digging a bigger hole even as they’re being asked to fill it up,” Mr. Obama said, adding that “there will be time for them to make profits and there will be time for them to make bonuses. Now is not that time.”

To join him in being upset about Wall Street bonuses totaling eighteen billion dollars is to pretend that Obama himself didn’t vote to authorize transferring hundreds of billions of taxpayer dollars to banks and agricultural businesses and automobile manufacturers with no strings attached. Of course, banks are going to use the money you’ve given them recklessly. You just voted to reward them for their reckless behavior! You just helped them evade the consequences of their bad choices! What would be your basis for expecting them to not go hog-wild with the cash windfall you bestowed upon them?

Meanwhile, why would you and I pretend that President Obama isn’t responsible for digging a far greater hole than Wall Street firms with their silly bonuses? Who is going to buy this class warfare red herring? Bothered about wasteful allocations of your tax dollars? Look no further than Obama’s first major legislation, a spending bill bloated with stupefyingly brazen wastes of your hard earned dollars. And Obama has essentially promised trillion dollar deficits for the foreseeable future. Hmmm.

The stench of your 2008 TARP vote hasn’t exactly cleared the room, Mr. President. You’ve got some nerve blaming the stink on others. Take responsibility, President Obama. Banks that make bad bets, car companies that make unworthy products, any company that fails to persuade people to buy enough of  its products and services to afford its existence must not be salvaged by coercive wealth transfers. It’s insulting, Mr. President. Admit that subsidizing corporations is fraught with peril. Promise not to waste any more of our tax dollars on bailing out companies that investors won’t voluntarily support and consumers won’t voluntarily patronize.

And, for the record, the time for making profits in the private sector is always “right now.” That’s what businesses do. Profits drive wealth creation and economic growth. Not sure what President Obama meant by this. I think he probably only meant to express derision for the bonuses, but his basic lack of respect for market processes abruptly revealed itself, too. Talk about sending shivers through financial markets!

Note to self and readers: when a president allegedly committed to restoring economic growth scorns businesses that make profits, it’s appropriate to feel nervous about the prospects for your own wealth.


Though President Obama has repeatedly affirmed “the Rule of Law” throughout his campaign and in the early days of his presidency, there are reasons to be skeptical of his fidelity to the concept.

Of course, I applaud the actions he has taken to increase transparency in the executive branch, his superlative exhortations to all federal employees to exceed legal requirements in their compliance with the Freedom of Information Act, and his unLincolnlike resurrection of the principles of habeas corpus. In these instances, President Obama demonstrates that he likes the Rule of Law more now than he did last year when he voted in the Senate to support warrantless wiretapping. Is he moving in the right direction? No, this is not part of a coherent trend. Obama is clearly going to refuse to let his administration be restrained by ideological consistency. He will not allow principled adherence to the Rule of Law to capsize most of his presidential agenda.

The concept of the Rule of Law holds that no person is above the law, and, by logical extention, that all citizens are entitled to equality under the law. All laws must apply equally to all people. When laws apply unequally to people, say, for example, by conferring on some advantages that are produced at the involuntary expense of others, then the Rule of Law is no longer effective.

Laws that identify some as “entitled” and others as “involuntarily obligated” tend to be designed and promoted by people who rely on votes and donations from the “entitled.”  What it takes to prioritize such legal schemes more than the Rule of Law is a kind of narcissistic conviction that “greater goods” can be served by exercising power in an unprincipled manner. Obama’s inaugural address includes several strong hints not only about his unwillingness to allow his political ambitions to be caged by principles, but moreover his disdain for a principled worldview. So the same speech that contains this phrase…

…the God-given promise that all are equal, all are free, and all deserve a chance to pursue their full measure of happiness.

… a clear allusion to the unequivocally libertarian Declaration of Independence, also contains the following:

What the cynics fail to understand is that the ground has shifted beneath them — that the stale political arguments that have consumed us for so long no longer apply.  The question we ask today is not whether our government is too big or too small, but whether it works.

Cynics? A free people should always be concerned with the moral basis for government action vis-a-vis individual liberty. And, to paraphrase Jefferson, a government big enough to give you everything you want is going to be powerful enough to take everything you’ve got. The history of the twentieth century validates Jefferson’s warning.


