Crony College Capitalism

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In several earlier articles in this journal, I began examining the theory and practice of crony capitalism — that peculiar form of statism that ostensibly embraces free enterprise, while arranging for government to control the major economic enterprises by means of its favored supporters (its “cronies”). I suggested that this form of statism is common in failed socialist states, such as Russia, and neo-socialist ones, such as the United States.

Much attention has been paid, by me and others, to the crony car and crony green energy capitalism so artfully practiced by the current administration. But there are many other flavors of crony capitalism. In a recent piece, for example, I touched on what you might call the Obama regime’s crony drug capitalism. Now let’s turn to a flavor that isn’t often noticed. It is what we might term “crony college capitalism.”

Besides studying Saul Alinsky, President Obama has apparently studied Antonio Gramsci, the Italian Marxist theorist who urged his fellow Marxists to go into education, the better to turn regular schools into training grounds for future radicals. Since its earliest days, the Obama regime has been concerned with extending its power in the realm of college education, giving economic rewards to college teachers and students, who are overwhelmingly Obama supporters.

The working class was once a mainstay of the Democratic Party coalition. The new Democratic Party will consist of statist-inclined college educated groups.

Indeed, a recent piece in the New York Times suggests that Obama’s reelection campaign strategy now explicitly recognizes that it has to give up the white working class, except the tiny 7% that is unionized, hence able to contribute largely to the campaign. The working class was once a mainstay of the Democratic Party coalition. The new Democratic Party will consist of statist-inclined college educated groups such as professors, teachers, school and college administrators, therapists, lawyers, librarians, social workers, artists and designers, and their numerous dependents, along with key ethnic minorities.

You can see this calculation at play in Obama’s recent decision to kill the Keystone XL pipeline. The decision cost tens of thousands of blue-collar jobs, but it mightily pleased the environmental lobby, disproportionately college educated folks of statist mindset.

The tactics the Regime is using to corrupt higher education policy for its own benefit are the same it has used elsewhere: identify cronies, expand the size and scope of federal subsidies to them, and expand the size and scope of regulation to attack the cronies’ competitors. More succinctly, the Regime’s crony capitalist game in higher education is — as it is everywhere else — one of rewarding supporters and attacking their (and hence its) enemies.

Start with the rewards for the cronies. One of the Regime’s major “educational” initiatives was its socialization of the student loan industry, which happened just two years ago. A troika of key Regime players — Obama, Rep. George Miller (D-CA), and Sen. Tom Harkin (D-IA) — ended private funding of government-backed student loans (the most common student loans), under the theory that the private lenders (read: banks) were greedy, i.e., only after profits, and not truly interested in helping students achieve a decent education. Government, of course, is run by people incapable of greed, and motivated entirely by their concern for others.

The scheme included the usual outrageous accounting trick. Sympathetic congressmen claimed that by nationalizing student loans, they would “save” $87 billion over 11 years. In the same way, nationalizing GM and Chrysler has “saved” billions, and Obamacare will “save” even more. At the time, the CBO had dutifully scored the savings at $87 billion, but the Director of the CBO, Douglas Elmendorf, had signaled Congress (in a letter to Senator Judd Gregg) that the scoring did not reflect the risk that defaults could be higher than projected. But the Regime pushed its phantom “savings” with a straight face. It even used them to write down part of the costs of Obamacare and justify an expansion of educational Pell Grants (about which more below).

You can see this calculation at play in Obama’s recent decision to kill the Keystone XL pipeline, a decision that cost tens of thousands of blue-collar jobs.

A posteriori experience from the student loan nationalization confirms what a priori economic reasoning would naturally suggest: the government generally runs things less efficiently than the private sector does. The Department of Education now reports that the default rate on student loans has surged by about one-fourth, from 7% in 2008 to 8.8% in 2009. Worse, because of another government accounting trick, these figures are deceptively low. The government loan program has options that allow some students to pay less that they really owe (these options are euphemistically called “income contingent” and “income based” repayment plans).

Besides rewarding its likely supporters with student loans, the Regime moved to expand the Pell Grant program — to double its funding, in fact. And it is resisting the efforts by the Republicans in the House of Representatives to rein in the program by requiring that recipients have a high school diploma or GED(!).

As a consequence of these policies, and the fact that in deciding who gets student loans the government doesn’t bother looking at the students’ assets or credit histories, the aggregate amount of college student debt has risen dramatically — up by 25% over the past three years, a time, please note, during which Americans generally reduced their personal debt load by 9%. Student debt now exceeds total consumer credit card debt. It now tops $1 trillion.

Of course, the Regime has revealed a solution for the problem it helped so much to create. It proposes to roll forward a law that helps college students mitigate and even get out of their student loan debts. Under current law, students must make monthly payments of 15% of discretionary income, with the balance of their loans forgiven after 25 years. (“Forgiven” means, of course, that the taxpayer eats the remaining cost of a college degree that mainly benefits the degree holder personally.) A law passed by Congress in 2010 and scheduled to take effect in 2014 will drop payments to 10%, with the balance of the loan forgiven after 20 years. Obama now wants this to take effect starting next year — which just happens to be his re-election year.

This is all on top of an existing program that allows students who enter “public service” (read: students who go to work for government or other nonprofit agencies — both areas in which employees tend overwhelmingly to vote Democrat) to have their loans forgiven after only 10 years. All of these “forgiveness” programs are projected to cost the treasury $575 million a year — quite unforgiving for the taxpayer.

Moreover, Obama is now proposing that students be able to combine their older (pre-Regime-takeover), federally-backed private loans together with the new government loans under a new lower interest as well as under the new rules.

All this is obviously aimed at buying the votes of all college students, but especially appealing to the ones whose degrees — say, in social studies, humanities, ethnic studies, women’s studies, and so on — make it likely they won’t earn high enough salaries to pay off the loans in 20 years.

Of course, complete student loan debt forgiveness is a prominent demand of the Occupy Wall Street protesters (those foot-soldiers of the welfare state so conspicuously embraced by the Regime), and a sizable proportion of students generally. One “We the People” petition on the White House website calling for total student loan forgiveness already has more than 32,000 signatures, and a similar petition on “SignOn.org” has garnered 640,000 signatures. You can bet Obama is after those votes.

Government, of course, is run by people incapable of greed, and motivated entirely by their concern for others.

How has the higher education business reacted to the increased amount of money it can now extract from students — because the higher education business can now extract more from government? The reaction has been predictable, from the economic point of view. Colleges have dramatically increased their tuition and fees. The costs of higher education have risen even faster than the costs of health care, which is widely viewed — even by the Regime — as out of control. Lavish funding for students has college administration and staff — another of the Regime’s core constituencies.

A recent report shows that just year, in-state tuition and fees for four-year public universities jumped by 8.3% on average, to a new high of $8,244. Private colleges saw tuition and fees jump by 4.5% on average to a new high of $28,500. (The state universities, at least, had to contend with a cutback of state support.)

The notion that increased federal funding of higher education has fueled its explosive growth in costs is the focus of a fine report by Neal McCluskey and Vance Fried, put out by the Cato Institute. The authors point out that profits at colleges — public and private, for-profit and non-profit — have escalated during the past three decades. They calculate the current costs in two different ways. They first is the “buildup" method, in which the researcher adds up all the input costs — professors’ compensation, administrators’ compensation, utility costs, etc. The second is the “internal accounting” method, which uses the actual accounting numbers furnished by colleges (numbers that few states make available, if you are talking about public colleges).

The authors find that both methods yield roughly the same result, about $8,000 a year at an average residential college.

Tuition figures are readily available. Using 2008 figures, tuition for a full-time student averages about $13,500 at a private 4-year college. This is a profit of $5,500 per student — or about a 40% margin. Add in charitable donations into the college endowment targeted for teaching, and the profit margin is even higher.

Moreover, they estimate that the margins at public universities are roughly the same, when you factor in the state subsidies (paid by the taxpayers) along with the tuition (paid by the students and their parents).

The high profit margins are the result of colleges jacking up their charges over the past 30 years. McCluskey and Fried note that even in constant dollars (i.e., correcting for inflation), average tuition and fees have gone up 300% during that time.

In what other industry do you see this sort of price inflation? On the contrary, in private industry, (real) price reduction is the norm. Prices of computers — even prices for laser eye surgery — have dropped dramatically over the years. But in the massively subsidized college business, which has seen its direct government subsidies — as well as the subsidies given to students — rise dramatically, price gouging has become the norm. The authors note that federal aid to students has gone up by an astounding 400% over the last three decades.

As the ever-prescient Glenn Reynolds recently put it, “When the government subsidizes something, producers respond by raising prices to soak up as much of the subsidy as they can. Colleges are no exception.”

Why is it not obvious to the average taxpayer that college costs are exploding precisely because of the generosity of that selfsame taxpayer? I confess that I find this psychological mystery even more interesting than the economic issues I have been addressing.

