Free Markets, Free People

Congress

The myth of “collective action”

As we launch ourselves further into an era of “collective action” as Obama called it in his 2nd Inaugural address, we can be sure that reality won’t stop the left from remaining true believers in its ultimate power and good and demanding it be forced on us all.  But what does that really mean?

Let’s hark back to Mancur Olson’s critique of collective action for a moment and point out a little ground truth about it, shall we?

Olson’s critique of collective action is complicated, and it is made less accessible by an ungainly prose style. But the gist is that large numbers of people do not naturally band together to secure common interests. In fact, the larger the group, the less likely it is to act in a truly collective manner.

As Olson explained, the interests that unite large groups are necessarily of the lowest-common-denominator variety. Therefore the concrete benefits of collective action to any individual are usually small compared with the costs — in time, effort and money — of participation. “Free-riding” is a constant threat — as the difficulties of collecting union dues illustrates.

By contrast, small groups are good at collective action. It costs less to organize a few people around a narrow, but intensely felt, shared concern. For each member, the potential benefits of joint action are more likely to outweigh the costs, whether or not success comes at the larger society’s expense.

Now, to me, that’s common sense. The bigger the group the more unlikely it will find common ground than a smaller group. So urging a nation of 300 million to a common effort or collective action? Yeah, not going to happen – at least in the areas Obama is likely to want to make such an effort.

That’s not to say that collective action won’t happen. It happens everyday in DC as Charles Lane points out:

Hence, the housing lobby, the farm lobby and all the special-interest groups that swarm Congress. Hence, too, the conspicuous absence of an effective lobby on behalf of all taxpayers or, for that matter, all poor people.

If there is any “collective action” that will take place in DC, besides those noted, it will be among the politicians who band together (and break apart) depending on what they’re after this week or next.  Their constituency?  Not that big of a concern to most.  Those that reside inside the beltway are more likely on their radar than those who voted to put them in office.

So when Obama called on Americans to once again act “as one nation, and one people,” he was, at best, stating an aspiration.

No he’s not – he’s mouthing platitudes to calm the masses, put the opposition on the defensive and set himself up to get his way. And this is how that will work:

Olson’s assessment of reality, both historical and contemporary, is less lofty but more accurate: “There will be no countries that attain symmetrical organization of all groups with a common interest and thereby attain optimal outcomes through comprehensive bargaining.”

Nope. It will be the group/party that is able to appeal the best to the masses and thereby garner more  of a veneer of support for their agenda than can the other party/group, whether or not the ultimate goal of the action is good for the country or the majority or not. Whether it really benefits the country as a whole usually has little bearing on the effort. And the minority? Well, they’re simply left hanging in the wind.

Their call for “collective action” is a cover, a means of draping the usual politics in high sounding rhetoric. The reality of the situation is that what he calls “collective action” is simply a new code phrase for continued class warfare and redistribution of income. The purpose of proposing “collective action” is to enable him and his cronies to label anyone who opposes them and their actions as divisive, unpatriotic and just about any other name they can think of necessary to demonize and dismiss them.

Meanwhile, the “collective” dismantling of this once great country will continue apace.

~McQ

And now the “rich” will pay…

I hate to say “I told you so”, but it isn’t just the rich who will be paying increased taxes. And what should be clear to anyone with the I Q of a turnip, is that this will cost people their jobs.

The compromise called for taxes to rise to 39.6% from 35% on personal income above $400,000. In a 2011 study, the Treasury Department found that raising taxes on incomes over $500,000 would affect roughly 750,000 small businesses organized as S-Corps, partnerships and other small entities.

Of course, you remember the Democrats claiming that this wouldn’t affect small businesses. Well, that was a flat out lie. But then we live in an era of lies which, if there political apparently, we’re willing to overlook. While most of us are. I just had to be one of those who isn’t.   Not that Democrats are the only political liars, but they seem to be the most prolific and the most blatant. Especially when it comes to budget, deficit, and financial matters. They are the quintessential “snake oil” salesman.

