Freedom and Liberty
I‘ve spoken before about the political brilliance that running on nebulous catch phrases can accrue for the politician. Lay them out there, let the voting public decide what they mean to each of them and then ride the wave to elected office.
Obama did precisely that. And many who are marginally on the right, were fooled by that. Those who voted for him projected their “hope” for “change” on the blank screen he provided. But, as you’ll see in this example, the reality of who Barack Obama really is may be clearing up, and it appears it is a huge disappointment to many of his more conservative/libertarian supporters.
Silicon Valley, where I live, is home to both political liberals and conservatives–more liberals of late, but not by a huge margin. The lopsidedness occurs on the freedom-statist divide. An overwhelming majority of Valley residents would place themselves on the freedom side and against the state. This should not surprise anyone. Silicon Valley is a land of immigrants, both foreign and from other American states. What draws people to Silicon Valley is the freedom to go out and commit industrial revolution and make the future.
Thus it was always odd that Silicon Valley voted for the most statist-inclined presidential candidate since FDR. Silicon Valley fell in love with Barack Obama. His youth and multicultural cool, along with the Web superiority of his presidential campaign, had Silicon Valley going googly for Obama.
In the eyes of Silicon Valley, Obama was like the Apple Macintosh. John McCain was like Windows.
Now comes the reckoning. Obama may be the coolest guy ever to hold the office of U.S. president. He may be the personification of an Apple Mac, iPod and iPhone. But this week Obama proved he is a big-state liberal, through and through.
My Silicon Valley friends who supported Obama are weirdly silent about this. I suspect they are in denial, still hoping for the closet libertarian Obama to emerge. Throughout the 2008 campaign, Silicon Valley Obama voters would tell me that Obama was really an economic centrist. Forget his liberal Senate record and Saul Alinsky-conditioned career as a community organizer. Forget the Chicago-style thug politics. That was in the past. Obama did what he had to do to rise. Once in the Oval Office, Obama will really govern more like John F. Kennedy, Bill Clinton or Tony Blair.
Say it enough times, and you can almost believe it. Well, sorry about that, you Obamacons. You just got thrown under the bus.
The $790 billion stimulus headed for Obama’s desk is statist. It is also backward looking. Sure, there are some forward-looking initiatives, such as a few billion for broadband. But the bill is overwhelmed by “shovel-ready” projects aimed at school building improvement, road repair and so forth, and by bailouts to profligate state governments.
Very disturbingly, the bill has the stench of protectionism in it. This is antithetical to the interests of trade-happy Silicon Valley.
What is becoming clear is the Obama we can expect to govern is the big government statist liberal and not a “closet libertarian” as they hoped. Note the word. They fooled themselves into thinking that was actually a possibility. Yet as I pointed out below, this huge and unfocused spending plan being touted as a “stimulus” is nothing more than a massive expansion of government. It is also just the prelude for further intrusion, essentially a down-payment which paves the way for massive intrusion in health care and the energy sector.
For those who cast a jaundiced eye on the candidate and his blank slate campaign, none of this comes as a surprise. A creature of the most liberal political machines in America, a student of Saul Alinski’s method and someone who consistently saw government as the answer and not the problem during his political rise, the Barack Obama the folks are suddenly discovering in Silicon Valley and other parts of America is precisely the guy we expected.
His “youth and multicultural cool” may have been part of sales job, but now it comes down to performance. Thus far his performance has been directed at expanding government. Two of the first three bills passed in his administration have massively increased government. And as I’ve noted, he promises even more.
In less than a month, Obama has signaled that there isn’t a libertarian leaning bone in his body. The question remains as to how people, like those in Silicon Valley, managed to fool themselves enough to vote for a candidate who so obviously didn’t fit their “hope”. And are they, as this particular piece seems to indicate, feeling a little buyer’s remorse?
I guess this is “excitable Andy” day, but Andrew Sullivan is engaged in some pretty poor spin today. Calling it a canard, Sullivan has this to say about the proposed census move to the White House by the Obama administration:
Again, this is not a real issue. It’s an issue driven by the paranoid GOP base. The census has not been removed from the Commerce Department’s purview, as Ambers explains below. And past censuses have long been conducted with coordination from the White House staff.
