How Green Were My Cronies

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One of the signature issues of the Obama administration has been “green energy.” From its first day in office, the Green Regime has attempted to get America to convert to the so-called “renewable” sources of energy: biofuels (especially corn ethanol), geothermal power, wind power, and solar power.

Behind its ideological commitment to green energy, however, is a solid core of self-interest. It gets a huge amount of financial support from environmental organizations, and a large number of wealthy environmentalists. It is using its funding and regulatory power to reward these donors, giving them not only psychic benefits but also material ones.

In short, it is green for the green.

This crony green capitalism has two sides: a regulatory side (negative) and a subsidization side (positive). Both sides are needed, because “renewable energy” sources are seldom even remotely price competitive with fossil fuels. Not only must they be subsidized by government, because private investors are reluctant to put up their own money for them, but they can become saleable only if the government drives up the cost of fossil fuels by piling up regulations on fossil fuel production.

The regulatory side of crony green capitalism is the administration's jihad against all fossil fuel industries. It has locked away vast parts of the continent from oil and gas drilling, and has fought the new fracking technology tooth and nail. It has set loose the EPA with the goal of ending the use of coal, and has severely restricted drilling in the Gulf of Mexico. And it is opposing even the exploration of the US continental shelf.

The flip side is the lavish subsidization of so-called green energy sources, especially wind and solar. It is here that the play for pay game gets frisky. A flurry of recent reports about who has gotten these taxpayer subsidies dramatically increases the stench of corruption that emanates from the Regime.

It is hard to know just where to begin, but we can start with Solyndra, that striking piece of rentseeking dreck Obama boasted would create tons of jobs. We first learned that the billionaire who backed the company, George Kaiser, was a big donor to and “bundler” (i.e., a collector of donations ostensibly from others) for the Obama campaign. Kaiser’s company Solyndra was given a half-billion dollar loan guarantee by the Green Regime’s Department of Energy (DOE), structured in such a way that if the company hit the wall, the American taxpayer (as opposed to the billionaire bundler) would be liable for the loan. And hit the wall it did.

The regulatory side of crony green capitalism is the administration's jihad against all fossil fuel industries.

Well, now we learn that the entrepreneurial genius, Kaiser, this bien-pensant billionaire who wants so very much to help his country — paid zero income taxes for years. He did this by buying companies that had unrealized losses that he could then use to wipe away his personal income taxes. Kaiser is an interesting pal for a president who has shown deep fondness for bashing “millionaires and billionaires” for not paying “their fair share” in taxes.

It also turns out that an advisor for the loan program that shoveled the cash at Solyndra was — by an astonishing coincidence — a huge Obama fundraiser. This fellow, Steve Spinner, raised over a half-million dollars for Obama. And he is also — by an even more astonishing coincidence — the husband of a lawyer whose firm represented the company during its application for the loan. Moreover, despite the fact that Spinner agreed in writing to stay out of the loan process, emails show that he was involved up to his eyebrows.

It has also come to light that RockPort Capital, one of Solyndra’s biggest investors (and a board member) used its seat on a Pentagon panel that exists to help the Armed Forces identify useful new technologies to push Solyndra on the military. While RockPort disclosed that it had an investment in Solyndra, it never mentioned that the latter was a financial basket-case.

We now also learn that at least four other solar energy firms that received massive loan guarantees had executives and board members who were big donors to major Democratic politicians. These companies include Abengoa SA, First Solar, SolarReserve, and SunPower Corporation.

Start with Abengoa, a Spanish company. (Spain, remember, embraced wind and solar as the key to a jobs renaissance a decade ago. But green energy proved a veritable economic Black Plague for a country that has massive state-induced financial problems.) It turns out that Abengoa has worked with Sen. Dianne Feinstein (D-CA) to get nearly $3 billion in loan guarantees from the Regime to finance Arizona solar farms.

First Solar, upon which the Regime has lavished over $2 billion in taxpayer-backed loan guarantees, is likewise a supporter of the self-same Regime. Its founder and CEO Michael Ahearn donated nearly $125,000 to Democrats in the last election. He cleared nearly $69 million by selling some of his stock last month, even though the company cannot qualify for another loan from the DOE. Ahearn is clearly using the guarantees to keep a shaky company afloat, even as he sells his personal stock. His $125k investment in crony green capitalism has paid off big time — $69 million — while the taxpayer faces a $2.1 billion hosing. No, no corruption there!

SolarReserve is even more choice. The aforementioned billionaire bundler Kaiser (the Solyndra genius) also owns a majority of this rotten company, which got a tidy $737 million taxpayer-backed loan guarantee from the DOE. His company, Argonaut, has a voting share on the SolarReserve board of directors. Another member of the SolarReserve board of directors is one James McDermott, who just happens to have given over $60,000 to various Democrats since 2008, with about half going to Obama’s campaign. McDermott’s company, US Renewable Energy Group, has also donated heavily to Sen. Harry Reid (D-NV), who needs no introduction.

Moreover, another SolarReserve board member, Lee Bailey, is a lavish campaign donor to Regime members and other prominent Democrats. Not to mention the fact that yet another board member, Jasandra Nyker, is partners with the brother-in-law of Nancy Pelosi (D-CA) in an investment company (Pacific Corporate Asset Management). And SolarReserve paid $100K in fees to a lobbying firm headed by Obama’s transitional team leader John Podesta, to push its loan and other interests.

Then there is SunPower, whose stock price has recently plummeted with its projection of losses for this year and next. It received a $1.2 billion taxpayer-backed loan guarantee, even after it announced that it would be building its solar panels in a new plant — in Mexico! So much for the idea that “green jobs,” paid for by Americans, would go to Americans.

SunPower gave $14,650 to Congressional Democrats in 2010 (and $500 to one Republican), with about a fourth of the money going to Reid. Oh, and the company paid nearly $300K to a lobbying firm headed by Reid’s close associate Patrick Murphy. Another major SunPower lobbyist just happens to be the son of Rep. George Miller (D-CA), who touted for the company in Congress, and publicity-toured its plant with the Regime’s interior secretary, Ken Salazar. The right honorable Rep. Miller also received funds for his own campaign war chest from the company in question.