And they have sold us are huge bottle of snake oil.

Couple these tax increases with the Obamacare taxes that kicked in on the 1st, and you have two reasons for 750,000 small businesses not to hire. And you can bet none of them will go over 50 employees, and some may even reduce staff to get under that number.

These are your “rich”. They happen to be the “rich” would generate jobs, or what have, if they hadn’t been hit by two new taxes this year.

Your government at work.

~McQ

Fiscal cliff: Politicians play “chicken” with your lives and livelyhood

Because we’re served by the worst political class ever:

President Obama’slead negotiator in the “fiscal cliff” talks said the administration is “absolutely” willing to allow the package of deep automatic spending cuts and across-the-board tax hikes to take effect Jan. 1, unless Republicans drop their opposition to higher income tax rates on the wealthy.

Treasury Secretary Timothy Geithner said in an interview with CNBC that both sides are “making a little bit of progress” toward a deal to avert the “cliff” but remain stuck on Obama’s desired rate increase for the top U.S. income-earners.

“There’s no prospect for an agreement that doesn’t involve those rates going up on the top two percent of the wealthiest,” Geithner said.

Apparently there is no way to raise the desired revenue, at least according to Obama/Geithner, that “doesn’t involve those rates going up on the top 2%”.  No way.

Oh, wait …

What we said was give us $1.2 trillion in additional revenues, which could be accomplished without hiking taxes — tax rates, but could simply be accomplished by eliminating loopholes, eliminating some deductions and engaging in a tax reform process that could have lowered rates generally while broadening the base.

Say, wasn’t that President Obama in July of 2011 at a press conference?  Why yes it was.  So there is a way, but he and apparently his “negotiator” refuse to pursue it (btw, no I”m not fooled by the illusion that this isn’t just as much a tax hike as what they’re proposing)?  It that what is happening?

Why yes, yes it is.  So there is another way to do this, apparently.  Unless our President was telling a tall one about what he’d be willing to do in July?  Yeah, I know, perish the thought.  Lie to us?  Unthinkable.

Instead according to Turbo Tax Timmy, they’d “absolutely” take us over the cliff, because, you know, raising taxes on the “rich” is now the only acceptable position.  You and your life?  You’re a mere pawn for these poppinjays.  They’re fine with playing with your life and livelihood to score a political win.   They have no problem holding your life and property ransom and using your future to force their desired resolution.  But if we go over the cliff, screw you.

Meanwhile, in the House, Speaker Boehner continues to look for a comfortable place to lie down and surrender.

In the Senate the GOP actually tried to bring the President’s proposal to a vote and Majority Leader Reid denied it.  Because it was, per Reid, a “stunt”.

This is all a “stunt”.    A miserable stunt perpetrated by a miserable group of people who have no concept of leadership or service to their country but are long on ego and party.

It is the price of always voting for the “lesser of two evils”.

Screw ‘em.

~McQ

Saxby Chambliss: Poster boy for what’s wrong in DC

Here is a good example of what is wrong with politics today – this time from the right:

Sen. Saxby Chambliss (R-Ga.) on Saturday defended his decision to break with conservative activist Grover Norquist’s anti-tax pledge, telling constituents he would not be “dictated to by anybody in Washington.”

“I think that you sent me to Washington to think for myself. And I want to vote the way you want me to vote,” Chambliss said to a group of local constituents at a Cobb County Republican party event, according to the Atlanta Journal-Constitution. “I don’t want to be dictated to by anybody in Washington, as to how I’m going to vote on anything.”

You see, Chambliss doesn’t seem to get the basic point: he made a pledge.  HE made a pledge.  Not someone else – him.  He didn’t have his arm twisted behind his back when he made the pledge.  He did so voluntarily.  The dirty little secret, however, is he didn’t make the pledge out of principle, he made the pledge because it was politically helpful and expedient to do so at the time.

