Rich Guilt

I read a fair amount, as input, some of which gets filtered through my brain and into this blog eventually. I don’t always know when I’m reading something that it’s going to stick with me.  But there was one among many commentaries I read this week that I keep returning my thoughts to. 

Katie Kieffer talks about the series of rich people (and singles out Brad Pitt) that have been coming out and saying, “Please, tax me more! I don’t pay enough.” Since it’s not against the law to overpay your taxes, or donate to government, I don’t know why these guilty rich people don’t just unburden themselves that way, instead of insisting that taxes on everyone should go up so that they can have less guilt.  

Personally, I haven’t had the opportunity of experiencing rich guilt. Oh, well. But, as most in the middle class, I have experienced the frustration of paying a lot of taxes that look to me like they’re being squandered—badly and inefficiently spent on education and social programs the government never received the Constitutional power to spend my money on in the first place. I don’t think wanting my government to use wisely any money entrusted to it makes me greedy. 

Here’s one of Kieffer’s paragraphs: 

Money is a necessary tool whereby humans achieve productivity. So, when the government unjustly appropriates money from wealthy entrepreneurs who need their wealth in order to invest, take risks, grow their companies and create jobs, the government is greedy—not the wealthy individuals. A greedy person—or institution—wastes and abuses money by pursuing excessive wealth for no productive reason. 

I suggest reading the whole piece.

Being There

There’s a John Milton poem with the line, “He also serves who only stands and waits.” I was thinking of that in relation to the poll watcher training I attended last night. 


Alan Vera, one of our poll watcher trainers

Last week I posted about True the Vote, a nationwide effort to overcome voter fraud, mainly through training poll workers and poll watchers. I said I’d tell a few adventures from last year. In Harris County (Houston area), Texas, where this effort started, there were some 750 incident reports—violations that weren’t immediately corrected. The reports were gathered and used in prosecutions, and also in efforts to change election law. 

Only one law has changed so far: if a presiding judge appoints a peace officer to help maintain order, such persons must be a credentialed peace officer. There’s a reason for this change. Last time around there were some rather large thugs who showed up, calling themselves peace officers, using physical intimidation against poll watchers and other poll workers.  

In one case an alternate judge—not associated with King Street Patriots' True the Vote project, who was serving in her own precinct, as she had done for several previous elections—was ordered to leave by these thugs. Burly men about twice her size threatened physical force, when all she had done was serve as alternate judge in a mild and efficient way. (Was it racial discrimination? Yes, I believe so; they were black and she was white. And up until now the US DOJ has refused to prosecute blacks in voter intimidation cases.) She contacted the county, which told her she was certainly entitled and expected to stay. But the thugs brought in an actual police officer and reported her as disturbing the peace, so, without evidence beyond their say so, she was forced to leave. 

Others were poll watchers, ousted from polling places by these thugs, who were forced to their cars and even followed until they had put some distance between themselves and the polling place. 

Why did these incidents happen at all? Because those polling places were run by people who had no interest in free and fair elections, but only in doing things the way they always had—with advantages to their party. You can guess which party. 

My adventure wasn’t so dangerous, but I was sent to a somewhat troubled area. I went as a midday replacement, after the two poll watchers who started the day at that location were physical ousted by the presiding judge. She physically shoved one out the door; she had to get someone else to go in and retrieve her personal belongings. The presiding judge was a big and forceful woman; this poll watcher (I met her later) was about 5’1” and probably not a hundred pounds. Her companion was also shoved and shouted out the door. Incidentally, she refused to give a reason for the expulsions, nor did she return their certificates of appointment, as required by law. 

I was sent along with another man, with the knowledge of what we were facing. There was a lot of hostility toward us—from the presiding judge and at least one of her clerks. But she didn’t dare try to shove us out the door—probably only because one of us was a strong healthy male and I am tall and sturdy looking. 

Most of the afternoon went fairly smoothly. I had a notebook where I recorded everything that happened, as I was trained: write down the time, write down what was happening—“just the facts, ma’am,” as Joe Friday used to say. If nothing untoward had happened, we would have been witnesses to verify that, so having poll watchers there is a benefit to any honest election judge. I believe that this year, with the expectation that we will be there, more judges will see us that way, rather than assuming we represent an accusation. 

There were some minor incidents I reported, nothing worth Andrew Breitbart’s attention, but probably typical of problem areas. At 4:05 PM a citizen came in and used the clerk’s cell phone. Cell phones (as well as any recording device) are not allowed in the voting place, with the exception of one used by the presiding judge (or an appointed clerk) to call the county, usually to verify if a voter is indeed on the voter rolls when they don’t appear in the book, or sometimes to clarify some procedure. In this case the “voter” (who did not vote while I was there) came in and had a loud conversation on the clerk’s phone to the county officials. So that all people in the voting place could hear, she said she did not see why this polling place had to have observers, rather than some other location that deserved to be watched. She said she was offended and felt like she was being raped. 

I believe the clerk had called the county for her, and then handed her the phone. The clerk and presiding judge did nothing to prevent this disturbance and showed no disapproval. 

So, offensive? Yes. Tolerable? Sure. I lived through it unscathed. Ironically, we do not watch the voters for illegalities; we watch the poll workers, to make sure they follow procedure. We have no interaction whatsoever with voters. In fact, we can be expelled from the voting place if we speak to a voter. Lips are zipped. If a voter asks us something, all we can do is ask a worker (usually the alternate judge) to inform the voter that we are required by law not to interact with them. This complaining woman hadn’t so much as made eye contact with a poll watcher. If our verifying a free and fair election by watching poll workers is comparable to raping her, then her understanding of life experience is more than a little skewed. 

At 7:00 PM, when the polls closed, the presiding judge insisted that we poll watchers leave. “I don’t need you any more,” she said. Of course, she didn’t need me at all. I wasn’t there serving her. Technically, I was there serving as a poll watcher for a particular judge on the ballot. And one of the things I was there to do was to see that all procedures were followed correctly for closing the polls. Make sure the number of votes matched on the machines and on the polling list. Make sure all e-slate machines matched the serial numbers from the beginning of the day. Make sure everything was sealed up so that nothing could be added to the machines during transport to the counting location. I don’t touch anything; I just observe and make sure protocol is followed. So the closing up time is kind of important for poll watchers.  

We refused to leave, mostly by silently ignoring her. She said to me, “You leave now, or I will have the police come and arrest you.” I verified with the alternate judge that I was allowed to stay. I offered to show her the citation of the law that verified my right to be there for the closing up, but she refused to look, so I just did my job.  

When all was sealed up, and the alternate judge was certain of the safety of the machines, we left—and the presiding judge led the clerks in applause and cheering that they had finally gotten rid of us. 