SunPower, by the way, now has a market capitalization of only $800 million, not much in the face of corporate debt of $820 million, and is facing a mass of investor lawsuits. No doubt it will, like Solyndra before it, eventually hit the wall and hose the taxpayers.

In general, the solar energy boom is going bust, because it was solely a function of political, not market, forces. Taxpayer money was shoveled to economic losers, to enrich the crony capitalists who shoveled money at the Regime.

Let’s turn next to the latest news on electric cars (EVs). Start with the frisky Frisker fiasco.

Frisker Automotive is a Finnish company that makes pricey EVs — cars in the $100K range, sticker price, making them attractive to movie stars such as Leonardo DiCaprio, but few others. Fisker was given — yes, you guessed it! — a $529 million dollar taxpayer loan guarantee from the Energy Department. No doubt pushing the idea was Reverend Al Gore, the Green Giant who is also a major investor in — Fisker! (Gore, by the way, has already earned tens of millions from preaching the environmentalist religion, making him eerily similar to a corrupt televangelist.) Also on the list of investors in Fisker Automotive are several big donors to the Obama regime, and also John Doerr, one of Obama’s advisors.

So much for the idea that “green jobs,” paid for by Americans, would go to Americans.

The Regime justified the loan on the usual lying basis, i.e., that it would bring jobs to Americans. Vice President and Chief Buffoon Joe Biden bragged that the Fisker loan would create “thousands” of American manufacturing jobs. But Fisker has just announced that because it couldn’t find any facility in America suitable for building its cars, it will build them in Finland. Again, so much for the idea that American tax dollars are bringing jobs to America. Oh, and Fisker's electric motor and batteries are made in China! All of these cars will get a $7,500 tax credit, meaning that the few rich buyers of the Finnish-made cars with Chinese-made innards will have part of the tab covered by average-income American taxpayers. Comedy writers must have scripted this.

The kicker is that the Fiskers that were recently showcased in DC are not pure EVs, but hybrids, whose gas mileage is about that of an older model Ford Explorer.

By the bye, also receiving a similar-size taxpayer loan guarantee is Tesla Motors. Tesla’s main investors include Larry Paige and Sergey Brin, both Google-billionaires who lavishly supported Obama. So much for their corporate motto, “Don’t be evil.”

Then there is EnerDel, a maker of lithium-ion car batteries. Back in 2009, Obama doled out $2.4 billion in grants to battery makers to support EVs, including $118 million to EnerDel. Again, the insufferably dense Joe Biden saucily minced around two EnerDel plants in Indiana, boasting before cameras that the administration wasn’t only creating jobs “but sparking whole new industries.”

EnerDel, which has never turned a profit since its founding nearly a decade ago, closed the last fiscal year with a whopping $165 million loss, a mindboggling $100 million more in losses than it had reported previously. Its shares have plummeted 95% in the last years, down to a risible 27 cents a share. Nasdaq looks like it will delist the stock, and Ener1 — the parent company — has notified the SEC that it “is in the process of determining whether the company has sufficient liquidity to fund its operations.”

In short, it’s a goner, and when it goes, the taxpayer will again eat a big loss. This company was dicey all along, but the Regime still threw money at it — because it is only taxpayer money.

EnerDel also got huge support from the state of Indiana, promising 1,700 new jobs by next year and 3,000 in four years. Unfortunately, it only employs 380 people, and they look like goners, too.

The problem is obvious, at least to everyone but the cretins and corrupt clowns who populate the Regime: the market for EVs is and will remain tiny, given their inherent limitations.

Now, let’s look at wind power. First is the news that Obama went out this month to raise money with a “businessman,” a supporter of long standing, named Tom Carnahan. They chummed it up at a $25,000 a plate fundraising dinner for the Obama reelection campaign. (That has a sickening ring, doesn’t it?) Carnahan is another bundler, having garnered between $100,000 and $200,000 for Obama in 2008.

Al Gore has already earned tens of millions from preaching the environmentalist religion, making him eerily similar to a corrupt televangelist.

Yet by amazing coincidence, Carnahan is the head of a wind power company, Wind Capital Group, which just happened to receive $107 million in federal tax credits from the Regime. By the same kind of coincidence, Carnahan is part of the Democratic family that has long dominated the state’s political scene, and a brother of Congressman Russ Carnahan (D-MO).

Even more egregious is the case of the Shepherds Flat project in Oregon.

Shepherds Flat is an 845-megawatt wind farm that will cost $1.9 billion. Of this, astoundingly, the DOE will pay the developers $490 million in an outright cash grant, and give them another $1.06 billion in loans. The developers are putting up only about 11% of the total cost, and — according to Carol Browner (the Regime’s own “energy czar”) and Larry Summers (its economic advisor) — they will reap a staggering 30% return on their investment. This compares very favorably with the average 7.1% that most utility companies receive on their projects.

And just who might these lucky “entrepreneurs” be? The biggest player is — wait, let the suspense build! — GE!, which is being joined by Google and a couple of other partners. Google, as I mentioned earlier, was a big donor to Obama’s campaign. And GE? It is headed by Jeffrey Immelt, whom Obama appointed head of the President’s Council on Jobs and Competitiveness. And he was a big donor to Obama as well, natch.

This is the same GE that has a market cap of $170 billion, earned $5.1 billion in profit last year, and paid no taxes at all. Did it really need the money?

The project is questionable on other grounds as well. It is being built in a region that is already experiencing electricity congestion (the region of the massive Bonneville Dam). CNNMoney reports that it will create only 35 permanent jobs, which works out to around $16 million per job. Not that GE really cares much about American jobs — it is shipping its medical devices division to China.

No, no corruption here. None at all.