Certainly, part of the problem is the rational ignorance spoken about in public choice theory: ordinary citizens are being screwed by greedy rentseekers, but those citizens remain uninterested, because of the asymmetry of self-interest involved. Each one of them loses only a relatively small amount of assets, while the rentseekers in the higher-ed business stand to make out like bandits. Even now, after the massive increase in federal and state funding of our increasingly dysfunctional K-12 public schools system, and its colossal and consequent failure (as evinced on international tests), the public is reluctant to institute deep changes, such as universal school choice.

The default rate on student loans has surged by about one-fourth, from 7% in 2008 to 8.8% in 2009. Worse, these figures are deceptively low.

Besides the normal rational ignorance of citizens, however, I suspect another reason. People who are usually critically aware have their senses dulled by the very concept of “nonprofit” institutions. I notice this phenomenon in my business ethics classes. It seems almost analytically true to the average student (and by extension, the average person) that in a nonprofit business, there should be no “principal-agent” problem. That is, since the people who created the institution are not in it for profit — unlike the despicable money-grubbers in private industry — their employees must also be devoted solely to delivering the service that the principals intended, instead of ministering to their own self-interests.

In the case of public and nonprofit private colleges, the service to be rendered is primarily student education (and to a lesser degree, research for the benefit of the people generally). The principals are the founders (in the case of private colleges), the taxpayers (in the case of public colleges), the donors, and the students (and parents) who pay tuition. The principals expect the agents — the college professors, administrators, and staffs — to work to achieve the service goals of the principals.

But the principal-agent problem (which is the problem of getting self-interested agents to do what is intended by the principals) is no less acute when the principals are presumed to be altruistic (as are the taxpayers and donors) than when the principals are themselves clearly self-interested (as are the owners of a for-profit business).

What the agents of the nonprofits typically do is just what the agents of profit-seeking enterprises do — continuously seek to expand their compensation, while diminishing their workload. They try for smaller classes, higher salaries, better retirement packages, more grants, fancier equipment, plusher offices, more research assistants, more student aides, more secretaries, more assistant deans, more time off, more holidays, more sabbaticals, more time attending professional conferences, and easier tenure requirements.

I have noted elsewhere one manifestation of this phenomenon: the explosion of the number of college administrators. Not only has the number of administrators at nonprofit colleges gone up, their pay has, too. For instance, in a major piece in the Chronicle of Higher Education points out that 36 nonprofit colleges had compensation packages well over $1 million in 2009. In its survey of 519 private nonprofit colleges, the Chronicle found that the median total compensation was $385,000.

This delusion that nonprofits are immune from greed helps explain the flip side of crony college capitalism, the Regime’s war against for-profit colleges, institutions that the Regime’s supporters in the academy universally despise.

The Regime has conducted a long, deliberate struggle with these colleges (especially chains such as Westwood College and National University). When the Regime controlled Congress, the attack took the form of “hearings” into the biggest chains. The “hearings” were essentially show-trials, exposing the for-profit colleges for being, well, profit-seeking. The people in charge obviously thought — or pretended to think — that the colleges were inferior, and sought out cases of consumers who claimed to have been harmed by being students there. These testifiers told sad tales of running up large loans getting worthless degrees.

In the massively subsidized college business, which has seen its direct government subsidies rise dramatically, price gouging has become the norm.

This sham show was just polemical tactics. The congressmen on the attack never once called students from public and nonprofit private colleges to testify about the student debts that they had run up while pursuing degrees that never got them jobs. I mean, it’s not as if we couldn’t find students who had accumulated big debts at, say, a California state university (where the presidents sometimes earn salaries in the $400,000 range) to acquire degrees in various unemployable subjects — women’s studies, say, or sociology. The Regime could have found plenty of such “victims,” of this I can assure you.

But a crony capitalist jihad — like any other jihad — is always directed at one group on behalf of another group, to wit, the cronies who inspire and sometimes fund the jihadists.

In crony college capitalism, these are primarily unions, especially teachers’ unions (and allied guilds, such as the American Association of University Professors). These cronies despise for-profit colleges, not merely on philosophic grounds, but because their faculties are non-unionized. To put this simply: they fear the growth of these enterprises in the way that Teamsters fear the expansion of Wal-Mart. For example, the AAUP has strongly attacked for-profit colleges, and called for dramatically increasing regulation of them.

The cronies don't care whether there is any greater pattern of "abuse" at for-profit colleges than at supposedly eleemosynary ones. If they wanted to find that out, they could do detailed observational studies that ruled out confounding variables (by correcting for ethnicity, income-level, and asset bases of parents, SAT scores, and high-school GPA), and see whether similar graduates from for-profit colleges fared any worse on the job market than graduates of nonprofits.

Also in the attack on for-profit colleges are trial lawyers. One notorious example is Florida attorney Chris Hoyer, who is suing Westwood College now, and looking at suing at least seven other for-profit colleges. Hoyer is a donor to the Regime, of course.

Naturally, however, the Regime’s Department of Education has plans to strengthen regulations governing for-profit colleges — yet another way of aggrandizing the federal government, at the expense of yet another part of the economy.

We can put an ironic cap on this discussion by noting a recent report out of the House of Representatives. It points out that over the past decade, while tuition has increased 4.5% at nonprofit private schools, and a whopping 8% at public colleges, it has gone up only 3.2% at for-profit colleges. This competitive edge would be reason enough for the Regime's desire to protect its cronies.

For the record, I think the government-backed student loan program should simply be ended. It is encouraging students to take on debt for degrees that have a dubious payoff, and creating thereby a massive moral hazard: a constituency of people who want to burn the taxpayer by not paying back the loans in full. Moreover, these government loans help inflate college costs pointlessly for all students.

Instead, let all college loans be between private lenders and individuals, with no tax dollars at risk, and with self-interested lenders using their judgment in lending money, knowing that if they loan to incompetent students or for unusable degrees, they may find that the students can’t pay and will discharge the debt in bankruptcy.




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Some Thoughts on Sharia Law

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I can’t say I’m in favor of dripping acid into peoples’ faces — but, given the right circumstances, I might appreciate the opportunity. I got to thinking about this back in the summer when Amnesty International called upon Iran to revise its penal code.

Sharia law provides for retributive justice and the retribution in question was made available to a woman named Ameneh Bahrami who’d been blinded when a creep named Majid Movahedi threw acid into her face after she refused to marry him. Outside of being a good judge of potential husbands, Ms. Movahedi holds a degree in electronics and held a job at a medical engineering company. She seems to be an accomplished woman who, even in the Islamic Republic, had a really bright future.

Now it seems that she doesn’t have much of a future at all. I hope I’m wrong about this, but it’s hard to imagine how any blind person could hold down a job in engineering, or how anybody as brutally scarred as Ms. Bahrami is going to have much luck finding a husband to take care of her. What she did have was the opportunity to visit Mr. Movahedi while he was strapped onto a hospital bed and pour acid into his eyes. For a long time, she wanted to do it, and I can’t say I wouldn’t have wanted to, also. Then Amnesty began to put the squeeze on her to back off, Ramadan and the time of forgiveness came around, she forgave and, from looking at the beaming pictures of her scarred face, it’s easy to see she feels pretty good about the decision. Think what would have happened in a similar situation in America.

For starters, the crime wouldn’t have been against Ms. Bahrami. It would have been against the State, and she would have been nothing more than a witness, if the judge had even allowed her to testify, because it’s easy to see a defense lawyer convincing a judge that the mere sight of her scarred face was too inflammatory for the jury to be allowed to see.

Even if she were allowed to testify, it’s not hard to imagine the same defense attorney convincing a jury to acquit on the ground that, since she was blind and all, her ability to identify her attacker simply wasn’t good enough to dispel all reasonable doubt that the guy who’d thrown the acid really was the same man sitting here in court.

Perhaps the prosecutor would be worried about getting a conviction, or just have too many trials to handle, and let Mr. Movahedi plea-bargain his way down to, say, second-degree assault and get off with time already served. No matter how things shook out, Ms Bahrami’s feelings would have had no bearing on the outcome.

I prefer the way the Iranians handle this. I like it that Ms. Bahrami is the one who not only got to decide what happened to Mr. Movahedi, but would have been the one to do it to him.

Or not. Either way, she was the one who got whatever emotional satisfaction there was to be gotten from the situation. I also don’t mind thinking about Mr. Movahedi spending something like the seven years he spent in prison waiting for Ms. Bahrami make up her mind about whether he got the acid treatment.

What Ms. Bahrami did have was the opportunity to visit Mr. Movahedi while he was strapped onto a hospital bed and pour acid into his eyes.