Almost everything that day, while I was observing, was done according to procedure. Maybe because we were there. There was an oddity that, while not illegal, made us wonder. When someone comes to the polling place and does not qualify to vote at that location (their name is not in the book and the county cannot verify that they live there; or they have moved and their new address is outside the county, or they have no way to verify their ID), they can vote provisionally. They fill out a provisional affidavit, and the code they are given at the machine is different from the usual voter’s code, so that their vote will not be counted. Usually these votes are never counted. In a recount, they may be gone through to see if any of them can be considered legal, but usually the margin isn’t close enough to bother. 

The voting place had a stack of probably fifty blank provisional affidavits—and we ran out. The county couldn’t get more to us before closing time, so they suggested using the back side, which was in Spanish. The judges used up another few dozen of these back sides, and had to include a note so that the county wouldn’t overlook the fact that many of the affidavits had one on the front and another on the back. As far as we could see, there was nothing wrong in the way this was handled. The odd thing was that there would be so many people going to that polling place when they couldn’t legally vote there. It was a fairly transient area, with a lot of students, near the medical center, a lot of apartment complexes. So maybe that was just the nature of the area. Or—it could be that it had been practice at that location for the presiding judge to allow many of those voters to vote illegally in the past. We don’t know. We only know that an inordinate number of provisional ballots were used while we were watching, and they were not counted as real votes. 

In the Texas legislative session this past spring, one of the bills that passed was voter ID, which will become law January 1^st. Our instructor talked about the need for that, based on his experience as an alternate judge in the last election. The way the law here reads (through this fall’s election) is that qualifying ID can a voter registration card with signature, a driver’s license or other state verified ID, a birth certificate, some other ID—possibly a utility bill with name and address on it. There were two times at the poll that day when someone was allowed to vote, using a utility bill-type ID, and then later in the day a voter came in with voter registration and driver’s license—clearly who they said they were, and clearly entitled to vote—but someone had already fraudulently voted and signed their name in the voting book. The real voter was disenfranchised, having to vote provisionally. It wasn’t the judges’ fault; they had been forced by law to accept the forms of ID that led to the fraud. 

There has been a lot of hoopla from the opposition concerning voter ID. What if an elderly person doesn’t have a driver’s license? What if they can’t get out of their house to obtain an official state photo ID? The concern that some singular person out there might be disenfranchised is their argument to prevent actual disenfranchisement. No one who cashes a check or uses a credit card can do so without a photo ID. If there is such a person, somewhere out there, that can be found as unable to get photo ID (and so far no such actual person has been found, only hypothetical persons), couldn’t concerned people go to them and do what it takes to transport them to get an ID? 

The surprising thing about the somewhat complicated rules about voting procedure is that each and every procedure has been put in place because, some time in the past, someone has tried to interfere with free and fair elections through that avenue. The real solution is to become a people who value honesty so much that fraud would not occur—but until then, he/she also serves who only watches and waits.

Two Revolutions

Back in the late 1700s there were two revolutions that continue to affect world history: the American Revolution (1776+) and the French Revolution (1789+).  

The American Revolution was amazing in a number of ways: the philosophy was civilizing. Rights come not from the state or ruler, but from God—to all human beings, who are naturally born free. These God-given rights can be summarized simply as related to life, liberty, and property. American Revolutionaries believed in the rule of law, as they believed in God’s law, which required personal accountability. The founding document outlining the philosophy is the Declaration of Independence, which was later codified into basic law in our Constitution, with the Bill of Rights. 

The war came about after all avenues of appealing to law had been rejected. Separation from the ruling power became necessary only after every other course was explored. The reasons—the abuses of power—are laid out in the Declaration. 

The French Revolution, only a few years later, also had a revolutionary document: The Declaration of the Rights of Man and of the Citizen. This document also claimed the natural, inborn rights of man to life, liberty, and property. But there was one all-important difference. The French version did not claim the rights came from God—rights just were. (But they applied only to free men, not slaves or women, for some reason.) The French Revolution coincided with a philosophical atheism totally opposite of the American Revolution. The French declared that God was dead and held a funeral, burying an empty casket with a wreath on top that read “reason.” 

How do Godless people compare to God-fearing people in a revolution?  The Americans held a tea party: revolutionaries dressed up as natives in a haphazard disguise, and then took the tea they were being unjustly taxed for and threw the cases into the bay. They had a liberty tree where they met and discussed plans. They fought a war against the invading British forces. Following Shay’s Rebellion—the slightest wind of chaos—the early Americans sent representatives to the Constitutional Convention and drew up the Constitution. The Constitution has undergone only a few changes and still stands. When we celebrated 200 years, we flew the flag, and got souvenir copies of the Declaration of Independence and little replicas of the Statue of Liberty.  

The French stormed the Bastille, beheaded men, women, and children of the ruling class. They killed, maimed, dismembered dead bodies, playing with the body parts, put heads on poles, and even degenerated into cannibalism. They are on their fourth iteration since the revolution. After 200 years, the souvenirs were tiny guillotines. They tried to do away with the family, considering it a conflicting loyalty, and assigned people to groups of ten, as a substitute. 

But when the world looks to those historical examples, revolutionaries tend to miss the American example and instead pattern their fight after the French Revolution. 

There is a cycle of tyranny: The tyranny becomes intolerable, and leads to anarchy (mob rule), which leads competing groups, which get weeded out to a new tyranny.  

In the Spherical Model, we have a way to look at this. The tyranny cycle is all southern hemisphere. State control is on the eastern side; anarchy is on the western side. Both are intolerable, but people who can’t envision the northern direction see no alternative but to switch between these two lower quarter spheres.  

It is a practice of would-be dictators to foment revolutionary anarchy and then gather supporters by promising to quell the chaos, and then work their way to the power position of next tyrant. It is the Marxist plan. Lenin used it; Stalin used it. It has been used repeatedly in South American revolutions. It is the Saul Alinsky pattern from the 1960s. It is the pattern of the Cambodian Killing Fields of the 1980s. 

It is the pattern followed by power seekers everywhere. 

Freedom seekers don’t stay down in the southern hemisphere. Freedom seekers move northward—a civilizing direction. Government has a specific and limited purpose. Rights are granted by God to every human being. Those rights must be protected by government, but must go hand-in-hand with personal responsibility. The behavior required is spelled out in the Ten Commandments. And the family, as the basic unit of society, is the vehicle for passing on the social, political, and economic truths from one generation to the next. 

We are extraordinarily fortunate that our founders moved northward, instead of the almost universal practice of framing power and rights only in the southern hemisphere paradigm of chaos and control. 

The contrast between the American and French revolutions continues today. We need to remember what it takes to stay in that rare northern freedom zone (or get back up to it): trust in God who gave us our rights, obey God’s law, and stand up against the enemies of freedom, using peaceful, lawful means as long as the law exists. 

My thanks to Charles Krauthammer for reminding me of that contrast in his speech last week, which I referenced recently. He said this: 

Compare the American Revolution and its prudential institution building, with the near contemporaneous French Revolution, which was the apotheosis of political romanticism, with its worship of reason and abstraction. It is no accident that France is on its fifth republic, and we are on our first. 