By the way, geothermal is looking pretty putrid, too. Two large geothermal companies, Raser Technologies and Nevada Geothermal Power, both received massive taxpayer backing, and are both sucking wind — the same wind that the solar and the (literal) wind companies are sucking.

Raser Technologies received a $33 million grant from the DOE. After pissing away all that taxpayer cash, along with a couple of hundred million bucks in private investor cash, the company has now filed for bankruptcy.

And Nevada Geothermal — a favorite pet of Harry Reid — received $66 million in grants from the Department of Energy, as well as a nearly $99 million taxpayer-backed loan guarantee. But it has just revealed that it has never operated at a profit for even one lousy day, and that it, too, is facing oblivion.

Still another geothermal company, US Geothermal, received a $97 million loan from the Department in February of this year, even though its financial filing with the SEC shows it hasn’t made a profit — in four years. And the stocks of two other geothermal companies that also got DOE loans are down 60% to 80%. These are just some of the tidbits of recent news from the taxpayer-supported green energy front.

Now, every time I report on the green "capitalism" that has been shoved down the throat of the American taxpayer by this corrupt Regime, I get wails of tearful anger from its supporters. The wails are of two types.

1. I am told that Republicans (especially the Evil Bush) have also supported various green energy projects. So, for example, the aforementioned Raser Technologies was backed by Sen. Orrin Hatch (R-UT). I am aware of that, and I criticized Bush in these very pages for doing the same thing.

But please spare me the simple-minded faux equation of the past administration with this one. There are massive differences in scale and focus. Bush did fund some green energy projects, but never on this massive scale. And his administration allowed oil, coal, and natural gas to flourish, and took the heat for it. He was pilloried for being too fond of fossil fuels. He was portrayed in the mainstream press as a creature of the oil industry; and Cheney and Halliburton — God, we never heard the end of that. Bush at least tried to push everything. . . . I certainly would have much preferred that he had pushed, or freed up, only what works (fossil fuels and nuclear power), but his approach was certainly better than the present crusade against fossil fuels, inaction on nuclear energy, and a massive splurge in technologies that are proven losers, yet owned by supporters.

The problem is obvious, at least to everyone but the cretins and corrupt clowns who populate the Regime: the market for electric vehicles is and will remain tiny.

You have to be blind to all recent history not to comprehend that since Carter at least, the Democrats have been by far more focused than Republicans on pushing inefficient green energies. Granted, Public Choice Theory posits that all politicians (Democrat, Republican, Communist, or Libertarian) are self-interested, so will be prone to spend public resources to advance their careers. But the point here is that precisely because green energies are absolutely commercially unviable without subsidies, while fossil fuels are extremely viable, a fossil fuels based energy program won’t need much subsidization, so will leave less scope for paying off supporters.

Really, if Obama dropped hydrogen bombs on every major red state in America, these same apologists would squeal, “But Bush bombed Iraq!”

2. I am told that I am being “hyperbolic.” In no way, these Regime apologists yelp, can the Green Regime be compared to, say, that of Putin.

My response is to ask the reader, with all we now know of the crony car capitalism, the crony green energy capitalism, and the numerous other crony dealings between the Regime and its supporters over the last three years, whether the comparison isn’t just. You decide: am I really being hyperbolic, or are the supporters of the Regime being merely obtuse?

While entertaining that question, you might consider this point. What has come to light so far has come out basically from the investigations of the alternative media. The mainstream media have done very little to look into any of the Regime’s scandals (contrast the unremitting, endless investigations of Bush). The Republican-controlled House of Representatives held some feckless hearings on the Solyndra farce, and only saw Solyndra’s executives smirk and plead the Fifth. If there were — as there ought to be — Watergate-style hearings into the whole green energy boondoggle, as well as the whole Government Motors scam, just imagine (if your stomach can bear it) what would come to light.

it announced that it would be building its solar panels in a new plant rdquo; of American manufacturing jobs. But Fisker has just announced that because it couldn$2.4 billion in grants




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A Prayer for the Council of Economic Advisors

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Have you ever said a prayer for the President’s Council of Economic Advisors (CEA)?

Neither have I.

It seems an odd thing to do, doesn’t it? To nonbelievers, it would, of course, be a pointless act, and while it would not necessarily be pointless to believers, surely even they would see it as presumptuous.

In any case, people do say prayers for their leaders, particularly in times of strife; and since we may be entering such a time, I have selected a prayer for the CEA just in case I ever feel the urge to use it.

It is a simple prayer, taken from the King James Bible, Luke 23:34: “Father, forgive them; for they know not what they do.”




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What Is a Job?

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The usual chatter has begun following President Obama’s Sept. 8 call for a $417 billion government spending package designed to stimulate economic growth and create jobs. As always, the commentary, both pro and con, focuses on speculation about the results of the program. Will this latest stimulus money actually reach “shovel-ready projects,” or will it disappear down the black hole of state subsidies for Medicaid and education? How many jobs will the program actually create, and what happens to those jobs when the program is over?

There is never any clear winner in debates of this nature. While the future is still unknown, Republicans will predict failure while Democrats will predict success. Once the program is over, Republicans will pronounce failure while Democrats will declare victory. The retrospective debate about the results of the program will continue until the media move on to something else. The debate will be resurrected at election time when Republicans will characterize the program as another “bridge to nowhere” and the Democrats will claim that it saved the economy.

Even after the fact, there is rarely a definitive answer to questions about the results of government action, as compared to government inaction. This may be one reason why most government programs never really end. The answers are much less ambiguous and elusive when the discussion is shifted from results to rights. But before exploring how Obama’s program affects the rights of the various parties involved, we must answer a previous question.

What is a job?

One might assume that everyone knows the answer to this apparently simple question, but I doubt that’s true. In fact, judging by what politicians, media, and even friends and neighbors have to say about jobs and unemployment, I’m convinced that almost no one in America today understands what a job really is.

