I've been asked, via email and personal conversations, about the decrease in blogging activity. The short answer is, I've been working my through a required reading list, several, in fact, and for different purposes. (For one thing, I'm several issues behind in Faith and Philosophy. I have to leave it at that.

Also, I've been involved elsewhere in on-line discussions on topics such as Arizona SB 1070. That one was a knock-about of pure fun, revealing to me that opponents of the bill either haven't read it, or just know things that, as far as I'm concerned, just can't be known. There is a third possibility: they just have an ethnic chip on their shoulder and everything is an attempt to do no more than to knock off that chip.

One with whom I discussed the matter was just certain that he and his father, despite being citizens, were in jeopardy under the law. He couldn't say how, though. I mean, presently Arizona law simply permits law enforcement to check immigration status if there is reasonable doubt about that status. The new law would have required a check of immigration status if there were reasonable doubt. I asked several times precisely how he and his father were in danger under a requirement that they were not under a permission. Nothing. Then there was this silly assertion:

And last time I checked, a valid driver's license is not proof of citizenship.

And that was from someone who says he read the law carefully, the same law which stipulates that a valid driver's license (among other forms of identification) is acceptable as sufficient evidence that the bearer is not in the country illegally. I asked him about that, too. I'm still waiting for answers to both questions.

But mostly, I've been catching up on some reading and attending to family-related and house-hold matters. I intend to resume normal blogging, including the return of Wisdom Sunday, in about a month or so.

"We won’t know the full results of what we have done until the very institutions we have created, the regulations we have suggested and provided for are actually tested." ~ Sen. Chris Dodd

In remarks delivered 13 July 2010, His Beatitude spoke, with reference to the recently signed financial reform bill of the end of an "era of irresponsibility". One must simply smile in order to avoid pulling out one's hair over a financial reform bill which not only leaves in place the entity, such as The Federal Reserve most responsible for this era (an era which, to some of us, goes all the way back to 1913, but actually gives to this entity, even more power over the economy:



Nice.

We are told that, although the government does exert a great deal of control over the economy, the fact that the financial meltdown occurred at all means that it still is not enough control. The "free market", we've been told, failed us. (It's funny how every failure of the "free" market is testimony to the fact that it doesn't really work, but any successes are not evidence of the contrary. But I digress.) More is needed, and so we have the financial reform bill. As we've heard, over and over, the free market clearly doesn't work the way its supporters say it works. There is never permitted the slightest suggestion that, despite the supposedly little control the government has over the economy, it has still been sufficient control to be the greater cause of our present difficulties than the "free" market.

The irresponsibility for the meltdown, we've been told, lay in the over-reliance upon credit, motivated, naturally, by greed. But who, precisely, extended and expanded this credit? Not the greedy people who borrowed the money. They don't have that kind of power. Not the lending institutions. They don't have that power, either. If we really are talking about money which should not have been loaned, then why were the interest rates as low as they were? The fact of the matter is that the Fed controls the money supply, expanding it or shrinking it as they see fit. This has an effect on the so-called free market, making it rather un-free. It is, in fact, one could say, driven. There is a reason why people took out loans they should not have done. There is a reason why banks lent money they should not have done. And greed is an acceptable explanation only if gravity is an acceptable explanation for every plan crash.

"Why did the passenger jet crash"?

"Gravity." Think of the billions that could be saved if the NTSB would stop investigating plane crashes.

The money was lent because Alan Greenspan made it availabe and it was virtually (but only virtually) free. Recall the present complaints that banks have been given a great deal of money which they are not lending. Had the banks not lent the money which started the boom, we'd have had the same complaints in 2003 and 2004. One of the reasons the banks are not lending is that there is no way for them to know which loans to grant.

For what follows, think of money not as a medium of exchange, but as a commodity which, like any commodity, can be bought and sold. When you work a job you purchase money with your labor; your boss purchases your labor with money. Think also of interest as the cost of money between borrower (buyer) and lender (seller). Money is a commodity; interest is the price of this commodity.

Now think about the function of price. For most of us, price affects a great many of the decisions we make. There is a reason I bought a 2000 Saturn in 2000 rather than a 2000 Lambourghini: price. I could easily afford the former, but not the latter. But let's say the price of a 2000 Lambourghini, as well as the cost of owning one, suddenly dropped to a point equal to that of the 2000 Saturn, making it possible for me to own a Lambourghini for as much as it would cost me to own a Saturn. I assure you, that would have been sufficient reason for me to have purchased the Lamboughini. So it is with interest rates. A higher interest rate has a different effect on calculation than a lower one. If the interest rate is too high I might be reluctant to seek a loan for a business venture, or even a house. Both are risky activities; and part of the risk is the ability to pay the loan. The higher the interest rate, the greater the risk, especially since, in the beginning, the bulk of each loan payment is on the interest of the loan, not the principle. But if the interest rate drops to almost zero (that is, almost free), then things change. A business venture at 20% interest is clearly much riskier than at 2%. At 2% it's almost like passing up a Lambourghini for $1,500.00 to purchase a Saturn for $15,000.00. Pass up a virtually free Lambourghini? Are you mad?

In the same way that price affects my decision about a car purchase, the interest rate affects a businessman's calculation concerning the chances of turning a profit from any projects he may be considering. Just like the prices of the material factors of production, wage rates, and the anticipated future prices of the products, the interest rate (the price of money) is an item that must enter into the planning businessman’s calculations. The result of this calculation gives the businessman an idea of whether or not a certain project will pay off. A drop in interest rate makes the businessman’s calculations misleading. These false calculations will tend to make some projects appear profitable and realizable which a correct calculation, based on an interest rate not arbitrarily manipulated by credit expansion, would have shown as unrealizable. Being misled by the interest rate the businessman undertakes a project he would not otherwise have done. Business activities are stimulated, and a (credit-generated) boom begins. About the only thing the current president has correct about the recently ended boom (the meltdown) is that it was false. Indeed it was, as would any boom be which was egged on by a false interest rate. But that is about the only thing, because what neither he nor any other administration, would admit is that this false boom was egged on by a false interest rate, an interest rate set arbitrarily by The Federal Reserve, an interest set as low as it was precisely to start a boom in the first damn place! Now, they blame the businessmen for their miscalculations, and, on top of that, blame these miscalculations not on the Federal Reserve's interest rate, but on businessmen's greed.

The interest rate in a truly free market (as opposed to a centrally manipulated market that is called free) would be set by individual lending institutions, about as follows. To get straight to the relevant point, banks need to lend money, especially if they are to pay you interest on your savings accounts. The more you save, the lower they would set their lending interest rate. The less you save, the higher would be the lending interest rate. Why? When you save alot you send a signal to the bank that you are putting off consumption until the future, the more you save, the futher into the future you are putting your consumption. Moreover, the more you save, the more reserves the bank has on hand for lending. Recall that money is a commodity. When a bank has a lot in reserve it is like a car dealer with too much inventory, so it will usually lower its lending interest rate (the commodity price) in order to lend from these reserves (sell the money), taking some of the interest from these loans for itsef, as its profit, and passing some more of it to you in the form on interest on your savings account, certificates of deposit, or money market account. As banks lower their lending interest rates, this sends a signal to businessmen that a large portion of the population is putting off consumption into the future. In the future, they will consume. Businessmen, anticipating what these savers will want to consume in the future, and anticipating much more consumption in the future than if savings were lower, will take out loans either for research into and development of new, as yet non-existent products, or improvements in current products, or simply increased production (without improvement) of current products. When savings are low, banks, having less in reserve, will raise their lending interest rate. This signals to businessmen that consumers are preferring present consumption to future consumption. Consequently, they will discipline themselves and concentrate their efforts on producing such products as are presently being consumed because higher interest rates mean less tolerance for risk.

That is how banking would work in a free market. By increasing or decreasing their savings, by preferring present consumption to future consumption, or vice-versa, consumers -- not the government, not the Federal Reserve, not any bank -- would control the interest rates. But that is not the way it works. The Federal Reserve controls interest rates, and by virtue of this control it can launch an economic boom, for which, of course, greedy businessmen will be blamed.

After the dot-com bubble burst, and in the wake of the 11 September 2001 attacks, Alan Greenspan decided to increase the money supply by targeting the federal funds rate, the rate at which banks lend to each other to cover their reserve requirements, lowering it to 1%. (Can you say, "Fifteen hundred dollar Lambourghini"?) And he held it there 2003 to 2004, the heart of the housing bubble.

As I mentioned above, this injection of liquidity sent a signal, as any change in any interest rates will do. For reasons I shant go into here, the dot-com bust resulted in a loss of confidence in the stock market. Where to invest this new liquidity? Confidence immediately turned to real estate. Among other things, the artificially low interest rate drove people into the building industry who, in a "normal" market would have been laughed out of a bank. In the market with which I am most personally familiar some of those who entered the general contractor profession included disk jockeys, cabinet makers, carpet and brick layers, electricians and one record producer (or drug dealer, still not sure.) Why could these people get loans to build homes, including "spec" homes? Because the loans were that cheap and, thanks to belief in a bit of nonsense which became known as The Greenspan Put, banks, among many, many others, falsely believed risk had been banished from existence. But also because, in most cases the banks would never have to wait for these loans to be paid.

