Monthly Archives: January 2010

Tea Party spillage

Doug has a great comment on the church-state separation issue. Go to his comment in the last blog entry for the explanation, but here is his summary:

The First Amendment embodies the simple, just idea that each of us should be free to exercise his or her religious views without expecting that the government will endorse or promote those views and without fearing that the government will endorse or promote the religious views of others. By keeping government and religion separate, the establishment clause serves to protect the freedom of all to exercise their religion.

Amen, I say.

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Filed under Conservatism, Religion

Tea Party redux

A recent column about the Tea Party movement got lots of comments, most critical. The essence of my column was that the “Tea Party” is more a protest against the status quo than a unified movement. That is important because I fear that politicians courting the Tea Party will take its support as a mandate, when there is not enough consensus within the group to discern a mandate.

Two of the more intelligent responses challenged my assertions.

One:

You are right in that they are a disparate group on many peripheral issues. They are, however, firmly united in patriotism and pride in country. They universally have a distaste for: (1) an elitism that seems to believe they don’t know what is best for themselves (2) what they consider to be  arrogance on the part of the media establishment and Congress (3) the unkept word of a president who promised openness, but whose party created the all encompassing health reform bill behind closed doors (4) financial policies that are contrary to the way they run their homes and businesses (5) the deafness of a Congress that cannot or will not hear what they are trying to say on most pocketbook issues, and (6) a government that seems to think that it is entitled to any tax it chooses on their wealth.

Two:

As an active Tea Party participant, I can tell you there are at least two common beliefs which are prominent throughout tea party organizations. At the core of the Tea Party movement is confidence in the U.S. Constitution and the beliefs of the Founding Fathers. We see our elected officials ignoring their oaths to “Protect and Defend” the constitution. Instead they expand governmental authority beyond the limits established by the constitution. They distort and pervert the very fundamental principals our country was founded on. A glaring example is the separation of church and state. Our founding fathers understood the formation of our great nation could not have occurred without divine influence. They never intended the radical interpretation that has lead to banishing God from public places and our schools.

The second common trait prevalent thru-out the tea party organization is a strong Conservative thinking. It is a belief in personal freedoms given us by our creator, not given to us by any government. Therefore, we believe government does not have the right to take those freedoms away. Our government abuses it’s authority in its endeavors to expand its size and increase its financial burdens on Americans.

You are correct when you say “there is a growing frustration with the nation’s status quo”. No administration has misled voters with promises for change and then totally ignored those promises more than the current administration. But Tea Party activists are not just dissatisfied with the current administration. They are disenchanted with both political parties as well.

I hope to comment soon on these and other responses.

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Request for climate-change posts

I am confused about the climate change debate, and most readers have greater aptitude in science than I do. So this is a sincere request for input.

All of the debates I have heard about global warming involve the data. Are historical measures accurate? Are computer models complete enough to accurately forecast trends? UAH’s Christy has attained considerable notoriety by challenging the data. “Climate-gate” suggested there were efforts to manipulate the data to buttress claims of anthropogenic (man-made) warming.

My confusion has to do with the relevance of the data. Obviously, many factors affect climate. No matter how significant human-caused greenhouse emissions are, natural factors could still cause a downward trend in temperatures. The issue is therefore, I would think, not whether there is an upward trend in temperatures, but whether human activities affect the temperature that would exist absent those activities.

That is not an issue that we can resolve with data, unless we understand every factor that impacts atmospheric temperature. We don’t.

So we have to look at what knowledge we have. We know, I thought, that carbon dioxide allows passage of sunlight. We know that some solar radiation, when it hits the Earth’s surface, converts to infrared radiation. We know that carbon dioxide tends to block the escape of the infrared heat energy from the atmosphere.  We know that human activity increases the amount of carbon dioxide, relative to the amount that would exist without human activity.

Given that knowledge, haven’t we proved the existence of anthropogenic climate change, regardless of the data?

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Obama pushing a thread

An economist once told me it works a lot better to pull a thread than push one. His point was that demand, not supply, is the trigger for economic activity.

President Obama’s job-creation proposal — which involves tax credits for businesses that hire employees — strikes me as an effort to push the thread. No rational employer will hire employees unless demand exists for its product. If a tax credit convinces employers to ignore the economic realities, it’s a bad thing. My suspicion is that it is time to step back from stimulus efforts altogether. If, despite national debt issues, we are to continue efforts to stimulate the economy, we should be looking at it from the demand side.

How to do that? One-time increases in unemployment benefits make the most sense, because almost none of that money ends up in savings and it helps those who need it most.