As I’ve said before, a job is a transaction between a buyer and a seller. The employer is the buyer and the employee the seller, selling his services to the employer for a mutually agreed upon price. This is a voluntary transaction for both parties, just like the buying and selling of lawn mowers or breakfast cereal. The buyer offers to purchase services at the price he can afford, and the seller decides whether to accept those terms or not. Both parties are free to decide not to go through with the sale. Unless a specific term of employment has been agreed to, both parties are also free to cease doing business at any time. The employee can quit the job (refuse to continue selling the service) and the employer can terminate employment (refuse to continue purchasing the service).

There is only one way in which a purchaser of services can continue to employ people on an ongoing basis. The services provided by the sellers must produce some product that makes a profit. If the firm loses money, then the employer must increase his sales or lower his operating costs. The latter solution most often means purchasing fewer services (layoffs).

The voluntary association between the buyer and the seller of services (the employment contract) depends upon another voluntary association between the firm and its customers. The firm’s customers must choose to pay more for the firm’s products than the cost of producing them, including labor, material, rent, administration, and all other costs of production. It is that choice by customers that creates a market value for the products, for the market value is merely the amount of money the highest bidder will voluntarily pay. If no one was willing to buy the firm’s products at any price, then those products would have a market value of zero.

When the opportunity exists to sell products at a higher price than the cost of producing them, it typically attracts more than one firm, and those firms compete with each other for the customers willing to buy their products. Thus, employment opportunities become abundant in that particular industry, as more and more firms enter the market to take advantage of the opportunity.

Before the first product of any of these firms is created, the owners must purchase the labor, materials, production facilities, equipment, and other capital goods necessary to make its products. The owners purchase these capital goods and labor with savings — which are the result of consuming less than they (or their lenders) produced over a period of time in the past. The only reason they choose to invest these savings is the opportunity for profits. Without that opportunity, they would consume their savings in the present or hold them for security against future misfortune instead of risking losing them by starting a new firm.

Almost no one in America today understands what a job really is.

As long as there are customers willing to buy the products the firm produces, the model is self-sustaining and productive. From a societal view, the owners, employees, and customers are adding more goods and services to society. Remember that the customers are only able to buy the firm’s products because of the products they’ve produced and sold to their customers, including their employers. Just like the firm, they must produce products that other people are willing to buy voluntarily. This is what gives them their purchasing power.

There is one word that sums up the entire process of economic growth and job creation: choice. The market price of products, the wage levels that can be sustained in the production of those products, the number of people who can be employed, and the quantity of products that can be produced — these all depend on the ability of economic agents to make rational choices in their own self-interest. Without freedom of choice, there can be no market, no division of labor, no prices, and ultimately no jobs. It is the degree to which all economic agents are free to make the best choices they can that determines how productive, efficient, and prosperous an economy will be.

All of this goes out the window the minute that one begins talking about the government’s “creating jobs.” By definition, nothing the government does allows any individual freedom of choice. This is where most people get confused, because they imagine the government to be a wealthy benefactor with money of its own. This misconception is reinforced whenever President Obama (and neither he nor the Democrats are by any means alone on this) refers to government spending programs as “investments.” It all sounds very prudent and morally sound, until one considers what is really going on.

Whenever the government “invests” in a particular industry, whether it is producing “green” cars, bridges, buildings or roads, it is overriding the choices made by customers. I refer to the choices made by taxpayers not to purchase that car, bridge, building or road, but to purchase something else, something they actually want and are willing to pay for. As we’ve seen, when there are people willing to buy products at a price higher than the cost of producing them, there are entrepreneurs ready to take advantage of that opportunity, and the products get produced. Customers do not choose to do this to help society, but to help themselves; nevertheless, they do help society by producing the needed or wanted products and employing the people necessary for that production.

Government-created jobs actually make society poorer, because they result in products that are worth less than the cost of producing them.

When government intervenes, not only are taxpayers forced to purchase products that they have previously chosen not to buy, but the entire nature of the employment contract is fundamentally changed. No longer does an employer purchase services from an employee for the sole purpose of realizing a return on his capital investment. Now, the taxpayer is forced to purchase the services of the employee, with no hope of the return he desired for his money. The best he can hope for is that somewhere a bridge, building, or road that he had previously chosen not to pay for gets built, or some service is rendered at a higher price than anyone had been prepared to pay. Employers who happen to be the beneficiaries of government intervention are able to make profits that would otherwise be unavailable to them, but only because the government has forced taxpayers to pay at least part of the operating costs.

While society does get a new car, bridge, building, or road, and some people get government services, the value of those products is lower than the cost of producing them. This is why government-created jobs end as soon as the government stimulus money is removed. If the products produced and the jobs related to producing them were economically viable, entrepreneurs would already be creating them. Government-created jobs actually make society poorer, because they result in products that are worth less than the cost of producing them. Ironically, politicians often boast that they created more jobs than their opponents — which actually means that they created more poverty than their opponents.

By definition, all government spending comes from savings, because it is wealth produced by economic agents but not consumed. Therefore, government-created jobs actually destroy capital, as no self-sustaining production or profits result from that capital investment. Not only is that capital wasted and destroyed on the unproductive temporary jobs, but it is no longer available to create other jobs producing products that people would voluntarily buy. But in terms of the economic harm caused by government stimulus, this is only the tip of the iceberg. For more, read Peter Schiff’s testimony to Congress on this subject as well as one of his primary sources, Frédéric Bastiat’s That Which is Seen and That Which is Not Seen.

Once you understand what a job really is, a lot of what you hear about jobs from politicians and the media sounds completely outlandish. You may hear it stated that everyone has a right to a job, but that can’t be true. How can anyone have a right to force other people to buy his products? If such a right existed, then no company need ever go bankrupt. Whenever it began losing money, it would simply appeal to the government to protect its right to force people to buy from it; the government would oblige; and the economy would support every one of the otherwise bankrupt businesses.