What typically happens is that banks eventually sell the loans they make. To the uninitiated this sounds mysterious. But think of it. If money is a commodity, then so is a loan. In practical terms, the loan is the paper it's written on, that is, the loan contract. So the loan contract itself, like the money it represents, is also a commodity, bought and sold like any other commodity. So let's say, keeping it simple, you take out a $1,000,000.00 million dollar loan which, when amortized, will mean that when you've paid it off, you will have paid $1,750,000.00. Let us stipulate also that this is a twenty year loan, meaning the bank must wait twenty years to get its $1,750,000.00. On the other hand, it could sell the loan for, say, $1,250,000.00. It just made $500,000.00 and it doesn't have to wait twenty years for you to pay anything. So if a bank loans money to a disk jockey who wants to play general contractor it risks virtually nothing if it can sell that loan. As we know, many of these loans were bundled together and sold as mortgage-backed securities.

Of course, it would be one thing (forgivable, even) for banks simply to have loaned money to disk jockeys to build spec homes. It is quite another for them to have loaned to people who, as we've heard, had no chance of paying them. As we've heard, banks were not even requiring proof of income. This, we've been told, was because banks were unscrupulous, greedy. (Ostensibly, the people who falsely reported, or perhaps inflated, their incomes were innocent by-standers, unwitting victims of bankers' greed. Who were sitting around, minding their own business, when these unscrupulous bankers knocked on their doors with offers that couldn't be refused. The poor dears.) Clearly, if all banks have to do is loan money and then turn round and sell the loans, it almost doesn't matter to the bank whether the mortgagee can pay. Almost. In a truly free market it would matter a great deal: the one who buys the loan could sue the bank for failing to perform due diligence. In selling the loan the bank would have been understood as warranting to the buyer that it had ascertained the mortgagee's ability to pay the mortgage. And the bank should have done, for if it could not find a buyer for the loan, then it would have been stuck with that loan itself. But in a market in which losses are socialized, this is not a problem.

For my purposes here, it doesn't matter why banks loaned money to people who couldn't pay them. Some blame the Community Reinvestment Act. It probably played a role. But, like I said, it doesn't matter. The boom was fueled by manipulation of interest rates by the Federal Reserve. If the boom had not occured in housing it would have occured elsewhere. Remember that the lowering of the federal funds rate gave banks virtually free money to lend. Banks make money by lending money the same way car dealers make money selling cars. That money -- that liquidity -- was going somewhere. Loans were going to be made to someone. A boom somewhere was inevitable thanks not to greedy speculators, drunk with "irrational exuberance", who can't do squat without liquidity, but to the Federal Reserve, which provides the liquidity.

And now, two weeks after Chris Dodd told us we won't know what the financial reform bill will do until after it's tested, the POTUS tells us the bill, which leaves the Federal Reserve in place and even gives it more control over the economy, will save us from the boom-bust cycle. If only the mafia could make their operations work as beautifully.

Finally, a brief explanation of the bust. The sad fact is the Federal Reserve may be able to create money out of thin air, but it cannot create factors of production. There may suddenly be more money available for business projects, but there is not equally as suddenly the material for these projects. At some point, producers are unable to keep up with the Federal-Reserve-driven demand for production goods. The market slows down as businesses wait for the needed material. Unfortunately, banks don't wait for loan payments, not for long anyway. Finally, projects increasingly cannot be completed. But these projects need to be completed in order for loans to be paid. The boom is over.

[The President of the United States]shall take Care that the Laws be faithfully executed.... ~ U. S. Constitution, Art. I, section 3.

Many people (including people on the right) are angry with the President for not issuing an Executive Order suspending enforcement of the Jones Act. Think of it: The President of the United States, constitutionally charged to see that the laws are faithfully executed, is to issue an order suspending the faithful execution of certain laws, as convenient.

Of course, the rationale is that this is an emergency of the sort which necessitates the suspension of this law, maybe others. Emergency -- that is the most common excuse used by tyrants to justify their excesses. One "emergency" after another; one suspension of law after another -- soon enough you have the Julio-Claudians and their successors running things.

It is odd that complaints come from the right, given their ire at the federal government's failure (or refusal) to enforce federal immigration law.

Supporters of this enforcement suspension cite the Bush Administration's suspension of it during the Katrina emergency. Robert Bluey explains a proffered distinction between the two events (here), such that Bush's suspension of the Act was justified, but Obama's would not be. But even if this distinction isn't valid, we are still talking about the suspended enforcement of law. Slow down and think that through. The President of the United States, because there is some crisis (you know, that thing which, according to Rham Immanuel, permits government to get away with things it otherwise could not), issues an Executive Order suspending enforcement of a law. While we're at it why not, if and when necessary, suspend enforcement of the Constitution, like Lincoln virtually did during the War to Prevent Southern Secession, or Wilson during World War I, or FDR during the crisis known as The Great Depression?

For the record: Like Senator McCain, I think the Jones Act should be repealed. (Wow. Something he and I agree upon. Who knew?) But so long as it remains in force, I'd prefer to see the POTUS exercise a habit of not picking and choosing which laws he shall faithfully execute and which laws he will not.

George Will on questions for Elean Kagan, here and here.

Very, very excellent questions.

For those who receive updates via RSS feed, something like Google Reader, or Facebook, please do me a favor. Head over to www.deviantscholar.com. I have a new layout, thanks to the skills of my graphic designer little girl. Let me know what you think.

Do me another favor. If you want a layout of your own, visit www.christyjanssen.com and contact Christy to get one of your own. And if you really want my appreciation, have a look at some of the other design services she can offer.

Be sure to let her know the Deviant Scholar sent you.

These people -- it's never satisfactory for them just to warn parents, and (HORRORS!) let parents decide whether to buy their children Happy Meals which include toys. Of course, they have warned parents; but parents (darn them!) insist on buying Happy Meals for their children. Since the parents won't stop buying, the only alternative is to make McDonald's stop selling the offending product, the product, that is, which offends the Center for Science in the Public Interest, not the parents.

It used to be that parents warned kids to run away from strangers offering candy, but companies have made an end run by laundering their perfidy through electronic media. Now kids absorb countless commercials touting premiums based on their favorite characters -- Shrek, Batman, Barbie, Beanie Babies, etc. -- and, surprise, surprise, ask their parents to take them to McDonald's. Consumer-marketing guru Adam Hanft said, "Happy Meals proved that you could actually 'brand' a meal and make children harass their parents for it."

The Federal Trade Commission has reported that fast-food companies--with McDonald's by far in the lead--spent $360 million in 2006 on toys to market children's meals. In the same year, fast food restaurants sold more than 1.2 billion children's meals with toys to children ages 12 and under, accounting for 20 percent of all child traffic at those restaurants. It should be no surprise that companies employ the practice--it works.

As one reads the article, one gets the impression that, for Jacobson and his ilk, the only market players involved are restaurants like McDonald's and children, where the children are the consumuers. The parents? Oh, those are the people who are "pestered" by the children into talking them to McDonald's and are, apparently, impotent in resisting this pestering. Some of us -- neanderthals, no doubt -- would say this marketing to children via toys works because -- and only because -- parents allow it to work. Jacobson knows better. It's McDonald's; and they've got to be stopped.

Granted "kids absorb countless commercials...and...ask their parents to take them to McDonald's" and that children can be motivated to harass their parents for a product. But the question remains: Who is in charge here? As Bill Cosby might say, "These are not your children!" (I can't tell you what my mother would tell Michael Jacobson.)

I recall the last time I attempted to pester my parents into something. I was about seven years old. Not only did I not get what I wanted, but my pestering was so aggressive I got something I most certainly did not want (but was told I asked for) -- and I got a lot of it!

The children may "pester" and "harass" but Mommy and Daddy are the push-overs who drive the little whiners to McDonald's. Mommy and Daddy are the ones who spend their hard-earned dollars on Crappy Meals. Why doesn't the Center for Science in the Public Interest sue the damn parents? I'll tell you why: McDonald's has more money.

Scumbags.

If a judge blocks a moratorium on off-shore drilling it presents a set of simple legal questions:

(1) Does the President of the United States have the Constitutional authority to stop off-shore drilling? (And, if so, in which article or amendment are we to look for this authority?)
(2) If the POTUS does have this authority, then under what circumstances is he legally authorized to do so?
(3) Do the circumstances under which the present moratorium was placed meet the Constitutional criteria?

Judge Martin Feldman has blocked the moratorium, asserting that it fails legal muster. Thus far the media are more concerned with Judge Feldman's oil holdings rather than the legal questions presented. In this article, Michael Kunzelman is pleased to inform us that "Feldman's financial disclosure report for 2008...shows holdings in at least eight petroleum companies or funds that invest in them, including Transocean, which owned the Deepwater Horizon drilling rig...." Kunzelman is kind enought to go on to report that it is not clear "whether Feldman still has any of the energy industry stocks."

I'm sure Kunzelman thinks he's a brilliant guy, but the fact is his sub silentio argument is that Feldman's argument is one he holds only because he probably owns oil stock. But this sort of reasoning, if it can be called reasoning, is logically fallacious. Specifically, it is called a Bulverism. It's the "You assert P because you are a Q" sort of argument, meaning, tacitly, of course, that P is false. Kunzelman writes nothing -- and I mean nothing -- about any legal argument the judge may have had. Pathetic.

Note: Judge Feldman's ruling simply "prohibits federal officials from enforcing the moratorium until a trial is held." A trial? What a travesty of justice! Oh! But wait! What's this?

No person shall be...deprived of life, liberty, or property, without due process of law....

I think that's in the Constitution somewhere. I could be wrong. But I'm not.

