Miscellany: 10/19/13

Quote of the Day
Courage to start and willingness to keep everlasting at it are the requisites for success.
Alonzo Newton Benn

Pro-Liberty Thought of the Day

Via LFC on FB

This also applies to their regulatory regime, like banking reform. It's always those "evil capitalists" operating by the rules of the government playing field: "market failures", not "regulatory failures".

Image of the Day

Courtesy of the Bastiat Institute (of course)

Newest JOTY Nominee: Steve "Tea Partiers are domestic enemies" Cohen



Sunday Talk Soup, the Shutdown, the Debt and the Stock Market

I had started a rant on the shutdown stalemate, but had not finished it at the time it played out the way I thought it would, even if I didn't publish it: the GOP would feel the brunt of the pain in terms of popular opinion, even though they controlled only one of the 3 parties in the dispute, even though I agreed with the intent of the ObamaCare provisions, I thought it was the wrong time and place to push the point (there's a reason I have not been promoting Ted Cruz in the blog, although he's arguably the most compelling new political talent--an able, articulate debater, a former collegiate debate champion and former SCOTUS law clerk whom himself has authored 80 briefs before the Court); I thought Obama would be emboldened after a reelection win and a slightly better showing of Democrats in both chambers of Congress--and he is still smarting over the fact of the sequester in 2011: there had been an unambiguous rebuke of the 111th Congress in the 2010 election, and he didn't need a shutdown in 2011 which could come back to haunt him at reelection. He also knew that the GOP took a hit over the shutdown in 1995-1996. I think that he hoped that he could use to go after the House next fall. But the fact is that Clinton did not have much coattails in 1996--he lost a couple of Senate seats and only trimmed the GOP's advantage in the House. I don't think Obama will improve on Clinton. He doesn't seem to have picked up any shutdown bounce, with the latest approval at 42%; RCP still shows ObamaCare opposed by a clear majority/plurality. The latest polls I've seen has vulnerable Senate Dem incumbents ahead in LA, NC, AL and AR, all states that went to Romney; it does look that the GOP looks ready to pick up a couple of open seats in SD and WV, but the GOP is struggling to put up good candidates in MN, NH, MI, CO, NM and IA, all of which should be doable. Most pundits, however, believe that the GOP is in a strong position to hold its House majority.

As I mentioned, I would have voted against the shutdown/debt limit deal, but I would have postured differently; we haven't seen the fiscal damage yet from ObamaCare, but the debt is corrosive, and I have identified a number of concrete steps: across-the-board cuts, federal hiring and travel freezes, asset sales and liberalized leases, operations reengineering, privatization, agency resource shares, shuttering unused and/or redundant facilities, etc.

What would I would done in Boehner's place? I would probably have resurrected Simpson-Bowles and pushed a White House endorsement of its framework. Given bipartisan support of the Senate members on the commission, it would have been politically difficult for Obama or Reid to stonewall it.

I am nor going to rant here about Jack Lew, but I was absolutely livid at what he said (virtually all politically spun fear-mongering) on MTP and Fox News Sunday, enough I'll probably convert my rant one-off into a Jack Lew critique. I will say that Dick Durbin actually surprised me on one of the Sunday talk shows by admitting the reality of unfunded entitlements and referencing Simpson-Bowles in a positive fashion. I also didn't know this, but my favorite columnist, George Will, has moved from ABC to FNC. (I would have paid good money to see George Will slap the taste out of Paul Krugman's mouth before leaving ABC This Week.) Although Chris Wallace is easily the best host of the Sunday shows, I'm not impressed with the other members of the Fox News round table (except maybe Karl Rove). I loved the way Will at ABC bided his time with the social liberals spouting their nonsense and then fashioned his trademark articulate slow build narrative to underscore his point, a thing of beauty. I don't think that he did it on his first two appearances on FNS, but I think it largely reflects the rest of the round table. To be honest, I would love to see a panel of Will, Stossel, and Napolitano....