Or, take an example that’s a little closer to me, personally. A few years ago my nephew was riding home on his bicycle. He had just been licensed as a civil engineer, and he and his father were about to launch into business together. He was, when I think about him, the best that his generation, the best that America, had to offer. He was smart and hardworking; he had a beautiful bride, a winning personality, and a glorious future — all of which ended when a middle-aged driver fell asleep, ran onto the shoulder where my nephew was riding, and put a stop to everything except his life with massive brain damage.

The thing was, it was probably the worst day of the driver’s life, too. She showed up at the hospital, sick with grief. And wasn’t allowed to see him. The lawyers thought it was a bad idea. She showed up repeatedly and never got into the room. Always the lawyers.

The boy’s father is a kind, generous man who would have given comfort to the driver, if he had been allowed to. And she to him. But they weren’t permitted to meet. Instead, the only satisfaction he got was to drive out to the highway and look at his son’s blood puddled on the asphalt. And the driver had to watch her trial grind its way through the legal system with no concern for whether the boy she had hit, or his family, even wanted her to be on trial.

Now, imagine if something like this had happened to an American in Oman in the mid-Seventies. It did. To a good friend of mine, only he was the driver.

Three years earlier, no Omani who wasn’t either in the military or the royal family even owned a car. In fact, no Omani even owned sunglasses. The sultan was opposed to things Western. Then he was deposed and the next sultan began to modernize, so the road my friend was driving along was brand new. And the old gentleman standing on the side of the road was newer still to the whole concept of high-speed traffic when he stepped out in front of my friend’s car.

My friend slammed on the brakes, spun the wheel, fishtailed, caught the old man with the rear of his car, then rolled four or five times before coming to a stop. The court my friend had to explain himself to was Sharia: a single judge with a council of elders to advise him.

I mean it when I say that my friend had to explain himself. Nobody got to have a lawyer. The old man spoke, my frind espoke, the police told what their accident investigation had found, the judge consulted with the elders, the village sat in a semicircle and listened, and the judge announced his decision:

To the old man, he said, "Our country is changing and you need to pay attention to those changes. By stepping into the road in the way you did, you have embarrassed a guest in our country."

To my friend, the judge said, "It appears that there was nothing more you could have done to have prevented what happened. I instruct you to pay the old man three rials." Rials were worth about $2.50 at the time, so my friend was ordered to pay seven-and-a-half bucks.

Nobody thought the rials compensated the old man for whatever injuries he had received. That wasn’t the point. The point was dignity. Regardless of how it happened, the old man had been hurt and my friend had been involved. The rials were for honor and, I am almost sure, for my friend too. To clear the books in his conscience as well as to make the old man feel vindicated.

Clearly, the lady who ran down my nephew was a lot more culpable than my friend, but ask yourself. If you had been either driver, would you rather have hired an expensive lawyer to try to justify your actions to a jury chosen at random from voters’ lists and then, if you did get off, perhaps face a trial for civil damages until you were bankrupt from attorneys’ fees? Or would you rather have told your story to a council of wise old men? I know which one I would choose.




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The Bowels of the Occupy Movement

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According to its website, Occupy Wall Street (OWS) is a people-powered movement organized in "response to the Great Recession caused by our financial and political leaders." It vibrates with activity as people organize against corporate greed. Working groups pulsate, "planning actions, coordinating with community groups, engaging with the press, supporting each other, and strengthening solidarity within the movement." They intend to work tirelessly until inequality, injustice, poverty, and war are eradicated, all the while "refusing to be silenced," presumably by powerful movements clamoring for inequality, injustice, poverty, and war.

The early days of the OWS movement experienced rapid growth, its popularity boosted by media coverage and support from celebrities and Democratic politicians. In recent weeks, it has been joined by labor unions, community organizers, human rights groups, and the Communist, Socialist, and Fascist parties. Implying a form of automatic enrollment for everyone whom big business and big government has been sticking it to, the hope is that the "99%" name will increase membership to, well, 99%. There is also a small, but vocal, anti-Semitic faction, no doubt formed from the belief that Jews own all of the banks. And since OWS demands "indictments and prosecutions of all crimes committed by banks, brokerage firms and insurance companies," a very large legal faction is expected to develop soon.

Much of the anger is understandably directed at our democratic-capitalistic system. But a poll conducted for the movement by CUNY sociologist Héctor R. Cordero-Guzmán found that 70.3% of OWS'ers are politically independent and 64.2% are under the age of 34. That is, most probably don't vote. The poll also found that 92.1% had some college, a college degree, or a graduate degree; 13.1% are unemployed; and 71.5% earn less than $50,000 a year. So most OWS'ers are highly educated and have jobs, but almost 85% (13.1 + 71.5) pay 0% in income taxes — in contrast to, for example, Tea Party members, who are old and uneducated, but pay 30% of their income in taxes.

In addition to Wall Street and the 1%'ers, OWS'ers hate big corporations, especially ones that make huge profits, ship jobs overseas, and "plunder the planet." During a working group debate, one protestor tweeted "X on sucks" to his followers by using his new $560 iPhone 4S. I assume he was talking about Exxon, a giant American oil company with a profit margin of 9.66%. Apple, which recently surpassed Exxon as the world's largest company, extracts a profit margin of 35% on iPhones, which are manufactured by Samsung in Taiwan. Evidently, big corporations that screw consumers can get an OWS protest exemption if they make cool products.

Similar logic applies to people. Corporate CEOs are demonized because of their sinfully high salaries. True, the top ten CEOs averaged $43 million in 2010. But the top ten celebrities averaged $100 million. Instead of castigating them, however, OWS'ers pay them tribute, by purchasing exorbitantly priced tickets to attend their bourgeois movies, concerts, and sporting events.

Despite numerous anti-capitalist signs (e.g., "End Capitalism" and "Smash the Pillars of the Pig Empire") and an equally large number of signs advocating socialism and communism, the OWS movement insists that it doesn't want to destroy business; it just wants to make a few changes. Specifically, it wants American business to hire more people, increase salaries and benefits, provide free health care and education, reduce the prices of products and services, and eliminate pollution and greenhouse gas emissions. The profits (if any, after all the wealth-sharing) should be returned to society. So the new system would be a hybrid in which capitalists could own businesses but control neither their property nor their profits. Let's call it Marxalism.

Self-respecting socialists cannot be expected to carry their clever anti-capitalist signs while shivering and holding their noses at their own fetor.

Nationwide demonstrations by rebellious youth may annoy and disrupt American business, but they are unlikely to cause an immediate, voluntary switch to Marxalism. Nor will they result in a swift enactment of anti-greed laws. The real leaders understand the futility of such languid tactics. They are professional radicals, hiding in the bowels of the movement — deep thinkers for whom class warfare is a full-time job. They are the friendly statists from ACORN-like orgs, whose anti-capitalist outrage calls for social revolution. And they want it before ADHD and cold weather drive demonstrators back to their jobs and classrooms.

To ignite a revolution, the movement needs rebellious leaders with the ability to rouse and incite the masses. Who should be the provocative face of the revolution? Given the number of protestors wearing chic T-shirts imprinted with the image of Mao and Che Guevara (not to mention Marx, Lenin, and Stalin), it would be tempting to use modern-day versions of these idols. However, Che-like leaders would be demoralizing. The original Che denounced the “spirit of rebellion” as “reprehensible” and those who “choose their own path” as "delinquents." Chairman Mao has become a cult hero, perhaps more trendy than Che. California even has "Mao's Kitchen" restaurants. But it would be difficult for Mao-like leaders to explain the miserable failures of the original Mao — for instance, the "Great Leap Forward" to create a just, egalitarian society that ended up killing 45 million innocent Chinese men, women, and children. As with Che's idol, Stalin, justice and equality were evidently unimportant goals for Mao.

There are even problems with frontmen such as Michael Moore. On the plus side, he is highly visible and somewhat popular, has no history of supporting mass murder, and has never been seen in a Che T-shirt (although he has endeared himself to Fidel Castro). A recent convert to the OWS movement, Mike hates capitalism, which he regularly and vehemently denounces. He often alludes to violence in the streets if Wall Street doesn't pay back what it has stolen: our pensions, our money, and the futures of our children. But the spectacle of Michael Moore raging against corporate fat cats would hardly ignite a revolution. And a T-shirt image of a fat 57-year-old man, with bangs sticking out from under a goofy ball cap, is simply ridiculous.

In terms of the stated goals, two months of demonstrations have achieved nothing. As the OWS movement has grown and spread, so too has its proclivity for violence and revolution. Writing in the New York Post of a recent visit to Zuccotti Park, Charles Gasparino "found a unifying and increasingly coherent ideology emerging among the protesters, which at its core has less to do with the evils of the banking business and more about the evils of capitalism — and the need for a socialist revolution." Unfortunately, the latest recruits to the cause — for the most part, criminals, drug users, panhandlers, and the homeless — have produced little more than a stench pervading the carnival-like encampments. Indeed, the increasing violence and decreasing sanitation of the movement has begun to wear out its welcome in many cities. And with the onslaught of winter, many protestors plan to retreat, vowing to return with the fair weather of spring. Self-respecting socialists cannot be expected to carry their clever anti-capitalist signs while shivering and holding their noses at their own fetor. Besides, it is an image more ridiculous than that of a Michael Moore T-shirt.

