Too-Big-to-Fail: a Huge Failure (I)

Normally, when a company fails, it declares bankruptcy and comes under the control of the bankruptcy court. It may be liquidated or bought out. But more likely it’s reorganized and returned to viability.

This normal approach, however, doesn’t give the federal government the opportunity to exercise power. Can’t have that. The feds are therefore identifying more than 50 large banks and non-bank financial companies as too-big-to-fail. These would receive taxpayer funds to prevent bankruptcy. They would also be regulated up to their eyeballs. 

The possible infusion of taxpayer money means that people who lend to these too-big-to-fail companies are more assured of repayment. The cost of borrowing by the biggies is thereby reduced. This enables them to swallow up smaller companies whose cost of doing business is not reduced.

Way to go, gov. Good of you to make rich people even richer.

But maybe the regulation of too-big-to-fail companies will be so onerous that they’ll be driven to failure by smaller, more nimble companies. Taxpayers would then have to come up with their hard-earned cash to keep the biggies alive. Either way, the prospects are wretched.

Too-big-to-fail will fail. The federal government itself is failing because it's way too big.

Communist Rule in China: Not Long for This World

Here are two good reasons why Communist rule in China doesn't have long to go.

-- Chinese colleges and universities annually graduate seven million bachelor-degree holders. The Communist Party, now 80 million strong, accepts only one million graduates as members. Since party membership is currently the main path to economic opportunities, six million graduates each year are excluded, making them prime candidates for political opposition.

-- The International Monetary Fund estimates that, in terms of purchasing power relative to other nations (purchasing power parity – PPP), China’s per-capita Gross Domestic Product is $8,382. Only 22 non-democratic countries have higher per-capita PPP, and fully 19 of those are oil-producers, which China is not. The three countries with higher per-capital PPP that are not oil-producers are Belarus, Singapore (where things look bright for democracy), and Lebanon (which had its Cedar Revolution in 2005 and where democracy will be fostered by the fall of Syria’s dictatorship).

The wealthier the citizens, the less they want government interference. The Communist Chinese government will soon find it futile to suppress democracy. This improves the prospects for peace.

Democracies seldom fight with one another. They talk.

Why Unions are Fighting So Hard in Wisconsin

Union money is pouring into Wisconsin to aid the recall of Governor Walker, who had the nerve to reform the state’s treatment of public-sector unions. The unions hate losing member dues. They also want to continue suing employers, to prevent changes in wages and other employment conditions.

Public-sector unions initiate thousands of grievances, all subject to negotiation, mediation, and arbitration. In 2010, the Wisconsin Employment Relations Commission issued 129 decisions just on cases that went to full hearings – a huge amount of litigation. 

Last year, resisted by a union, a Wisconsin teacher was fired for viewing and sharing pornography on his school computer. An arbitrator reinstated the employee and awarded more than $200,000 in back pay. In a failed attempt to fire the man, the school district spent over $300,000 in legal fees.

The real class warfare in the U.S. is not rich vs. poor. It’s government employees vs. taxpayers who pay their salaries.

Formerly, government employees faced a trade-off: They didn’t have to kill themselves on the job, and they wouldn’t be fired. But their compensation was low. Now, government jobs are safe, secure, and twice as lucrative as the pay and benefits of those who come up with the money.

The unions are fighting, all right, but they’re going to lose.

Government’s Proper Duties

Government at all levels should be limited to the following duties:

-- Protect private property

-- Enforce contracts

-- Keep people from directly hurting others by force or fraud

-- Defend the nation (a federal function)  

In the long run, everything else government does causes more harm than good. No political system is perfect, of course. But if there’s a need from which someone can make a profit, or for which someone can make a gift, the need will be pretty well filled, better and at less cost than government can possibly do.

Except for the military and possibly the police, all government employees would serve at the whim of elected officials. Government’s most active branch would be the judiciary, whose employees would serve at the whims of judges.

Legislators and judges would be subject to term limits. For legislatures, meeting just a few weeks a year should be quite enough, thank you.