More often you will hear that everyone has a right to “a living wage,” but this makes no more sense. The price of any product in a free society is the result of mutual agreement between the buyer and the seller. Either party has the right not to make an exchange if he is not satisfied with the price. Government interventions, such as minimum wages, obviously interfere with this right. In fact, it is the seller of services (the employee) whose rights are most infringed by minimum-wage laws, which prevent him from selling his services below a certain price even if he wishes to, thereby enabling employers who otherwise could not afford him to offer him a job. That anyone believes that the government has a legitimate authority to set an arbitrary price level and then forcibly prohibit people from selling their services at a lower price speaks volumes about how little we value freedom in the land of the free.

No, the supposed right to a job or the right to forcibly fix the price of a job are not real rights. They both involve initiating the use of force against other people, and no one has a right to do that. In fact, the true rights that are at issue with this program are the rights of the unwilling buyers, the taxpayers. They have a right not to be forced to buy goods or services against their will. Yet violating this right is the only way in which any government can ever create a single job. The fact that the debate between either major party is over how the government could create jobs, rather than whether the government should attempt to create jobs, reinforces the fact that liberty is not even a consideration in the formulation of federal government policy.

It is the government’s thousandfold trampling of liberty that has created the economic malaise that the government is now trying to end. If we ever want to see the unemployed people get back to work, we have to understand what a job is and how and why jobs are created. Then the government's part in the solution will become clear: Start securing our rights instead of violating them. Stop wasting our money, and our opportunities, in the misguided attempt to “create jobs.”



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Getting Ready for October 21

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For a long time,  I’ve been reporting on the apocalyptic prophecies of Family Radio, the group that identified May 21, 2011, as the date for the manifestation of Christ and the rapture of God's elect. When that date passed without either the Rapture or the great earthquake that Family Radio’s founder and chief, Harold Camping, had predicted, it was a big news story. It got enormous attention around the world. As I’ve been saying, this was actually a significant event, not just a media event, because it provided the best chance we’ll probably ever have of seeing what occurs when prophecy conclusively fails for a large group of people.

What followed May 21 was a process familiar to students of apocalyptic history — the spiritualization of the failed prophecy. Camping, who at first seemed stunned by the complete normality of May 21, soon decided that the earthquake had actually occurred, but it had been a spiritual earthquake, signaling an invisible and wholly spiritual Last Judgment. According to him, the enrollment of the elect had been completed; all that remained was the final elimination of the non-elect, which would take place, as he had previously prophesied, on October 21, 2011, when the physical universe would be totally destroyed. God's activity would thus be visible on October 21 as it should have been on May 21. Camping suggested that the remaining months of Family Radio’s existence would be devoted to quiet cultivation of the spiritual lives of the elect, not the attempted conversion of persons irrevocably condemned.

Already, however, there was strong evidence that many, if not most, of the people at Family Radio's headquarters in Oakland, California were dissenters from the official message. Most broadcasts on the worldwide radio network had ignored Camping's distinctive doctrines and predictions. Many broadcasts were devoted to presentations that contradicted his doomsday prophecies — discussions of health maintenance, provision for old age, long-term strategies for child rearing, care for the environment, and so forth.

Camping’s new emphasis appeared to satisfy both the believers and the nonbelievers within the organization. The former could continue to believe whatever he said; the latter could go about their normal business, unworried about the need to convert anyone to his unusual ideas. Family Radio’s website withdrew all direct mention of Camping's endtime books and pamphlets, although it continued, and continues, to run a link to his quaint answer to the question, “What Happened on May 21?

Yes, we got a few details wrong about the second coming, or the total collapse of the financial system, or the destruction of the middle class, or the coming of global warming (which used to be global cooling), but thank the Maker that the Message still got out.

Then, on June 9, Camping, age 89, suffered a stroke. He was hospitalized, and his Monday through Friday live broadcasts ceased. Virtually the only Campingite voice on Family Radio was that of an epigone, one Chris McCann, who kept preaching the party line about May 21 and October 21, though without Camping’s goofy panache. In a recorded talk that FR broadcast on August 12 (one of a series of talks that is still going on), McCann said of the apocalypse of May 21, “In some small degree it didn’t happen.”

In August, Family Radio’s monthly direct-mail fundraising letter quoted listeners who thanked FR for its message, even though May 21 didn’t turn out to be exactly what they had been led to anticipate. “I am not disappointed with anyone at Family Radio," one listener said. "I believe all intentions were good.” The letter betrayed no visible embarrassment on FR's part. But the September letter didn't mention May 21, or October 21, either. It contented itself with an understated request for support. So the stage was set for a full, though gradual, withdrawal from predictions and disconfirmations.

On September 20 came the news, delivered by website, that Camping had returned to his home, followed on September 27 by a recording of Camping’s own voice — firm and clear, only a little slurred, and precisely the same in reasoning and intention as his pre-stroke explanations of what had occurred and will occur in 2011.

In this new message, Camping reasserted the idea that October 21 will see the end of the physical universe. The elect will survive; the non-elect (everyone not saved by May 21) will perish eternally. His one addition came in response to a question of urgent concern among his remaining followers: what will happen to the unsaved members of our families?

Camping had already established the doctrine that only 200,000,000 people, out of the billions who have ever inhabited this planet, are among the elect. Now he offered consolation to people about to be deprived of their families and friends. He said it is likely that there will be no violence on October 21: “Probably there will be no pain. . . . They will quietly die and that will be the end of their stories.”

“The end," he went on, "is going to come very, very quietly, probably during the next month, probably by October 21.” Lest you mistake “probably” as a concession to uncertainty, he also said, “I am very convinced that all the elect will go to be with the Lord in a very few weeks.” Regrettably, however, from the point of view of his own credibility, he recurred to an idea that he had been preaching before his stroke — his explanation of why God had let him go so wrong about May 21. There were a lot of things, he said, that “we” didn’t understand, but it was good that God had withheld the full truth; it was good that God had let Camping declare, in the most dogmatic terms, that there would be a literal cataclysm on May 21 — because if he hadn't, the rest of his message wouldn't have aroused much interest.