In the bowels of the OWS movement lie zealous agitators who see themselves as its true leaders. Privately they regard the mainstream media, vocal celebrities, and shrill professors of socioeconomic equality as useful idiots. When it comes to money and power, they are as greedy and exploitative as any of their oppressors. By offering false hope and fomenting hatred and unrest, they seek to extort capital and usurp power for themselves. And with thousands of eager demonstrators at their disposal, they believe their moment is now (or next spring).

But there is an obstruction, a chronic irritation — the lack of charismatic demagogues to articulate the ideology. Some would say the movement has been stricken with irritable bowel syndrome. Alas, for this strain, no medicine seems to be available.




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Poisoning the Well

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Young people are getting an education on the free enterprise system that prejudices them against it.

Their educators tend to see its ethos as one of “dog eat dog.” They believe that fierce competition is its only feature, and that this competition must always be destructive. They believe that some will win and others lose, and that the winners must completely obliterate the losers.

Kids learn that lying in business is sharp and shrewd. That successful businesspeople use every dirty trick in the book to get ahead. That, given the nature of the system, they absolutely must do this to succeed. Dishonesty may be considered wrong everywhere else in the world, but in the workplace it is a skill necessary for survival.

Of course this is the detritus of Marxist philosophy. Even at its mildest, it is not what people who esteem the free enterprise system, who support it as the one most conducive to freedom and prosperity, believe. But youngsters who aspire to succeed in business tend to believe these things, because they’re what’s being taught. They carry such notions into the business world, and this accounts for the abysmal lack of ethics we see in all too many of them.

People who notice this bad behavior are often told that “that’s business,” and believe it. Thus they are vulnerable to the rhetoric of “progressive” political hucksters who preach warmed-over Marxist ideas such as the redistribution of wealth and the supposed necessity of government intervention in the marketplace. And thus does the vicious cycle perpetuate itself.

But among those who care about free enterprise, there is a sense of what, for lack of a better word, I might call sportsmanship. While at one level a business competitor may be a rival, in the larger scheme he is actually a partner. You might defeat him today, he might defeat you tomorrow, but next week you might succeed together. As for customers, they are not suckers to be bamboozled; they are every company’s greatest resource. A continuously profitable business doesn’t try to fool them once, then go in search for other suckers; it establishes a mutually beneficial, long-term relationship with them.

The economic chaos we face today didn’t spring full-blown from Obama and the Left. It is the product of both major parties, and the years of confusion over which they’ve presided.

An understanding of these principles is almost totally absent in the minds of many young folks in the corporate world. And this has opened a Pandora’s box of ills. It has much to do with why tycoons pay expensive lobbyists to get legislation passed forcing competitors out of business. It’s why big corporations gobble up struggling small fry and — with the help of bought and paid-for elected officials — strangle other entrepreneurs in regulations that keep them from building better companies. It’s how so many of them can thrive on taxpayer-funded subsidies, then congratulate themselves on their commercial genius. Such tricks are then described, by anti-free enterprise professors, as capitalism in action.       

What the young are not being told is that there is a beauty, balance, and wisdom to the free enterprise system. That it can thrive only in an atmosphere of trust, based on individual integrity and mutual respect. That it is up to each of us to keep that trust. It’s true, we all compete, but only so we can become our best. And if personal dishonesty becomes too widespread, it will undermine and erode our ability to trust one another.

The well is being poisoned right at its source. William F. Buckley raised an alarm about the fouling of this spring in his first bestseller, God and Man at Yale, more than 50 years ago. His warning is as timely now as ever. We are paying small fortunes to educate our sons and daughters, and they are being taught to distrust the very waters in which they must swim. They are being taught that the only way to clean them up is to pay self-designated geniuses to regulate the flow.  What will happen is that the pool will dry up.

I spent my early college years at public institutions, and I remember being taught that the system in which I had to survive was evil. Then I transferred to a small, private college, and for the first time I heard that the economic system developed in my country had become a blessing to the whole world. For the first time, from professors not beholden to socialist dogma, I was exposed to a gospel of hope. It was many years before I was able to sort through the confusion of those conflicting doctrines and find my way to the truth. Kids today are confused, too, but they are as salvageable as I was.

They won’t hear the truth from the GOP-led Right. That crowd preaches free enterprise, yet feeds into the corruption and calls the bitter sweet — at least until the Democrats are in charge. The economic chaos we face today didn’t spring full-blown from Obama and the Left. It is the product of both major parties, and the years of confusion over which they’ve presided. Most of our would-be leaders learned from the same kind professors who now teach our kids, so they are no less befuddled.

Competition can be healthy. It can make us grow. But it can also be sick and deranged, goading us to tear each other apart, which is what happens when people compete for money and economic privilege that are taken from others and given to them. Thus Solyndra enjoys half a billion dollars provided at the expense of taxpayers who are losing their own jobs and homes. But there are still examples out there of beneficial competition in action, of good people working to keep our country great. I suspect, however, that Washington DC is the last place we’re going to find them.

If we can be made to believe the bad press about free enterprise — whether it comes from academia, from Hollywood, from the news media, or simply from our friends—we will act according to such notions. We’ll lie, cheat, and try to rig the game, and no one will have any cause to trust us. This was how the well got poisoned to begin with. The economic system that made America great needs better public relations. But we can’t merely entrust the job to any self-styled expert. We must, each and every one of us, take it up ourselves.

We must stop subsidizing schools that sow destruction. There are good schools, and responsible professors, who still teach the principles that can save us. There are still candidates, and voters, who care passionately about liberty. This is no time for passivity or despair. It is time to speak up, and to practice what we preach with greater fidelity than ever before. Our kids are watching every move we make to see how closely it corresponds with our words.

In the break room at one of my many corporate jobs, there was a poster promoting carpooling. It showed a throng of cars packed into a traffic jam. In each was a single driver, and from every driver’s head came a thought-balloon saying, “I can’t make a difference.” Although this was government-funded “green” propaganda, and the phrase has, unfortunately, become a cliché, it carried a grain of truth.

Each of us can make a difference, because although we are individuals, we are not alone. But we are individuals, and we are each responsible for ourselves. The great cleanup of the well can only begin with us.




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End the Green Nightmare

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There is currently a maelstrom of news about costly failures in the so-called green energy industry. Of course, solar power is prominently featured, and the Solyndra fiasco is only one of the scandals. Rapidly rising to public consciousness is another crony capitalist solar company, SunPower, which looks like it too will go bust and cost the American taxpayer a fortune. Also in this club of losers are solar companies such as First Solar and Abengoa, both again the recipients of taxpayer dollars, thanks to the current administration’s rigid environmentalist ideological mindset.

But not to be overlooked are disappointments in the other segments of the green energy industry. Corn-based ethanol has proven to be such a wasteful boondoggle that even Al Gore has rethought his support of it. And wind power has come in for a good deal of scrutiny. Why, even geothermal companies are proving questionable. A recent report of three on the biggest such companies — Nevada Geothermal Power, Raser Technologies, and U.S. Geothermal — shows that they are all in financial difficulty or are just not profitable. All are recipients all of taxpayer loans or loan guarantees.

This has left the proponents of green power trying desperately to explain away its dismal failure — both here and abroad — to prove itself commercially viable without massive governmental subsidization, and without the corruption that governmental subsidies typically bring. But while we are witnessing the bursting of the Great Green Energy Bubble, we are also witnessing a renaissance of fossil fuels — the very fuels that Malthusian prophets of doom have for decades claimed are “running out.”

This renaissance has been caused by a technological revolution that is transforming oil and gas drilling. Because of it, oil and gas are far more plentiful here and in countries outside the Middle East and other hostile neighborhoods, such as Russia and Venezuela. I am thinking especially of two technologies, fracking and horizontal drilling. The rebirth of fossil fuel production was unimaginable a few years ago. It is completely beyond the ken of the Greens who constitute the Obama Regime, people who never anticipate revolutions that are not run from above, by them, but instead originate in the distributed intelligence of regular (read: creative) people.

We are also witnessing a renaissance of fossil fuels — the very fuels that Malthusian prophets of doom have for decades claimed are “running out.”

Start with fracking. It has certainly made some energy companies rich. For, example, Noble Energy has just paid a whopping $3.4 billion for a half-interest in the Marcellus Shale holdings of Consol Energy. Together they plan to develop a huge chunk of Pennsylvania and West Virginia (663,000 acres). Even after selling off half its holdings, Consol still expects to extract a massive 350 billion cubic feet of gas.