Now he wants to back out of his pledge.  It is no longer expedient or helpful politically.   He, like our President, is trying to blame the predicament he finds himself in – i.e. breaking a voluntary pledge – on someone else.  It’s their fault he’s in this predicament.  And by gosh he won’t “be dictated to by anybody”.

Well he hasn’t been dictated to by anyone.  Again,  he voluntarily took a pledge back when it was politically helpful and popular to do so.  Now he wants to bail on it.  I don’t know about you, but when I pledge something, I give my unbreakable word I’ll do what I pledge to do.  I don’t enter into them lightly.  And I do everything in my power to live up to the pledge.

It’s about honor.

But apparently that’s a concept that is passe in today’s political world.

Go ahead Mr. Chambliss.  Break your pledge.  But remember what happened when a certain president bailed on his no new taxes pledge?

I can only hope I’ll be part of the lesson teaching when your time for re-election comes.  Then, by Georgia, you’ll be “dictated too” by the people of this state.  And you’ll be looking for new work.

~McQ

The Senate filibuster fight gins up – hypocrites to the left of us, hypocrites to the right … (Update)

Another example of why you can’t ever take anything a politician says at face value or believe them when they say they stand on ‘principle’.

For instance, consider the looming Senate fight over the filibuster.

Once a cause championed by a few Democratic senators, changing the filibuster has become a top priority for Senate Democrats who’ve repeatedly complained about Republicans blocking legislation from even being debated on the Senate floor. Reid noted on Monday that in his nearly six years as majority leader, he has faced 386 Republican-led filibusters in the chamber.

“We can’t continue like this,” a visibly frustrated Reid Monday said in a response to McConnell.

Of course the “visibly frustrated” Senate Majority Leader, Democrat Harry Reid, was one of those huge champions of the filibuster when he was a minority leader and then the new Majority Leader because he’d used it many times in his long political career:

SEN. HARRY REID (D-NV):“As majority leader, I intend to run the Senate with respect for the rules and for the minority rights the rules protect. The Senate was not established to be efficient. Sometimes the rules get in the way of efficiency. The Senate was established to make sure that minorities are protected. Majorities can always protect themselves, but minorities cannot. That is what the Senate is all about.” (Sen. Reid, Congressional Record, S.11591, 12/8/06)

REID: “For more than 200 years, the rules of the Senate have protected the American people, and rightfully so. The need to muster 60 votes in order to terminate Senate debate naturally frustrates the majority and oftentimes the minority. I am sure it will frustrate me when I assume the office of majority leader in a few weeks. But I recognize this requirement is a tool that serves the long-term interest of the Senate and the American people and our country.” (Sen. Reid, Congressional Record, S.11591, 12/8/06)

REID: “I say on this floor that I love so much that I believe in the Golden Rule. I am going to treat my Republican colleagues the way that I expect to be treated. There is no ‘I’ve got you,’ no get even. I am going to do everything I can to preserve the traditions and rules of this institution that I love.” (Sen. Reid, Congressional Record, S.11591, 12/8/06)

REID:“…one of the most sacred rules of the Senate – the filibuster… It is a unique privilege that serves to aid small states from being trampled by the desires of larger states. Indeed, I view the use of the filibuster as a shield, rather than a sword. Invoked to protect rights, not to suppress them.” (Sen. Reid, Congressional Record, S.434, 1/5/95)

Yeah, well that was then and this is now. The “world has changed” as Republican Senator Saxby Chambliss said this week as he sought to duck out on his pledge of years past not to vote on raising taxes.

You have to love the Reid line about the Senate not being established to be efficient – see the budget.  Going on 4 years without one.  But you see, getting a budget passed would require Reid and the Democrats to compromise with the Republicans in order to achieve that 60 vote margin and, well, he’s just not willing to accomodate the minority despite his stirring words to the contrary about protecting the rights of the Senate minority, words, by the way, he’s likely to dismiss now.