Here is the unconscious cynicism that religious and secular prophets so often display. Yes, we got a few details wrong about the second coming, or the total collapse of the financial system, or the destruction of the middle class, or the coming of global warming (which used to be global cooling), but thank the Maker that the Message still got out. So please keep trusting and respecting us, the people uniquely qualified to convey such Messages.

I will continue to report on events at Family Radio. My current, highly fallible prediction is that within a few months after October 21, Mr. McCann will vanish from the broadcast schedule, the greatness of Mr. Camping will be institutionally recalled, but not his teachings, and Family Radio will return to a more or less typical Christianity — unrepentant, unconfessed, and unwilling to remember the great events of 2011. Such is the way of this sinful world.




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Risky Business

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There I was, minding my own business and rereading Emerson’s Nature (with the intent of writing something about how the Transcendentalists would reject out of hand today’s “green” cult) when I was interrupted by rhetoric so strikingly stupid I was compelled to put down the old book.

The president was on the television, babbling:

And when you look at what independent economists are saying about the American Jobs Act, my jobs plan, uniformly what they are saying is, this buys us insurance against a double-dip recession, and it almost certainly helps the economy grow and will put more people back to work, and that's what the American people want . . .

It’s excruciating to me how this affirmative action-borne halfwit misuses the word “insurance.” And this is more than just a semantic objection — the stupidity that statists show about matters of risk and insurance are a major reason America is stumbling toward bankruptcy.

I make my living writing about risk and insurance for professionals and interested laymen. It’s important stuff, a nexus of philosophy and finance. So it galls me particularly when some hack yammers about “insurance against . . . recession.” That’s like insurance against bad luck or unhappiness. There’s no such thing.

Insurance entails many elements but two are most important: risk identification and risk transfer. The first involves understanding and organizing the specific causes of loss that a person or entity faces in given circumstances. The second involves finding a counterparty willing — for a fee — to indemnify the person or entity against the losses that occur from those specific causes.

The point here is that no one, and no form of insurance, can eliminate risk. All that insurance does is move the risk around. Done well, it moves the risk in a way that makes economic sense to all parties involved.

The president believes that his latest spending spree is insurance. If so, who’s the person or entity identifying the risk? He? We? And who’s the counterparty agreeing to indemnify against the specific losses? They? A bunch of rich guys who aren’t Jeffrey Immelt?

The answer, of course, is nihil and null set. The American Jobs Act transfers nothing and insures against nothing. And I hazard the prediction that will accomplish nothing.

Hacks like Obama confuse the concepts “insurance” and “subsidy.” And this isn’t a new mistake for the president. Four years ago, when I reviewed his meager campaign document The Audacity of Hope for this magazine, I wrote:

Obama’s most tortured pages are the ones that deal with issues of risk and security in public policy. Like most statists, he has a weak understanding of risk theory.

“The bigger the pool of insured, the more risk is spread, the more coverage provided, and the lower the cost. Sometimes, though, we can’t buy insurance for certain risks on the marketplace — usually because companies find it unprofitable. Sometimes the insurance we get through our job isn’t enough, and we can’t afford to buy more on our own. Sometimes an unexpected tragedy strikes and it turns out we didn’t have enough insurance. For all these reasons, we ask the government to step in and create an insurance pool for us — a pool that includes all of the American people.” (177–78)

This passage makes Obama seem either ignorant or willfully misleading about risk allocation and insurance. . . . no [counterparty] — including the state — can “step in” and create a risk pool after a loss (in his words, a “tragedy”) has occurred. The purpose of risk pools is to gather resources before a loss occurs, so that they can be allocated when one does.

That part about stepping in and setting up risk pools after a loss is important. It’s essentially what Obama is doing now — arguing for more borrowed money to be spent “creating jobs” after high unemployment numbers have been reported.

This willful stupidity about risk and insurance explains much about Obama’s ineffectiveness as an executive. And I still wonder today what I did four years ago: do statist hacks believe in collectivism because they don’t understand risk and rewards? Or do they believe in collectivism first and then ignore risk because its rules contradict their halfwit pieties?




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Getting There from Here

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Libertarians have little reason for optimism these days. Things could have been different. If government interventions since the 1930s had not crowded out profit-oriented enterprise, then programs for retirement, medical care, relief of poverty, dependable energy, and protection of property rights and of the environment would have evolved in more satisfactory ways. Private enterprise would have taken account of increasing life expectancy, increasing mobility, reduced intergenerational solidarity within families, improving medical technology, and changes in the labor force and labor market. The details of flexible evolution could not have been (and cannot now be) foreseen.

Government has forestalled any such evolution. The Great Depression, itself the consequence of botched policy, brought many experiments, including Social Security and privileges for labor unions. Wage controls in World War II brought employer-centered medical insurance. Politicians now have ample opportunities to urge their bright ideas, including more regulation as well as more spending.

It is easy to recommend limited government in a libertarian society. But how can we get there? “Entitlements” and commitments to police the world have saddled the government with extreme financial burdens on top of the explicit and ever-growing national debt.

Libertarian politicians must be willing to negotiate. Academicians, though, should not fudge their analyses in hopes of political influence. A generation ago, Clarence Philbrook rightly condemned such “realism” (American Economic Review, December 1953). Among politicians, everything should be on the table, even tax increases. I rather admire the sober approach of the Simpson-Bowles commission. It is scandalous that politicians should be intimidated into signing Grover Norquist’s antitax pledge. The recent debt-ceiling increase may have been a legitimate bargaining chip, but it was irresponsible to resist any compromise that included it. It is deplorable to call people like Michelle Bachmann libertarians (as I have heard in conversation). The Republican presidential aspirants (including, apparently, the eager-to-be-drafted Sarah Palin) hardly command enthusiasm. Among academics, dogmatic outright anarchists also harm the cause of a free society.

Getting there requires starting from here, which requires restoring government fiscal health on the way. (Remember about sometimes taking one step back to take two steps forward.) Ways can be found to shrink deficits and debt as fractions of GDP and eventually even in absolute terms. That is feasible, fiscally and economically.