What is fascinating is that Conrol Energy is a Pennsylvania-based coal company — you know, one of those, well, fossils of the fossil fuel industry. It is nicely positioning itself for the inevitable shutting down of coal-fired power plants under the relentless pressure of the EPA. Consol and Noble are just two of the flood of companies moving in to develop the Marcellus Shale formation.

Fracking is also rewarding key players in the industry. Marcus Rowland, the CEO of the small but important player, Frac Tech International, earned a tidy $24.4 million last year. His compensation made him the highest paid CEO of any publicly-traded energy company. He is paid more than the CEO of IBM.

Frac Tech is beating many other energy companies by providing hydraulic fracturing services for big energy companies such as Chesapeake Energy and ExxonMobil. It brought in nearly $1.3 billion in revenues. In the world of fracking, only Halliburton and Schlumberger are bigger.

There is a very recent report about the development of a shale field of truly stupefying proportions. The Utica Shale deposit is an enormous geological formation stretching from Quebec to Kentucky. It may be an even more fertile source for oil and gas than the Marcellus Shale field. Ohio state geologists — a neutral source, please note — estimate that Ohio’s share of this field holds upwards of 15 trillion cubic feet of natural gas and 5.5 billion barrels of recoverable oil (or roughly a third of the production of America’s largest oil reserve, Alaska’s Prudhoe Bay).

Then there is brilliant article discussing one of the unsung creative geniuses of American industry, Harold Hamm. In a week dominated by paeans to the fallen Steve Jobs — who rightly deserved recognition for his amazing success in making Apple what it is — it was nice to see a piece on the remarkable Mr. Hamm.

Far from welcoming the renaissance of the American fossil fuel industry and the jobs it would provide, the Obama Regime has fought it tooth and nail.

Hamm is the founder and CEO of Continental Resources. He rose from humble origins — the thirteenth child of Oklahoma sharecroppers — to become thirty-third on the current Forbes list of wealthy Americans. Yes, Virginia, there is a Horatio Alger. Hamm is almost certainly going to rise to a much higher place on the list, given how much oil he owns.

He made his early success as a wildcatter with a keen sense of where oil could be found. But his greatest contribution was his early employment and improvement of a second innovative fossil fuel technology, a method called horizontal drilling. This is a technique whereby the drilling company drills downward (up to two miles deep), then drills outward, horizontally. This technology has — as dramatically as fracking — allowed energy companies to exploit petroleum and gas reserves hitherto not commercially viable.

Hamm is the discoverer of the famous Bakken oil field that extends from Montana to North Dakota. So fertile has this field proven that it has helped put America back in third place in the world in oil production. He estimates the reserves in Bakken alone at 24 billion barrels — which if true is double our currently proven national reserves. Continental has seen its proven reserves go from 118 million barrels in 2000 to 421 million barrels this year.

One might expect that the Obama Administration would be delighted at the prospects of America’s becoming energy independent — and potentially millions of American blue-collar workers getting high-paying jobs.

But one would be wrong.

Far from welcoming the renaissance of the American fossil fuel industry, the Obama Regime has fought it tooth and nail. It is attacking shale oil and gas with every tool at its disposal. Its Department of the Interior has undertaken a jihad against them. It has locked away from exploration and development vast new areas of the Midwest and has waged a war against conventional offshore drilling. It is now doing its best to stop the new technological drilling, even in lands that have been drilled conventionally before.

The Green Regime’s SEC has entered the fray, demanding that companies like Continental follow new Sarbanes-Oxley requirements about reporting royalty and production figures, meaning that CEOs like Hamm face jail time if some low-level operator misreports production from a field.

Ironically, the feds never apply Sarbanes-Oxley to themselves. If Obama or any of his administration misreports taxpayer liabilities, say, for solar industry loans, nobody faces any consequences.

In addition, the Regime is pushing de facto tax increases for the oil and gas industry, by ending various tax credits the oil industry has long enjoyed. This — coming from an administration lavish in its subsidies to minor and expensive energy sources such as solar, wind, geothermal, and ethanol — is from the point of view of physical science simply bizarre.

Finally, the Green Dream Team has brought its Justice Department into the jihad. It recently brought charges against seven oil companies in North Dakota for killing 28 birds. Continental has been accused of killing — one bird! But this is not a minor matter: the executives face six months in jail if convicted. (Note: The same Justice Department has never even once pursued any American wind power company, even though American wind power facilities kill on the order of half a million birds a year.)

But even as the Regime wages its jihad against domestic fossil fuel industries, other countries are moving ahead with the new fossil fuel technologies. As I noted in an earlier piece, Israel has set about using fracking to free itself from reliance on foreign sources of oil, which would mean changing the balance of power in the Middle East. Israel is using fracking to exploit some major fields, the most recent being a field (named “Leviathan”) which holds 16 trillion cubic feet of natural gas, or about a century’s worth of gas at Israel’s current usage. This field is only part of the massive Levant Basin shale field, which holds upwards of 122 trillion cubic feet of natural gas, or about eight centuries’ worth.

More recently, a small energy player in the UK has announced that the Bowland Shale field, in northwest England, contains an estimated 200 trillion cubic feet of natural gas. This estimate (by Cuadrilla Resources) means that this one shale field contains enough natural gas for two-thirds of a century of the UK’s needs at present levels. And that is only one field.

The British boom is being echoed elsewhere in Europe, where other countries are also turning to fracked gas — except France, which has outlawed shale gas exploration altogether, one suspects to protect its nuclear industry from competition. But Poland, for instance, has an estimated 187 trillion cubic feet of shale gas. This is geopolitically game-changing, considering that Poland now has to import its natural gas from neighboring Russia, a country that historically has kept trying to incorporate Poland into its empire.

Note the extremism of Banks’ demand: don’t even explore, much less try to use, resources until they are proven, to her ilk, to be perfectly safe—something that will never happen.

This discovery in the UK comes just in time to stop its increasing dependence on natural gas from the Middle East and Norway. But — naturally — the British energy suppliers are facing the same kneejerk environmentalist opposition that Hamm and other American suppliers do. Soi-disant environmentalists in Britain are roused in furious opposition. Jenny Banks, the “energy policy officer” for the environmentalist group WWF (World Wildlife Fund) demands, “The government should at the very least halt shale gas exploration in Britain until more research can be undertaken on both the climate-change impacts and contamination risks associated with shale gas.” Note the extremism of her demand: don’t even explore, much less try to use, resources until they are proven, to her ilk, to be perfectly safe—something that will never happen.

What explains this visceral hostility to a product the human race desperately needs, and the pushing of forms of energy that have proven time and again to be commercial losers?

The answer is that much of the environmentalist movement consists of two groups: neo-socialists, and neo-Romantic pagans. The former profess a love of the ecosystem but are really animated by a hatred of capitalism. These are the people who never uttered a peep about environmental degradation when the Soviet Empire was cheerfully despoiling the ecosystem, but who now wax furious at the thought that a capitalist — a capitalist — should even explore for oil. Should Vladimir Putin or Hugo Chavez start using fracking, why, instantly, fracking would be fine.

The second group, even more bizarre, is populated by those I have characterized elsewhere as self-loathing hominids, i.e., people who are ideologically misanthropic. They view their own species as vile and disgusting, literally a blight upon the planet. The thing they fear most is precisely the discovery of inexhaustible, inexpensive energy. They fear it because such energy would allow the human race to flourish, and these self-loathing hominids do not want the human race to flourish. To them, rats and roaches are wonderful, but children are not.

You simply can’t please these worshipers of Thanatos.

But the rest of us should rejoice in the renaissance of fossil fuels. Unlike the green energy sources that have done so pathetically little to help humanity, it holds the promise of inexpensive energy on which our continued prosperity depends.




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Homes for Green Jobs

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It's difficult finding good green jobs today, even after $110 billion in stimulus money has been spent to help create them. Newly formed green energy companies such as Solyndra, Evergreen Solar, and Green Vehicles are going out of business and newly converted green energy companies such as General Electric are outsourcing manufacturing jobs to cheap-labor countries.

Nevertheless, many in government, especially the White House and the EPA and DOE, believe there will be plenty of future green jobs to go around — 5 million high-paying jobs, according to President Obama. The reason for their optimism may lie in the expectation that millions of Americans will soon make a transition to energy efficient homes. Although the parts and materials may be manufactured in other countries, the houses must be built and maintained here.

This optimism has, no doubt, been buoyed by the 2011 DOE-sponsored Solar Decathlon, a competition among collegiate architectural teams "to design, build, and operate solar-powered houses that are cost-effective, energy-efficient, and attractive." The picture belowshows the excitement surrounding the program (all pictures: USDOE). To be fair, the Decathlon got off to a rainy start — good neither for attendance nor electricity generation. However, the inclement weather obviously failed to detract from the beauty of these earth-friendly, sustainable homes. A government source, who wishes to remain anonymous, exclaimed that he "envisioned entire communities of these cost-effective, energy-efficient, and attractive dwellings sprouting up throughout the land. The demand may exceed that of wind farms."