This moratorium constitutes the deprivation of the liberty of oil companies to engage in their business. Due process of law? A trial? With a jury sitting as finder of fact? Good heavens! What next? Rule of law?

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Once upon a time many thought generals criticizing presidents was good for democracy. Now, it's a threat to civilian control of the military.

The welfare of humanity is always the alibi of tyrants. ~ Albert Camus

It is easy to believe the story that the purpose of the $20 billions in "escrow" taken from BP is to make sure that BP meets its liability. But this is due to ignorance. The fact is, BP is already in process of meeting its liabilities. Soon after the spill, BP announced that it would pay all justifiable claims resulting from the oil spill. It opened 25 claims offices. As of June 15, it had approved initial payments that amounted to $63 million, and was expected to rise to $85 million by the end of the week, to businesses claiming $5,000 or more in damages. So it wasn't that BP had merely said it would meet its obligations. It was already doing so when the shake-down occured. BP created its own fund, appointed its administrator, and determined staffing with a view to ensuring only qualified persons, businesses, and governments would be reimbursed for losses. There was no need for this action.

Then, of course, there is the law. No provision of either the U.S. Constitution or the U. S. Code authorizes the executive branch to take this sort of action. Even if an escrow account was needed, such accounts are supposed to be managed by the judiciary. Well, until now anyway, in the United States I used to know.

Someone commenting on this said this action was necessary in order "to make sure BP pays up front, since we know damn well they will try to use every trick in the book to funnel their wealth to their shareholders or executives when the check comes due for the incredibly expensive disaster they've inflicted on us."

This extra- constitutional, extra-legal action was necessary for our welfare. Never mind that there has been no trial. No finder of fact has found for any plaintiff, assessing BP's liability for anything. The executive branch, according to this commentator, must punish BP for a crime "we know damn well" they will commit.

Of course...



Thus, an oil spill is such a crisis as requires suspension of the rule of law.

The point of this "escrow" account isn't to make sure that people get their money. The point is to make sure they get it from Obama. Remember these ladies?



And this one?



When the time comes, the right people will remember that they got their money -- Obama money -- from Obama, not BP. That is priceless.

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Governments never lie about anything, especially inflation

When I was growing up, table talk could be a boring experience because most of the talk, dominated as it was by my parents, usually involved business, especially finance. I've learned to be grateful for it, especially when listening to politicians.

Of course, it's also the reason I think people like Nancy Pelosi are ignorant. Not because I don't like her policies. Quite the contrary, in fact. I don't like the policies because I believe them to be rooted in ignorance, an ignorance which is a function of both illiteracy and innumeracy.

Take, for example, a report I recently heard on the radio that she believes BP should not pay its stock-holders dividends. Maybe they shouldn't. But her reasoning is the most simplistic crap my parents trained me out of before I'd graduated high school.

BP should not pay dividends because it made $17 billions in profits last year. Actually, it was $16.58 billions. Close enough though.

One of the things my parents taught me about business finance, and understanding profits, is that some amount of money is "a lot" or "a little" only in comparison with some other amount of money, the two amounts being percentages of each other. Pelosi thinks $17 billions is a lot of money because she's comparing it with the thousands of dollars needed by victims of the oil slick. In fact, it represents only a 6.74 percent profit. Yes, I said only. In business, that's not very much. It is $17 billions, in comparison with $246.1 billions in revenue. That $17 billions represents what is left of the $246.1 billions when all the bills are paid.

This isn't to say BP doesn't have a liablity. It is to say that whatever Pelosi thinks BP should pay, and to whomever she thinks it should be paid, it should be paid because it is owed. It should not be paid just because she thinks $17 billions is a lot of money. It isn't. It's a paltry 6.74 percent profit. The company I work for didn't make $17 billions in profits last year. But it did make about 12 percent in profit. Profit is about the percentage of revenue, not the raw dollar amount. And neither the raw dollar amount nor the percentage have any bearing on liability. Would Pelosi entertain the notion, if BP's profits on $246.1 billions were only $1.7 billions, that they could then pay dividends? We know better than to believe that, I think.

I doubt Nancy Pelosi knows, or cares, to whom much of these dividends will go. No one can like everyone on the list, but some of my favorite stockholders are Ameriprise Financial, Capital Group, Prudential, TIAA-CREF, Standard Life, and the State of Texas, among others.

You might want to check your retirement fund. Make sure it doesn't (still) have any BP stock among its holdings.

Some are offended at the President's use of the word 'ass'. Frankly I don't find it offensive at all. It's one of my own favorite words, as, for example if I were to say something like, "The POTUS is an ass." But never mind that just now.

It's not even offensive to me that he is looking for assess to kick. What is offensive is the general direction he's looking for this ass. This is a man who cannot call terroritists, well, terrorists. He's reluctant to use the word "enemy". He's not looking for any terrorist ass to kick. He's not looking to kick any Taliban ass. He's not looking for any Hamas ass to kick. He's not looking for any Hezbollah ass to kick. And he most certainly is not looking for any illegal immigrant ass to kick -- not that I have a problem with that one. (If anything he's probably more interested in kicking some Arizona governor ass.)

That is what is really offensive.


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This video has been making the rounds on Facebook:



Since she loves the word so much, let her hear from it:

Hear the Word of the LORD, you who cant love for The Word. "This is what the LORD Almighty says: Reform your ways and your actions, and I will let you live in prosperity. But do not trust in deceptive words and say, 'This is the Word of the LORD, the Word of the LORD, the Word of the LORD!' If you really change your ways and your actions and deal with each other justly, if you do not oppress the alien, the fatherless or the widow and do not shed innocent blood in this place, and if you do not follow other gods then I will let you live in peace. But as it is, you are trusting in deceptive words that are worthless. Will you steal and murder, commit adultery and perjury, burn incense and offer prayers to a god of your own understanding and then come and stand before Me, Book in hand and say, 'We are safe'-safe to do all these detestable things? Has this Word, which testifies to Me, become a stamp of approval to you? But I have been watching! declares the LORD." ~ Paraphrased from Jeremiah 7.

This reminds me of something I was saying here. It may be that, as Eland puts it, "Tea Partiers are right-wing Obama-haters rather than liberty-lovers. And like their icon Sarah Palin, they seem proudly ignorant of history." But they probably can more easily be transformed into the sort of liberty lovers Eland and I would like than leftists can be.

In this interview with Mike Rosen, oilman Paul Teague explains the technical aspects of the oil spill -- and not just British Petroleum. Yeah, like the news media, who are largely so ignorant of off-shore drilling that they can't properly report on it. The number of lawsuits coming out of this, he says, is going to be huge.

Paul Krugman wants us to know we are not Greece. Denver radio talk show host, Mike Rosen says it's only a matter of time. It's the government spending, stupid.

In honor of Ken Salazar, I'm thinking that my new nick-name for the executive branch of the unfederal government will be The Boot.

In a recent column, Cal Thomas was rightly critical of National Day of Prayer activities. However, in the course of his column, he offers the following critcism:

Judge Barbara Crabb, a U.S. district judge in Wisconsin, recently ruled it is unconstitutional for the government to endorse the National Day of Prayer. She did not rule prayer unconstitutional, which would be an entirely different matter. The decision will likely be appealed, but... [the Bible] says Christians are to obey the government because God instituted it. How do they justify disobeying a government God has put in place, including one led by President Obama, who many "Christian leaders" spend more time bashing then they do praying for? And if they believe, as Paul wrote, that all authority is from God, why are they spending so much time criticizing the authorities and focusing on the "kingdom of this world," instead of focusing on that other "kingdom" they say they believe is eternal?

I believe I can offer a very short answer to Thomas's question about why Christians spend time criticizing the authorities (some of which Thomas dismisses as "bashing" the president). While we agree with Paul that we should obey the governing authorities, we recognize, as Thomas seems at times not to do, that our "governing authorities" are not Rome's governing authorities. The governing authorities the Romans were exhorted to obey were authorities in an imperial system. Our authorities are authorities in a constitutional republican system. Inasmuch as Paul, on at least one occasion, insisted on his rights as a Roman citizen, we believe it perfectly acceptable for us to insist on our rights as citizens of the United States. Roman law gauranteed that no citizen could be scourged before being condemned; and he insisted on receiving that right (see Acts 22.25-29). Our constitution guarantees to us the right to criticize (dare I say bash?) policies with which we disagree, as well as the politicians who propose those policies. We criticize because it is our right. We are not in Rome.

But, says Thomas, all authority is from God. And that is true. But what, exactly, is the nature of the authority granted? Is it the power to do with that authority all that one wishes to do, without criticism? Is it, more importantly, the power to exceed that authority without criticism? If, as Thomas would say (and with which I agree), Barak Obama holds the office of President of the United States by the grace of God, then let us reflect that the office held by the grace of God, is not dictator of the United States, but President of the United States. The office comes with limitations. He doesn't get what he wants on the simple grounds that he has the office by the grace of God. He gets only what the Constitution grants him. And the Constitution does not grant him immunity from criticism. The authority God has granted to Barak Obama is the authority -- and only that authority -- which belongs to him by virtue of his being the President of the United States. Like wise with Congress and with the courts.