Politically — that is another story. Voters, by and large, have become too dependent on government to tolerate libertarian ideas any time soon. Drift will continue, and the government will eventually have to repudiate its debt and other commitments. Default will not come openly but through inflation, through destruction of the dollar.

I am anxious to be shown wrong. Can anyone offer any plausible grounds for cheer?




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Cesspools of "Education"

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As readers of this journal know, I like to highlight work being done by classical liberal thinktanks. A recent piece by the estimable George Leef of the John William Pope Center for Higher Educational Policy affords me the opportunity to do so. It touches a topic about which I have written myself.

The topic is the dirtiest, darkest secret in American education: the general weakness of university education departments, through which pass most future teachers. These departments effectively control the teacher credentialing process in most states. They are truly cesspools of educational mediocrity.

Leef reviews a paper by an economist, Cory Koedel of the University of Missouri. Koedel conducted a detailed analysis of the grades given in education department courses, and we are all shocked — shocked! — to find grade inflation rampant.

Koedel found that profs in education departments award good grades to virtually all their students. In many ed school classes, all “students” receive As. It’s Carrollean: all the kids are winners, so all must have prizes. Koedel notes that this was recognized as a problem half a century ago. And I recall reviewing a book back in 1987 (Education’s Smoking Gun, by Reginald Damerell), a book that excoriated ed departments as hopelessly obstructionist and patently useless. But given the continuing decline of American students in the international rankings, this matter seems worth addressing with renewed interest.

Koedel notes that one reason for the easy grading is that there is no market discipline to check it. If an engineering department routinely gave As to even the most incompetent students, the market would punish it—very soon, its graduates would simply not find jobs. But no such discipline faces incompetent education school grads.

Of course, if we privatized the public school system by voucherizing all the schools, there would suddenly be market discipline. But I won’t pursue that topic here.

Leef adds a second reason for the fact that grade inflation is especially rampant in ed departments: they are ruled by an ideology that includes the view that the role of the teacher is to impart self-esteem directly to the student. Ed profs are merely being consistent — making their students feel good by shoveling the As at them.

I have no doubt that a big part of the problem with ed schools is a loopy leftist ideology, a kind of aging hippie Weltanschauung that worships books like Pedagogy of the Oppressed. It’s no surprise that when Bill Ayers decided he wanted to stop waging revolution and start working for wages, he became an ed school prof.

But I suspect that another part of the problem is simple ignorance about how to instill self-esteem. Alas, ed school profs don’t read Aristotle (he is, after all, a really dead white male). His view is one that the best teachers instinctively hold. It is that the way to create self-esteem is not to try to instill it directly, but instead to help each student develop his potential, his virtues; and from the exercise of his virtues he will get his rightful self-esteem. If you have a student who has ability at, say, math and music, encourage her to develop those abilities as far as she can, and from the mastery of those subjects will flow her self-esteem.

I am grateful to Leef for pointing out something of which I was unaware. Japan — a country where student performance has traditionally been excellent — has no ed schools. All teachers must actually get an undergraduate degree in an actual academic subject, and then find a teacher with whom they can apprentice, to learn the mechanics of the profession.

This raises the intriguing question of whether we could implement such a system here. Certainly something like that is being done by the group Teach for America, which takes Ivy League graduates in solid subjects and just gives them a course in the mechanics of classroom instruction. Its graduates are highly sought after.




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More on Government Motors

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Earlier this year, President Obama went on one of his gloating tours, touting the wisdom of his nationalization of General Motors and Chrysler. Theirs was a corrupt bankruptcy that strongly rewarded the UAW, one of Obama’s major financial contributors. The new GM then posted a few months of improved sales, leading to much crowing by all the corrupt cocks.

But lately, the road for what is derisively termed “Government Motors” has become rather bumpy, as illustrated in a recent story. The report is about how the New GM is trying desperately to get a dismissal of a class action lawsuit filed on behalf of 400,000 Chevy Impala owners.

The suit, filed by one Donna Truska, argues that the Impalas — made between 2007 and 2008 — had defective rear spindle rods, leading to rapid tire wear. The plaintiff claims that GM has breached its warranty, and demands that GM fix the cars.

But the new GM argues that since the cars were made by the Old GM, it is not liable for the repairs, and the 400,000 Impala owners should therefore go to hell. Of course, the New GM was only too happy to take over the losses of the Old GM so it could stiff other taxpayers out of future taxes on the New GM, but it doesn’t want to assume any liabilities.

And of course, back in March of 2009, as GM headed toward bankruptcy, Obama promised that in any action he took to “save” GM, consumers would have their warranties honored. As he trumpeted at the time, “Let me say this as plainly as I can. If you buy a car from Chrysler or General Motors, you will be able to get your car serviced and repaired just like [sic] always. In fact, it will be safer than it has ever been. Because starting today, the United States will stand behind your warranty!”

Another Obama lie, of course. He stood behind GM warranties about as much as he has stood behind the American dollar . . .

Meanwhile, shares of the New GM hit a new low of $22 a share.




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The Passing Paradigm

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The latest much-ado-about-nothing crisis passed, with a result that should seem familiar. In 2008, Americans were told that if the TARP bill (a $787 billion taxpayer-funded welfare handout to large banking institutions) wasn’t passed, the stock market would crash and massive unemployment would follow. After an unsuccessful first attempt to pass the bill amid angry opposition from constituents, the bill passed on a second vote. Subsequently, there was a stock market crash followed by massive unemployment.

This time, our political-media cabal told us that if Congress was unable to pass a bill to raise the debt ceiling, the government would not be able to meet its short term obligations, including rolling over short term bonds with new debt. US debt would be downgraded from its AAA status, and a default would be imminent. After the melodrama, Congress passed the bill raising the debt ceiling. Standard and Poor’s subsequently downgraded US Treasury debt anyway, and deep down everyone knows that a default is coming as well, one way or another.