Such innovative designs underscore the wisdom of government programs spending hundreds of millions of dollars to train people for the coming green economy. Clearly, existing builders are not able to construct such ecological marvels, as advanced as they are beautiful. Indeed, to non-green tradespeople, even the new building codes will be incomprehensible. And remodeling companies and do-it-yourselfers will be sorely unqualified to handle renovations and repairs. But, a government source, who wishes to remain anonymous, predicted that "when millions of Americans begin to abandon their inefficient and wasteful homes for these cost-effective, energy-efficient, and attractive dwellings, a highly paid green energy workforce will be at the ready."

The offering in the forefront is from the California Institute of Technology, one of our most prestigious engineering schools. As can be seen in the enlarged, twilight view below, its parka-esque look (siding from LL Bean?) exudes warmth. And if the house becomes too warm (retains too much captured solar radiation), there's no better way to cool off than to luxuriate in the crisp (and now cleaner) sunset air whisking across your spacious deck. There, you can sink into an eco-friendly folding chair and ponder your energy savings while enjoying a panoramic view of our planet healing.

The Cal Tech house and the other contenders will seem diminutive and trifling to people with that antiquated "a man's home is his castle" attitude. But, as a government source, who wishes to remain anonymous,hastened to recall, "the goal of the competition is to demonstrate cost-effectiveness, energy-efficiency, and attractiveness." Consumers desiring bigger homes could simply purchase an enlarged version of their favorite design or integrate multiple units into a structure of the required size.

This latter option is more easily implemented with rectilinear structures such as the City College of New York design below. The CCNY offering is 750 square feet. A young couple seeking a starter home need only purchase two units and have them contiguously integrated into a 1500 square foot home, much like bolting together two double-wide mobile homes. The inherent flexibility of this modular approach permits end-to-end or side-to-side bolting. And, as the family grows, additional units can be readily attached. According to a government source, who wishes to remain anonymous, "this should be performed by properly trained, authorized and qualified green energy technicians."

There is no question that all the teams have done a great job improving energy efficiency. For example, the CCNY house is able to create up to eight kilowatts of free energy on sunny days. Purchasers of these homes will reduce their electricity bill by hundreds of dollars annually, thereby shrinking the time needed to recoup their solar investment.

The CCNY house costs $500,000 for materials. A conservative estimate of labor cost would be $125,000 (25% of the materials cost). With green labor, $200,000 (40%) is more realistic. Throwing in another $100,000 for the building lot and other expenses brings the total to $800,000. In this scenario, the young couple's 1500 square foot starter home would cost only $1,500,000.

Let's assume the couple comes up with the $300,000 (20%) down payment and can afford the monthly mortgage payments (perhaps by the time they are ready to buy, they will have high-paying green jobs). Further assume that their resulting energy savings are $2,000 a year. Their investment recovery time would therefore be only 150 years (for the down payment, of course). Imagine the recovery times of the designs from teams that failed to qualify for the Solar Decathlon.

Such calculations can be misleading because they fail to account for green goodwill, an intangible but saleable asset representing the value your investment contributes to saving the planet. It is saleable in that you can add it to the future selling price of your home. A government source, who wishes to remain anonymous, explained, "It is an additional amount that a prospective buyer, equally ignorant and gullible, would be willing to pay for your cost-effective, energy-efficient, and attractive solar home."




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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.




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The Sarah Palin of the Wild-eyed Left

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Right now, our ineffectual President is not the highest-profile among those who would make slaves of free citizens; his incompetence as an executive has reduced him to a cynical, groveling faux populism. The highest-profile slaver is not a significant writer or intellectual of the Left; those who might be significant waste their time performing on cable television minstrel shows. It’s not an internet or New Media big-shot; they’re more interested in feuding than influence.

Right now, the highest-profile collectivist in America is a woman named Elizabeth Warren. A Harvard Law School professor and aspirant to elected office in Massachusetts, she combines the President’s cynicism with the intellectual Left’s focus on cable TV performance and a strong internet presence. Her writing indicates a trivial, though eminently credentialed, mind; her body of work reads more like Suze Orman than Richard Posner or Lawrence Tribe.

If you follow the news or scan left-leaning media outlets, you’ve heard Warren’s name. If you live in Massachusetts, you know that she’s seeking Teddy Kennedy’s old U.S. Senate seat, presently occupied by Scott Brown. But the chances are that you, like most Americans who aren’t wild-eyed Maoists, have a vague impression of the woman.

But it’s important to clarify that vagueness. This woman reflects several current trends in American culture — most of which are not good.

She was born Elizabeth Herring in Oklahoma City in the late 1940s. It was the front end of the Baby Boom, but her childhood wasn’t Happy Days. When Elizabeth was a young teenager, her father had a heart attack and related health issues. These led to severe financial problems for the Herring family. They lost a car to the repo man . . . and fell out of what they considered the middle class. Her mother went to work as a telephone operator. Later, Elizabeth waited tables to help support the family.

She was bright. Did well in school. Got a debate scholarship to George Washington University in the nation’s capitol — and left Oklahoma. Quick as she could.

GW isn’t an intellectual mecca. The biggest part of its student body is made of underachieving kids from affluent families who pay full freight, leavened with some smart kids from hinterlands there on scholarship.

While still an undergraduate, Elizabeth married a classmate named Jim Warren. In 1970, she graduated with a degree in speech pathology. Jim pursued a career and established himself as a middle-class breadwinner; Elizabeth used her degree to get work helping children who were recovering from head traumas and brain injuries.

Various left-wing media outlets were entranced by the soft totalitarianism of Warren’s schoolmarm demeanor.

But that wasn’t satisfying. The collegiate debater felt drawn to something more ambitious. Law school. While having two children with Jim, Elizabeth cobbled together a law degree — starting out at the University of Houston and eventually finishing at the Newark campus of Rutgers. Along the way, she interned at a white-shoe Wall Street firm and was an editor of the Rutgers Law Review.

She got her law degree in 1976 and ran a solo practice in the New Jersey suburbs, focusing on wills and real estate closings. She taught Sunday school, reading and telling kids about Methodist founder John Wesley. She still cites Wesley as an inspiration.

In 1978, she and Jim divorced. That seems to have changed many things.

Elizabeth moved from practicing law to teaching it. She started at Rutgers and moved through short-term gigs at the University of Houston, Texas, and Michigan before getting a tenured position at the University of Pennsylvania. And, as she explains it, she began to change from a free-market advocate to a full-blown statist.

While her academic research wasn’t exceptional (more on that in a bit), she was a dynamic classroom instructor and popular with students. While Reagan and the elder Bush occupied the White House, she refined an approach that worked well in the university setting. The actual content of her writing and speaking is usually unexceptional; but she conveys — by demeanor and implication — sentiments that click with campus radicals. She signals progressive pieties that flatter students and colleagues, making them feel they aren’t just careerist clerks but Deep Thinkers interested in Profound Issues.

She moved from UPenn to Harvard in 1992.Today, she is the Leo Gottlieb Professor of Law, teaching commercial law and bankruptcy. She is or has been a member or officer of: the American Academy of Arts and Sciences; the American Law Institute; the Executive Council of the National Bankruptcy Conference; the Federal Depository Insurance Corp.'s Committee on Economic Inclusion; the National Bankruptcy Review Commission. As I’ve noted, she’s eminently credentialed.

She signals progressive pieties that flatter students and colleagues, making them feel they aren’t just careerist clerks but Deep Thinkers interested in Profound Issues.

Most university professors are expected to produce a steady stream of peer-reviewed academic articles and research papers related to their fields. Generally, law professors have some relief from this severity; because law schools are usually profit centers for their universities, law school teachers can focus on classroom teaching rather than driven academic publication. Still, a law professor is expected to produce — or at least contribute to — the occasional academic paper.

Here, Warren has had some trouble.

In 2005, she and several colleagues published a study in the academic journal Health Affairs on the relationship between medical bills and individual bankruptcy. They concluded that half of all families filing for bankruptcy did so in the aftermath of a serious medical problem and that 75 percent of those families had some form of medical insurance. This gave a lot of rhetorical ammunition to people vilifying “evil insurance companies” and calling for “health care reform.”

Some readers questioned the study’s methods. As a surprisingly good analysis from ABC News noted:

The Harvard report claims to measure the extent to which medical costs are “the cause” of bankruptcies. In reality its survey asked if these costs were “a reason” — potentially one of many — for such bankruptcies.

Beyond those who gave medical costs as “a reason,” the Harvard researchers chose to add in any bankruptcy filers who had at least $1,000 in unreimbursed medical expenses in the previous two years. Given deductibles and copays, that’s a heck of a lot of people.