And, as you hear the fight gin up, don’t forget the past words of other Democrats who will now call the GOP minority obstructionists and tell us all the filibuster is bad and has no place in the Senate.  For instance, if we hear the President opining, it’s alway nice to remember his words on the subject for the brief period he was a Senator and take his words, on both sides of the issue, with a grain of salt:

SEN. BARACK OBAMA (D-IL): “The American people want less partisanship in this town, but everyone in this Chamber knows that if the majority chooses to end the filibuster, if they choose to change the rules and put an end to democratic debate, then the fighting, the bitterness, and the gridlock will only get worse.” (Sen. Obama, Congressional Record, S.3512, 4/13/05)

OBAMA: “[T]he American people sent us here to be their voice… What they do not expect is for one party, be it Republican or Democrat, to change the rules in the middle of the game so they can make all the decisions while the other party is told to sit down and keep quiet.” (Sen. Obama, Congressional Record, S.3512, 4/13/05)

And, of course, that’s precisely what the Democrats and Obama want the Senate GOP to do – sit down and be quiet.

On any subject, you know little Chucky Schumer has an opinion:

SEN. CHUCK SCHUMER (D-NY) On Any Threat To The Filibuster: “The basic makeup of our Senate is at stake. The checks and balances that Americans prize are at stake. The idea of bipartisanship, where you have to come together and can’t just ram everything through because you have a narrow majority, is at stake. The very things we treasure and love about this grand republic are at stake.” (Sen. Schumer, Congressional Record, S.4801, 5/10/05)

SCHUMER: “We are on the precipice of a crisis, a constitutional crisis. The checks and balances which have been at the core of this republic are about to be evaporated by the nuclear option. The checks and balances which say that if you get 51% of the vote you don’t get your way 100% of the time. It is amazing it’s almost a temper tantrum… They want their way every single time, and they will change the rules, break the rules, misread the Constitution so they will get their way.” (Sen. Schumer, Congressional Record, S.5208, 5/16/05)

Yes, it was a “Constitutional crisis” in ’05. Now? Not so much.  Speaking of temper tantrums, funny how one’s words can come back to haunt them, not that they care.

Finally, we have dandy Dick Durbin who also thinks it is time to change the filibuster rules, although in ’05, he had a completely different take on the subject:

SEN. RICHARD DURBIN (D-IL): “Those who would attack and destroy the institution of the filibuster are attacking the very force within the Senate that creates compromise and bipartisanship.” (Sen. Durbin, Congressional Record, S.3763, 4/15/05)

DURBIN: The filibuster is “[one] of the most treasured and cherished traditions of the United States Senate.” “Many of us in the Senate feel that this agreement tonight means that some of the most treasured and cherished traditions of the United States Senate will be preserved, will not be attacked and will not be destroyed.” (Sen. Durbin, “Statement Of Sen. Dick Durbin Regarding The Agreement On Judicial Nominations In The Senate,” Press Release, 5/23/05)

It’s not so treasured any more, is it?  At least not by Senate Democrats who were so enamored with it in ’05.

The point of course is obvious.  Don’t ever believe anything any politician of either side says on any subject – ever. They’ll bail on it in a New York minute if they see political advantage in doing so.  Pledges and “traditions” mean nothing to them.

If faith in government is built on trust, and trust is built on political leaders promising to do things and then keeping their word, trust in this government died quite a while ago.

And that’s sort of the crux of the problem isn’t it?  We are represented by an amoral political class who doesn’t hold their word to mean anything and reserve the right to change their “principles” on the fly in an attempt to gain temporary political advantage.

We’re served by the worst political class I can remember.

The problem is we can’t blame them – we elected them, and, like Harry Reid and Saxby Chambliss, we’ve kept them in office for decades.

Unfortunately, when you don’t pay attention and you just tune in when it is convenient for you, you get exactly what you deserve in DC.  This is just another in a long line of examples of that truth.

UPDATE: Apparently the WSJ and I are on the same wave-length today:

One of the more amazing post-election spectacles is the media celebration of Republicans who say they’re willing to repudiate their pledge against raising taxes. So the same folks who like to denounce politicians because they can’t be trusted are now praising politicians who openly admit they can’t be trusted.

