Free Markets, Free People


Public distrust of government has hit an all time high

Yes, I know … what a surprise:

The public’s trust in the federal government has dropped to an all-time low, according to a new national survey.

A CNN/ORC International Poll released Wednesday morning indicates that only 15 percent of Americans say they trust the government in Washington to do what’s right just about always or most of the time. Last September that figure was at 25 percent. Seventy-seven percent of people questioned say they trust the federal government only some of the time, and an additional eight percent volunteer that they never trust the government to do what’s right.
In the past five years the number who say they trust the government "always" or "most of the time" was usually in the low-to-mid 20’s. Before the recession hit that number was usually in the low-to-mid 30’s, and slightly more than a decade ago, it was in the high 30’s or occasionally just over 40 percent.

"The previous all-time low was 17 percent, set in the summer of 1994," says CNN Polling Director Keating Holland. "Before the Watergate scandal, a majority of Americans said they trusted the government always or most of the time, but since 1974 that has happened only during a brief period in 2001 immediately after the 9/11 terrorism attacks."

I’d say this is a well earned distrust.  Over the years, the Federal Government has become more and more intrusive, and we’ve seen our lives impacted more each year by that intrusiveness.   We’ve seen the militarization of the police.   We’ve seen bureaucratic creep into areas that most believe the government has no business.  Government is borrowing and spending at an unsupportable rate, thereby binding unborn generations to debt they had no hand in incurring.  And we’ve seen an unwillingness on the part of government and politicians to modify their behavior and address the problems listed.

Government has always been a “dangerous servant” especially when it has become an arrogant servant.  In fact, what happens, as history teaches us, is government usually tries (and succeeds) to become the master most of the time and uses coercion and violence to have its way. 

Part of the problem is so many people are invested in the idea that government is a panacea for all the perceived ills of human nature and that if done properly, utopia is just around the corner.


It is this sort of thinking that led to the disasters of the USSR, Nazi Germany and many other examples.   What Frederich Hayek called the “fatal conceit”.

What we’ve seen develop in our government over the decades is a tendency toward central planning.  In the name of social justice, more and more of our economy has been brought under government control by various means.  And, as usual, we’re headed in a very predictable direction because of it.  James Piereson explains with some recent examples:

Their efforts to create "green" jobs, stimulate the economy, redistribute income and manage costs in the health care system are all examples of the fatal conceit run amok. A large and modern economy, made up of hundreds of millions of participants who make spending and investment decisions by the minute, is far too complex to allow for centralized coordination. Such efforts, Hayek warned, invariably make a difficult situation worse.

And that’s precisely our experience which of course explains some of the distrust of government.  The “fatal conceit” was something the founders of this country tried to avoid.  Unfortunately it’s very difficult to weed out or prevent from growing (or perhaps metastasizing is a better word) within government regardless of its initial structure, no matter how well thought out.  But we’ve seen the results of the change so many times we ought to be able to recognize it and we obviously should try to avoid it:

[A]ny effort to organize society around a common economic plan will inevitably lead to a loss of freedom and a return of the common man to a condition of servitude and dependence. Hayek reminded his readers that Hitler was not just a nationalist but a socialist as well, and that his brutal tyranny developed out of a malignant synthesis of these ideas. Market liberalism, in contrast to both ideologies, follows no overall plan but allows progress to emerge out of the coordinating actions of free individuals.

Yet here we are pursuing the former to the detriment of the latter.   And by the way don’t mistake crony capitalism for free market capitalism.  Capitalism only demands the private ownership of the means of production.  Whether or not the markets are free isn’t a prerequisite.  Hence the descriptors that differentiate the type.  What we mostly suffer here is crony capitalism as demonstrated by the green agenda and Solyndra, et. al.

But to the main point that ties it all together, again from Piereson:

Hayek wrote the book partly in response to John Maynard Keynes, the British economist who had argued a few years earlier that government could lead the economy out of depression through deficit spending. Keynes believed that this would stimulate consumer demand and private investment.

Hayek was skeptical of Keynes’ theory on economic grounds, but even more so on political grounds. Efforts by the state to manage the economy will certainly fail, he argued, but they will not be abandoned. Every failure would instead lead to more ambitious and extravagant policies to reach the elusive goals, until more and more aspects of the economy are brought under government control. This, Hayek argued, was "the road to serfdom."

Keynes was convinced that war and depression ended all hopes that the liberal order of the 19th century could be revived. His theory represented an effort to place the market system on new intellectual foundations. But Hayek was equally convinced that the tradition of Adam Smith and "The Federalist" had to be renewed as the basis for a restoration of liberty and progress. The intellectual opposition between Keynes and Hayek still underpins many of our current debates.