Moreover, Harvard’s definition of “medical” expenses includes situations that aren’t necessarily medical in common parlance, e.g., a gambling problem, or the death of a family member. If your main wage-earning spouse gets hit by a bus and dies, and you have to file, that’s included as a “medical bankruptcy.”

So, the study was marred by the hacky left-wing politics that pass for “consensus” in many of the social sciences. (The University of East Anglia’s Climate Research Unit caused a similar controversy when it filled its reports on global warming with comparable manipulations.)

While academic research isn’t her forte, Warren has shown greater enthusiasm for more popular fare. She has co-authored (with her daughter, Amelia Tyagi) two consumer books on personal finance, All Your Worth: The Ultimate Lifetime Money Plan and The Two-Income Trap: Why Middle-Class Mothers and Fathers Are Going Broke. The books offer useful, if basic, financial advice. They read like personal-finance versions of celebrity cookbooks — people who come to the books because they like Warren probably find them worth the price; others probably don’t. In its review of The Two Income Trap, Time magazine wrote: “For families looking for ways to cope, Warren and Tyagi mainly offer palliatives. . . . Readers who are already committed to a house and parenthood will find little to mitigate the deflating sense that they have nowhere to go but down.” Like most of the establishment media, Time has been generally favorable to Warren in other contexts.

In the mid-2000s, Warren and some of her Harvard law students wrote a column called Warren Reports for the popular left-wing internet news site TalkingPointMemo.com. Warren Reports purported to be a deep-think collaboration like the libertarian-leaning opinion site Volokh Conspiracy; it ended up being less deep analysis and more hacky partisan spin.

But Warren’s hacky politics found an audience. On November 14, 2008 — days after Barack Obama had been elected president — she was appointed by Senate Majority Leader Harry Reid to chair the five-member Congressional Oversight Panel created to oversee the implementation of the Emergency Economic Stabilization Act and its main product, the Troubled Assets Relief Program (TARP).

In other words, Warren oversaw the Wall Street bailout.

Through her term as chair, the Congressional Oversight Panel released monthly reports that evaluated the bailout and related programs. These reports — and videos that accompanied them — served as bully pulpit for Warren. She focused her regulatory enthusiasms on topics including: bank stress tests, commercial real estate, consumer and small business lending, farm loans, financial regulatory reform, foreclosure mitigation, government guarantees, the automobile industry, and the impact of TARP on financial markets. She also testified frequently before House and Senate committees.

From these unlikely venues, a star was born. Various left-wing internet news sites and new media outlets linked to her videos and reported on her congressional testimony. Like the campus radicals at UPenn and Harvard, they were entranced by the soft totalitarianism of her schoolmarm demeanor.

Throughout her various congressional testimonies and internet videos, Warren advocated for the creation of a new Consumer Financial Protection Bureau. In a December 2009 interview with Newsweek magazine, Warren said:

To restore some basic sanity to the financial system, we need two central changes: fix broken consumer-credit markets and end guarantees for the big players that threaten our entire economic system. If we get those two key parts right, we can still dial the rest of the regulation up and down as needed. But if we don't get those two right, I think the game is over. I hate to sound alarmist, but that's how I feel about this.

(Reread that last sentence, keeping in mind the famous negotiating aphorism: “Everything before the ‘but’ is a lie.”)

This quote embodies two essential traits of Warren’s political persona.

First, she identifies important issues but comes to illogical conclusions about them. She’s right that moral hazard had dulled the capital markets; government guarantees for banks that are too big to fail inexorably leads to more failure. But she doesn’t seem to understand her own point. She wants more well-intentioned regulation to cure the problems caused by previous well-intentioned regulation.

Second, she leads with her heart — which is good in love letters but not so great in governance. Most of her public policy statements are full of prefaces, parentheticals and sidebars about how she feels about things.

One challenge for a politician who has lots of stupid people cheering for her everywhere she goes is to avoid losing any connection to reality.

In time, Warren got her new (and additional) consumer protection agency. The Frank-Dodd Wall Street Reform and Consumer Protection Act, signed into law in July 2010, created the United States Consumer Financial Protection Bureau — which some in the Obama administration hoped would grow as large and powerful as the FBI.

Warren’s growing legions of collectivist supporters wanted her to be named head of the new bureau. She wasn’t. Some collectivists saw this as apostasy on Obama’s part — he’d caved to the Wall Street establishment by not appointing the woman who’d supervised the bailout of the Wall Street establishment. Others collectivists blamed “the Republican congress” for blocking her ascent.

Warren settled instead for the consultative position of “Special Advisor” to the Bureau. Which she kept for less than a year, when she quit to launch her U.S. Senate campaign. On her way out, she issued a farewell statement (surely one of the few Special Advisors to a non-cabinet-level agency ever to do so) that read, in part:

Four years ago, I submitted an article to Democracy Journal that argued for a new government agency called the Financial Product Safety Commission. I felt strongly that a new consumer agency would make the credit markets work better for American families and strengthen the economic security of the middle class. I leave this agency, but not this fight . . . the issues we deal with — a middle class that has been squeezed and business models built on tricks and traps — are deeply personal to me, and they always will be.

Again, rich subject matter and a jabberwocky conclusion. A “new government agency” will make credit markets “work better for American families”? Not likely. The lesson of the subprime mortgage collapse and the current recession is that statist abominations like the Community Redevelopment Act, TARP (the Wall Street bailout which, it bears repeating, Warren administered) and Fannie Mae/Freddie Mac create moral hazard and obstruct market efficiency.

And, again, the pabulum about her “deeply personal” feelings. Warren’s feelings are a big part of her public persona — as big as policy details or the effects they have on objective reality. This is an unexpected focus for a law professor. But Tip O’Neill would understand. Feelings work well at the retail political level. Paste-eating collectivists put maximum importance on “personal narratives”; they care less about logic or objective reality.

Warren has peddled her emotions with some success in the popular media. She appeared several times on the Dr. Phil TV show. She’s been a recurring guest on The Daily Show. She talked about Wall Street greed in Michael Moore’s documentary Capitalism: A Love Story. And she’s a staple on less popular TV talk shows hosted by the likes of Charlie Rose, Bill Maher, and Rachel Maddow.

Her focus on “personal narrative” also plays into some au courant gender-studies topics. But in a way that doesn’t play out well for gender equality. In short, some on the American Left believe that women prefer narratives to facts . . . and these types applaud Warren’s constant drumbeat of “feelings” that are “deeply personal” to her. But lost in all this postmodernism and academic jargon is the ugly and ancient assumption that women aren’t up to analysis of objective reality.

When Warren jabbers on about deeply personal feelings, she’s not so much different than the notorious talking Barbie doll who complained, “Math is hard!”

For those who are inclined to like Warren, these things don’t matter. They don’t even register. A quick survey of the reader comment sections of left-leaning internet news sites finds the following:

  • I'm 'blown-away' by Elizabeth: she's like a breath of fresh air. I watch this video every morning: its my Doxology!!
  • I love her!!!!!!!!!!!!!!!!!!!!!!
  • I love Elizabeth Warren! Such a breath of fresh air. I only wish I could vote for her. But, unfortunately, I'm in Ohio. We need more crusaders like her. You go girl.
  • If the Dems are smart they will highlight E Warren for the next 14 months and then give her a high profile role in the Senate because she IS 2016 staring them right in the face and challenging them to step up.
  • Love her. And I wish she were running for President now. But, she'll be no more experienced in 2016 than Obama was in 2008.
  • I love Elizabeth Warren. She saw the whole mess coming and did something about it. Her campaign now is the most valuable thing I can imagine for the Democrats over the next year.
  • Warren's courage has been contagious so far. Her clarion call to justice for the next generation of Americans can provide Democrats and progressives with an opportunity to reclaim the narrative about how to make America work again for everyone.

(from the Huffington Post)

  • I'm so JEALOUS... I live in Missouri and wish we had someone like Elizabeth Warren to run here. She is AMAZING and she's gonna kick Scott Brown's ass.
  • Getting rid of Scott Brown AND having a MA senator in the ranks of Bernie, Al, and Sherrod?!? Be still my beating heart...Elizabeth Warren will be a wonderful successor to Sen Kennedy.
  • a massive showing for the person who is probably one of the most effective leaders we have seen in a long time.

(from the Daily Kos)

In many ways, these comments are typical of political commentary of all political stripes on the internet. Personality-driven. Egocentric (note how many of the comments start with and focus on the “I” of the commenter). Infantile. At their best, such sentiments can be charming; at their worst, they’re moronic.

And, when Warren is observed in this light, she begins to resemble someone her fans at the Huffington Post and Daily Kos ritually hate: Sarah Palin.