Just a few comments about debt and the shutdown. I'll go into more detail in my upcoming Lew critique, and Obama, demonstrating once again his incompetence on economic issue, made reference to "damage to the economy" due to the shutdown. That's utter crap! The government is a parasite on the economy, a drag on the economy. We have had over a dozen shutdowns in recent American history, none of them have lasted very long. I think the reason the stock market basically shrugged off the shutdown was they knew this was more about grandstanding and would be short-term. It didn't surprise me Obama tried to make the shutdown as unpleasant as possible; keeping WWII vets away from memorials was politically toxic; there's no way that he'll win over the military community after that nonsense. I briefly mentioned the incident in the blog, but I rather enjoyed seeing the GOP give Obama all the rope he needed to hang himself. It was entirely predictable--after all, this is the same guy whom cried wolf over the sequester cuts. Of course, he's going to be petty and try to manipulate public opinion, but he doesn't understand he's swinging a double-edged sword. What Obama showed the American people, despite all his histrionic warnings, he wasn't willing to give Republicans any concession--he just wanted an unlimited debt. In the real world, lenders won't give you an unlimited credit line--because the bigger the existing debt, the harder it is to pay you off. That a family not spending beyond its means is damaging the economy is ludicrous. If you take on more debt, the lender will charge you a higher interest rate, to take on the risk of nonpayment.

Fitch threatened a debt downgrade, and a Chinese credit rating firm did downgrade US debt. Whereas businesses and rating agencies don't like the uncertainties introduced by shutdowns, that has nothing to do with downgrades. The issue is how the US can shoulder interest on a $17T debt at the historic mean of 5%; interest alone could account to more than a third of federal revenues.  We have to cut debt before interest rates get that high--and Obama/Reid refuse to cut budgets for ideological reasons (Keynesian economics). Downgrades have to do with revenues and expenditures, not with political bickering.

Finally, this is not an investment blog; invest at your own risk. But on Friday I once again hit all-time highs in my retirement accounts. I will simply state that among the themes I've been pursuing are certain players in the oil/gas shale story, certain small-cap, dividend and value ETF's, a few undervalued health companies and/or REITs, and I've been intrigued by compelling values in East Europe/Russia; at this point, the overwhelming majority of my investments are domestic, but I'm not chasing momentum stocks, and I'm keeping some powder dry. It seems to me some stocks are priced to perfection; I'm not predicting a 1987 style correction, but I think a correction can happen at any time. What's particularly interesting is how the short play on T-bonds TBT, which was up 25% YTD in August, since the no-taper announcement by the Fed, has dropped nearly $9/share, down to about 16.25%..

Facebook Corner

Via LFC on FB

What hubris--the same government that can't balance its own checkbook and optimize its own operations thinks it has the expertise to micromanage the healthcare sector. Let's look at their effectiveness in the marketplace: we pay above-market prices for sugar, we stockpile cheese and other commodities, the government propped up an unsustainable housing bubble with easy money and easy credit policies, and we now have a college loan bubble. We've had roaring healthcare and college inflation based on government meddling, and the "progressives" response is "let's throw another shrimp on the barbie".

LFC (on Canada's new free trade pact with the EU).When the state passes laws/fines/taxes aimed at preventing trade between individuals, it makes everyone poorer. It is a good thing for these laws to be repealed BUT often "free trade" agreements create a worse evil, that is, they centralize government. Whereas before, businesses could move to whatever government had the best regulations, free trade treaties "harmonize regulations" on IP, etc., centralizing power. (Teal)

The problem I have with Teal's description is that nations have long reserved the power to establish tariffs, a principal funding source for early American government. A traditional debate has been between low tariffs and protectionist tariffs. I agree with Teal's ideal of open markets but I'm not sure we have seen that ideal; one of the first things Congress did in 1789 was to protect domestic sugar producers . Like Teal, I would prefer comprehensive vs. piecemeal tariff reform, but once again our Trader-in-Chief leads from behind, as Canada wins its free trade agreement with the EU before we did; no wonder Canada leads us in economic freedom indexes. Getting liberalized trade policy from this president is like pulling teeth. It took him years to get Bush's blocked agreements. He believes in industrial policy and plays winners and losers with sectors (e.g., our manufacturing sector)