[...]

If Republicans in Congress want to repudiate the pledge, they are free to do so at any time. They could even quote Edmund Burke’s line that a democratic representative owes his electors his best judgment, not a slavish fealty to majority opinion. But that would mean saying they didn’t mean it when they signed the pledge. So they are now busy pretending that Mr. Norquist is a modern Merlin who conned them into signing the pledge and must be eliminated before they can do the “right thing” and raise taxes.

[...]

Republican voters know that elections have consequences and that Mitt Romney’s defeat means there will be policy defeats too. But they will give the House and Senate GOP credit if it fights for its principles and drives a hard bargain.  The voters are also smart enough to know that Republicans who focus on Mr. Norquist are part of the problem.

But apparently, for some, it’s too much to ask our politicians to stand by their word.  Apparently, principles are only important when these people say they’re important.  At other times, they’re very malleable or can be thrown to the side and rationalized away.  And in this case, the rationalization apparently says that political necessity now requires that a crumb be thrown to “public opinion”.

With other people’s money, of course.

~McQ

Obama’s “tax negotiations” are no such thing

Obama has strained to make everyone believe he is open to “negotiations” on the tax rates in dispute that are leading us inexorably to this “fiscal cliff” everyone is talking about.

The word “negotiate” implies compromise.  You give a little, he gives a little, you reach a deal neither really likes but both can live with.

He has no intention of giving anything.  Why should he?  He can’t run for a third term.  He has nothing to lose if he stands his ground.  Nope, the only one’s who have anything to lose in this one are the usual deer-in-the-headlights suspects.  And, of course, Obama has someone else to blame:

By taking an absolutist line, he’s basically gambling that Republicans will be more reasonable than he is and will blink. But if they don’t blink and we go over the cliff, from his point of view so what? Mr. Obama then has an excuse to blame Republicans if there’s another recession. Meanwhile, he pockets the higher tax rates that take effect on January 1 anyway, and he can then negotiate a budget deal next year without having to make any tax concessions.

He pleases his left wing for which higher tax rates are a secular religion, while pinning one more defeat on Republicans. Lest you think this is a conservative fantasy, it’s more or less the tax cliff strategy that Democratic Senator Patty Murray of Washington advocated on Sunday on ABC’s “This Week” and that labor leaders lobbied for at the White House on Tuesday.

So, as we wander toward Taxmageddon, fear not, either way it goes, Obama figures he wins.  So why try?

Indeed.

Why negotiate?

~McQ

Look West, Young Ukraine

“Freedom is the right to question and change the established way of doing things. It is the continuous revolution of the marketplace. It is the understanding that allows to recognize shortcomings and seek solutions.”

Ronald Reagan — Address to students at Moscow State University, May 31, 1988

Remember the Orange Revolution? Believe it or not, it’s still pretty darned important.

We’re knee-deep in a presidential election. The European Union is witnessing a slow-motion meltdown. Syria is quickly becoming a bloody nightmare, while North Africa seethes under the vicissitudes of the Arab Spring. Iran marches closer to nuclear arms, and perhaps war with Israel. And Sino-Japanese relations threaten to simmer out of control. So why care about the Ukraine?

The simple answer is because Ukrainians have had a taste of freedom, and liked it, and we should encourage that journey towards liberalization to continue. We have an interest in such development – via free and fair elections, open markets and greater legal protections in its reformed court system – because this is how individuals become personally invested in the growth of the nation, and thus how liberty spreads. As President Reagan emphasized in 1981, “only when individuals are given a personal stake in deciding economic policies and benefiting from their success — only then can societies remain economically alive, dynamic, progressive, and free.” The more societies like that in the world, and especially in the Eurasian region, the better. And this is exactly where Ukraine is poised to go.