Keynes may have exercised the greater influence in political and academic circles over the second half of the 20th century, but the tide is turning today.

The problem, of course, is that today’s politician, at least the one’s holding power, still cling to the Keynesian notion that government can positively effect the economy in the face of overwhelming evidence and history that it cannot. Add to that the “social justice” crowd who want to redistribute income and you have a fatal mix who will kill the goose that has been laying the golden eggs.  And because of those beliefs held by each group that even the public has seen through, we continue down a disastrous road that has kindled great discontent and distrust in government.

Most Americans intuitively understand that what is being done by government isn’t what needs to be done, but is instead driven by a mistaken and bankrupt ideology that has spent itself disastrously in numerous scenarios around the world.   There was never any vision among our founders of a behemoth like the government we have today.  Never will you find in any of their writings any inkling that government should be involved in things like health care, energy or even education.  They successfully managed to avoid the fatal conceit, only to see subsequent generations fall into bad habits led by mistaken beliefs that have lead to our present and critical situation.

The problem, of course, is how do we back out of this?  It has taken us decades to get to this point and unfortunately, at least to now, politicians have learned that what got us to this point worked to get them elected.  The incentive for them, at least, to back us out of this isn’t there yet.

And then there are the true believers among them that still actually believe that utopia is possible if only we have more government and a more powerful government.

If the liberal elite wonder what is at the base of the Tea Party movement – a movement this polls suggests is only the tip of the iceberg – they need only reflect on where we started and where we are.   And then review how we did in between those times.

An honest appraisal would find that our greatest progress took place in eras in which government played more of a roll of night watchman than Santa Claus.   When the attempts to use government as the great social equalizer began so did our decline.  It was small in the beginning – almost imperceptible – but in hindsight, certainly recognizable if you bothered to look.  And in the name of social equality, government grew exponentially and with that exponential growth came an equally exponential expansion of power.

And here we are. 

The simple fact of the matter is this isn’t working.  Government is out of control, broken and pulling us all under.  The question is how do we fix it … or is that even possible?


Twitter: @McQandO

Economic Statistics for 29 Sep 11

Today’s economic statistical releases:

The Commerce Department’s final estimate for second quarter GDP was revised upwards to 1.3% annualized, compared to the previous estimate of 1.0%. It’s a mediocre revision to an unimpressive number.

A big 37,000 decline in initial jobless claims last week pushed the total down to 391,000. Claims seem to have been inflated by Hurricane Irene’s aftermath in prior weeks.

The National Association of Realtors reported that the pending home sales index fell 1.2 percent to 88.6. Credit and appraisal problems are on the rise, which indicates future weakness, as well.

Corporate profits in the second quarter were revised upwards to an annualized $1.470 trillion, up 0.3% on a year-over-year basis.

The Bloomberg Consumer Comfort Index dropped to -53 in the period ending Sep 25. That’s the second-lowest reading ever for the index. Confidence by homeowners and part-time workers fell to the lowest level since 1990.

The Kansas City Fed’s Manufacturing Index improved slightly to 6 in September from 3 in August. Readings above 0 generally indicate expansion in activity.

Dale Franks
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Economic Statistics for 28 Sep 11

Today’s economic statistical releases:

Last week, mortgage rates dropped, and the Fed announced a switch to longer term treasuries. This sparked a rush of refinancing, as well as new mortgage applications. The Mortgage Bankers Association reports that mortgage applications rose by 9.3%, led by a 11.2% rise in re-fis, and a 2.1% increase in purchases.

Durable goods order fell –0.1% last month, both overall and ex-transportation,  though they were still 12.3% higher than last year.

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Obama: Likeable but incompetent?

One of the enduring truths about national political elections in the US is you can’t win with just the support of your party base.  There just aren’t enough of them. Roughly 30% on the left consider themselves to be Democrats and about the same on the right call themselves Republicans.  Even if a candidate got every vote, he or she is going to be shy of the majority needed to win the office.   So another enduring truth is you must win the independent vote – that big, supposedly moderate 40% in the middle – to win an election.  That’s why you hear people talk about politicians “running to the middle”. 

So when you’re looking at a presidential race or polling, the most interesting demographic are the “independents”, because where ever they’re going or whatever they’re saying is likely to determine the election.