A second point I want to make to Teal (and a commentator below whom employs a principle I would describe as relativistic local trade policies) is that this is one of the few times I think centralization works--it is far more efficient to negotiate tariffs centrally, which is why the Constitution specifically authorizes the feds versus states on things like the military, tariffs and immigration.

Via LFC:
Many roadways before the twentieth century were privately built

Well, of course, the government owns or controls property in metropolitan areas and between population centers. Roads are hardly as complicated as, say, building a semiconductor foundry. Roads basically are showcase loss leaders for Statists for promoting their self-preservation and/or empire-building; roads are not really free--they're paid for by excise taxes on fuel and/other other taxpayers. No wonder former Sen. D'Amato relished the nickname 'Sen. Pothole'. Never mind the fact of overutiilized "free" roads in constant disrepair: this is not a government bug; it's a feature!

LFC likes to stir the pot. In this case, they borrowed a social liberal group's photo (I'm not going to promote "progressive" propaganda by embedding it but it should be available here) The group is arguing an NFL sponsor pizza chain can afford to give away "free" pizzas, but it's scrimping on employee healthcare.
What is salient is worker compensation, not just wages and/or benefits. Businesses often use discounts or loss-leader promotions to extend their customer base; restaurants don't make money by giving away stuff, at least in the long run. You spent your take-home pay on your basic needs--food, shelter, etc. If you don't have company-sponsored healthcare, that also includes your own health insurance (unfairly because you're not paying with pretax dollars) and/or paying out-of-pocket. The problem is that healthcare insurance--really bundled health services--costs are outstripping gains in worker productivity. (in part, this is due to government distortions in the market like unnecessary benefit mandates, tax subsidies, etc). The prices the policyholders see piecemeal are often artificially low (e.g., co-pays) which spike demand and further exacerbate inflationary pressures. From an employer's perspective, money is fungible, including healthcare dollars; it's not a value issue--it's a labor cost issue. Will workers accept compensatory wage cuts to accommodate health insurance cost increases? I don't think so. So some employers are trying to do what they can to manage health care costs whether it's limiting enrollments, increasing employee wage deductions, or even dropping coverage to pay a more affordable penalty.

Via LFC

If you agree to a concept of limited government, you should be willing to accept a low, flat, commensurate tax amount, particularly for services like public safety. I generally think it's in the best interest of government to encourage business ownership by not establishing a barrier of entry. I would waive or discount fees for modest enterprises,like your child opening a lemonade stand on your front lawn. To the restaurant entrepreneur commenting below, I could easily see an independent non-government entity (e.g., auditing, credit-rating agency,...) attesting to health safety standards--you don't need a government monopoly to do that. As for the image above, my understanding is that there is a bidding war for permits with high-demand public access. Although clearly the fee is high and is a windfall for Statist mischief, the fact that it is a voluntary bidding process makes it less objectionable than arbitrary across-the-board tax increases.

Courtesy of LFC

The progressive income tax serves to discourage, vs. maximize economic success. It is also highly inefficient and unduly burdensome.

Via Libertarian Republic

As a fat person I have no problem with physically fit people having a positive self-image. What bothers me more is the judgmental, in-your-face, condescending attitude; my health condition is none of your business; it's between my doctor and me. For new or unfamiliar readers, I also have a separate nutrition blog. More recently I've been on a renewed diet and exercise regimen over the past 6 months or so losing over 40 pounds to date. I am well-read on nutrition matters since I started a low/lower-carb regimen in 2003 and prepare most of my own meals.

Political Cartoon

Musical Interlude: Motown

Rick James, "Super Freak"