A Key Job Interview Revealed

I am now in a position to reveal Ben Bernanke’s job interview with the President prior to Bernanke’s appointment as Chairman of the Federal Reserve Bank: 

President:  You realize, Mr. Bernanke, that the enormous powers of the Federal Reserve necessitate your disguising your intentions, to prevent profiting by speculators. Tell me, can you talk out of both sides of your mouth?

Bernanke:  Yes, sir. I've been taking lessons.

President:  Good. Can you keep a straight face while talking in riddles?

Bernanke:  I've always been able to do that.

President:  Fine. Now, one more thing: Some people think that the government's monopoly of the money supply is pernicious. They suggest that the people should be allowed to choose which of competing currencies are the most convenient and which best hold their value. They believe that the Federal Reserve Bank should cease to exist. When these suggestions are made, are you prepared to fight like a cornered lion?

Quietly unsheathing his claws, Bernanke touched the President's arm.

President:  Ouch! That will do, Mr. Bernanke. You've got the job.

The Employee Free-Choice Act: Anything But Free Choice

Despite Congress’s rejection, Obama is putting into effect the disastrous Employee Free-Choice Act via the National Labor Relations Board (NLRB), whose membership he now controls.

For many years, workers have voted whether to adopt unionization with a secret ballot. No longer. The NLRB now requires employers to supply union organizers with the names and home addresses of every employee. At work or at home, the organizers can apply pressure and harassment to persuade each employee, in the presence of the organizers, to sign a document authorizing unionization. If the employee refuses, the organizers can threaten reprisal at work should the union win the election – or worse.

Free choice with a secret ballot is replaced by intimidation.

If the union is adopted, the employees must then pay large dues, which the union bosses can spend on campaign gifts for liberals. Once in place,unions are very difficult to remove. Union elections resemble the presidential elections of some third-world nations: one man, one vote, one time.

Employee Free-Choice Act? Hah! The new regulations offer anything but free choice.

The U.S. Government is Borrowing from . . . Itself

To fund the annual federal deficit and roll over expiring debt, the U.S. Treasury Department for many years borrowed between 0.6 percent and 3.9 percent of the gross domestic product (GDP).

But last year, in 2011, the Treasury borrowed a whopping 8.6 percent of the GDP, more than twice the previous peak.

Americans and foreigners, as always, are stepping in to buy the U.S. securities, right?

Nope. From 2009 to 2011, American purchases of U.S. Treasury debt plunged from 6 percent of GPD to a scant 0.9 percent.

And from 2009 to 2011, foreigners cut their purchases from nearly 6 percent of our GDP to only 1.9 percent.

With American and foreign purchases way down, who’s buying the Treasuries?

The U.S. government itself, via the Federal Reserve Bank. Let’s say the Treasury issues $1 billion of new IOU’s. Easy as pie, the Fed records one billion smackers in the Treasury’s books. That’s new money, which Congress and the President can waste, I mean, spend as they please.

During 2011, the Fed bought a massive 61-percent of U.S. debt, up from negligible amounts prior to the 2008 financial crisis.

But the flood of new money creates the danger of rapid inflation, doesn’t it? 

Never mind, says the Fed, we’ll worry about that later.

The Highway Bill Monstrosity

Gridlock on the roads costs motorists more than $100 billion a year in delays and wasted gas. Additional highway lanes are needed, with market-based pricing, including higher tolls during peak travel times.

Meanwhile, people use public transit sparingly. You may have noticed how often city buses pass by nearly empty. Overall, public transit accounts for a mere 2 percent of all inner-city trips – closer to 1 percent outside New York City. 

You’d think the federal government, in its wisdom, would arrange for more highway lanes and less public transit.

Sorry about that. Liberals hate cars (except for themselves), and they love unionized public transit. The highway bill now before Congress therefore provides too little money for roads, no money for market-based pricing, and gobs of the stuff for union-organized public transit in politically-powerful cities.