While we may enjoy them, it should not be for our own freedoms alone, but even more importantly for the freedoms of our non-Christian neighbors (rich and poor, corporate and non-corporate), we should continue bashing while we're free to do, especially while it is so clear that one of the present goals is to use the present malaise as an excuse for the consolidation of every more power in the executive branch of the government. Doing so is not ipso facto to focus on the kingdom of this world to the exclusion of that other, eternal kingdom. As C.S. Lewis said, in The Joyful Christian, “If you read history, you will find that the Christians who did most for the present world were just those who thought most of the next. The Apostles themselves, who set on foot the conversion of the Roman Empire, the great men who built up the Middle Ages, the English Evangelicals who abolished the Slave Trade, all left their mark on Earth, precisely because their minds were occupied with Heaven.”


I do not see the attempt to do good here on earth and being heavenly minded as mutually exclusive. Lewis would have us consider the probability that we can do earthly good precisely by being heavenly minded.

Thomas was better on the National Day of Prayer here .

I just finished listening to the oral arguments in the Citizens United case, something I've been wanting to get to for some time. One can't deny she knows the law. Of course, it's her view of the Constitution and its application that would be objectionable. But there were some disturbing elements in her arguments.

"The effects of false and pernicious propaganda cannot be neutralized except by a thorough training in the art of analyzing its techniques and seeing through its sophistries." ~ Aldous Huxley, "Brave New World Revisited"

The nomination of Elena Kagan reminds me of a recent column by E. J. Dionne, on what it is marxists -- I mean, liberals -- need to do in the fight over the Supreme Court.

He begins his Monday, 26 April 2010 column by writing:

The genius of American conservatives over the past 30 years has been their understanding that the most effective way to change the country is to change the terms of our political debate. On issue after issue, they have done just that.

Sensible regulation was cast as a dangerous quest for government control. Modest measures to alleviate poverty became schemes to lock the poor into "dependency." Advocates of social insurance were condemned as socialists. Government was said to be under the sway of a distant "them," even though in a democracy, government is the realm of "us." And attempts to achieve a bit more economic equality were pronounced as assaults on liberty.

Notice that regulations, which Dionne calls "sensible", are simply cast as a quest for government control, as if that regulation is sensible which Dionne and his ilk call sensible. Disagreement is not principled; it is simply framing.

The furor over Arizona entails belief that it is a crime to be in the United States, but not in any single state, illegally, as well as that enforcement of immigration laws requires racial profiling when performed by state agents but not federal agents. Right. We all know how ethically up-standing the unfederal government is.

Limbaugh thinks what bothers the Left about Arizona is the left's need of illegal voters. Perhaps. But there is something else for the Left to worry about. For perhaps the first time since the 19th century we have a state taking upon itself to enforce the terms of the U.S. Constitution, in response to federal malfeasance.

If illegal immigrants don't have to obey federal immigration law, why should U.S. citizens obey a federal law requiring the purchase of health care insurance? Oh. Yeah. The unfederal government will actually enforce the latter. That's right. I guess the real question is: Will the unfed object to states passing laws making it a crime for state citizens to disobey the law requiring the purchase of health care insurance, or will the unfed be glad for the help?

Frankly, I think it would be great if we had immigration policies even half as sensible as Mexico's, with all of which I entirely agree and support, by the way.

Yes, I read the bill.

An update to this post:

Reader AdamJ writes:

Paulson paid Goldman 15 million, not the other way around. Which is why Goldman was trying to help keep Paulson involved in portfolio selection. And the SEC doesn't claim that Goldman wasn't betting on Abacus to fail or to succeed. I suspect Goldman only lost that 90 million because they couldn't find a buyer for the 45-50 tranche in time before Abacus imploded- Goldman was making bets against the housing market at the time (they were the only bank which knew which way the wind was blowing)

It merely is saying that Goldman said ACA, an independent company with experience picking CDOs and omitted to mention that Paulson helped pick the bonds that went in the CDO. Obviously, an investor (particularly a sophisticated one) would want to know that someone helping to pick the bonds is shorting the CDO and therefore wants to pick the worst possible bonds. Paulson wasn't sued because Paulson didn't have any disclosure requirements.

I reply:

I'm pretty sure my source, to which I failed to link, and cannot now relocate, had it that way. Figures. I maintain a policy of once I put it up it's there and I have to live with the occasional embarrassment which comes from blogging in too much haste. This is, of course, one of the reasons why bloggers should always leave open the possibility of comments. If one can't always be right, one should at least be open to correction. I stand corrected, and chastened. If that is the way the source had it, I should have done a better job of double checking the precise relationship between Paulson and Goldman Sachs. I was attempting simply to translate my source. Clearly, I should have appraised and then translated.

On the other hand, it must just be that in "translating" I mis-wrote, thus rotating the roles played by Paulson and Goldman Sachs. Rather than writing Paulson paid Goldman, I wrote it the other way round.

Larry Kudlow provides a time line of the securities-selection process that was made by ACA management, the portfolio selector, from the actual SEC complaint:

ACA/PAULSON PORTFOLIO

January 9, 2007
Goldman sends email to ACA, titled "Paulson Portfolio," containing list of 123 RMBS selected by Paulson for the Abacus 2007-AC1 reference portfolio

January 22, 2007
ACA sends email to Fabrice Tourre & others at Goldman containing list of 86 RMBS, including 55 of the 123 selected by Paulson; 68 were rejected. This is very important. Goldman maintains that ACA was in fact the portfolio selector. ACA rejected 68 of Paulson’s recommendations. They accepted 55.

February 2, 2007
After meetings with Paulson & Tourre, ACA emails Paulson, Tourre & others at Goldman a list of 82 RMBS on which Paulson & ACA concurred, plus 21 others. So at this point, they are in agreement on 82, but they insert 21 others.

February 5, 2007
Paulson sends email to ACA & Tourre deleting 8 of the RMBS recommended by ACA and leaves the rest alone.

February 26, 2007
After further discussion, Paulson & ACA agree on a reference portfolio of 90 RMBS for Abacus 2007-AC1.

Clearly, as AdamJ, writes, ACA management was the portfolio selector. Confusion is rooted in the fact that some (but only some) of the RMBS were selected by Paulson, and of the 123 he selected, ACA accepted 55. The one doing the accepting, is pretty clearly the portfolio selector.

I didn't double check my source's recitation of the facts because I knew that Paulson had a role in the selection. I trusted my source's understanding of the nature of that role. I've never relied on that source before. Won't do it again, at least not uncritically.

Deserta faciunt et pacem appellant


As is well known, last week the Securities and Exchange Commission charged Goldman Sachs with fraud. Since then both Republicans and Democrats have been using the case to promote their respective. For Democrats, Goldman Sachs demonstrates the need for more financial regulation. For Republicans the case raises questions about the involvement of some members of His Beatitude's Administration. Some wonder if His Grace will return nearly one million in Goldman Sachs campaign contributions.

So here's E.J. Dionne to tell us who the TEA partiers are, and aren't. Quite simply: they don't believe what the rest of us good folk believe. Apparently, this makes their beliefs false, although Dionne doesn't quite say that. Citing a New York Times and CBS News poll, what he does say is, in relevant part, this:

[The poll's] findings suggest that the Tea Party is essentially the reappearance of an old anti-government far right that has always been with us and accounts for about one-fifth of the country. The Times reported that Tea Party supporters "tend to be Republican, white, male, married and older than 45." They are also more affluent and better educated than Americans as a whole. This is the populism of the privileged.

And the poll suggested something that white Americans are reluctant to discuss: Part of the anger at President Obama among Tea Partiers does appear to be driven by racial concerns.

Saying this invites immediate denunciations from defenders of those who bring guns to rallies, threaten violence to "take our country back," and mouth old slogans about states' rights and the Confederacy. So let's be clear: Opposition to the president is driven by many factors that have nothing to do with race. But race is definitely part of what's going on.

The poll asked:"In recent years, do you think too much has been made of the problems facing black people, too little has been made, or is it about right?" Twenty-eight percent of all Americans -- and just 19 percent of those who are not Tea Party loyalists -- answered "too much." But among Tea Party supporters, the figure is 52 percent, almost three times the proportion of the rest of the country. A quarter of Tea Partiers say that the Obama administration's policies favor blacks over whites, compared with only 11 percent in the country as a whole.

So race is part of this picture, as is a tendency of Tea Party enthusiasts to side with the better-off against the poor. This puts them at odds with most Americans. The poll found that while only 38 percent of all Americans said that "providing government benefits to poor people encourages them to remain poor," 73 percent of Tea Party partisans believed this. Among all Americans, 50 percent agreed "the federal government should spend money to create jobs, even if it means increasing the budget deficit." Only 17 percent of Tea Party supporters took this view.

Asked about raising taxes on households making more than $250,000 a year to provide health care for the uninsured, 54 percent of Americans favored doing so vs. only 17 percent of Tea Party backers.

It is entertaining to read and hear that people of the TEA party stripe are anti-government. E.J. Dionne and his ilk know this is a lie: anti-government types are called anarchists; and anarchists don't want limited government (as Dionne recognizes the TEA partiers as wanting); anarchists want no government. Immediately, we have cause to wonder about Dionne's honesty. Besides, there's no crime in being anti-government until Dionne proves otherwise, which he can't. Frankly, I don't think the man knows what a proof looks like.

Apparently, TEA partiers are easily dismissed because they tend to be -- tend to be, mind you -- "Republican, white, male, married and older than 45", as well as "more affluent and better educated than Americans as a whole". This set of facts justifies Dionne's characterization of the movement as "the populism of the privileged." What? Those who pay the bills complaining about having to do so? Is there no decency? Where do these people get off? Just pay your taxes and keep your mouth shut.