The explanation Sullivan offers says:
“This administration has not proposed removing the Census from the Department of Commerce and the same Congressional committees that had oversight during the previous administration will retain that authority.” …
Kenneth Prewitt, who served as Census director from 1998 to 2001, said he worked with White House staff during the 2000 Census on budgeting, advertising and outreach efforts.
But as Jeff Zeleny of the NYT reminds us, that’s not at all what the White House proposed:
The White House signaled last week that it would exert greater control over the Census Bureau, in part because of a concern among minority groups over Gregg leading the Commerce Department. Then, in response to complaints by Republicans, the administration said it would work closely with the director of the census, but it would not be under the direction of the White House.
Those “minority groups” were the Congressional Black and Hispanic caucuses. So it was political pressure that precipitated the move. Additionally the move was to have the director of the census bureau work with and report directly to Rahm Emanuel, President Obama’s chief-of-staff.
Now the claim is that nothing different was planned, and it all was a misunderstanding and that it will be business as usual (now that it appears a Republican isn’t going to be running Commerce).
Of course, that’s nonsense. But not to excitable Andy. He, with his fine tuned discrimination antenna says:
This issue was championed by Republicans for the usual “the-darkies-are-taking-over!” reasons.
Lost in his sloppy analysis is the fact that the announcement by the Obama administration was very specific about the move and why – complaints from the CBC and Hispanic caucus. Also missing is the fact that the move was overtly political and meant to placate the complaining political special interest groups. For a guy who constantly complained about the politicization of the Justice Department, he seems fine with covering an attempt to do the same thing with the census. Coordinating budget and outreach with the executive department isn’t at all the same as proposing a move of the entire census bureau out from under the Commerce Dept. – where it has always been – to the White House.
Sullivan will be fun to watch as he becomes part of the effort to backtrack and coverup for the new administration.
Since the inception of the current downturn, free market capitalism has taken quite the bashing. Supporters of significant government involvement in the economy deride the horrors of “unfettered capitalism” and a “free market run amuck.” Frequently, deregulation of capital markets is singled out as the most dastardly culprit, to which Pres. Obama seems to be alluding when he blames “relying on the worn-out dogmas of the past,” and “too little regulatory scrutiny.” Yet, after the last eight years in which we witnessed Sarbanes-Oxley, No Child Left Behind, Medicare Part D, and numerous attempts to reign in Fannie Mae and Freddie Mac shoved aside by legislators, evidence of unregulated economic activity being the source of our crisis seems rather scant.
The idea that “deregulation” was somehow responsible for the mortgage meltdown is a particularly shaky proposition. Shannon Love explains why:
Leftists have to answer a question: if greedy, irresponsible, unregulated etc. capitalism caused the housing bubble, why didn’t we see a similar bubble in commercial real-estate markets which operate under even less regulation than the residential markets? Why does the politically neglected and unregulated commercial real-estate market exhibit much milder swings?
The differences between residential and commercial real estate provide the means to test the hypothesis that government intervention or the lack thereof caused the housing bubble and subsequent collapse of the financial system. We can compare the two markets because the same institutions ultimately make residential and commercial loans. They make loans in the same communities and regions. Changes in the economy affect both types of real estate at the same time and to the same rough degree. The only major difference between the two markets lies in the degree of government intervention.
After dispensing with some obvious questions about the comparison, Love highlights how the residential market was essentially turned into a Lemon’s Market:
As Love points out, the commercial real estate market has no such mechanism muddying its waters, and information is comparatively less asymmetric. Without the government interference, commercial mortgage lenders let the potential for bad outcomes drive their decision making:
More than any other policy, the creation of Freddie Mac and Fanny May distorted the residential mortgage market in a way that the commercial market escaped. The FMs exist solely to induce lenders to make residential loans that the free market judged too risky. The FMs buy up residential mortgages from primary lenders and bundle them together in securities. They do so precisely in order to short-circuit the free-market feedback system that communicates to banks when the financial system as a whole has lent out as much money as it safely can. That feedback system worked like a governor on an engine. It kept the system from running away and lending more money than it could recoup, but also prevented people with poorer credit from getting loans.
