"Our Country!
In her intercourse with foreign nations may she always be in the right;
but right or wrong, our country!"

    --Commodore Stephen Decatur

Tuesday, June 29, 2010

The Irish Grasshopper

Today's New York Times reports on a new kind of "troubles" in Ireland. After more than a decade of capitalizing on cheap labor and goods in the expensive Euro-zone, Ireland has fallen harder than most in the global downturn. The same forces that propelled Ireland's economy forward before the crash have now driven unemployment above 13%. Trapped by the Euro, Ireland cannot now devalue their currency to boost economic growth.

Despite this, the Times portrays Ireland's economic troubles as the tragic consequence of so-called austerity measures that were enacted in 2008 to prevent Ireland's government from defaulting. Sticking with the liberal playbook, the Times trumpets Keynesian stimuli enacted by other countries while lamenting that Ireland couldn't afford to save jobs with a stimulus of their own. This is preposterous: raising taxes while Ireland's economy was going down the toilet is the source of their trouble, not a lack of stimulus.

To wit, we have seen that the Democrats' massive $800 billion Keynesian "stimulus" package has done nothing to slow the loss of jobs here in America. After passage of the bill in February of 2009, the US unemployment rate continued to rise, spiking at 10.6% in January of this year. At 9.3%, it is still higher than it was then. Worse still, jobs "created or saved" by the stimulus—if not outright fabrications—are at best only temporary. Unless the private sector starts creating new jobs—which it has not—unemployment will spike again.

The real problem with Ireland's austerity is that, like all of Europe, they waited until after the crisis to address outrageous deficits and runaway spending. Like the grasshopper of fable, Ireland and the rest of Europe danced in the summertime, blithely spending money they didn't have to fund an ever-increasing entitlement state. Now, Europe's welfare bomb has exploded, and it can't be put together again. America still has hope of avoiding the same fate, but we must learn to save when times are good.

The Obama Administration has created vast new spending programs that will not take full effect for several years, and while repealing ObamaCare is a good start, it will take much more to put America back in the black. Politicians hate cutting spending; more so when revenues are high, but when the economy eventually recovers, we must remember this moment. If we do not reduce spending when times are good, we too will end up like the grasshopper, dying in the cold.

Wednesday, June 16, 2010

"BP Will Pay"

The New York Times reports on President Obama's speech last night with the type of puffery we would expect from the mainstream media. Apparently, the American people--especially the people on the Gulf Coast most directly affected by the spill--are supposed to take solace that the President has appointed a commission.

Until now he has employed most of the tools of his office, imposing a deepwater drilling moratorium, traveling repeatedly to the region, firing an agency director and appointing a commission. He used a few more Tuesday night, summoning the cameras to the Oval Office, appointing a long-term recovery coordinator and demanding that the company responsible, BP, set up a multibillion-dollar escrow account to compensate the victims.
Meanwhile, oil continues to leak from the seafloor despite BP's efforts to bring the well under control. While Obama is busy appointing new oil spill czars, the Associated Press reports that government scientists have increased their estimates of the oil being leaked by a factor of 10, up to as much as 2.5 million gallons per day. Even if BP succeeds in shutting off the flow, there will still be 50-100 million gallons of oil loose out in the Gulf of Mexico, waiting to be washed ashore by the first hurricane that comes through, or worse, to be spread along the entire eastern seaboard by the Gulf Stream current.

In the White House transcript of Obama's speech, one line jumps out as an indicator of how the President is still underestimating the vastness of the spill. While outlining his plan for recovery, Obama took pains to assure the American people that, "BP will pay for the impact this spill has had on the region," but Obama's $20 billion escrow fund is nothing compared to the mind boggling scale of this disaster.

Even if BP is deemed by the new oil spill czar to be liable for unlimited damage claims, Obama's plan has one major problem: what happens when BP runs out of money? The Washington Post reports that as members of Congress scathe BP's leaders with a withering crossfire of recriminations, they are also selling all stocks related to BP. At the same time, BP's shares have declined by almost 50% since the explosion of the Deepwater Horizon on April 20.

Obama is talking tough and is even taking tough actions, but the real measure of his leadership skills is whether his actions actually bring the spill under control and repair the damage. In both cases, he continues to push all responsibility to BP. This may be a good political tactic, but it also comes with a big risk. If BP ultimately fails, the responsibility he now evades will come back to him--with interest.