It's a difficult place to be for a TEA partier. They are more affluent and better educated than Americans as a whole, which means they are paying the taxes, or at least, by virtue of being more affluent and better educated, most of the taxes. But, precisely because -- and despite -- paying the bills, because they are relatively few, they are irrelevant. Of course, on the other hand, they do pay the bills. So this is not the populism of the privileged; it is the populism of the tax-payer. It is the populism of the American Revolution. Liberals have been correct to point out that the Boston Tea Party was about taxation without representation, whereas we have taxation with representation. In fact, however, the representation at issue was really representation for net tax payers, not net tax receivers. What we have right now, and Dionne substantiates the claim, is a situation in which tax receivers out-number tax-payers. Since majorities win, most of the representation in this country goes to those who receive tax monies. It is interesting to note, on that point, that neither the poll, nor Mr. Dionne, offer any details about the level of taxes paid by TEA partiers in comparison with Americans as a whole. That's very telling. Given that 47% of households pay no taxes and TEA partiers are such an insular minority, I think we know who is paying the taxes for those 47%.

Dionne also asserts a racial component. For TEA partiers race, not truth, is a concern. He writes: "Twenty-eight percent of all Americans -- and just 19 percent of those who are not Tea Party loyalists -- answered "too much." But among Tea Party supporters, the figure is 52 percent, almost three times the proportion of the rest of the country. A quarter of Tea Partiers say that the Obama administration's policies favor blacks over whites, compared with only 11 percent in the country as a whole."

And? And nothing. It's just wrong to believe that too much has been made of the problems of blacks. Perhaps. But is it true? Dionne is silent. This is, of course, because he "knows" that TEA partiers don't care if it's true; they're just racists. They don't believe this because it's true; they believe it because they don't like black folk.

Actually, I find it particularly easy to believe that too much has been made of the problems of blacks. When I compare the performance of blacks and, to a certain extent, hispanics, with that of, say, Asians, I simply cannot avoid thinking so. For all that is made of the problems of blacks, they simply are not doing as well as Asians. Why? Because blacks they think they're owed, indefinitely, one supposes. Asians are hungry, but blacks think they're owed. For my money, when someone with problems thinks he's owed then any attention he gets is too much. For E.J. Dionne, however, there is no excuse for this sort of thinking. Most Americans don't believe too much is made of the problems of blacks and, therefore, TEA partiers are of line, even racist, for thinking so -- even if it is true. If it is true that too much is made of the problems of blacks, then TEA parters are not racists just for thinking so. But truth doesn't matter to Dionne.

Perhaps the most entertaining part of Dionne's column was this part:

The poll found that while only 38 percent of all Americans said that "providing government benefits to poor people encourages them to remain poor," 73 percent of Tea Party partisans believed this. Among all Americans, 50 percent agreed that "the federal government should spend money to create jobs, even if it means increasing the budget deficit." Only 17 percent of Tea Party supporters took this view.

Think about this. What does it really tell us that 38 percent of all Americans believe providing government benefits to poor people encourages them to remain poor and that 73 percent of TEA partiers believe so? Here again we have a question regarding a matter of fact: Is it, or is it not the case, that providing government benefits to poor people encourages them to remain poor? And even if we don't not know certainly, are there reasons for believing it to be the case? I think so. The behavior of people presently receiving unemployment benefits suggest that it is the case.What does it really tell us that 50 percent of Americans agree that the federal government should spend money to create jobs, even if it means increasing the budget deficit while only 17 percent of Tea Party supporters do? For one thing, let's recall that, TEA partiers being more affluent and better educated, they are likely the ones whose money is going to be spent on this. Additionally, it may just be that, however counter-intuitive, government spending, while certainly capable of creating a myriad of jobs, may not create the best, longest-lasting jobs. After all, TEA partiers (better educated than most, remember) may be aware that recent scholarship seems to be showing that FDR's New Deal actually prolonged the Great Recession.

None of what I've written really refutes Dionne's argument, however. His argument is pragmatic. TEA partiers, whether simplistic anarchists or sophisticated minarchists, mean-spirited racists or thoughtful critics of race-related policies, represent a small minority. And this minority, for all its bluster, will be irrelevant to the next election and should be disregarded. Perhaps. On the other hand, those who were the most committed to the American Revolution accounted for only a third of the population. There is something to note, once again, about the sort of minority that TEA partiers represent: They are, according to Dionne, more affluent and better educated than the rest. That class is usually the one from whom the best leaders come. It takes initiative and commitment to become affluent (unless Dionne wishes to claim, and prove, that all this affluence was inherited). It takes initiative and commitment to become educated.

They may be a minority. A more relevant question would be: Are their beliefs correct? Even if not, let's say they are a minority. So what? It may be relevant to the next election, but the country wasn't lost in a day. It won't be regained in a day, either. As the latin proverb has it: "He who perseveres, conquers."

NOTE: I have never attended a TEA party.

I for one don't share Paul Rahe's optimism about this being conservatism's finest hour. For one thing my convenient alliance with conservatism (both neo- and paleo-) has become more tenuous than ever; so I'm not really looking to be optimistic in the first place. Better informed is Mark Steyn. Secondly, I don't think conservatism has The Young People. (Hyacinth Girl and Five Feet of Fury feel the same way.) I think too many young just have not been given the mental goods to critique leftist doctrines. Quite the contrary, in fact. Many of them, including some who are Christians, think in marxist categories and don't even realize it. I recently had two dialogs with one of them. Here's the first of two emended records of those dialogs with A Young People, Ivy League educated. Except in my case, names have been changed to protect privacy. I've also done some editing for purposes of enhancing readability and entertainment.

It began with someone I'll call TIMON saying: It seems there is a much smaller version of health care legislation which could perhaps be something Republicans could support.

STACIA: But would not Republicans have to reject it entirely in order to win in the next election?

TIMON: If indeed Obama does back off on as many things as a "much smaller" bill would entail, it will be victory enough for Republicans.

Of course, they still won't support it, because they have a fundamentally different philosophy of governance. Whether or not the smaller size, which is clearly an attempt to court the moderate Democrat vote, is enough to see health care's dismal prospects brighten is a big unknown.

JFS: Thinking in terms of "victory enough" is one of Republicans' problems. The left are not opponents; they are enemies domestic. Republicans act as if this is polo or something, perhaps football. These people mean war; for all their pathetic talk about caring for working people, they are marxist through and through. Forcing your enemy to take a few steps back, or to surrender this or that piece of turf is not a victory; it's nothing to celebrate. These people need to be destroyed, utterly, completely and to the utmost.

STACIA: And here I thought that our political system was to avoid continual wars over differences of opinion, at least within the country.

JFS: Would that be the political system which existed before, or after, the "civil" war? Or perhaps the political system which has existed since FDR's "reforms"?

Or, were you being sarcastic?

STACIA: No sarcasm. We haven't actually had any wars that I know of since the civil war, and considering the number of civil wars and/or revolutions other countries around the world have had since we broke free of Britain, I'd say it's working pretty well. Or, are you saying you want another civil war? Because that's sure what you sound like you're advocating, unless I'm misunderstanding you.

JFS: I don't think it's worked as well as you may think, not since the "civil" war. Indeed, the "civil" war is evidence to the contrary. But we digress, I think. It's not that I want a war. The war is already on; it just hasn't gotten bloody yet. Marxists are at war. It's not that I want one. It's that I recognize this for what it is. You apparently think it's polo interspersed with a few shouting matches. If it remains bloodless, fine by me--preferable, in fact.

STACIA: I'm relieved.

JFS: What is not fine by me, is people thinking they can effectively oppose marxism while looking for, and celebrating, things they can call "victory enough". Marxists, I can assure you, do not do that; their opponents certainly shouldn't. I was 15 years old when the so-called Reagan Revolution occurred. I've watched Republicans celebrate one "victory enough" after another--and lose more and more ground with each celebration. This isn't a debate in an Oxford senior commons room.

For the record: I don't hold the view which has it that talking civil war is a bad thing, in and of itself. If you are a fan of our secession from the British Empire, then you should be a fan of wars of secession if and when they are necessary. I know I am. However, I don't think it is necessary at present. And I always prefer to let statists fire the first shots.

STACIA: Maybe "the left" has a deep sinister plot; I'm not convinced of that. Nor am I convinced by tales of the deep sinister plot of the right. But it seems to me that being unwilling to compromise at all would halt anything happening in our government. Why are we paying all those congressmen if not to actually govern?

And I agree that drastic measures will probably eventually be necessary; we do seem to have wandered rather far from our original government. On the other hand, I'd rather not see more people die over politics.

JFS: They wouldn't be dying over politics. They'd be dying over freedom.

STACIA: Maybe. So far, our political system seems to give the closest thing to "bloodless revolutions" (in the form of the switch from Republican to Democrat and back again) so any further change may involve something stronger (more war). Especially since we have gotten to the point where people in general seem to both hate and fear the opposite party; that makes it almost inevitable that our system can't last much longer. I just hope much longer is 50 years and not 5, because I fear the collapse more than I fear the opposing party.