That reminded me of the class I attended in August, on the culture wars, taught by Brett Latimer (referenced here, with many more details than I have managed to present so far), in which he contrasted these two revolutions. 

Class Warfare Rhetoric vs Math

Chances are you’ve heard, in the last few days, the accusations against hard working Americans from Elizabeth Warren (senate candidate and special advisor to the Treasury). Her point was, essentially, how dare we resent having government confiscate our taxes, when it was government who granted us the ability to earn money in the first place!  

I understand a similar concept related to tithing. It is all God’s—everything. He grants us life and breath, and energy and ability, and the world in which we live. And in our case the best country on earth to live in. If we gave Him everything we have, we would still be in His debt. But He asks only that we voluntarily give a tithe—a tenth—of our earnings to Him, which He then uses for our good.  

I’m not resentful about that tithe; I’m grateful. But I have very different feelings about government. Take a look at what Warren actually said: 

I hear all this, you know, “well, this is class warfare, this is whatever. No! There is nobody in this country who got rich on his own—nobody. 

You built a factory out there? Good for you. But I want to be clear. You moved your goods to market on the roads the rest of us paid for. You hired workers the rest of us paid to educate. You were safe in your factory because of police-forces and fire-forces that the rest of us paid for. You didn’t have to worry that marauding bands would come and seize everything at your factory—and hire someone to protect against this—because of the work the rest of us did. 

No look, you built a factory and it turned into something terrific, or a great idea. God bless—keep a big hunk of it. But part of the underlying social contract is, you take a hunk of that and pay forward for the next kid who comes along. 

There’s something interesting here. What is the proper role of government? Protection of life, liberty and property. And you can argue for infrastructure. You can even argue for public education (although you can also argue against it, since public education provides an educated populace so much poorer than the private sector would and should do). So she lists just about only the things we already agreed, pretty much since our founding, were worth having government for. That’s why we granted those enumerated powers.  

She fails to list the innumerable extras we didn’t grant to government: welfare, social security, medicare, housing subsidies, government regulatory bodies, government science grants, foreign aid (particularly foreign aid to our enemies), and other obscene spending foolishness.  

And did we mention that the factory builder already paid his share of taxes while gathering enough capital wealth to build the factory? He wasn’t freeloading on the rest of us, as she seems to assume. 

If we were talking only about what she has listed, there’d be a lot less complaining about paying a fair share, or even what is a progressive tax already much higher on the wealthy.  

I happened to listen to another clip yesterday, posted in August, from the Mark Levin radio show. A caller named Paul Jackson from Michigan called in, having done the math. Here’s what he had gathered:  

Listen, the reason I’m calling is, I did a little analysis of the budget. The deficit for 2011, as you know, is projected to $1,650 Billion. If you add in the 1% cuts that the politicians just passed, that’s $38 B. If you say, OK, well the reason we have such a big deficit is because the evil George Bush made those tax cuts, if you dial up the tax rates for those making over $250,000 to 39.6% where it was under Bush, you… subtract an additional $65 B. If you say, well, it’s because the evil George Bush got us into these wars, if you back up the costs of, the projected costs of 2011 of Iraq, Afghanistan, the VA costs and everything, that’s an additional $171 B.  

Now we’re left with a budget deficit of $1,376 B. OK, then you can say, well it’s those evil, greedy companies that are doing this, like Exxon and Wal-Mart. As a matter of fact, let’s tax the Fortune 500 companies, the top 500 companies in this country, at 100%; let’s just take all their profits. If we do that, we’ll take an additional $232 B. Now we’ve got a deficit of $1,143 B. 

Now, as you know, Barack Obama’s gonna go around saying, Well, the reason is is the rich need to pay their fair share, and that’s the reason why, that’s where we need to get the money. OK, those making an income above $250,000, the income they made over $250,000 was probably by cheating some poor working person. So let’s just tax them at 100%. Let’s take all their money that they earn above $250,000 and confiscate all of it. Now we collect another $853 B. Now, after we’ve done that, after we’ve taxed all income above $250,000 at 100%, we’ve confiscated all the profits of the Fortune 500 at 100%, we assume we never went to war in Iraq and Afghanistan and we recover all that money, we still have a deficit, Mark, of $290 B. That’s nearly twice the deficit that we had in 2007 under the evil George Bush and those evil Republicans. 

He’s just talking about the deficit for this year, not accumulated deficits. He added his sources:  

One was Iowa Hawk, a terrific website…. And the other is IRS Data. And another one was, it was a government website on the cost of the war. The total cost of the Iran/Iraq War, from 2001 to 2011, and this is a government study, is $1.291 Trillion, and the projected cost for 2011 is $171 B. So you can confiscate all the money, and there’s still not enough.  

$1650 B -                   38 B  recent tax cuts -                   65 B  Bush tax cuts -                171B  war spending 2011 -                232 B  all Fortune 500 profits -                853 B all income over $250K $290 B

So, is it true people are complaining about the class warfare rhetoric? Yes, with good reason. The wealthy are already taxed way beyond what the Constitution allows the government to take for the enumerated purposes. Already the wealthy pay at higher percentages on each and every dollar they earn. Already the wealthy pay way beyond the total revenue of the middle class and poor (49% of the poor pay essentially no income tax, only FICA and state and local taxes). So it’s a little jarring to have someone come at hard working Americans and accuse us of being ungrateful for not enslaving ourselves to the whims of a greedy government.

Elizabeth Warren was an advisor to the President—and hadn’t done the math! Or else, she had done the math but ignored it for the sake of class warfare. Is there some other way to assess what she meant by her little rant? Oh, yeah, there is: a rather frightening belief that Obama and his government are indeed the new god and tithing—and tithing now means several times more than ten percent.

Foreclosures Everywhere

I happened upon several stories of foreclosure this weekend, and just the frequency of it got my attention. This is anecdotal, and I don’t have access to further details in each case. But, still, it may be instructive to talk about. 

There’s a young couple, 30-ish They bought a home a few years ago while his entrepreneurial business was doing well. When there was a decline in business, he did two things: tried to keep the business functioning just enough while he went back to school to finish a degree. In the process, he got behind on house payments. The couple started working with the mortgage bankers two years ago. They were eligible for some government program to help them refinance to lower payments and keep the home. They submitted all the paperwork. The bank (or whatever the entity was) lost the paperwork and asked them to resubmit, which they did. The bank lost the paperwork—again, and asked them to resubmit, which they did. The bank lost the paperwork—again, and asked them to resubmit.  

In the meantime, they had money to make regular house payments. He finished his college degree and got a job (ironically enough at a different bank). But until the paperwork was ready, there was no account to send the money to. The bank said, “Don’t worry about that; just send us the money,” and he said, “To what account? I send it the minute you tell me where to send it.”  

I should mention that selling the house was always an option—except that the downturn in the economy meant that house sales plummeted, and a real estate agent overpromised and underperformed. 