Thursday, June 10, 2010

The Party Is Over

The New York Times reports today on the passage by plebiscite of Proposition 14 in California, which outlaws party primary elections for all offices except the Presidency and party leadership positions. As is often the case with public referenda, an initiative which was put directly to the people will in the end take power away from the same people who supported it.

Supporters for the initiative claimed that the "top two" primary system would promote more moderate candidates, but this flies in the face of all logic. Quite to the contrary, California’s new system will promote more extreme candidates in some areas, while at the same time diminishing voters’ choices and influence in the rest of the state.

In districts which lean heavily one way or the other, the dominant party can run multiple candidates with the hopes of blocking the other party from the general election. But this can backfire as we saw in the electoral oddity of Republican Charles Djou’s special election victory in Hawaii last month with only 39% of the vote. Under Hawaii’s normal election rules this fall, he won’t stand a chance against a unified Democratic party backing a single opponent in a strongly liberal district.

Conversely, in districts which are evenly balanced, the "top two" system will encourage each party to choose one candidate to support before the voice of the people can be heard. As we saw in the public and acrimonious internal struggle of the NY-23 special election, Republican leaders chose Dede Scozzafava, whom they perceived as the strongest candidate despite voters’ opposition. This led to disaster and embarrassment for conservatives when Democrat Bill Owens won with only 49% of the vote.

California has always been weird, but it now joins Washington and Louisiana as the only three states that allow voters to pick candidates from multiple parties during a primary. Although the Supreme Court heard a challenge to the system in 2008, it ruled that the Washington’s version was too new to draw any conclusions about its fairness.

Examples like the ones above show how the "top two" system will result in anomalous results which run contrary to the will of the people--results which are bound to be repeated in the coming years as Washington and California continue with their experiments in hyperpluralism. Although it is entertaining to see the underdog do well in sports, this is a dangerous trend for our system of representative government.

Tuesday, June 8, 2010

Sound as a Pound

The BBC reported today that the British pound took a massive hit as a major ratings agency issued a warning about the scale of the United Kingdom’s debt crisis. Fitch’s warning echoes Britain’s new Prime Minister, David Cameron, by drawing attention to one of the highest debt ratios in the world. At the same time, the loss of confidence in the pound is a warning that no country is safe from the emerging worldwide debt crisis, not even the United States.

Of course, not all debts are bad. The United States is forced maintain a large amount of government debt as a consequence of our position as the world’s dominant reserve currency and the same is true for Britain, although to less of a degree. In order to hold dollars in reserve, a large portion of our debt will be continuously renewed by the same countries that are holding it now. Far more important than the amount of a nation’s debt is whether or not a nation is able to meet its obligations.

In this regard, a much more important measure than the size of the debt is the ratio of interest payments on the debt to GDP. For 2009, the interest on the U.S. debt totaled more than $383 billion, or about 2.7% of GDP, thanks to extremely low interest rates. Meanwhile, the Guardian reports that the interest on the debt for the United Kingdom is currently about £42 billion, which is about the same in terms of GDP.

That 2.7% may not sound like a lot, but when interest rates start to increase, the ballooning debts here and in the United Kingdom will take an ever larger proportion out of tax revenue. With no end to trillion-dollar deficits in sight, our national debt is well on its way to doubling as a percentage of GDP within a few years compared to the 69% debt-to-GDP ratio of 2008.

It is worth considering that defense spending and government health care each account for about 5-6% of GDP right now, but as the baby-boomer generation ages, government health care expenditures are going to skyrocket. If the ratio of interest on the debt to GDP approaches 5%, the United States will face massive societal upheaval and economic collapse. Britain is making painful choices now in order to avoid this bleak forecast. We postpone the same difficult choices at our peril.

Thursday, June 3, 2010

The Real Enemy is Cynicism

President Obama famously said while still a candidate that, "...our rivals won't be one another, and I would assert it won't even be the other party.  It's going to be cynicism that we're fighting against."  Apparently he is waging an epic internal struggle against himself.  The Washington Post reports today that Obama has realized that the crude oil bubbling up in the Gulf of Mexico is destroying more than federally protected wetlands.  In response, he is now going to press for climate change legislation in a cynical move to deflect public anger away from himself.
President Obama tried Wednesday to channel public outrage about the Gulf of Mexico oil spill into support for a climate-change bill, seeking to redefine an issue that threatens to tarnish his presidency.