Unfortunately, we may be taking steps to discourage further liberalization in the form of a Senate resolution essentially demanding that Ukraine act exactly like a western democracy immediately or face consequences. The reality is that the former soviet republic of nearly 50 million souls is at a crossroads. Will they continue to move towards alignment with the West, or turn back towards familiar haunts in Moscow?

To be sure, the current government has expressed great interest in being integrated into the European Union, going so far as to ink an Association Agreement in March:

The Association Agreement creates a framework for cooperation and stipulates establishing closer economic, cultural, and social ties between the signees. Moreover, Brussels officials expect the document to promote the rule of law, democracy, and human rights in Ukraine.

This first step to entering the EU (which still needs to be ratified) requires a concrete demonstration from Ukraine that it is moving towards “an independent judicial system, free and fair elections and constitutional reform.”

These are exactly the sorts of reforms that serve to expand liberty. Indeed, as Ukraine has liberalized over the past two decades since independence, it has since fits and starts of great economic growth and expanded prosperity. For example, between 2001 and 2008, the economy expanded at an average rate of 7.5%, and despite a severe downturn in 2009, it has continued to grow with exports increasing by 30% in 2010 alone. Indeed, Ukraine is ranked by CNBC.com as the second best country for long-term growth in the world, right behind the Philippines. Ukraine has also begun to institute judicial reforms that promise to train better judges, hold them accountable, and strengthen the fairness of the system that has long been burdened with rampant corruption and cronyism. And for the first time ever, outside election observers will be allowed to monitor the parliamentary elections this month.

Yet, these necessary and welcome reforms lie on a fragile bed.

Ukraine has been moving toward a market economy since it declared independence in 1991. The way has been extremely difficult and bumpy. Twenty years after the beginning of market reforms, Ukraine is still struggling to build a strong, transparent, and sustainable economic system that can provide the Ukrainian people with economic prosperity and social security.

Moving towards greater integration with the West, via the EU, will strengthen that bed. Demanding that Ukraine act as a long-established western democracy right now, today, only serves to further weaken it :

Economics 101 defines the problem of scarcity as unlimited wants with limited resources, and, to paraphrase George Shultz, the laws of economics apply as much in foreign policy as they do at home. While it may be rhetorically satisfying and politically convenient for Americans to assert an equal commitment to every priority in Ukraine, ranging from democratic development to removal of weapons-grade uranium, the reality is that some priorities are achievable, at an acceptable cost and within a realistic timeframe, while others are not.

If we cannot advance all of our values and all of our interests all of the time, then we are left with the necessity of ranking our national priorities. While it is clearly important that Ukraine put an end to politically motivated prosecutions, it bears asking whether resources and attention from Washington that have been focused exclusively on this issue are crowding out other compelling U.S. national interests.

The Orange Revolution was not a battle or a war. It was, and is, a movement. Our national interests will always be aligned with fostering greater liberty, which is what the Orange Revolution movement is all about. Instead of throwing up roadblocks in the Senate, we should be helping build road signs that lead towards further peace, prosperity and freedom.

When government chooses not to enforce the law of the land

As you might imagine, it has consequences, and, given this situation, it is very hard to pretend the consequences are unintended.  Why? Because even a 5th grader could have predicted this outcome:

In a startling allegation, the president of the union representing Immigration and Customs Enforcement officers claimed illegal immigrants are "taking advantage" of a new directive allowing some undocumented residents who came to the U.S. as children to stay in the country. Union boss Chris Crane said the policy ends up allowing illegal immigrants to avoid detention without any proof — particularly so-called "dreamers," or those illegal immigrants who would benefit under the "DREAM Act" proposal, which Congress has not passed but the administration  has partially implemented.

"Prosecutorial discretion for dreamers is solely based on the individual’s claims. Our orders are if an alien says they went to high school, then let them go," he said at a press conference with GOP senators. "Officers have been told that there is no burden for the alien to prove anything. … At this point we don’t even know why DHS has criteria at all, as there is no requirement or burden to prove anything on the part of the alien.