JFS: I don't believe in sinister plots myself. I know marxists and marxism because I'm a former marxist. For that reason I cannot avoid saying that you are ill-informed. Marxism isn't one of many options in economics. It simply cannot be compromised with, not because I, or anyone else, won't have it, but because it simply cannot be done. Marxism, is an entire worldview, which puts "history" in the place of God and seeks to be on its right side. There is a reason why our president keeps talking about being on the right side of "history". I couldn't any more compromise with a marxist than I could worship with a Unitarian. It's not that I don't like Unitarians; it simply is not logically possible for us to worship together. Your relegation of it all to politics, while elegant in its way, is naive. (Confirmed by your greater fear of an impending collapse than of marxists achieving all their goals.) It's not about hating and fearing the opposite party. It's about knowing and understanding others' intentions, and perhaps even believing that their achieving their goals is, however paradoxical, worse than the collapse you fear, especially since the collapse I have in mind leaves the states wholly intact, resulting only in a devolution to the states of powers improperly exercised by the federal government.

As to what we pay congressmen for, I would be quite willing to see them unemployed: my state capital is much closer than that monstrosity on the Potomac. Most of the business that affects my daily life should rightly be carried on closer to home.

STACIA: Clearly I don't understand enough about Marxism. What is it about their beliefs and the policies they are putting into action that makes it not compromise when they listen to you and incorporate your wishes? How can a belief system so effectively hijack a political system that they can't possibly lose?

JFS: Ask the Nazis.

STACIA: So Democrats are Nazis?

JFS: Well, perhaps only in the sense, as far as I'm concerned, that they are socialist. If you mean do I think Democrats are interested in genocide as a means of advancing their goals, then, no, I don't.

STACIA: Then what's your point?

JFS: It matters only that it has happened that belief systems have so hijacked things as to render it difficult for them to lose and has, I think, happened now. How it has happened is irrelevant to me. What is relevant is how to destroy them, utterly, completely and to the utmost, in order to get back what has been hijacked.

But even so, I'll give a brief answer to your other question, which was, "What is it about their beliefs and the policies they are putting into action that makes it not compromise when they listen to you and incorporate your wishes?" Right?

STACIA: Right.

JFS: Perhaps it will become clearer to you if you turn your attention from what they DO compromise upon to what they do NOT, ever, compromise upon. For example, they give up this or that detail in health care. But they do not surrender the basic proposition: That government should, and shall, be ever more responsible for providing ever more charity. These compromises are compromises upon specific applications of general (and marxist) principles, never upon the general principle. The general principle is "classlessness". The motivation behind health care reform is not to do something about health care costs. I know this because there is a fundamental question which no one, not even Republicans, ask, or answer: Why do these costs continue to rise, when the general tendency for all other prices, over time, is to fall?

The argument for health care has been: No one should do without health care simply because they cannot afford it. The underlying principle is "classlessness": there cannot be a class of individuals who can get the care they want, and another class who cannot. Compromise is on specific applications of the principle of classlessness, never on the principle itself. Note, that Republicans have gotten themselves into the corner of having accepted the proposition that no one should go without health care, whether he can afford it himself or not. It's about principles and their applications. Marxists never, ever compromise upon the principle. Never. Republicans have done, over and over.

So, now, to answer your other question: It's possible to so hijack a system that you can just about win no matter what, if your opponent hasn't figured out exactly which game you're playing.

STACIA: I wouldn't say I'm a Marxist but it sure does seem to me like there should be some things that everyone should have access to, and health care is actually one of them. If people who can't afford health care should suffer and die then why did anyone bother to send aid to Haiti, for example?

But I do see what you mean about not compromising on the essentials. It just seems like good politics to me, though. Would Republicans be compromising on their base beliefs if they were in power? Is that really unique to Marxism, or just to any well defined belief system?

JFS: First, everyone does have access to health care: It's the law. But even overlooking that, everyone could have access to health care -- or at least much more of it -- if it were entirely privatized. Like so many others, you, too, failed to answer the key question I noted above: Why do these costs continue to rise, when the general tendency for all other prices, over time, is to fall? Here's a hint: now that iPads are out, watch the prices for them in ensuing months. Then ask yourself why prices associated with health care don't behave in the same way.

Furthermore, inasmuch as any aid was sent to Haiti, I'm all for it, as long as it was private. Saying the government shouldn't do it doesn't mean it shouldn't be done at all. Accepting that there will be classes, including classes of individuals who can and others who cannot afford health care, is not the same as saying those who cannot should suffer and die. The issue is how, and by whom, suffering is properly alleviated.

Do as you please with your money. Believing that government shouldn't do it, is not the same as saying it shouldn't be done at all. Likewise, saying it should be done is not the same as saying government must do it. So, it's not that people who can't afford health care should suffer and die. It's that others shouldn't be robbed so that you can do with the stolen money what you think others should do with it.

With respect to compromise, it is truly only logically possible between people who share the same general principles, and even then only upon the application of those principles. It cannot logically be done between people who do not share the same general principles, or basic beliefs. For example, belief in God is a properly basic belief. Compromise between atheists and theists is not possible. Compromise between Christians and Jews on the person, natures and work of Jesus of Nazareth is not possible. Compromise between Christians on the one hand and Jews and Muslims on the other, on the matter of the Trinity is not possible. It's logic.

On the matter of Republicans compromising on their basic beliefs, the fact of the matter is that, with few exceptions, most Republicans really do accept the same philosophical materialism that Democrats accept. But since Democrats are the most consistently materialist in the application of that philosophy, they will ultimate win all that they want. It's only a matter of time, unless the materialist philosophy is rejected. (Alexandr Solzhenitsyn explained this in his 1978 Harvard address, "A World Split Apart", if I recall correctly.)

STACIA: Something I don't understand is what do you mean exactly when you talk about privatizing health care? I know what it means to have the government take over completely. But except for getting rid of guaranteed health care for the very old and young I don't know how much more private it can get. Is the argument that if the government just didn't meddle at all then everyone would have affordable health care?

Also you say that if I want to help people I should do it myself instead of trying to get the government to do it. But I can barely pay my own health care bills since the private insurance companies have decided that they don't have to actually pay to treat all health problems, just the ones they want to. And I as an individual have no bargaining power to get them to lower prices or cover people who they decide are too great a risk.

I don't want the government to take over everything. On the other hand, it sure does seem like we've been busy proving that privatizing everything with no outside controls does NOT work. Wall street happily fritters away their pretty numbers however they want, and insurance companies happily profit from people without apparently providing any actual health services whatsoever. And because we can only afford employer funded health insurance (in most cases), insurance companies can also refuse to pay for preventative health care knowing that the odds are against them having to pay for the bigger bill later on, because the insured will probably have been forced to move to a other company before then.

JFS: There's a flippant gloss over myriads of details. I'd be happy to respond point by point to each element, but I can't. So, I'll have to limit myself to the more important elements.

First, the major problem with paying for health care is that "insurance" is a poor model. Insurance itself is, in fact (to offer part of the answer to the question I've asked), part of the cause of the price increase. There is nothing to fix about health insurance in order to correct the rising prices. Insurance is one of the things driving up the prices.

Privatization will, however paradoxical to you, begin to push prices down (along with doing away with "insurance" as a way of paying the bills). I prefer privatization firstly because it means freedom, not a solution to all my problems. Of course privatization looks bad; it is made to look that way. Every problem or pretended problem is a prima facie case against it. By your logic, since there are problems with all private endeavors, we should make everything public. But then, there are problems with the public sector, also. It is odd that those problems are not arguments for privatization in the way that problems with the private sector constitute arguments against privatization.

As for your inability to help others because you can barely pay your own bills, this really is a bad reason for the policies you support. The idea that your inability to discharge your duty to the poor justifies the use of force in having others discharge that duty for you really concerns me. What do you and your fellow travelers do for an encore? Mug a rich guy coming out of fancy restaurant to give to a homeless guy you just bumped into but didn't have any money to give? It's preposterous.

Also, your mis-charactization of insurance companies as "happily profiting from people without apparently providing any actual health services" just won't do, either. This is a gross generalization from a handful of instances. By contrast I have a close friend who would tell you that his insurance company paid over 600 thousand dollars to save his daughter's life just six years ago. Presently, another insurance company is paying the bills for the treatment of his infant nephew's lymphoma. I know another whose son received a liver transplant, and is being treated for cystic fibrosis -- bills paid by the insurance company. You have permitted yourself to be swayed by a handful of sob stories. Besides, insurance companies are required, by law, to spend something like 60% of premiums on paying bills. My employer is also being treated for lymphoma; and his insurance is paying his bills. Not only are you grossly mis-informed, you, and others who employ the method of reasoning from a relative handful of bad cases to the generalization you have just proffered, commit the fallacy of hasty generalization.

STACIA: Well, that was rather a tangent on an issue that's close to my heart. I think the point you make about people being unable to compromise on any given topic unless there is a certain base commonality is obviously true in case of religion. But in politics it paints a rather hopeless picture. How could any political system work, ever, as long as every citizen doesn't share common beliefs? Were the European countries right to kick people out based on religion? Are we going to have to segregate the states based on both religion and politics and make the federal government into the "american union"? (More similar to pre civil war years, and not a bad idea, if people hadn't moved everywhere almost regardless of the state laws because they didn't matter that much.)

JFS: All properly basic beliefs are religious in nature. The distinction you make between "politics" and "religion", allowing for compromise in the former but not in the latter is a false one. Marxist basic beliefs, if they are properly basic, are no less religious than a Christian's basic beliefs. The problem with the system is that it tries to do too much. That was the problem in Europe: the more the system is tasked, the more agreement there must be on basic beliefs, requiring that dissidents be driven out. The solution is to have less done by government, requiring less agreement because people who do agree on basic beliefs can act privately in concert with one another.