After nearly two years of this nonsense, they were told they were no longer eligible for the program they’d been trying to sign up for. They tried another route, a deed in lieu of mortgage or something I didn’t understand. The bank was slow in completing the paperwork (no surprise), and told them it could take up to 90 days to get it completed. Then, after just 45 days the bank sent a foreclosure notice. The couple will lose the house that they have been willing to make payments on. They will be forced to leave just before baby number three is born. They can no longer afford that part of town, where they would have liked to stay to raise their kids. But, they did just go through the last two years living in the house without making a payment, so that is some compensation. 

Couple number two is a little older, in the middle of their working life. A downturn in the economy led them to know they were in trouble. They kept making payments, but it was really hard, and they went to the bank, to see if they qualified to refinance to lower payments. The bank (or whatever mortgage entity) told them they couldn’t qualify for the government program if they hadn’t missed any payments; the bank advised them to stop making payments so they would qualify. That was scary. Why would they do that? But they were feeling somewhat desperate and did what the bank told them. After two missed payments, they went back to the same bank (but for some reason it was never possible to get the same person on the phone two times in a row), and the bank told them, “Because you’ve missed payments, you don’t qualify for the program.” Hmm. So, after some unsuccessful efforts to sell, and going through a similar runaround to couple number one, the wife said, “I can’t bear to live here without paying, when things are never going to get fixed. Let’s just give the bank the house.”

Another acquaintance is a couple within a decade of retirement. He works in the medical field; she is a teacher. When business was going great, they bought a nice home in a favored part of town. Then, a downturn happened—I don’t know all the details, but it was enough that staying in the nice house wasn’t going to work out. They worked with the bank, and tried to sell. Higher end homes were particularly hard hit by the drop in real estate sales. They would probably only have missed a few payments. They were at a place in life where they had proof of the kind of steady customer they would have been, if the bank had been willing to work with them. A lot of confusion ensued (which is beginning to look like standard operating procedure). They got a foreclosure notice, which, at their point in life, was especially painful. They left their dream home and started over, hoping to make enough headway before retirement that they wouldn’t become a burden on their children. 

A banking executive I know explains that some of the difficulty is in the way banks are set up. Banks are not in the business of real estate; they don’t want to acquire homes, along with the burden of maintaining until the property can be sold. So they have always been willing to work with mortgage holders that are likely to make good on their loans. Those who aren’t going to make good ought to be foreclosed on quickly, for everyone’s sake, and the homes auctioned off quickly. But normal practices haven’t been allowed for a while. 

One problem, at least in this executive's bank (one that wouldn't have taken money from government bailouts without being forced) is that the foreclosure department is totally separate from the refinance department. In the bank’s mind, those two departments handle completely separate functions. But the government, in its “well intentioned” meddling, forced these programs on banks, to help out people with failing mortgages. Banks weren’t set up to handle these programs, nor did they really want to implement them, including hiring and training people for the sole temporary purpose of doing the government's bidding. So they didn’t automatically restructure their whole industry.  

So the refinance department had all the information about the people involved in these refinance programs. And from their point of view, as long as they were actively working with someone, all was well; those people were a good risk and didn’t have to worry about foreclosure. But they didn’t share this information with the foreclosure department. So, no matter how actively the mortgage holder was working with the bank’s refinance department, the foreclosure department was completely unaware that the mortgage holder had done anything but fail to pay. Bureaucracies are like that (and government and large banks are both bureaucracies). 

On the macro scale, if government had refrained from meddling in housing, from the 1980s on, banks would have been free to do what they have traditionally done well: judge whether a person is a good lending risk, which minimizes defaults; and handle necessary defaults quickly and efficiently. There would not have been a housing bubble followed by an inevitable popped housing bubble. And people like all three of the couples above, even had they come on hard times, would very likely have solved their problems either by working with the banks or by successfully selling their homes. Banks would have gotten full payback for the mortgage, mortgage holders would have gotten at least part of their equity, and new buyers would have gotten a good deal.  

Anecdotal evidence doesn’t prove a rule, but it can clue us in to a rule that maybe we can prove with actual research. So what I see from these stories today is the rule of unintended consequences: government interference will generally cause damage to the very constituencies it intends to help.

Free and Fair Elections

A couple of evenings ago I went to learn about signing up to be a poll watcher again for November’s election. I did it last year. Houston has kind of been ground zero for attacking the voter fraud issue. But it’s expanding to a state near you, so I thought maybe you’d like to know what’s going on. 

A couple of years ago, 2009, some friends in Houston met in a pub, complaining as they had often done, about the direction their beloved country was going. But this time it was no longer enough just to commiserate. This coincided with the rise of the Tea Parties and 9/12 groups, which was good. But this small group wanted to do more to take action. 

King Street Patriots was born. The name comes from King Street, a historic location in Boston. The Boston Massacre took place there; the original Tea Partiers crossed it to get to Boston Harbor. So it has historic meaning, outside either party, and historic to all of America instead of a single locale.  

One of the projects that came out of this group of self-proclaimed patriots was True the Vote, an effort to bring about free and fair elections. That first year there were only a dozen people in Harris County (where Houston is located). They worked hard and learned a lot. They studied voting law, and learned what they could do. At any polling place it is expected there will be a presiding judge, an alternate judge, and a clerk or two or three to check in voters and verify their ID. And there can be poll watchers, nonpartisan observers there simply to observe and report what happens. Think Jimmy Carter in Haiti, but not famous, just volunteer citizens at every polling place. 

So these 12 people covered (incompletely, to say the least) the 835 polling places in Harris County that first year, for an off-year election. Most of the violations they observed were small but common, things like failing to ask for ID, officials accompanying people to the voting booth (allowable under certain conditions) and telling voters who to vote for (never allowed), sometimes setting it up for them (touching the machine is never allowed) and telling the voter to push the button.  

Much of the time conscientious volunteer poll workers were willing to follow the rules but were inadequately trained. King Street’s True the Vote project has helped recruit and educate presiding judges and alternate judges as well since then. 

Last year, when I learned about it and stepped up to be trained, there were 700 or so volunteers, which is a good step up from a dozen, but not enough to put a team (at least two, to avoid the problem of “your word against mine”) in each in the 835 locations. We’re handling an off-year election this year, which is good practice and preparation. Then next year KSP is hoping the have 3000 volunteers in Harris County. The not-big-enough crew, however, uncovered 750 documented election irregularities, and were able to turn over the evidence and testimony to authorities—something that usually doesn’t exist, which is why prosecuting voter fraud is so difficult. 

This is not just a local story. True the Vote has trained people across Texas and in 25 other states. Anyone interested can go to the website, TruetheVote.org, and see if there is something going on in your area. You can get training online, which may not be adequate, but it’s a good start, in a good year to practice—so that next year, when it is more critical, we have a chance to ensure free and fair elections. There will be at least ten two-hour training sessions starting Wednesday, September 28, and October. The training is free. Allow yourself two hours to see if this is something you can do. 