Politicians who wanted the engine to run faster created the FMs to bypass the governor in order to get higher performance in the short run. Since the FMs would buy up almost any mortgage, lenders could make riskier and riskier loans without suffering any negative consequence. The FMs replaced the self-interested secondary-market buyers with people playing with government money and a mandate to induce more and more lending. Special dodgy accounting rules allowed the FMs to hide the risk behind the securitized mortgages they sold.
Tellingly, no such intervention occurred in commercial markets. The FMs’ charters expressly prevented them from buying commercial mortgages. As a result, the commercial mortgage market functioned with a free-market governor. When lenders made too many risky loans, free-market secondary buyers stopped buying their mortgages and the system cooled down. As a result, commercial markets saw no runaway boom and subsequent colossal bust.
Although I think that laying the crisis solely at the feet of the residential mortgage market is overly simplistic (for example, what was up with the ratings agencies?), Love does point to a very apt comparison as to how government intervention in the market changes incentives and behavior. If you guarantee risks against bad loans, and subsidize the debtors, then more of such loans will be made. Remove such a guarantees and subsidies and market forces will severely punish improperly compensated risk taking.
The trade off, of course, is that free markets do not allow much opportunity for rent-seeking. Which is why Love’s final lament is so true:
Sadly, experience suggests that mere empiricism has no place in political economics.
That’s because empiricism does not buy votes.
Some real anger is welling up down under against some “green” laws which prevented residents from taking prudent fire control measures which may have prevented both property destruction and deaths:
ANGRY residents last night accused local authorities of contributing to the bushfire toll by failing to let residents chop down trees and clear up bushland that posed a fire risk.
During question time at a packed community meeting in Arthurs Creek on Melbourne’s northern fringe, Warwick Spooner — whose mother Marilyn and brother Damien perished along with their home in the Strathewen blaze — criticised the Nillumbik council for the limitations it placed on residents wanting the council’s help or permission to clean up around their properties in preparation for the bushfire season. “We’ve lost two people in my family because you dickheads won’t cut trees down,” he said.
Sound familiar California? And there are other places as well where environmental activists have successfully blocked forest management procedures which help inhibit the type of holocaust loosed in the bush of Australia and in the California fires of a year or so ago.
It seems, when given the opportunity, environmentalists tend toward the extreme. The result in Australia, of course, just as in California, was the total destruction of all the trees they were supposedly saving. Not doing what anyone with common sense would call prudent has also lead to the deaths of not only masses of wildlife, but fellow human beings as well.
There was widespread applause when Nillumbik Mayor Bo Bendtsen said changes were likely to be made about the council’s policy surrounding native vegetation.
But his response was not good enough for Mr Spooner: “It’s too late now mate. We’ve lost families, we’ve lost people.”
Julio works at Mickey D’s and has for the last 4 years. President Obama tells him not to worry, that upcoming legislation is going to cover him up with money he didn’t earn (“refundable tax credits”) and help pay for his college too!
Watch this performance – on both sides:
Maybe that car and mortgage payment aren’t such a wild thought after all.
But as Walter Williams reminds us:
“In stimulus package language, if Congress taxes to hand out money, one person is stimulated at the expense of another, who pays the tax and is unstimulated. A visual representation of the stimulus package is: Imagine you see a person at work taking buckets of water from the deep end of a swimming pool and dumping them into the shallow end in an attempt to make it deeper. You would deem him stupid. That scenario is equivalent to what Congress and the new President proposes for the economy.”
Welcome to the deep end. You’re going to be putting Julio through college. Do you think he’ll even send you a thank you note?
I‘m not much of a fan of Saturday Night Live anymore. The overly partisan commentary was bad enough, but when Will Ferrell left, there wasn’t much reason to stick around anymore. Despite all that, however, I think Seth Meyers pretty much nailed it on the Michael Phelps pot smoking non-story:
Well, after Democratic assurances that the Fairness Doctrine wasn’t something they planned to pursue, Michigan Democratic Senator Debbie Stabenow muddied those waters again. Appearing on the Bill Press Show she had this to say:
BILL PRESS: Yeah, I mean, look: They have a right to say that. They’ve got a right to express that. But, they should not be the only voices heard. So, is it time to bring back the Fairness Doctrine?