"We believe that significant numbers of people who are not dreamers are taking advantage of this practice to avoid arrest," he said.

Whether or not you agree with the immigration laws of the country, executive fiat is not the method the Constitution outlines as legitimate redress.  And, unsurprisingly, those illegals who would benefit, even if not actually eligible, will exploit an opportunity such executive fiat presents.

According to Chris Crane, that’s precisely what is happening. 

The allegations from the union were expressed in unusually blunt terms Thursday.

George McCubbin, president of the National Border Patrol Council union, said the Department of Homeland Security has made it impossible for agents to do their jobs.  

Crane said it’s led to disorganization and "confusion" at ICE.

Not that ICE hasn’t had its share of confusion in the past, but now, it is even more difficult to do their jobs. 

Crane cited one case in which, he said, an immigrant facing criminal charges was let go under the policy. Further, he complained that officers are "under threat of losing their jobs" if they defy the policy.

Anyone who thinks this is how our system should work needs to re-examine the Constitution.  One branch creates the laws (legislative) and one branch enforces the laws (executive).  If you don’t like a law or want it changed or repealed then it’s back to the legislative branch.  And no, inaction by the legislative branch doesn’t mean the executive branch can arbitrarily ignore the law or decide it’s not going to enforce it.  Not and still be a Constitutional republic.

I’m on record saying our current immigration system sucks.  There’s no reason in this day of cyber advances that we couldn’t have the slickest and quickest system on earth.  And yes, I hold Congress directly responsible for the inactivity that has led to the mess at the border. 

But that doesn’t give the executive license to ignore laws or selectively enforce them.   Kings do that, not presidents, and we have no kings.  We just have a president who thinks he’s one.

~McQ

Twitter: @McQandO

Crop cronyism’s destructive results

We talk about it.  Politicians condemn it.  Nothing ever happens to change it though.

This year’s agriculture bill again redistributes your money to rent seekers:

Combine a Midwestern drought with pointless ethanol mandates, and the supplies of corn inevitably dwindle, driving prices sky high. Politicians like Sen. Claire McCaskill, Missouri Democrat, are citing the crop crisis as an excuse to ram through a near-$1 trillion farm bill. While a bit of that cash might find its way to a small farmer, the bulk of the loot will be transferred to individuals who are anything but poor. Like the bank bailouts and TARP, the farm bill illustrates the capture of the legislative process by special interests.

The last farm bill in 2008 was the focus of $173.5 million in lobbying expenditure, according to a report released Tuesday by Food & Water Watch. This is all money spent on what the Mercatus Center’s Matthew Mitchell calls “unproductive entrepreneurship” where people are organizing and expending their talent to become rent seekers, and the end result is wealth redistribution, not wealth creation. Real entrepreneurship innovates in ways that are socially useful. Cronyism diverts resources — both money and talent — into a system that rewards privileges to favored groups. In the case of the 2008 farm bill, recipients of subsidies of $30,000 or more had an average household income of $210,000.

Mr. Mitchell argues that “government-granted privilege is an extraordinarily destructive force” because it not only results in a misallocation of resources and slower growth, it undermines civil society and the legitimacy of government by providing a rich soil for corruption.”

She’s absolutely right.  And, of course, when you mess with markets, like has been done with the corn market and mandated ethanol, the expected results occur when something unanticipated, like a drought, happens:

Corn and soybeans soared to record highs on Thursday as the worsening drought in the U.S. farm belt stirred fears of a food crisis, with prices coming off peaks after investors cashed out of the biggest grains rally since 2008.

Corn prices crossed into uncharted territory above $8 per bushel — about three-and-a-half times the average price 10 years ago of $2.28. Soybeans punched past $17 for the first time — also three-and-a-half times the 2002 average.

Analysts said that while forecasts for continued dry weather are expected to sustain the rally, corn prices could be vulnerable to any move by the government to lower the amount of corn-based ethanol blenders are required to mix with gasoline.