STACIA: Now, that is an interesting position. But I guess I still don't understand what you mean by privatization. I'm really not trying to be argumentative. I agree that insurance is a very bad model for health care, especially since with every "thing" that we insure, we can get a new one: car, house, even stuff inside the house. Whereas obviously no one is offering to give you your health back because they can't make any promises. But every time I hear privatization, I understand it to mean getting the government out and letting the market work. Is this wrong? If not, how does this inevitably lead to health insurance going the way of the dinosaur?

As to my differentiation between religion and politics, I wasn't trying to say that Marxism isn't a religion. I guess what I was thinking is that religions supply the principles but politics is about applications. And the application of different principles can be similar on occasion, unless of course if one or more religions is particular. (If we had to legislate who would get into heaven Christians would clearly throw a cog in the works.) But ideally, people follow their principles and elect officials that have, if not the same principles exactly, then at least the same ideas for applying their principles. Hence I can look at health care, as a Christian, and think that my religion says I'm supposed to take care of the downtrodden, and think if maybe health care reform is needed, possibly with the government regulating a few things at least, maybe with a competing government option to keep the insurers "honest". And that might look similar to what Marxists want to do, but does that make me a Marxist? (or maybe just horribly mistaken about the best way to follow my principles. Also an option.)

JFS: It makes you mistaken about the best way to follow your principles because it entails your feeling groovy about using force to compel others to discharge what is really your duty to the poor.

STACIA: Well, I'll have to think some about that.

JFS: You do that. Meanwhile I identified four main themes in what you said even before all that. I'll try to respond to reply to each.

I mean precisely what you say when I use the term 'privatization': getting the government out and letting the market work. Letting the market work means that the only people who really need to be involved in any exchange are buyers of good and services and sellers of goods and services. We are taught to fear this because supposedly letting buyers and sellers negotiate means that sellers will always exploit buyers. And whenever we suggest that the government's hands in the market drives prices up, we get laughed at. But it costs money, over and above production and marketing, to abide by regulations. It ought to be intuitive that more amd more regulation means more and more price increases as organizations must hire more and more people just to remain apprized of regulations, and spend more and more money on things unrelated to producing and selling their goods and services. And then there are the fines for failure (intentional or not) to meet regulatory standards. But never mind all that, which is just over-view. In terms of health care, I can list four specifics which clarify what I mean by privatization:

1. Eliminate all licensing requirements for medical schools, hospitals, pharmacies, and medical doctors and other health care personnel. Licensing is a way for those already in a profession to limit entrance by others into the profession. Entry into the health professions is costly. Robbing practicioners of their "gate-keeping" privilege would almost instantly increase the number of practitioners and, thereby, competition among practicioners. Increasing the supply of anything, including the number of people practicing a profession, reduces the value of it, which results in falling prices, as more practicioners must "chase" fewer dollars. Furthermore, a greater variety of health care services would appear on the market, since buyers would be free to decide for themselves what "health care" means. For some, it may mean visiting a voodoo witch doctor. For others it may continue to mean seeing a traditionally trained physician (who knows he must compete in a market blown wide open because he has been deprived of his gate-keeping power). There would be no such thing as the "unlawful" practice of medicine.

2. Eliminate all government restrictions on the production and sale of pharmaceutical products and medical devices. This means no more Food and Drug Administration, which presently hinders innovation and increases costs. Toyota demonstrates that while the bottom line may occasionally result in a loss of quality, ultimately no company realizes long-term benefits from harming its customers. The same goes for pharmaceutical companies, who spend billions in research and development and then may wait years before they can begin to try to make their R&D money back. This problem is further compounded by the fact that the patent could expire before the FDA approves the drug in the first place! As C.S. Lewis observed: First we castrate the gelding then order it to be fruitful. (Frankly, I think we should do away with patents. Intellectual property is problematic and amounts
to a government-supported monopoly. But I digress.)

3. Deregulate the health insurance industry. Private enterprise can offer insurance against events over whose outcome the insured possesses no control. One cannot insure oneself against suicide or bankruptcy, for example, because it is in one's own hands to bring these events about. (At the risk of seeming self-promotion, I posted to my blog sometime ago why insurance is a poor method of paying bills, here.)

4. Eliminate all subsidies to the sick or unhealthy. Subsidies create more of whatever is being subsidized. Subsidies for the ill and diseased breed illness and disease, and promote carelessness, indigence, and dependency. If we eliminate them, we would strengthen the will to live healthy lives and to work for a living.

Moving to your second theme, it is premature, at this point, to talk of a government option keeping insurance companies honest. Presently, they are not exactly permitted to keep each other honest. Many states have laws which prevent out-of-state insurers from selling insurance within their borders. To stifle private competition, and to then talk of giving competition by a government option is a sick joke. You have the spectacle of insurers, who cannot even compete with each other in every possible market, having to compete with an entity with unlimited resources -- not to mention the power to tax and regulate its competitors. To talk about the failure of market forces when such forces are not permitted to work is just silly.

To your third theme, you may compromise with marxists at your leisure, and it doesn't make you a marxist. But if you don't mind my saying so, it does make you a bit naive. The marxist isn't playing the same game you are. You are attempting to discharge your Christian duty to the poor, trying to solve a particular problem: health care. Your game is a practical one. He is not trying to solve this or that problem. He is pursuing the "right" side of history. His game is theoretical. Marxism has an entirely different conception of freedom itself; and it is irreconcilable with the notion of freedom embodied in the Declaration of Independence and the Constitution -- irreconcilable.

Finally, I think we should question the notion that we can discharge our duty to the poor by means of government programs. I do not find that God has authorized us to employ the government to take peoples' money for our charitable purposes.

STACIA: Those four things do seem like they would lower prices, but many times at the expense of safety.

JFS: Than accept the fact that part of the high cost you complain of is caused by the pursuit of your vision of safety. And deal with it.

STACIA: Perhaps. But completely eliminating licensing for doctors would make it incredibly hard to make sure you've found a good one. Unless you're talking about making it optional.

JFS: You would find a good doctor the same way you find anything else: ask a friend, "Who do you see?" Also, not licensing is not the same as not certifying. But certification is a private matter. Mechanics are certified, not licensed (well, not in all jurisdictions); and they are certified by private, professional organizations. The same should happen with physicians. Then it would be a matter of the actual performance of these certified professionals. In the case of malpractice, the certifying organization would, and should, also be a party to a suit. When was the last time a state was sued because a physician it licensed was guilty of malpractice? Unlike The State, a private certification organization wouldn't be able to deny permission to be sued.

STACIA: Well I still don't see how this is going to put insurance companies out of business

JFS: Insurance companies don't need to be put out of business. They need real competition. But in terms of health care it alleviates the need for insurance as a way to pay bills. With lower prices, the probability of which you've already acknowledged, there is very little for health insurance to do except pay expenses related to catastrophic illness and does it more efficiently by enlarging the risk pool -- the way insurance works for all the other things we insure.

STACIA: If the FDA is taken out of the picture, who pays for the studies that determine whether a medication is actually helping or hurting a person? And what is to stop it becoming like the illegal drug industry where I have no idea what is in the medication I buy? (I'm sure you want to make all drugs legal and I'm not against you there, I'm just saying that I don't think legalizing all drugs will make them definitely more safe.)

JFS:The pharmaceuticals themselves, or possibly their insurance companies, will pay for studies that determine whether a medication is actually helping or hurting a person. It's a simple matter of managing liability. Pharmaceuticals are no different than anyone else. They must cover themselves against loss to due product failures. Insurance companies assess risk and write policies on the basis of their risk assessment. In order to assess risk, they will have to require testing of the products.

STACIA: You have more faith in the market than I.

JFS: I have no faith in the market. I just understand how it works, especially the desire for profits. Insurance is about assessing risk (actuarials) and then spreading the risk. An insurance company might pay to have a determination made as to the viability of its client's products. They have a vested interest in testing, a better interest than the FDA, since it will cost them if the product is faulty and they end up paying claims. This is a better motivator than the FDA has. This is called loss prevention, or limiting liability. And, as a former business manager myself, I can tell you it is quite the motivator. However well the FDA does or does not work, it still gets our money. And who checks up on the FDA? Also, even if insurance were removed from the picture, companies have a vested interest in assuring, for themselves, that their products actually help. Again, despite propaganda to the contrary, there is no real profit in killing your customers. (Short term, perhaps; but most companies lose those short-term profits, when they are found out -- as Toyota is now discovering. Jack-in-the-Box restaurants still have not fully recovered from losses due to deaths by tainted meat in the early 1990s.) FDA testing and approval isn't about anyone's safety, it is just another form of "gate-keeping". Who can better afford, all other things being equal, the money it takes not just to develop drugs but to wait for the FDA to approve them, Big Pharma, or Little Pharma? On your view, apparently, before the government came along, it was open season on the pharmaceutical customer.

Illegal drugs are unsafe precisely because they are illegal: you have no legal recourse if illegal drugs do you any harm. (For one thing, who is going to test an illegal drug?) In order to get your day in court, you have first to confess to using an illegal substance. This is not the case with legal drugs. By presenting a drug to the buying public, a company implicitly warrants its product, hence the need for liability insurance. This leaves it open to legal action in the case of harm. This is why every now and then companies get sued, or issue recalls. There is no profit in killing your customers. You want to prevent harm. Fine. But that is part of the reason for the costs. You can't have it both ways, favoring policies which drive up costs, and prices, and at the same time complaining that costs and prices are high.