SENATOR DEBBIE STABENOW (D-MI): I think it’s absolutely time to pass a standard. Now, whether it’s called the Fairness Standard, whether it’s called something else — I absolutely think it’s time to be bringing accountability to the airwaves. I mean, our new president has talked rightly about accountability and transparency. You know, that we all have to step up and be responsible. And, I think in this case, there needs to be some accountability and standards put in place.
BILL PRESS: Can we count on you to push for some hearings in the United States Senate this year, to bring these owners in and hold them accountable?
SENATOR DEBBIE STABENOW (D-MI): I have already had some discussions with colleagues and, you know, I feel like that’s gonna happen. Yep.
Really. “Accountability”? What sort of “accountability” is Sen. Stabenow talking about?
What she means is she’d like to see the bane of the Democrats, the one venue that regularly frustrates their efforts, out of business or seriously handicaped.
The arguments for the previous Fairness Doctrine were pitifully inadequate and certainly an infringement of free speech, but radio was a dominant medium at the time and that’s how supporters justified their attempted control of what could or couldn’t be said.
Now, however, even those marginal arguments are obsolete. The choices of media have expanded exponentially. The internet has changed the whole game. To pretend that “standards” and “accountability” must be imposed on a very small part of this media spectrum while ignoring the rest is laughable.
So this comes down to power and control. And it requires a willingness to ignore the tenets of liberty and heritage of free speech embodied in the Constitution. I have no doubt that Democrats are more than willing to do exactly that in their effort to consolidate their power.
Many progressives thought that Pres. Obama had abandoned them after the election, but I’ll bet they’re singing a different tune today:
President Barack Obama on Wednesday imposed a $500,000 cap on senior executive pay for the most distressed financial institutions receiving taxpayer bailout money and promised new steps to end a system of “executives being rewarded for failure.”
The limit would apply to top-paid executives at the most distressed financial institutions that are negotiating bailout agreements with the federal government.It also would apply to other banks that receive aid, but they could get around the limits by publicizing to shareholders plans to exceed the salary cap.
The “most distressed financial institutions” will not include those which have already received TARP funds, such as AIG and Citigroup. However, those firms are already subject to caps on executive pay under the statute authorizing the bailout last Fall. And because these companies have all come to the government “with hat in hand,” in Obama’s words, not too many people outside of Wall Street are upset. Yet, Obama does not seem content to stop with these “distressed” companies:
The administration also will propose long-term compensation restrictions even for companies that don’t receive government assistance, Obama said.
Those proposals include:
• Requiring top executives at financial institutions to hold stock for several years before they can cash out.
• Requiring nonbinding “say on pay” resolutions — that is, giving shareholders more say on executive compensation.
• A Treasury-sponsored conference on a long-term overhaul of executive compensation.
This is exactly the sort of creeping socialism that many of us were worried about with Obama’s election. Mind you, McCain would not have been much better, but this sort of heavy handed government interventionism would not have been proposed by his administration, much less tolerated by most Republicans in Congress.
Obama’s proposals are somewhat tolerable with respect to the bailed out companies since they are being funded with tax payer dollars. If these companies are going take the money, then they should have to abide by whatever rules are attached to the funding no matter how onerous. But trying to impose such draconian restrictions on companies that are not being bailed out is nothing more than a direct assault on freedom.
Even if you think that no executive should be paid more than $X more than the lowest paid employee of a firm, or are just angry at the seemingly wasteful and lavish life styles of Wall Street bankers, you still have to find this sort of proposed legislation abominable. Why? Because no matter what you think about executive compensation, the owners and operators of these companies think otherwise. It’s their decision to make about how their companies are run and how well their employees are paid. Unless, of course, you would just fine and dandy with some government bureaucrat deciding that you are overpaid for your position, and that no matter how hard you work you can never make more than $Y.
The only people who would ever agree to such slavery are those who have no ambition and little, if anything, to offer the world in terms of work product. They are not the people who invent the items, create the ideas, or provide the services that make our lives better over time. That is not to say that their efforts are not appreciated, nor that they shouldn’t be rewarded. But neither should we base the engine of wealth creation on their hopes and dreams of sinecure.
Beyond the egregious assault on freedom these proposals represent, there is also a huge question as to their efficacy, regardless of whether the firms are troubled or not (my emphasis):
Compensation experts in the private sector have warned that intrusions into the internal decisions of financial institutions could discourage participation in the rescue program and slow down the financial sector’s recovery. They also argue that it could set a precedent for government regulation that undermines performance-based pay.