Notice what entity is mentioned in the last paragraph?  Yes, government. A key player in the increase in corn prices (yes, understood, they’d be higher with the drought alone, but government’s ethanol mandate has driven them even higher yet).

Meanwhile, as mentioned above, we’re subsidizing agriculture to the tune of $1 trillion dollars of your money (in cash or in debt to be paid back in the future).  Meanwhile, you’ll be paying more for corn based products at the grocery store as well.

Nita Ghei lays out the bottom line problem with this sort of cronyism and rent seeking:

Government privileges come in many forms, direct and indirect. It might be a monopoly, such as the one granted to utilities like Pepco. Regulations such as licensing can be used to limit entry to a particular field to the benefit of existing businesses. Lobbying and the revolving door in Washington create what economists call “regulatory capture,” which is what happens when existing firms use regulatory agencies to benefit themselves. Tax breaks, loan guarantees and subsidies are the most direct signs of a government’s favor. Bailouts of big banks under TARP, and Fannie Mae and Freddie Mac when the housing bubble burst, are the most recent examples of direct action.

Extending each of these privileges reduces America’s economic competitiveness. A monopoly protected by the government has little incentive to provide good service. The greater the availability of privileges, the greater is the incentive to indulge in rent seeking, which diverts resources from truly productive activities. In the long run, the result of anti-competitive policies is less innovation, lower growth and a smaller pie to share.

The greatest scourge to the honest Midwest farmer is not unfavorable weather, pestilence or disease. Far worse for them is the plague of politicians who create an artificial market in which only those with influence can truly compete. Defeating the budget-busting 2012 farm bill is the best chance at a good harvest.

The chances of that happening, however, are slim to none.  Regulatory capture is as common now as government debt and unemployment.  It is a systemic problem that rewards rent seekers and the well connected to the detriment of innovators and competition.  It is the antithesis of capitalism.

Unless we have the will to stop this sort of cronyism, we’re on a short road to failure.  This is another, in a long line of government programs, that are unsustainable, destructive and just flat something government shouldn’t be involved in.

But my guess is, this time next year, we’ll still be talking about it, politicians will still be condemning it and nothing will change except the higher national debt number.

~McQ

Twitter: @McQandO

Obama and taxes

President Obama is on his newest attempt to change the subject and find something to take to the people that might interest them and distract from his abysmal economic performance.  It’s taxes.  Specifically, he’s decided to make an issue of the automatic tax increases that will take effect in January and claim he does not want to see taxes increase on anyone but those nasty rich who need to “pay their fair share”.  Or, back to class warfare.

A) He likes to refer to these as the “Bush tax cuts”.  In fact, they’re the current tax rate.  Have been for years.  What he wants to do is see a tax increase on the rich, but no one else.  I’m not sure how else one characterizes that but “class warfare”, especially given the percentage of total taxes that top income group pays already.

B) Republicans are saying no tax increases on anyone.  Democrats like to characterize that as protecting the rich.  I like to characterize it as an attempt to address the real problem – out of control government spending.

C) The nasty “rich” Obama wants to tax also include almost a million small businesses.  That’s one of the primary reasons, in this weakening economy, that Republicans are right not to agree to any tax increases.  It is both stupid and economically suicidal.  But then you have to know about economics and the business world to understand that.

D) Democrats had two years of a complete monopoly on government to get this done and didn’t.  It’s not the Republicans who have prevented anything.  It is total incompetence on the Democratic side of the aisle.  And, as Obama’s favorite pastor likes to say, “those chickens are coming home to roost”.

E) Finally, Barack Obama has already raised taxes on the middle class despite his statement in a speech yesterday claiming he had no desire to raise middle class taxes.

The tax is called the mandate in ObamaCare.  It goes like this:

 

Taxmandate

 

75% of the mandate tax falls on the middle class.    That is a middle class tax hike in anyone’s book.

So when he claims he has no desire to raise the taxes on the middle class, that may be true … now.  Because, in fact, he’s already done it.

~McQ

Twitter: @McQandO