One of the efforts of True the Vote has been to clean up voter rolls. Last year they uncovered a plot in Harris County to load voter rolls with fraudulent registrations. There were some 25,000 new registrations for only 7,000 actual voters. A “community organization” called Houston Votes was charged with voter registration fraud—entirely because of the work done by True the Vote. They requested voter rolls, public information, and tediously went through them, documenting patterns that looked wrong, and followed up with authorities. 

They have a third attack, through the legislature. Following up after what they uncovered last year, they were able to lobby for legislative change in this year’s legislative session. Of the 22 points they advanced, 18 were made into bills; 6 were penned into law. One of these bills was that, if a presiding judge wants a peace officer at the polling place, that must be a licensed peace officer, not a group like the Black Panthers, the group who showed up at polling placed and thuggishly intimidated and physically threatened any volunteer they didn’t want there—and they accused the innocent volunteers of disturbing the peace. And then they lied to police about what had happened, making it impossible for the actual police to allow for free and fair elections. 

There have been numerous lawsuits against KSP and True the Vote volunteers. There are attacks going on now. But, because of the excellent training, and the discipline of the volunteers, every accusation is always dismissed for lack of evidence. Training makes a big difference. And it is becoming more obvious that the opponents are against free and fair elections—and against any civic-minded volunteers who step up to make them happen. 

I’d like to tell some of the adventure stories from last November. Andrew Breitbart recorded many of them. I had a little adventure myself, although not of the level worth video, but still maybe worth telling. I think I’ll save that for another day. 

For now, let me just make this point: being there and watching is likely to make someone think twice before acting against the law. Being there means we will probably see nothing or very little done wrong. And that is the outcome we want. Good old boring adherence to law—don’t you love it!

Constitutionalism

I mentioned last week that one of the ways I was celebrating the anniversary of the Constitution was by participating in the course provided free by Hillsdale College (constitution.hillsdale.edu). Last Thursday was opening day, and then there are weekly lectures on Mondays for several weeks. Anyway, Thursday evening’s keynote included a speech by Charles Krauthammer (which you can still see in the archive—he’s about 20 minutes in, after a couple of shorter speeches, and speaks for 30 minutes plus Q&A). 

He related his theme, about our surprising reverence for the Constitution, to the spontaneous movement among people to rise up and take action, to say to government—you have gone too far! We call it the Tea Parties, or maybe other names like 9/12ers or liberty groups. But people have acted totally contrary to how the opposition behaves (paid organizers fomenting faux grassroots responses) and to what they have come to expect (grumbling capitulation). As Krauthammer put it: 

So on the one side we have American hyper-liberal government trying to push us to a more social democratic system, and then miraculously, or astonishingly, no matter how you want to see it, you can believe in providence or not. But amazingly there is a spontaneous reaction. It was not led. It was not organized. It was no conspiracy. People reacted against this push to the left, and the movement has been called Tea Party, but in reality it’s much more widespread, expressed itself in the November elections of last year, which calls for a more restricted vision of government, more consistent with the intent and the aim of the founders. I would call it constitutionalism, or a return to constitutionalism.

He talked about how philosophically perfect this movement is. It’s hard to summarize this justly, but he said that, in the past the argument against New Deal-style overreaching has been to point out the inefficiencies and arbitrariness—good arguments, but not apparently strong enough to halt the encroachment. The new argument is rooted in the enumerated powers Constitution—which limits the powers of government. As Gandalf, we say to the evil Balrog of big government: “You shall not pass!”

Here’s a portion of Krauthammer’s description of the difference in defense of our liberties: 

The traditional defense against government encroachment over the last decades has been not to argue about enumerated powers, but to argue on the grounds of the Bill of Rights, and to claim individual, the inviolable sphere of freedom and sovereignty of the individual: “You can’t do X because it goes against individual rights and the Bill of Rights.” But that idea, that kind of defense, tends to concede that outside of that private sphere surrounding the individual, the government is free to roam and to rule.  

The attack today on the basis of enumerated powers is a stronger attack on big government. Because now it argues that it is government, not the individual, that is constrained by a sphere around it. And that sphere constrains the government because of the enumerated powers in the Constitution beyond which it may not go…. 

In some ways it’s a kind of recapitulation of the argument that is the basis of the 10^th Amendment, but it has I think a larger implication, because once you talk about enumerated powers, you’re going to the heart of the expansion of the state, ever since the New Deal. And that I think is why it’s so important.… 

This to me is the final judicial attack on big government. The commerce clause for 80 years has been the high road to the expansion of government, which is why the framers of Obamacare were so contemptuous and dismissive at the beginning of any constitutional challenge, that they just assumed, “We’ve been using it ever since the 30s, and we’re going to use it again,” and now it’s under challenge—and these Democrats are not dismissive anymore. They’re scared. They’re afraid of two things: that they will be rebuked and defeated by the courts, and even if not that they will be rebuked and defeated by the people at the polls in November. 

That’s why I have reasonable hope for the future. I do think that this popular reaction—again, inchoate, unorganized, undirected, that developed into this tsunami that we saw on election day last year, and that still animates the opposition—as one unbelievably wondrous sign of the health of the body politic. And the fact that it has concentrated on exactly the correct constitutional issues, that it refers to, finds its strength in constitutionalism itself, is encouraging.  

It’s not just the traditional arguments that Obamacare or these other expansions are inefficient, they are not economically sound, they lead to bureaucratic inefficiency; that would be OK, but it wouldn’t be enough, not at this time. The argument now, the resistance now, is emphasizing, is rooted in an attack on the constitutional illegitimacy of what is being done. And that, in a constitutional republic, is the heart of the matter. 

A good portion of his speech talked about how unusual and providential it is that we reverence the Constitution in the first place. Most places around the world do not abide by the words in a written document. It is heartening that even our opposition recognizes that it must convince the people of the legitimacy of its actions—by torturing the meaning of the Constitution if necessary, but recognizing that the people will not just ignore our basic law. So when the people understand the Constitution, and stand up on their own, joining together, to say, “The Constitution says you shall not usurp this power from the people, and we do not grant this power,” the big government pushers must of necessity back off, albeit with weeping and wailing and gnashing of teeth. 

The very fact that I do not feel alone as I passionately defend my love and respect for the Constitution is indeed reason to hope. To hope that, after a century of encroaching big government, we can change, to return to principles rooted in our miraculous, brilliant Constitution.

Still Thinking

I started working on one little concept earlier in the day, which involved re-listening to a speech I heard last week. And then I got distracted spending a few hours with Baby Political Sphere. So today's post is just a breather. I'll just leave you with a couple of recent quotes I collected from Thomas Sowell.