How about enabling the states to decide what’s best for them? Naah, the feds want to preserve the power for themselves.

Would you think that liberals have no interest in anything but the power? Why of course not. Great souls that they are, they keep the genuine interests of others forefront in their minds.

In November, Obama is Likely to Lose Big

Primary voting on May 8 revealed that American voters are sick of liberals and their moderate-Republican lackeys.

In West Virginia’s Democratic Primary, Keith Judd, an inmate in a Texas federal prison, took an astounding 41 percent of the votes to Mr. Obama’s 59 percent. Nice going, Prez; you beat an incarcerated felon.

In Indiana, tea-party Republican Richard Mourdock beat moderate-Republican Senator Richard Lugar by a massive 22 points.

In the Wisconsin primary election to recall the governor, the Democratic candidate who was heavily financed by Big Labor lost to the Democrat less favored by unions. But the Republican Governor, Scott Walker, who had no opposition in his primary and needed no votes, outpolled both Democratic candidates combined.

Mitt Romney has mistakenly appealed to moderates, instead of holding to a conservative stance and, like Reagan, letting the moderates come to him. Even so, in November, barring a big surprise, Mr. Romney will not only beat President Obama, he’s likely to win in a landslide.

Well of Course Greece will Default and Revert to Its Own Currency

It cannot do otherwise. The stock market is worried about a default, but this probably won’t matter much.

For years, the Greeks considered profits to be an abhorrence and free-market capitalism an abomination. They built up the government sector and built down the private sector. They unionized everybody, produced little, handed out big incomes, and borrowed the difference.

No nation can build a mountain of debt and avoid default by suppressing productivity. Greece continues to tax its most productive citizens heavily. It overregulates businesses and makes starting new ones very difficult.

To a lesser degree, Spain, Italy, and France have done the same. In France’s recent presidential election, not a word was spoken about cutting government expenses, lowering tax rates, reducing regulations, and otherwise increasing productivity.

Eventually, the European Union and the euro will probably fail. You cannot create a democratic state by forcing the issue from the top down under a suffocating bureaucracy. The only successful way to combine the nations of Europe would have been to repeal all tariffs and impediments to trade and repeal all limitations on the movement of people. Over time, a union, or possibly several unions, might have assembled naturally from the bottom up.

A Government Boondoggle

In October 2010, the federal government’s General Services Administration (GSA) held a lavish conference in Las Vegas, attended by 300 GSA employees. It cost $835,000 of taxpayer money. The costs included $147,000 for six planning trips by the organizers, $3,200 for a mind-reading psychic, $6,300 for a commemorative coin set displayed in velvet boxes, and, according to the Washington Post, $75,000 for a training exercise to build a bicycle, whatever that means.

Here’s why the organizers could plan such a boondoggle. Any exercise of good judgment by GSA employees is smothered by layer-upon-layer of executives, one above the other. In late-2010, at least ten layers of political and career civil-service executives stood between the individual who planned the conference and the GSA administrator far above. We’re talking executives, mind you, not the additional layers of clerks, secretaries, and janitors stretched out above and below.

This particular Las Vegas conference was eventually approved by an executive at a level higher than the planners. But the GSA administrator never got a chance to scrutinize the idea. That would have been too many levels higher.

Throughout the federal government, in fact, executives are densely packed. Mr. Paul C. Light, a professor at New York University’s Wagner School of Public Service, made a study of the changes in organizational structure of federal cabinet-level agencies. He found that, during the 48 years from 1961 to 2009, the number of executive layers more than doubled from 7 to 18. At the same time, the number of executives per layer soared from 451 to 2,600.

Do you think it might be time for government’s growth to be reversed? Why no, every one of these executives is bringing us hope and change.

FDR Got Things Done, All Right

Newt Gingrich said he admired Franklin Delano Roosevelt because he got things done.

He certainly did: FDR’s wretched policies lengthened and intensified the Great Depression.

Let’s avoid political leaders who propose new policies. We want them to undo old ones – thousands and thousands of old ones.