If President Obama were to sign a law granting him dictatorial power, that would be no more or less a violation of the Rule of Law than his signing a law that grants to some percentage of the population claims over the wealth of another percentage of the population. In the latter case, it does not matter if such a claim would be based on gender or age or religion or income or ethnicity or political affiliation or industry, the Rule of Law is violated as a result of executing laws that do not apply equally to all. Other violations include laws that apply retroactively (ie, ex post facto laws), and laws that ignore the “presumption of innocence.”

There is an intimate relationship between the Rule of Law and Individual Liberty.

Embodied in the legal constraint on the State suggested by the “presumption of innocence” is a universal implication about the moral legitimacy of a State’s laws. It is implied that all innocent individuals (ie, those who are peacefully going about their lives) must not be be subject to laws that deprive them of life, liberty, or property outside of the context of outcomes of court cases in which they are found guilty of crimes. In other words, in addition to the issue of all laws applying equally to citizens is the notion that individual citizens have a fundamental expectation of noninterference by the State except under strict conditions.

If President Obama were serious about upholding the Rule of Law, he would call for Congress to reverse course on the TARP spending. Bank executives and employees should not have laws made for their benefit at the involuntary expense of taxpayers. Neither should automobile manufacturers, nor anyone else.

In accordance with the Rule of Law, President Obama should call for a flat income tax. If he had the audacity to propose a Constitutional Amendment undoing the Sixteenth Amendment, he could invoke the principle that an income tax unjustly punishes people for freely exercising their right to pursue their “full measure of happiness.”

President Obama should abolish all corporate welfare and also all corporate taxes. He should eliminate the capital gains tax and inheritance tax, cancel minimum wage laws, and do away with any tariffs and/or “protectionist” restrictions on access to markets. Any laws that artificially create winners and losers should be voided. May as well end the war on drugs, too.

Of course, the bottom line is that President Obama is not convinced that adhering to the principles of the Rule of Law require him to reform the entire federal government so that it consistently protects individual liberty. To him, the Rule of Law is not of overriding importance but rather one of many competing instruments (from his perspective, like the market or like a government mandate), and one that is more or less worthwhile given the particularities of different contexts. President Obama has signaled that he has collectivist sensibilities and a pragmatist streak, which is to say he is romantic about accomplishing goals that serve the common good using whatever means are required to do so. Thumbs up to the Rule of Law today and in particular contexts, thumbs up to coercive wealth transfers to banks tomorrow.

Though he has declared himself the harbinger of an age in which the size of government should be less of a concern than what works, he has a definitive bias in favor of government projects and against market processes. And historically, governments cause more problems than they solve, whereas markets create wealth and enhance people’s quality of life. Which means that despite mountains of empirical data about what does not work, President Obama may insist on the moral imperative of his collectivist intentions, emphasizing the potential of government to do good (once he makes it work well enough), even though it actually does the opposite.


Public-Sector vs. Private Responses to Bad Decisions, Part Deux

by adam January 8, 2009

Here’s a lovely question for a rainy day in NYC: Why don’t more politicians kill themselves given the depth and scale and reach of their failures? At the very least, why don’t more politicians seem depressed? Look at the financial condition of the states and the federal government. You wouldn’t exactly be surprised to learn […]

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Public-Sector vs. Private Responses to Bad Decisions

by adam January 6, 2009

There are two news stories on the “front page” of today that make for an interesting exercise in juxtaposition. First, there’s the suicide of an entrepreneurial billionaire. Adolf Merckle, the German billionaire whose speculation in volatile Volkswagen stock had pushed his sprawling business empire to the edge of ruin, has committed suicide, his family […]

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Obama… Professional Politician or Magician?

by adam January 5, 2009

Check this out from Politico: Obama plans to ask Congress for a stimulus package of $675 billion to $775 billion, so the planned tax cuts will total about $270 billion to $310 billion. So Bush gave us tax cuts and record spending, and now Obama’s going to do the same damn thing. Government spending in […]

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Big Failures Aren’t Helped By Big Subsidies

by adam January 2, 2009

Lost in the incessant jabber about the dismal events that *would* unfold if massive banks or car companies were to go out of business are the bright inescapable facts that (1) these firms are insolvent and (2) the U.S. federal government is also insolvent. Insolvency means that they do not have the means to pay […]

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