Since the government creates no wealth, it can only transfer the wealth required to hire people. Even if the government creates a million jobs, that is not a net increase in jobs, when the money that pays for those jobs is taken from the private sector, which loses that much ability to create private jobs.—Thomas Sowell, 7-6-2011

People who say they want a government program because "I don't want to be a burden to my children" apparently think it is all right to be a burden to other people's children.—Thomas Sowell, 8-2-2011

Econ Lesson

I got a simple (but not necessarily easy) economics lesson from my son Economic Sphere, which I’d like to share. Be patient through the charts; there are some relevant points we can draw from this. 

It came up in conversation (yes, I recognize that we have arcane conversations at our house) that the payroll taxes for Social Security are divided into equal portions paid by the employer and the employee—except for the self-employed who pay the full amount. And this led to a discussion about whether it matters who pays. 

So here’s a basic representation of that concept. In this first chart we’re looking at the supply (S) of workers and the demand (D) for workers. The vertical axis is the price (P) paid for an employee per unit of work (such as a man-hour). The horizontal axis is the quantity (Q) of labor units. 

At the low end, there is a small supply of workers willing to work at a low price, and a high demand for workers at that low price. And at the other end there is a high supply of workers willing to work at a high price but a low demand—low number of employers willing to pay that high price. So the supply ascends as price rises, and the demand descends as price rises. 

There is an intersection point, above which there is a consumer surplus (the consumer in this case is the employer, who buys units of labor), and below that point a producer surplus (employees willing to produce the units of labor). 

What happens when we add a tax?  

If you put it all on the worker, it looks like the green line: the supply requires a higher price in order for there to be willing workers, assuming all else being equal (meaning the willingness of workers to work at a given price hasn’t changed). 

If you put it all on the employer, then the wage at which the employer is willing to hire goes down—the red line. Employers are paying the price at the green dot in order to purchase the amount of labor at the red dot. The harm caused by the tax is the difference between the green and red dots. So things are made worse for both consumer (employer) and producer (employee) when a tax is added. That box is the damage caused by the tax. 

But the tax goes to government, so it is in theory paying for something of value. Except, see that orange triangle? That is deadweight loss—not recovered by worker, employer, or government, simply a cost to society as a whole when a tax is imposed. 

The angle of the supply and demand lines in our chart above assumes approximately equal elasticity. That means that behavior is approximately equally responsive to changes in price. You’ll notice that the burden caused by the tax is about equal above and below the equilibrium line (black dotted line). That means it doesn’t matter whether the tax is imposed on the employer or the employee, or some combination of the two; the burden affects both approximately equally. 

But in real life, demand for labor and supply of labor are not equally elastic. 

It happens that the supply of labor is more inelastic than the demand for labor. Whether a person hires depends on the price. An employer can put off hiring or do without, or make do with producing less. When circumstances are more favorable, the employer can choose to hire more workers, but if circumstances are less favorable, the employer is free to simply choose not to hire. So the employer’s decisions about hiring are somewhat elastic. 

But the individual worker needs to get some job in order to have income, even if it’s not as much as desired. So the supply of workers is more inelastic. The more inelastic supply (S) line appears more toward vertical on the chart. 

Now when you draw the black dotted line from the intersection point, to show the differences caused by the taxes, you can see the heavier burden is borne by the worker—whether you split it between employer and employee or have either one pay it in full. The tax (any tax, with a few exceptions that economics could point out, but we don’t need to) just naturally puts the greater burden on the worker. 

Taxes on the employer hurt the employee more than the employer, and taxes on the employee hurt the employee more than the employer. 

When there is a huge oversupply of labor—what we call high unemployment—is there any scenario in which higher taxes on either employer or worker can lead to employers hiring more? No.  

The president has called for an additional tax of $500+ Billion, which he calls a Jobs Bill, intended, he says, to get people back to work. He is saying this tax will be “paid for” by the rich, those making over $200,000 a year—the small business owners and entrepreneurs in particular, who inhabit that range. If this tax makes it more difficult for the employers to hire (and taxes always do that), then it is guaranteed that this “Jobs Bill” will fail to decrease unemployment, and is likely to cause unemployment to rise. 

The concepts above are not controversial; they are from a basic economics textbook. The president’s advisors have, we assume, covered basic economics. So there must be some reason other than encouraging job creation for adding to the tax burden. We can speculate on the reasons—most of them ideological and/or political, but not common-sense logical. Whatever the reasons, they are certainly not intended to decrease the burden on American workers.

False Choices

This editorial cartoon was in the local paper on Friday. It represents a false choice that the opposition to the Constitution are promulgating—and Spherical Model dispels. 

The false choice is between the enormous overreaching federal government favored by the Democrats and other socialists/tyrannists, and the supposed disposal of the federal government, which this cartoon claims is the position of the GOP. 

So the question is, do you know any Republican who wants to “conserve” civilization by overthrowing/dismantling/doing away with the federal government? Do you know such a person personally, or in the public view? Anywhere? I don’t. 

Think about history just a bit. We started as 13 British colonies declaring independence from the Mother Country on July 4, 1776. At this point, through the war, and up until 1787, these 13 colonies joined together as a confederation (Articles of Confederation). What they found was that, without anything stronger than this loose joining, there was no way to assure these things:

• establish justice
• insure domestic Tranquility
• provide for the common defence
• promote the general Welfare
• secure the Blessings of Liberty to ourselves and our Posterity.

Yes, that is in the Preamble to the Constitution (you just read it in my Friday blog, celebrating the 224^th anniversary). These are the limited and specific purposes of a federal government. The rest of the Constitution, including the amendments, spells out the structure that will meet these needs. 

If we can be called “conservative,” then what we are conserving is the Constitution. From the point of view of those conserving the Constitution, we’re not trying to figure out which GOP (or other) candidate we should choose to dismantle the federal government as outlined in that precious document—but who will best get us back to it, so we can do those few specific things in “a more perfect union,” as intended.  

The very people accusing “conservatives” of being extreme, then, must have something else in mind—something other than “conserving” the purposes and limits of the Constitution. 

The false choice offered to most of the people who have lived on the earth has been between the tyranny of chaos and the tyranny of state. But the real choice is between tyranny (of either of those two sorts) and freedom. The Spherical Model shows how both anarchic tyranny and government tyranny are in the lower hemisphere of the sphere. It takes effort from a special people to pull themselves up to freedom in the upper hemisphere. 

So the question GOPers are actually asking is, “Which of these candidates will help us move back up to the freedom zone of the Constitution, against the southern pull of the tyrannists?” I don’t know yet which candidate it should be. I do know that each and every one of them is likely to move northward from Obama, because it’s hard to go much further south than his ideology. 

There ought to be a guide, to help people judge whether the direction is toward freedom or toward tyranny. Other than our Constitution, I’m afraid it’s just going to require common sense. Let’s apply that to a few issues, just to see how it goes: 

Health Care:

• Tyranny approach—choose between having central government control all health care decisions or having no access to health care.
• Freedom approach—use the free market to keep costs low and distribution as wide as possible, and then add in philanthropy to help the unfortunate few who, through no fault of their own, can’t afford to meet their health care needs.