“One of the big questions is whether it will make it more difficult to recruit and retain executives at these companies,” said Claudia Allen, chair of corporate governance at the Chicago-based law firm of Neal, Gerber & Eisenberg.
The $500,000 cap “is a very tight limit,” she said.
Timothy J. Bartl, vice president and general counsel for the Center On Executive Compensation, said the president’s actions are a unique situation given the government’s role bailing out troubled institutions.
“We do not view it as something that ought to be extended beyond this circumstance,” he said.
I don’t think there’s any legitimate doubt that these will be the effects. Indeed, here are some of the reactions to Obama’s proposals:
Goldman Sachs said yesterday it wants to repay $10 billion it got from Treasury under the TARP to signal the firm is healthy and to escape limitations that came with that infusion of money. “Our financial condition is sound and, subject to approval from regulators, we hope to repay TARP money as soon as practicable,” said Lucas van Praag, a spokesman for New York- based Goldman Sachs.
JPMorgan CEO Jamie Dimon said Feb. 3 that the firm didn’t need capital and didn’t ask for TARP funding. The lender accepted the $25 billion it received from the first capital injection at the request of the government and to help stabilize the banking system, he said.
Goldman has to get permission to repay the government? Does that make sense? Only if the reason the funds were distributed in the first place was to give the federal government control over the market place. I think that’s exactly what Bush (“I’ve abandoned free-market principles to save the free-market system”) and Paulsen had in mind with TARP, and I think Obama is prepared to carry the ball even further into socialist territory.
As far as retaining talented executives, why would any of them stay? If you were making $10 Million per year including your bonuses (not uncommon), why would you stay somewhere that’s forcing you take a 95% pay cut? Of course, many will say good riddance to bad rubbish, and perhaps their right. It’s not like a firm that goes crawling for a federal handout was performing all that well. Except that (a) it’s far from clear that bad management led to the current crisis (although, surely that had something to do with it), and (b) even if it were clear, not every executive or potential executive was responsible. If you are a rising star in your investment bank who has put in exhaustingly long hours to get ahead in hopes of a big payday in the future, why would you stick around where you know your options are limited? These are very smart, industrious and capable people. There are plenty of places where they can go and not be subject to such pay strictures, and that is where they will end up.
Moreover, a part of the proposed regulations practically eliminates the fabled “golden parachutes” for executives:
Obama said that massive severance packages for executives who leave failing firms are also going to be eliminated. “We’re taking the air out of golden parachutes,” he said.
This displays a fundamental misunderstanding of what golden parachutes are. Contrary to popular belief, they are not generous giveaways to failed executives, but instead incentives for failed executives to get out of the way and allow new management. Without these sorts of incentives, management becomes entrenched and complacent. If a proposed takeover threatens to take away the goodies they can vote themselves, then they will forego such proposals and keep cashing in. In order to align management’s interests with the shareholders, golden parachutes were introduced to incentivize firm managers to sacrifice their jobs when the best interests of the company warrant it. Since one of the major problems that everyone seems to have with Wall Street is the failure of effective management, one would think the new rules would make it easier to bring in new blood, not harder.
But none of that matters to Obama:
Mr. Obama said the cap strikes the right “balance” between fair compensation and proper stewardship of taxpayer funds. “This is America. We don’t disparage wealth. We don’t begrudge anybody for achieving success. And we believe that success should be rewarded. But what gets people upset –and rightfully so–are executives being rewarded for failure, especially when those rewards are subsidized by U. S. taxpayers.
“For top executives to award themselves these kinds of compensation packages in the midst of this economic crisis is not only in bad taste, it’s a bad strategy — and I will not tolerate it as President.”
Again, it’s hard to generate much sympathy for executives who’ve come begging to Washington. But at the same time, what point is there to heavy handed measures that don’t do anything more than satisfy some people’s jealousy and outrage? Shouldn’t these proposals be designed to put people back to work?
I think my guy Hugo is beginning to see the handwriting on the wall and realizes that if he doesn’t manage to fool the population into making him president for life now, he’ll have to seek other means.