...Allies of the president have argued for weeks that the administration should stop talking about BP, the oil company responsible for the spill, and instead tap into the public attention to the catastrophe in hopes of giving it at least some redemptive value in the long term.
Obama fears that this crisis could destroy what little credibility he has left with an angry American public.  President Obama made a big point during his press conference to tell the nation that he's "in charge," but after spending so much time trying to convince the American people that he can do anything, Obama now must grapple with the limits of the government's power.  Congress can pass as many laws as they would like and the Justice Department can sue everything in sight, but the oil keeps bubbling up.

When a disaster strikes, people often look to the government for help.  Floods and earthquakes are acts of God and only a few fringe crackpots would think of blaming the government in their aftermath.  This disaster is different.  Although Obama claims that BP bears full responsibility, it is clear that government regulations meant to avert this type of spill were not being enforced.  Few people will be fooled by a cynical ploy to divert attention away from the spill and the government failures which contributed to it.  Obama can talk himself blue in the face about punishing BP, but what about reforming government?

Presumably, Democrats in the House of Representatives did not anticipate a massive oil spill when they passed their version of the climate change legislation almost a year ago.  Jamming the same legislation through the Senate would be a naked power grab, and would do nothing to reduce the dangers of another spill.  Furthermore, as long as the sludgy crude oil is washing ashore, it is ludicrous for Obama to ask people to entrust the government with even more power when his administration is so obviously unable to wield the power it already has.

[Editor's Note: if you would like to help the cleanup efforts in the Gulf, please support one of the charities listed in an earlier post here on the Prolix Patriot.]

Tuesday, June 1, 2010

Come Sail Away

The loss of life in the Gaza blockade incident is tragic.  However, the Times of London has published first-hand accounts which reveal that the organizers of the so-called "Freedom Flotilla" were prepared for violence.  The flotilla entered the blockaded area despite repeated warnings and refused to turn away when confronted by the Israeli navy.  Downplaying the dangers, the organizers of this mission used willing civilians as human shields for a cynical political stunt.

One woman was quoted as saying, "We were aware of the possible danger; in joining the trip, but there are thousands of babies in Gaza.  If we had reached Gaza we would have played with them and taken them food."  Feeding babies is a fine thing, but this same woman also brought her own baby with her to a war zone in an attempt to run a blockade.  One has to question the motives of a mother who would knowingly place her own child in such extreme danger.

The Times also reports that one of the men aboard the flotilla, "told his wife that the journey could be potentially fatal and asked for her blessing."  The people aboard these vessels knew they were going into danger.  They were not going to Gaza in peace, but openly vowing to provoke confrontation with the Israeli Defense Forces.  Whether by running the blockade itself, or otherwise stirring up trouble, the so-called "activists" were not headed to Gaza for a pleasure cruise.

Media accounts which portray the Israeli navy as acting unlawfully are nothing more than political posturing.  Throughout history, navies have always enforced blockades against unlawful civilians with deadly force.  The archives of the New York Times include a contemporary first-hand account from the Civil War of a British blockade runner.  In those days, the U.S. Navy was not afraid of using force--even against a neutral British ship in foreign waters:
The [U.S.S.] Tuscarora fired a plank gun as soon as she left her anchorage to arouse the watch, I suppose, partly, and to call us to stop and as a warning of what was coming.  We kept on as hard as we could but the wretched funnel showed the cruiser our course by a great flame.  Bang, bang, ping, went the shot and shell from the Tuscarora as she overhauled us hand over fist.  She is uncommonly fast, and beat our craft all to nothing.  We thought the game was all up.  One shot passed right under our stern, and the last, a shell from his 11-inch Dahlgren, went in a straight line over us, and luckily fell in the water without bursting, just ahead.
In the account above, the British ship ended up escaping from its American pursuer in a storm, but not every blockade runner was always so lucky.  Although the death of some of the Gaza blockade runners is regrettable to modern sensibilities, those who died were not under any illusion about the risk of their mission.  Worse still, by seeking confrontation, this "humanitarian" mission will only prolong the plight of the Palestinians whom they claim to help.