Housing:

• Tyranny approach—choose between having central government control prices and/or mortgage opportunities, or else go homeless.
• Freedom approach—use the free market to keep costs low and distribution as wide as possible, and then add in philanthropy to help the unfortunate few who, through no fault of their own, can’t afford to meet housing needs.

Education:

• Tyranny approach—choose between having central government control content, standards, and costs, or else go without education.
• Freedom approach—use the free market to keep costs low and distribution as wide as possible, and then add in philanthropy to help the unfortunate few who, through no fault of their own, can’t afford to meet their family’s education needs.

Indigent Care:

• Tyranny approach—choose between having central government control distribution of income from producers to non-producers, or let the indigent starve.
• Freedom approach—use the free market to allow as many options as possible for earning income, and maintaining independence with dignity, and then add in philanthropy to help the unfortunate few who, through no fault of their own, cannot be part of the self-sustaining producers.

Hmm. There seems to be a pattern.  

Government health care was only recently rammed down our throats in full tyranny manner, even though there has been tyranny creep for some time. But the suddenness has gotten our attention and caused many of us to stand up and say—“No! We don’t want the federal government to decide these personal choices.” The false choice was put to physician Ron Paul in a recent debate: what would you do about a 30-year-old who chose not to purchase insurance and then had a debilitating injury? Do you just let him die without care?  

On economic issues, Ron Paul can be pretty sensible. He pointed out that, early in his medical practice, before government interfered, the way it would be handled was, the care would be given, and then the debt was expected to be paid by the patient. And in case he could never do that, that’s what churches and charities were for. Clearly, before government interfered, patients were not left to die until a financial statement was presented (although being deprived of care and left to die happens frequently in socialized medicine countries). And repaying the debt was more doable, because there was a closer connection between the free market and medical care, so costs were more affordable. 

For many of us housing choices are still market related. We pay rent we can afford or buy houses when we can qualify for a mortgage. But the government’s interference over the past several decades has led directly to the bubble pop in housing. That crisis would not have happened without government interference. Enough of us are aware of this that we’re standing up to say—“Get out of my housing decisions!” But a growing number of people with an entitlement mentality are fighting that, are insisting that the producers must be coerced by government into providing for their housing. The tyrannists feed the fear of less-able producers (or non-producers) in order to make the decision appear to be between homelessness or government control. But trusting the market has always provided better housing choices at better prices than government has been able to do. 

Education is emotionally harder to deal with, because the false choice between government-controlled education and no education at all has been pounded in for a full century. It was fear that we would have an uneducated populous that pressed for government to step in and make education happen—which has led to less education for greater and greater costs. (I wrote about this here.) What would happen if we trusted the market instead of government?  

But I agree that any drastic change would be difficult for many specific families, even those who care deeply about the education of their own children. So, until we can regain the idea that education is a good to be provided by the parents (either through home tutoring or through hiring educators of choice through the free market), then we need something less chaotic than abolishment of public schools. So I propose the step toward more freedom would be away from centralized control and toward more local control—abolish federal department of education, limit state departments of education, and  empower local school districts to make decisions relevant to the families involved. 

The question for care of the poor requires only that we look at how things were handled prior to LBJ’s Great Society. Good people don’t stand idly by watching people around them starve; good people offer to share what they can. They do it through churches and other charitable organizations. They do it still. But government siphons off a significant amount, filters it through bureaucratic overhead, and then makes the corruption-susceptible choices about who should get what. When churches do it, they can make decisions based on whether a person is really in need—because they know the individuals humbly asking for help. Government is so far removed that the system encourages and subsidizes non-producers, regardless of responsibility for their situation, getting more of what they claim to alleviate. 

Here’s the thing to remember: the freedom approach in the Constitution works every time it’s tried—but has rarely been tried. The tyranny approach fails every time it is tried, and we have plenty of historical and contemporary evidence.  

So, who should we choose as a candidate? I don’t know specifically which one yet, but it must be someone who honors the Constitution and shows us how we can get back up to the freedom zone of the Constitution. That isn’t dismantling the republic we pledge allegiance to; it’s regaining it from the actual dismantlers.

Celebrating the Constitution

The 224^th anniversary of the Constitution is tomorrow, so I thought I’d celebrate that. 

I heard a Ronald Reagan quote a couple of times this week:  

Freedom is never more than one generation away from extinction. We didn’t pass it to our children in the bloodstream. It must be fought for, protected, and handed on for them to do the same, or one day we will spend our sunset years telling our children and our children’s children what it was once like in the United States where men were free. 

Here’s more from the great Reagan, from his farewell address: 

Those of us who are over 35 or so years of age grew up in a different America. We were taught very directly what it means to be an American. And we absorbed almost in the air a love of country and an appreciation of its institutions. If you didn’t get these things from your family, you got them in the neighborhood, from the father down the street who fought in Korea, or the family who lost someone in Enzio. Or you could get a sense of patriotism from school.  

Or if all else failed, you could get a sense of patriotism from the popular culture. The movies celebrated democratic values and implicitly reinforced the idea that America was special. TV was like that too, through the mid-60s. But now we’re about to enter the 90s, and some things have changed. Younger parents aren’t sure that an unambivalent appreciation of America is the right thing to teach modern children. And, as for those who create the popular culture, well-grounded patriotism is no longer the style.  

Our spirit is back, but we haven’t re-institutionalized it. We’ve got to do a better job of getting across that America is freedom—freedom of speech, freedom of religion, freedom of enterprise. And freedom is special and rare. It’s fragile. It needs protection. So we’ve got to teach history, based not on what’s in fashion, but what’s important…. 

I’m warning of an eradication of the American memory that could result ultimately in an erosion of the American spirit. Let’s start with some basics: more attention to American history, and a greater emphasis on civic ritual.  

And let me offer lesson #1 about America: all great change in America begins at the dinner table. So tomorrow night in the kitchen, I hope the talking begins. And, children, if your parents haven’t been teaching you what it means to be an American, let ‘em know and nail ‘em on it. That would be a very American thing to do (video here).

One thing I love about this is that when Reagan said “we” need to do a better job of teaching, he didn’t even hint that there should be a government program involved in that effort. Start with families, then neighborhoods, then schools and popular culture. 

Since I had the privilege of homeschooling my three kids, I got to study the Constitution and American history along with them. And it has become habit. I carry a pocket copy of the Constitution with me in a capacious mom purse, as well as a bookmark listing the 28 Principles of Liberty from The 5000-Year Leap. I’ve used curriculum from the National Center for Constitutional Studies (www.nccs.net) for teaching elementary through high school, along with using the video A More Perfect Union, an award-winning dramatization of the Constitutional Convention. (I wrote more here.)I’ve also taken a one-day seminar from NCCS when they were in town about a year ago. 

Right now Hillsdale College is offering a free online course on the Constitution. It started yesterday, but since it’s archived, I think you can still get in on everything. Go to Constitution.Hillsdale.edu and register so you can either watch live or access the archives. 