Since early last year, that demographic has been increasingly deserting the Democrats in general and Barack Obama specifically.  To put it succinctly, they’re not at all happy with the condition of the country, it’s direction or his policies even while many of them find Obama to still be likeable.

In 2008, Obama carried independents by a decisive 52% to 44% margin and took 30 states. In 2004, John Kerry narrowly won independents over George Bush 49% to 48%, reversing Bush’s 47% to 45% win against Al Gore in 2000.

In only nine of the last 32 months has the IBD/TIPP Presidential Leadership index been above 50, and the positive months were all in 2009. Since January 2010, the index has stayed in the negative territory (below 50). The averages were 57.5, 44.2 and 44.6 for 2009, 2010 and 2011, respectively.

Independents also believe the country is headed in the wrong direction. Only 19% of them are satisfied with America’s direction and 80% are not satisfied.

But will likeable be enough in 2012?  Not likely.

An overwhelming share of independents (74%) like Obama personally, and 59% believe he has the vision to be president. A similar share (58%) also believe the president cares about the needs of people like them, and 59% think he’s worked hard to bring about change compared with 40% who say that he has mostly talked about it.

On the other hand, 62% disapprove of his policies, and by 63% to 35% they think he lacks the experience to be an effective president. A majority of independents (51%) do not believe that he is someone they would be proud to have as president; only 42% would be proud.

Reality is a stark reminder that performance, not rhetoric  is what counts.  And likeability will only carry you so far. Good intentions are laudable but only if they lead to solid results.  Also of note is most people are willing to give a politician a chance to accomplish things and are even appreciative of hard work and that the politician “cares”.  But the bottom line is that only results get someone re-elected.  To this point, Obama simply hasn’t provided those.  Independents may like him for the most part, but his job performance has not impressed the majority:

Only 15% give Obama an A or B for his handling of the economy, 16% give him good grades for managing the federal budget, and just 12% see him favorably for creating jobs and economic growth.

These low grades more than cancel out Obama’s non-economic successes, including the killing of Osama bin Laden. Nearly eight in 10 (79%) independents say his handling of the economy weighs more in their minds than getting the al-Qaida leader and mastermind of 9/11 (11%).

Funny and ironic … in his run for the presidency, his lack of a resume was probably his biggest strength.  What was to criticize?  What was there to assess?  He sounded great.

Now, on the other side of winning the presidency, he has to finally run on his record.   And, given this poll’s results, it isn’t a good one.


Twitter: @McQandO

Economic Statistics for 27 Sep 11

Today’s economic statistical releases:

ICSC Goldman reports retail sales slowed for the 2nd consecutive week, down 0.2% for the week, with the year-on-year rate down to 2.7%. Meanwhile, Redbook reports slightly below trend retail sales growth of 4.2%.

The S&P Case-Shiller Home Price Index held steady for the last week, with no change in prices from last month, on a seasonally-adjusted basis. Year-over-year, however, the price index is down -4.1%.

The State Street Investor Confidence Index, despite a rough couple of weeks, shows a boost in confidence to 89.9 from August’s revised 88.1.

The Richmond Fed Manufacturing Index shows the third consecutive drop to -6 from last month’s -10, as manufacturing in the Richmond Fed’s district continues to contract.

The Consumer Confidence Index rose to 45.4 from 44.5 last month. Despite this, consumers report deteriorating current conditions, which bodes ill for the September employment report. On the other hand, the 6-month outlook rose, while inflation expectations fell, bringing the overall index higher.

Dale Franks
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Economic Statistics for 26 Sep 11

Today’s economic statistical releases:

New home sales fell to a 295,000 annual rate, compared to 302,00 in July. This is a nine-month low for new home sales. Of course, without any serious mortgage lending by banks, we can expect home sales to remain depressed.

The Dallas Fed’s Texas Manufacturing Outlook Survey index of general business conditions slipped to -14.4 from last month’s -11.4. The production index rose, however, from 1.1 to 5.9 as factory activity increased.

The Chicago Fed National Activity index fell to minus 0.43 in August from plus 0.02 in July. Employment-related indicators fell to -0.08, and consumption & housing slipped to -0.35.

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Economic Statistics for 22 Sep 11

Today’s economic statistical releases:

Well, this really isn’t a statistic, as such, but the Dow slipped -300+ at the open, on a pessimistic economic outlook for the US and EU, weak data for the euro zone,  and a negative outlook on the US economy from the Federal Reserve. Why the markets are reacting as if any of this is a surprise is beyond me.

Initial claims for unemployment fell -9,000, to a still-unpleasantly-high 423,000. Meanwhile, last weeks claims were revised upward by another 4,000.