The problem with a tax credit for job creation, aside from its potential to distort rational views of demand, is that it would undo some of the benefits if the economy rebounds. An economic rebound — that is, an accelerated increase in demand that corresponds with renewed consumer confidence — would create jobs with or without tax credits. The main significance of the tax credit, therefore, would be to compromise efforts to reduce national debt.

Obama is in a tough political situation, but I wish he would hold fast. Much of the stimulus money has yet to work through the system, and the economy is showing obvious — if not dramatic — signs of improvement. (Note the 5.7 percent annualized GDP growth in the 4th quarter.) Now is not the time to increase our debt with fixes that may not be necessary.

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Filed under obama, Recession, stimulus

Obama’s zinger

President Obama’s State of the Union speech had lots of high points — including the fact that he can pronounce “nuclear” and does not grin every time someone claps — but I thought one of his best points was this one on global warming:

I know that there are those who disagree with the overwhelming scientific evidence on climate change.

But here’s the thing. Even if you doubt the evidence, providing incentives for energy efficiency and clean energy are the right thing to do for our future, because the nation that leads the clean-energy economy will be the nation that leads the global economy, and America must be that nation.

If the United States wants to increase exports, it needs to understand the market. Like it or not, foreign markets are demanding products that reduce energy consumption and greenhouse emissions. If we are to fund research and incentivize innovation, we should do so with an understanding of the markets we want to supply.

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Cap Saban’s salary?

Clearly no human is worth $3.9 million a year, and certainly not worth $400,000 in one day — the amount University of Alabama Coach Nick Saban reportedly received for winning the championship Thursday.

Anyone who wants to cap CEO salaries obviously would want to cap the salary of Saban.

Before you fire off the nasty email, I’m with you. For The University of Alabama, Saban was worth the money.

A ditch digger or a janitor or even a journalist may contribute as much effort to his or her job as Saban does to his. In a capitalist economy, though, the issue is not just effort. It’s value. The ditch-digger’s value to the economy is lower; thus his lower pay. Sadly, the same is true with journalists.

Capping salaries strikes at the heart of free enterprise. Capitalism rewards revenue-producing talent. Revenue-producing talent usually requires hard work — certainly that’s the case with Saban — but the issue is not hours clocked in, but success. Capitalism rewards those who can direct labor in productive directions.

The recent complaint about corporate CEOs is that many receive Saban-sized salaries even as their companies struggle. That’s a complaint with little merit. In a difficult economy, a small loss may be a great victory. Mere survival — of a company, its shareholders and its employees — may be a remarkable success.

If shareholders have a legitimate role in setting a CEO’s salary, government should have no control over the result. If there is a breach between the board of directors and the shareholders, the appropriate remedy is aimed at the breach, not the ultimate salary.

A significant caveat involves companies that survived as a result of taxpayer loans. One of President Obama’s more brilliant moves — one I initially criticized — was cutting CEO salaries and bonuses at companies that were beneficiaries of federal largess. A goal of such restrictions was to expedite the repayment of the federal dollars. Shareholders, or at least directors, recognized they could not retain talent with artificial salary caps. That is one of the main reasons the federal government has been so successful in recouping stimulus money given to lenders.

Cap Saban’s salary? Heck no. He was worth every penny. Stakeholders, not legislators or bureaucrats, need to decide what CEOs are worth.

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Filed under Free Market, Government regulation, wages

Bubbling concerns

My Sunday column, Capital Considerations, proposed Decade of the Bubbles as an appropriate name for the last 10 years. Federal Reserve Chairman Ben Bernanke also worries about the phenomenon. On Sunday, he said stronger regulation would help prevent the speculative bubbles that can send the economy into crisis.

Political debate these days is polarized, and that creates a likelihood of bad economic policy. On one side of the debate is the group that believes government should intervene at every sign of inequity. On the other is the group that holds the market as so sacrosanct that any government involvement is a negative.

Speculative bubbles — like the dot-com bubble that led to a minor recession early in the decade and the more severe housing bubble that nearly collapsed our economy in 2006 and 2007 — are examples of inherent flaws in a market economy. Those that say capitalism is the most efficient system devised to allocate resources are correct, but that is not equivalent to saying any intrusion on a free market causes inefficiencies.

As bubbles demonstrate, market economies are at times inefficient, sometimes with disastrous consequences. The ideal economic policy is one that harnesses the strengths of the market, while recognizing that intervention sometimes is appropriate.

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Filed under Free Market, Government regulation