Just to celebrate today, I’d like to repeat the Preamble to the Constitution, laying out the proper role of government, outlining the limited purposes of this basis for our law. I suggest memorizing it so that it remains with you and comes to mind as needed: 

We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America. 

May God continue to bless America!

Bubbles

A few evenings ago I had the opportunity to hear BobWiedemer (eventually available here), one of the authors of Aftershock, a bestselling book on the economy. His main point is that, rather than the usual image of business cycles, it is more accurate to view America’s economy, at least during the last couple of decades, as a series of bubbles. While being diametrically opposed to the supposed experts, Wiedemer’s group identified and predicted the dot.com bubble, the housing bubble, the rise in the value of gold, and others. One of his main points was that, unlike cycles, where things eventually turn around and get better again, after a bubble pops, it’s not coming back. 

He warns that it is a mistake to assume that because things have always been a certain way means they always will be. Experts assumed housing prices would always rise. But when Wiedemer saw an unusually sharp rise in housing prices, that was a clue that something wasn’t right. Turns out that, as it often does, the bubble happened because of interference with the market. Mortgage standards were forced lower, with the goal of putting more people into their own homes (particularly those previously identified as not financially ready to take on a mortgage). More buyers meant more demand, which meant higher prices, which meant attracting more builders to the booming market, which meant oversupply—and combine that with much higher default rates causing insecurity in a previously safe investment, and housing prices suddenly plummeted. The bubble popped. 

When the government sees a bubble that threatens to pop, its tendency is to avoid (postpone) failure by propping up the industry—purposely allotting greater resources where there capital has obviously been ineffectually used. This is what they did with the bailout of GM and various other entities back in 2009. A better way would be to pop a bubble quickly, when it’s still small. Then the capital becomes available for more promising purposes.  

Serious trouble lurks on the horizon when the economy is a series of interwoven bubbles, so that the outcome is likely to be a domino effect once they start to pop. 

Wiedemer’s group identifies the bubbles, and, when possible, predicts when they will pop. He says the current bubbles are government debt and the dollar. We’ve seen the charts. Debt slowly creeps up over the previous century, and then spikes during Bush’s term, followed by approaching the asymptote as soon as Obama takes over.  

When there is debt, one way government deals with it is printing money to pay for it. (This is something counterfeiters do too, but when government does it, we don’t jail them. Maybe that’s the problem.) Sometimes money isn’t actually printed, just electronically produced by selling treasury bonds, where numbers change on computers, but no actual money gets hefted from place to place. But this “printed” money doesn’t represent wealth (surplus representing work completed that society is willing to pay for). It’s like monopoly money. Well, technically monopoly money has the value of functioning in a certain way for the purpose of playing the game, which is something people are willing to pay for. But, anyway, this printed money isn’t “real,” in the sense we regular mortals think of real wealth. 

The usefulness of printing money to pay your debts is that it doesn’t take as much of that tedious work and wealth building to pay things off. Instead, you use the wealth you’ve already created and call it double that amount (or whatever increase). Your creditor might not be happy about receiving $1Trillion that represents only the work of $500 Billion or so. They will feel cheated. Not as cheated as if they get stiffed for the whole amount, but at some point they’re going to say, “You’re not worth lending to.” When they say things like that, it translates as, “Your Triple-A rating is being downgraded,” which happened last month. And that means, as a higher risk, we don’t get the lowest interest rates when we turn over the debt, but we pay something higher that is still adequate to persuade creditors to take the risk. And then we go ahead and pay with even-lower-value dollars, so they downgrade further and eventually refuse to lend to us at all. At which point any current debt isn’t payable—unless we drastically increase our dollar printing to pay off the debts with paper that doesn’t represent actual wealth.

So, what happens when government presses its luck and prints so much that the value of each dollar shrinks to something infinitesimally small? Hyperinflation. What are the signs that this could be on the horizon? Other countries don’t want to use the dollar as their base currency anymore—they don’t trust its value. (Although, so many countries have inflated their currencies that there isn’t an obvious replacement—which has been propping up the dollar for a while already.)  

Another signal is the price of gold. When we were on the gold standard, in theory you could go to your local bank and turn in your dollars (bank notes) in exchange for that value in gold. When that got too limiting for government experts (back in the 1960s), we left the gold standard, and the dollars are just backed by the federal government’s promise that the dollar has worth. So when we know the dollar represents a lower value, it buys less. So prices rise. Inflation.  

Gold is more stable. If you look at the amount of gold it takes to purchase a home, for example, it would stay relatively stable. But the dollars you would exchange for gold change as trust in the dollar changes. So, right now, while the value of the dollar is drastically shrinking, gold prices are drastically rising.  

He didn’t say this, but I think gold is a bubble. If you’re trying to protect the value of your savings, doing it with gold is a good way. If you started doing that at $300 an ounce, instead of now, even better. It looks like you’ve made huge profits. But actually the profits are in less valuable dollars. At some point you’ll need a wheelbarrow full of dollars in exchange for an ounce of gold. This “bubble” will continue as long as distrust of the dollar continues.  

But even gold has its limits. There is the following exchange about the value of gold in Terry Pratchett’s Making Money (I talked about it here). Moist von Lipwig is talking with journalist Sacharissa Cripslock. 

Moist: “What are we, magpies? Is it all about the gleam? Good heavens, potatoes are worth more than gold!”

Sacharissa: “Surely not!”

Moist: "If you were shipwrecked on a desert island, what would you prefer, a bag of potatoes or a bag of gold?”

Sacharissa: “Yes, but a desert island isn’t Ankh-Morpork!”

Moist: "And that proves gold is only valuable because we agree it is, right? It’s just a dream. But a potato is always worth a potato, anywhere. Add a knob of butter and a pinch of salt and you’ve got a meal, anywhere. Bury gold in the ground and you’ll be worrying about thieves forever. Bury a potato and in due season you could be looking at a dividend of a thousand percent.” (p. 108) 

In other words, even gold’s value is limited to either its usefulness or to whatever we decide to call its value. You can’t eat it. So in famine, when food is scarce, it will take more gold to buy a sack of flour. But it’s traditionally the best we’ve got for being a stable money base value. Certainly better than a piece of paper (or digital message) that the government no longer even claims to represent a given amount of work. 

What is going to happen? I don’t know. I’m just beginning to read the book. Maybe before it’s too late we will elect an administration that will stop the insane rise in debt and government spending. Then maybe trust will continue so that getting out of the bubble will be less painful than if it continues to grow before popping. Maybe we can keep enough trust in the dollar that hyperinflation and collapse won’t be the inevitable only way to stop the current practice. 

One thing in our favor is that we are used to being a free, hard-working, inventive and entrepreneurial people. Our behavior has always created real wealth. The system of exchanging that wealth is the problem—and it’s a big problem. But it’s not as big a problem as many countries face: a growing entitlement mentality. OK, we have that problem too. But maybe it’s not too late to pop that bubble quickly and move along with a better allocation of resources.