The Bloomberg Consumer Comfort Index dropped to –52.1,  the worst since the recession "ended" in June, 2009. Note the scare quotes around the word "ended".

The Index of Leading Indicators rose 0.3% last month, though mainly on money supply gains as investors bailed out and went to cash. Which actually isn’t a good sign.

The FHFA home price index in July rose 0.8%. That’s the fourth month in a row the index has risen, so not everything is a complete disaster. We take our good news where we can find it, I guess.

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Slight majority now blame Obama for the economy

For the first time, says Gallup, a slight majority of Americans polled put the blame for the shape of the economy on President Obama:

Gallup found a substantially wider gap in public perceptions of how much responsibility Bush and Obama each bore for the economy when it first asked the question in July 2009, the sixth month of Obama’s presidency. That narrowed by March 2010, caused mainly by a jump in the percentage blaming Obama a great deal or moderate amount, and has since changed relatively little. However, the results from a new Sept. 15-18 USA Today/Gallup poll are the first showing a majority of Americans, 53%, assigning significant blame to Obama. Forty-seven percent still say he is "not much" (27%) or "not at all" (20%) to blame.

Key demographic:

Independents blame both presidents about equally: 60% blame Obama a great deal or a moderate amount, and 67% say this about Bush. In 2009, the figures were 37% and 81%, respectively.

Obama has been given ownership, whether he wants it or not.

Here’s the key problem for Barack Obama: George Bush isn’t running for president.


Twitter: @McQandO

Economic statistics for 21 Sep 11

Today’s economic statistical releases:

The market was shocked into stupefaction at an Existing Home Sales release that was stronger than expected. Sales rose by 7.7% to an annual rate of 5.03 million. On a year-over-year basis, sales were up 18.6 %.

The Mortgage Bankers Association reports that purchase applications fell –4.7%, while re-fi apps rose by 2.2%, resulting in a composite index up by 0.6%.

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Is everyone feeling miserable?

The “Misery Index” was invented by economist Arthur Koon, an adviser to President Lyndon Johnson in the 1960’s.  It’s a fairly simple formula really.  Inflation plus the unemployment rate equals the misery index.  Of course since it was first published, we’ve changed the way we compute unemployment so when you see that number today, you have to remember it is lower because of that change.

But still, relatively speaking, it is a good indicator of our economic condition.  Today, the misery index stands at 12.87.  For the past 4 presidents, the index has ranged from a low of 6.05 under Bill Clinton to the high you see today.  Interestingly one term president George H.W. Bush had high index numbers during his presidency (low 10.9, high 11.10).  And we know how that turned out.

Barack Obama’s numbers are the highest of the 4. 

I noticed that some pundits are trying to compare Obama’s approval ratings at this point in his presidency to those of Ronald Reagan.  The misery index gives you an idea of why that won’t fly.

Obama’s index numbers started at 8.92 in 2009.  Reagan had an index of 17.97 his first year in office.  But the second year numbers tell the tale.  In his second year (1982) the index dropped by 2 plus points to 15.87.  And the third year numbers are actually a tick lower than Obama’s at 12.82.  But notice the trend.  It’s down.  Markedly down.

Obama’s is going the other way – from 8.92 to 12.87.  So while you can certainly say they had similar numbers, what you can’t draw from those numbers is the probability of similar results when election time rolls around.  One was trending markedly down and the other is doing the same on the up side.   The only thing that has saved Obama from a much higher misery index is the fact that inflation has been successfully dampened by the Fed to this point.  If that ever breaks loose, we may see an Carter era Misery Index.

Here’s another comparison that isn’t favorable for the incumbent.  The new poverty index numbers are in and they’re not good.  A sample:

Americans below the poverty line in 2010: 46.2 million

Official U.S. poverty rate in 2007, before the recession: 12.5 percent

Poverty rate in 2009: 14.3 percent

Poverty rate in 2010: 15.1 percent

Last time the poverty level was this high: 1993

Another index trending upward that isn’t good news for an incumbent.

So when you see the left trying to put a brave face on the numbers and making comparisons, all you need to remember to understand they’re simply whistling past the graveyard is that at the same point in each presidency, Reagan’s numbers were getting a lot better while Obama’s continue to get a lot worse.  If you’re going to make a comparison to a recent President, Jimmy Carter or even George H.W. Bush are better comparisons – not Ronald Reagan. 

And the key to remember about Bush and Carter is this salient description – “one term president”.


Twitter: @McQandO