You see, the situation in Venezuela is not getting better nor the future brighter for our favorite socialist:
Treasury reserves are dwindling, electricity blackouts are becoming commonplace, public security is deteriorating, and the finances of the state-owned oil monopoly, PdVSA, are in apparent disarray. There is little reason to think that the decline will be reversed any time soon.
If Mr. Chávez hopes to continue governing under the guise of democracy after 2013, when his term expires, he must get the constitution changed now.
The last time he tried this, even with almost total control of the voting apparatus, he was unable to concoct a win. He apparently tried for days, but apparently the loss was such that even he couldn’t fudge it.
So now the newest attempt. Interestingly, the latest attempt includes open-ended terms for nearly every elected official in Venezuela, not just the presidency. I’d suggest that actually works against Chavez and not for him. Those that marginally favor Chavez may not want the local mayor, legislator or governor in office indefinitely. It is an even bet then that they will not be inclined to vote for such a constitutional amendment. They, as well as anyone, know the hazards of entrenched power.
You have to wonder then, given the great possibility that the amendment will go down in flames on Feb. 15th what Hugo’s next move will be. My guess is it will have nothing to do with supporting and defending the constitution of Venezuela.
When Bill Clinton was found to be a womanizer and serial abuser, the silence among women’s rights groups, such as NOW, was deafening. Since Clinton was a “progressive” and since he believed in the progressive agenda they shared, most feminists were quiet about his violation of various women’s rights. He was excused from the same level of condemnation the likes of Bob Packwood endured.
Seems we’re about to witness the same phenomenon among human rights groups concerning the Obama administration’s decision to continue the rendition program.
Under executive orders issued by Obama recently, the CIA still has authority to carry out what are known as renditions, secret abductions and transfers of prisoners to countries that cooperate with the United States.
Current and former U.S. intelligence officials said that the rendition program might be poised to play an expanded role going forward because it was the main remaining mechanism — aside from Predator missile strikes — for taking suspected terrorists off the street.
You’d expect, given this decision, to see the usual suspects, like Human Rights Watch, condemn the continuation of the program begun under Bill Clinton and continued through the Bush administration, wouldn’t you? I mean if they really were more concerned about human rights than politics. And principled consistency.
But Darren Hutchinson over at Dissenting Justice (a “progressive blog”) seems to have caught HRW in a NOW moment. Hutchinson quotes and links to HRW’s written position on rendition – a position it has held for at least the Bush years:
The US government should:
Repudiate the use of rendition to torture as a counterterrorism tactic and permanently discontinue the CIA’s rendition program;
Disclose the identities, fate, and current whereabouts of all persons detained by the CIA or rendered to foreign custody by the CIA since 2001, including detainees who were rendered to Jordan;
Repudiate the use of “diplomatic assurances” against torture and ill-treatment as a justification for the transfer of a suspect to a place where he or she is at risk of such abuse;
Make public any audio recordings or videotapes that the CIA possesses of interrogations of detainees rendered by the CIA to foreign custody;
Provide appropriate compensation to all persons arbitrarily detained by the CIA or rendered to foreign custody.
He then quotes the Washington advocacy director for HRW, Tom Malinowski apparently modifying the previously unequivocal position of HRW:
“Under limited circumstances, there is a legitimate place” for renditions, said Tom Malinowski, the Washington advocacy director for Human Rights Watch. “What I heard loud and clear from the president’s order was that they want to design a system that doesn’t result in people being sent to foreign dungeons to be tortured — but that designing that system is going to take some time.”
Malinowski said he had urged the Obama administration to stipulate that prisoners could be transferred only to countries where they would be guaranteed a public hearing in an official court. “Producing a prisoner before a real court is a key safeguard against torture, abuse and disappearance,” Malinowski said.
Given their previous position, this is simply capitulation with a huge dollop of hypocrisy added for taste. Suddenly the ‘new’ rendition isn’t like the old rendition because there’s a progressive in town. The fact that the same agency which has been running the program for the last 16 years will continue to do so is waved off as unimportant. And the fact that the incoming administration which roundly condemned the practice previously but now sees utility in its continuation is studiously ignored by HRW.
Now there are “limited circumstances” where there is a “legitimate place” for such practices. Obviously, those “limited circumstances” never existed previously and only suddenly emerged on January 20th around noon. Apparently they think that such a radical shift in position will go unnoticed and unremarked upon.
Hope and change.