We are seeing the end of a paradigm. Thomas Kuhn argued in The Structure of Scientific Revolutions (1962) that anomalies eventually lead to revolutions in scientific paradigms. His argument holds equally true for political paradigms.

A paradigm is a framework within which a society bases its beliefs. For example, people at one time believed that the forces of nature were the work of a pantheon of gods. Sunlight came from one god, rain from another. The earth was a god, as was the moon. With nothing to disprove the premises of the paradigm, it persisted. People went on believing that sunlight and rain were the work of sunlight and rain gods because there was no compelling reason for them to believe otherwise.

However, within any paradigm there are anomalies. Anomalies are contradictions — phenomena that cannot be explained within the framework of the paradigm. People have a startling capacity to ignore or rationalize away these anomalies. While it may defy logic to continue to believe that rain comes from a rain god even after evaporation and condensation has been discovered and proven, people would rather ignore the anomalies and cling to the paradigm than face the fact that the paradigm is false.

There is at least one thing that will be quite obvious: centralized government is insane.

But once there are too many anomalies, the paradigm fails, and a new one must take its place. This new paradigm renders the old one absurd, even crazy. At some point in the future, people will look back on the political paradigm of the 20th and early 21st centuries. There is at least one thing that will be quite obvious to them: centralized government is insane.

Consider the premises upon which this present paradigm relies: all facets of society must be planned and managed by experts. The judgment of the experts trumps the rights or choices of any individual. The choices made by the experts will result in a more orderly society and greater happiness for the individuals who compose it. There will be better results from one small group of experts controlling everyone than multiple groups of experts controlling smaller subgroups of society.

Of course, libertarians reject every one of these assumptions on its face. A free society does not tolerate “planning” or “management” by anyone. All choices are left to the individual, as any attempt to plan or manage his affairs amounts to either violation of his liberty, looting of his property, or both. However, let’s assume that the first three assumptions of the present paradigm are valid and merely examine the last. Even that does not hold up to scrutiny.

Suppose an entrepreneur starts a business. At first, his market is local. He opens retail outlets that are overseen by store managers. The entrepreneur is the CEO of the company and manages the store managers. Even at this point, the CEO must trust day-to-day decisions to his managers. He has no time to make everyday decisions as he tries to expand his business. The managers do this for him and he concentrates on strategic goals.

His business is successful and soon he begins opening outlets outside of the original market. He now has a need for regional managers to manage the store managers. He manages the regional managers and leaves the details of how they operate within their regions to them.

The business continues to expand. With retail outlets in every state, there are now too many regions for the CEO to manage directly. The CEO appoints executive directors to manage larger regions, each composed of several smaller ones. There is an executive director for the West Coast, another for the Midwest, and another for the East Coast. Of course, the CEO has the assistance of his corporate vice presidents who manage sales, operations, human resources, and other company-wide functions from the corporate office.

Now, suppose that one day the CEO decides to fire the executive directors, the regional managers, and the store managers. He will now have the salespeople, stock clerks, and cashiers for thousands of retail outlets report directly to him and his corporate vice presidents. Would anyone view this decision as anything but insane?

As silly as this proposition sounds, this is a perfect analogy for how we have chosen to organize society for the past century. The paradigm rests on the assumption that every social problem can be better solved if the CEO and his corporate staff manage the cashiers and the salespeople directly. As in all failed paradigms, anomalies are piling up that refute its basic assumptions.

This paradigm assumes that centralized government can provide a comfortable retirement with medical benefits for average Americans, yet Social Security and Medicare are bankrupt. It assumes that a central bank can ensure full employment and a stable currency, yet the value of the dollar is plummeting and unemployment approaches record highs (especially when the same measuring stick is used as when the old records were set). It assumes that the national government’s military establishment can police the world, yet the most powerful military in history cannot even defeat guerrilla fighters in third-world nations. It assumes that the central government can win a war on drugs, yet drug use is higher than at any time in history. It assumes that experts in Washington can regulate commerce, medicine, and industry, yet we get Bernie Madoff, drug recalls, and massive oil spills.

Hundreds of years ago, the prevailing medical science paradigm assumed that illnesses were caused by “bad humors” in the blood. Operating with that assumption, doctors practiced the now-discredited procedure known as “bleeding.” They would cut open a patient’s vein in an attempt to bleed out the bad humors. As we now know, this treatment often killed the patient. Most rational people today view the practice of bleeding as nothing short of lunacy.

Ironically, this is a perfect analogy for the paradigm of centralized government. The very act of a small group of experts attempting to manage all of society drains its lifeblood. It is the uncoerced decisions of millions of individuals that create all the blessings of civilized society. It is the attempt by a small group of people to override those decisions that is killing society before our very eyes. Someday, people will look back on our foolishness and laugh as we do now at the misguided physicians who bled their patients to death. The present paradigm is dying. The revolution has begun.




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A Call to Repentance

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Are there libertarians who still regard President Obama with affection?

I understand that some people voted for him because they wanted to punish Bush and his fellow Republicans. The Republicans were warlike, and they were spendthrifts.

Well, if punishment is on the agenda, I want to be first in line to give some. Plenty, in fact. I’ll never get over George Bush’s ability to lie, lie, and keep on lying. But did you expect something better from Obama, you who supported him?

You did. I know you did. I heard you — at length.

As you said, Bush went to war, twice. But Obama continues running both wars, and he started a third one, the marvelously useless war in Libya. If he doesn’t get us involved in Somalia or Haiti, it will be a wonder.

As you said, Bush spent too much money. But Obama started off by spending a trillion dollars on a feckless economic program. He instituted a healthcare scheme that, basically, nobody wanted, which will cost at least half a trillion more and will give us notably less effective healthcare.

On August 8, Obama addressed the nation’s economic problems by demanding higher taxes and accusing those who don’t (such as you) of having caused the present economic distress. While he was talking, the stock market dropped like a rock. It lost 634 points that day.

But perhaps those who expected something libertarian out of Obama were right in one respect. His presidency has been wonderful for the gold market.




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