On the surface, Warren is a sort of anti-Palin. Dowdy. Scolding. Harvard professor. Twice-married (the second time to a deferential fellow Harvard professor). Credentialed. Elitist.

But dig a little deeper. Oklahoma native. Scholarship student at a third-tier college. Married at 19. Less-than-gilded law school at University of Houston and Rutgers-Newark.

She’s like Palin in significant ways. They both have built bases of popular support on checkered histories in public service; they both welcome the biases and preconceptions of their supporters.

Here’s an illustrative anecdote: When I told one lefty acquaintance that I was surprised an academic of such modest background had advanced so far, my acquaintance replied indignantly: “What are you talking about? Elizabeth Warren went to Harvard.”

Warren fairly cried out for libertarian scrutiny with one recent quote. A supporter filmed some video of the candidate speaking at a fundraising event. Asked about the president’s ineffective attempts to raise taxes on the wealthy, Warren said:

I hear all this, “You know, well, this is class warfare. This is whatever.” No! There is nobody in this country who got rich on his own. Nobody! You built a factory out there? Good for you! But I want to be clear: You moved your goods to market on the roads the rest of us paid for. You hired workers the rest of us paid to educate. You, uh, were safe in your factory because of police forces and fire forces that the rest of us paid for. You didn’t have to worry that marauding bands would come and seize everything at your factory and hire someone to protect against this because of the work the rest of us did.

Now, look: You built a factory and it turned into something terrific or a great idea, God bless! Keep a big hunk of it. But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along.

The video became a sensation on the internet. Collectivists cheered Warren’s “full-throated” arguments for wealth redistribution.

But reread the quote — it’s not quite that. It’s a poorly-made argument about externalities.

Like a debater who knows she’s making a weak argument, Warren picks the easiest points to support her case for a social contract. Only the most rigid anarchist would deny legitimate externalities like roads and reasonable law enforcement. Those aren’t the things that are bankrupting America. Welfare programs, subsidized mortgages, “free” public services and defined-benefit pensions are the problems.

The promiscuous enthusiasms of Warren’s fans lead them to some genuinely bizarre conclusions.

As far as her talk of workers that the collective has paid to educate, Warren needs to talk to some actual employers. The failure of the American elementary and secondary education system is driving some firms to look abroad and in some cases relocate for competent employees.

Lastly, the notion of “pay it forward” as part of a social contract is dubious. A social contract should more modest than her ambitions for investment in future outcomes. Support of externalities and infrastructure aren’t about paying it forward — a phrase that has developed a popular connotation of karmic debt that people today owe people in the future — they are about paying for external goods in the here and now.

Warren’s fans aren’t likely to hear any of this, of course. In fact, their promiscuous enthusiasms lead them to some genuinely bizarre conclusions. Here’s what one halfwit fan wrote about Warren’s “pay it forward” quote:

She's wonderful, and dead on with her comments about public investments enabling private success. But she's wrong about "debt" and the national "credit card". Money is a public monopoly. The primary way it comes about is thru federal deficit spending. And US dollars precede US Treasury debt. So there is nothing for children or granchildren to pay back, and there is no "hole" in the budget.

A challenge for a politician who has lots of stupid people cheering for her everywhere she goes is to avoid losing any connection to reality. Life in an echo chamber can lead to bad choices.

Recently, the Daily Kos ran an adoring article on Warren that included a picture of a room full of lumpenprole women and pear-shaped men, cheering on their majestic crusader. To that crowd, and later to several media outlets, Warren bragged that she was the spiritual founder of the Occupy Wall Street protesters. “I created much of the intellectual foundation for what they do.” And:

. . . no one understands better what the frustration is right now. The people on Wall Street broke this country. And they did it one lousy mortgage at a time. It happened more than three years ago, and there has still been no basic accountability, and there has been no real effort to fix it. That’s why I want to run for the United States Senate. That’s what I want to do to change the system.

The National Republican Senatorial Committee jumped on that, issuing a quick press release noting that some of “her Occupy acolytes in Boston” had fought with the police. And ended up in chains.

At the same time, some wild-eyed Occupy Wall Street protesters have demanded that Warren “repudiate” — a totalitarian word — Obama’s bailout of big investment banks (which, again, she oversaw) before they will support her bid for the U.S. Senate. Doesn’t seem like a nice way to treat the lady who created much of their intellectual foundation.

Warren invites this lunacy. By throwing in with the Maoist protesters, she’s likely to have marginalized herself.

There’s a whole year in which candidate Warren’s signals to campus radicals will come back to haunt her. At the Daily Kos, people who “love” Warren are begging her to run for president, in 2016 if not sooner.

A rational person can only hope their love for Warren will be fleeting, just as their love for Obama was. In the mean time, the woman who oversaw the Wall Street bailouts will have talked a lot about her deeply-held feelings. And inched free people who build factories or have great ideas a little closer to slavery.




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99 to 1

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I am sick of hearing about the “99%.” I am in the 99%, but you won't see me marching on Wall Street and making signs about my worthless college education. That’s because I’m working my ass off trying to get into the 1%.

My husband and I have a small business. We do software testing. We have some employees, and we use a lot of temps. We've probably created or saved as many jobs as President Obama has. Probably more.

Nevertheless, almost all the people we hire are in their early twenties, just out of college, with a useless "Game Design degree." Just the kind of people you see marching on Wall Street.

I just heard that one of our workers was complaining about some other company "being cheap" because they didn't want to pay for someone's health insurance.

Damn.

Why can't companies not be "cheap"? Why can't they just pay you more?

First of all, why can't you pay more? Well, why don't you pay $300 for a videogame? Because it’s not worth it to you. But if you paid that much, then maybe videogame testers would make more money. But you won't pay $300 for a game, and neither will anyone else. So companies who make games need to control their costs.

Testers do not make a ton of money. It's true. But the companies that employ you don't make much off of you. We charge our clients your hourly rate plus $X. And X ain't a big number. Believe me, we would like to charge more per hour for your services, but we can't. If we charged a reasonable markup on your rate, then the companies that hire us might just decide to take their business elsewhere, like Bangalore or Hyderabad. We need to keep our profit margin mighty slim, or we'll be paying you zero — because you won't have a job.

So, yes. We are all "cheap.” But you have a job.

By the way, the competition has testers in foreign lands. Their daily take-home pay is a little bit more than what you make for one hour. And they aren't complaining.

But even so, you think, we must charge our clients some kind of markup on your hourly rate, don't you? Where does all of that money go?

Well, it goes all over the place. We have to pay the rent for the offices you are sitting in. We have to buy power strips, chairs, desks, lamps, cabinets, tape dispensers, paper, pens, pencils, notebooks, toner for the printer, and paper for the toner to go on. It adds up.

We also have to pay for the people who clean up after you when you spill coffee on the carpet or you use the bathroom and leave a mess.

Believe it or not, we have to pay the electric bill. We have to pay for the water, the coffee, the cream and sugar, the Red Vines, the occasional well-deserved doughnut feast.

We have to pay for the very fast internet connection that we need to do business. We have to pay for the phones. We have to buy computers and the hardware that you are testing on. Even if we only use it for three weeks, we have to buy every Microsoft test kit, every Sony test kit, every Nintendo test kit, etc., etc. They aren't cheap. And we have to buy a lot of them.

We have to buy software so you can do your work — bug tracking software, operating systems, secure instant messaging systems, general office software. We have to pay to have the network installed at the office, so that we can do our jobs.

But to return to you yourself. We have to buy workers' comp insurance, because one day, you may get a hangnail and sue us. Who cares, you think, it's the insurance company that’s going to pay for it. Yes. And we pay for the insurance. And if there’s a hangnail lawsuit, we’ll have to pay more and more for that insurance.

Lawsuits have made it more expensive to do business. If we have a client with deep pockets, and you’re trying to be crafty and so sneaky, you'll sue the client for that hangnail, too. But our clients are crafty and sneaky, too, so they require that we have certain supplementary insurance as well. Meanwhile, we need lawyers to read, write, and review our contracts so we don't get sued by you or by our clients. Lawyers are not cheap.

In addition, we have to pay for alarm systems, just in case you've told your ne'er-do-well brother-in-law who just got out of jail that you work at this cool company that has a bunch of computers.

We have to pay for those silly little taxes that cities decide to place on businesses, just for the pleasure of existing in them, and employing their citizens.

Naturally, we need to pay interest on the large amount of money we borrowed to pay for all of the above.

Oh, yeah. I almost forgot. We need to eat, too.

One day, we will finally pay off our debt — if we manage to stay in business, despite the lackadaisical, whining employees who do poor work because they are lazy, or maybe no work at all because they really couldn’t care less about their low-paying jobs.

At the end of it all, after years of stress and lack of sleep and no vacations and strained family life, we just might end up wealthy.

On that day, I will happily tell the rest of you 99%-ers to screw off.




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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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