STACIA: Maybe you're right about drugs. I'm still skeptical. But what about people with deadly food allergies? Without the government regulating ingredient lists, no one could be sure what to eat.

JFS: Are you kidding me? No one would know what to eat?

STACIA: No, I'm serious.

JFS: What the hell do you think people did before they formed governments to tell them what to eat?

STACIA: They died.

JFS: I have bad news: Even with the government to tell you what to eat, you're going to die. Accept it.

STACIA: But I'll live longer than if the government didn't tell me what to eat.

JFS: May you live forever. Anyway, you labor under the notion that, apart from government, companies would see a profit in killing their customers. But, again, the best motivator for labeling is not government, but loss prevention, the need -- the market-driven need -- to limit liability. By virtue of insuring food manufacturers, insurance companies have a vested interest in requiring their clients to label their products. But even if not, companies would still have an interest in labeling for the same reason: limitation of liability. If it is known that people with allergies to peanuts can die, and a company offers no warning that its product contains peanuts, it stands to lose a great deal in court, where a jury, applying the "reasonable man" standard would no doubt find for the plaintiff, deciding that a reasonable man, exercising due diligence would warn customers of potentially fatal products. (On the other hand, a jury might find for the defendant, deciding that someone with a deadly allergy should take responsibility for his own life and find out for himself what is in the product. But I doubt that.) You seem to believe that apart from government requirements, or "goodness", companies would see, and realize, great long-term profit in killing their customers with impunity. Ironically, it is government which can kill, and rob, its customers with impunity.

STACIA: I agree that God did not mandate us to use the government to solve these problems, and I wish I saw another way to make things better. I am not convinced that taking away subsidies will magically help people get jobs and be productive (plenty of very smart, useful people have been out of work for a long time during this recession) and it certainly won't help them live healthier when the healthy food is more expensive than the cheap food and the poorest people also have the least time to cook or exercise.

Has any country ever de-regulated health care like this? Or never regulated it all in the first place? Because as you can probably tell the whole idea scares me. Maybe it would scare me less if it didn't look like what we're going to get anyway if the government completely collapses somehow.

JFS: I'll respond to those in turn.

Having granted that God did not mandate us to use government to solve these problems, it logically doesn't matter whether you see another way to make things better. Once we acknowledge the absence of a mandate, we must find other ways of making things better. But then, of course, I'm only assuming with you, for the moment, that we even have a mandate to make things better. We may not have. But even so, it is one thing for us to discharge our duties to the poor and down-trodden; it is quite another to make our neighbors help us as well, especially if we are doing so by use of government force.

If something has to be subsidized in order for people to be employed, then there must not be enough demand for the object of the subsidy. Some very smart, useful people may be unemployed because they had themselves trained and educated to do work for which there is no longer sufficient demand. And again, you favor policies which increase the cost, and the price, of food, then you complain about the cost, and price, of food.

If we're all standing around waiting for some country to be the first to deregulate health care, then I guess it won't get done. Too bad Isabella and Ferdinand didn't ask, rhetorically, "Has any other country ever financed a round-the-world exploratory fleet?" Who knows how much better off native americans would be. More importantly, here is an historical fact of life: Every civilization collapses, so stop worrying and living in fear. Begin today to wean yourself from a government which will inevitably collapse -- whether in your time, or your great-granchildrens' time. When it does so, you, or your great-granchildren, being dependent upon it, will be unable to cope. Why would you want to hitch the wagon of your life to that which is doomed?

STACIA: I think it's interesting to see how we look at the same things and see something so different. Almost certainly I trust the government too much. On the other hand I think you trust the market too much.

JFS: I don't trust the market at all. What I trust above all else, except God, is my own skill and precision. I don't need to trust the market. But I trust the government even less than I trust the market, because against it I have no negotiating power: they have more guns.

STACIA: I was especially interested in your examples. There may be no long-term profit in killing your customers, but there's even less in admitting it. For example, Toyota actually had an internal meeting in which savings from not recalling cars were praised. And then the government got involved. I don't remember the Jack-in-the-Box incident very well, but I suspect it was a government agency that tracked down where all those sick people were coming from. And how often do companies admit that something is wrong with their food before the FDA forces a recall?

You say it's good for business to tell people when allergens are in food. If so, why did the government have to mandate allergen labelling on food? Why do I have to call almost every company (or find someone who has) to find out if their product has barley or rye in it (which ingredients make at least 1% of the population very very sick)?

And if the pharmaceutical companies just want to make us all better, and if allergen labeling makes so much business sense, why is there not a single pharmaceutical company that has allergen labelling on their products? Wheat is one of the top 8 allergens and they are not required to list if it was used as a binder. So they don't.

I'm not all for the government option. In a lot of cases what I really want is the government watching out for us, making sure that in their search for the bottom line, companies don't hurt or kill us (or overcharge us because the wealthy can afford it and the poor don't matter anyway, toward their bottom line).

Is there some coherent middle point between "businesses will always do the right thing" and "the government should just (try to) do everything important"?

JFS: I think it's not that we look at the same things and see something different. We both see the same things. The difference is a key preposition. You say we look at, and see a difference. I think we look for different things. You are looking for something to trust; I'm not. I'm looking for people with whom I can engage in mutual satisfaction of wants without aggressing against people or their property.

You may trust the government too much; I'm sure I think you do: you are talking about trusting the use of force. But you are incorrect to think that I trust The Market too much. There is nothing for me to trust: Unlike The Government, The Market doesn't really exist. The Market has no central, controlling intelligence; it is simply the spontaneously-ordered, sum total of activities performed by free people, Buyers and Sellers of goods and services. I do not trust a sum total of activities. What I trust, when it comes to The Market, is that the other players are also desirous of satisfying their wants, at the lowest possible cost to themselves. I respect this, because I'm doing the same; and so are you.

On the other hand, The Government does exist; therefore, you have something to trust.

Toyota was going to have problems whether the government got involved, or not. Your argument seems to be that had the government not got involved Toyota would have continued making profits killing its customers. They would not have done. The fact is exactly as I said: There is no real, long term profit in killing your customers. And it also remains true, as I said, Toyota is discovering that. You haven't refuted my assertion. At best, you've shown only that Toyota, which used to know better, no longer does. Had the government not got involved, insurance companies would have done. As claims pile up, insurance companies begin investigating. Their investigations would have led to the conclusion that Toyota was liable for damages. This happens everyday, without help from The Government.

It may have been a government agency that tracked the deaths back to Jack-In-The-Box. But again, an insurance company could have done even better. Loss prevention may not sound very high-minded, but it is quite the motivator, a motivator government agencies don't have. Funny you should have mentioned the FDA previously. At the time of the Jack-In-The-Box E. coli disaster, the FDA required hamburgers be cooked to an internal temperature of 140 degrees F, not hot enough to kill E. coli, but still the temperature at which Jack-In-The-Box cooked its hamburgers. A government agency may have found Jack-In-The-Box, but it was the FDA which told Jack-In-The-Box how hot to cook burgers. Jack-In-The-Box almost went bankrupt. The FDA is still in business. (You'll recall I said something about only governments being able to kill their customers with impunity.)

The fact that something is good doesn't mean people do it. It is good not to smoke, yet people smoke. And this, despite, a government-required warning on cigarette packs. You're claiming counterfactual knowledge: If the government had not mandated such labels, they would never have come about. Saying labels are good, and that businesses can recognize greater, long-term satisfaction of wants (especially if they start being sued for damages) is not the same as saying they will do so in accordance with your or my time preferences. Your rule of thumb seems to be that if they don't do it by the time you would like them to do they never will do and it's time to employ force in getting what you want.

I never said pharmaceutical companies just want to make us all better. They want what we all want: to satisfy wants, to increase utility, to make profits. What I said was that it is in their long-term interest to do such and such. And it is, just from a loss prevention standpoint. Their recognition of that is another matter.

You may want the government watching out for us, trying to make sure that companies don't hurt and kill us. But let's be clear that what you want is a police state. You want a government not which will punish wrong-doers, but which will prevent wrong-doing in the first place. But the government cannot keep us from being harmed; and it only causes more trouble by trying to do. It can really only respond after harm has occurred. You have already tacitly acknowledged the role The Government plays in increasing costs, and therefore prices. Yet, you continue to want Prevention rather than Justice.

Your notion that "over-charging" is done by companies precisely so that the poor cannot buy them proceeds in ignorance of how selling price is determined by Sellers. Briefly, in order to set an appropriate price, a Seller has to able to predict the prices he himself will pay in the future for the goods he himself must purchase in order to produce in the future. Price is never about Today; it's always about Tomorrow. The selling price is based on estimates of future costs per unit. (Some boutique type operations may set prices based on a perception of what their intended clientele are willing to pay. But that is a different matter.) There is a market clearing price for all goods and services. If health care could cost less, it would, not because I trust The Market, but because it's a law of economics.

Since I don't believe "business will always do the right thing" or "the government should...do everything important" I don't need to find some coherent middle point between the two. "Important" is a matter of subjective judgment. We don't all value the same things, or to the same extent; so the government will first dictate what is "important" by forcing one person's, or group's, subjective notions of "important" upon the rest of us. Let the government take action after a harm has been alleged. That should keep it busy enough.

The dialog ended abruptly as we had schedules to keep. But see what I mean? With thinking like that, (which I suspect is at epidemic proportions) who can be optimistic? This lady, an Ivy League grad, won't know what to eat if the government doesn't tell her! But, wait. There was another.