Inverted Morality

Never in the history of America have so many supported such unscrupulous policies while firmly and self-righteously believing they are doing something very moral.

How to explain this?

If you are not depressed you either don't know what is going on, or else you are in the grip of some strange and diabolical moral code.

If the latter, as I suspect of many, it amounts to the belief that the "rich" are the one's who will be taxed for the benefit of the rest - and it is ok to plunder the "rich"! What about the burden that will be borne by future generations?

Do we have a right to plunder them as well? I am not sure how they answer this. Probably by saying: "Oh who knows what will happen, we have to do something now, lets worry about that later. And it will probably be on the 'rich' of the future generations anyway."

Really? Will there be any "rich" left?

Why are there so few who find this illogical and unconscionable? Will the majority come to its senses before it is too late?

See below from today's WSJ. Read it carefully, and weep.

PL.

WSJ: Opinion
The Greatest Show on Earth
Step right up: A new entitlement that cuts the deficit!

Washington spent the week waiting for the Congressional Budget Office to roll in with its new cost estimates of the Senate health-care bill, and what a carnival. Behold: a new $829 billion entitlement that will subsidize insurance for tens of millions of people—and reduce deficits by $81 billion at the same time. In the next tent, see the mermaid and a two-headed cow.

The political and media classes are proving they'll believe anything, as they are now pronouncing that this never-before-seen miracle is a "green light" for ObamaCare. (What isn't these days?) The irony is that the CBO's guesstimate exposes the fraudulence and fiscal sleight-of-hand underlying this whole exercise. Anyone who reads beyond the top-line numbers will find that the bill creates massive new spending commitments that will inevitably explode over time, and that this is "paid for" with huge tax increases plus phantom spending cuts that will never happen in practice.

The better part of the 10-year $829 billion overall cost will finance insurance "exchanges" where individuals and families could purchase coverage at heavily subsidized rates. Senate Finance Chairman Max Baucus kept a lid on the cost by making this program non-universal: Enrollment is limited to those who aren't offered employer-sponsored insurance and earn under 400% of the poverty level, or about $88,000 for a family of four. CBO expects some 23 million people to sign up by 2019.

But this "firewall" is unlikely to last even that long. Liberals are demanding heftier subsidies, and once people see the deal their neighbors are getting on "free" health care, they too will want in. Even CBO seems to find this unrealistic, noting "These projections assume that the proposals are enacted and remain unchanged throughout the next two decades, which is often not the case for major legislation." Scratch "often."

Then there are the many budget gimmicks. Take the "failsafe budgeting mechanism" that would require automatic cuts in exchange spending if it increases the deficit. CBO expects 15% reductions in exchange subsidies each year from 2015 to 2018, even though the exchanges don't open until 2014. That kind of re-gifting should have been laughed out of the committee room, but the ruse helps to move future spending off the current budget "score."

Mr. Baucus spends $10.9 billion to eliminate the scheduled Medicare cuts to physician payments—but only for next year. In 2011, he assumes they'll be reduced by 25%, with even deeper cuts later. Congress has overridden this "sustainable growth rate" every year since 2003 and will continue to do so because deeper cuts in Medicare's price controls will cause many doctors to quit the program. Fixing this alone would add $245 billion to the bill's costs, according to an earlier CBO estimate.

Recall that when President Obama started the health-care debate, the goal was "bending the curve"—finding a way to reduce both Medicare and overall health spending. Budget director Peter Orszag talked about "game changers," which CBO has now outed as nonchangers. Comparative effectiveness research about what treatments work best? That will save all of $300 million in Medicare, even as it costs $2.6 billion in new taxes on premiums. More prevention and primary care will increase spending by $4.2 billion.

Senate Finance votes next week, and no doubt this freak of political nature will pass amid fanfare and self-congratulation that their new entitlement will reduce deficits. Never mind that such a spectacle has never happened in the history of the republic. P.T. Barnum had nothing on this crowd, and the bill hasn't even hit the Senate floor yet.

Meanwhile, the bill piles on new taxes, albeit on health-care businesses so the costs are hidden from customers. Insurance companies offering policies that cost more than $8,000 for individuals and $21,000 for families will pay $201 billion per a 40% excise tax, which will be passed down to all policy holders in higher premiums. Another $180 billion will hit the likes of drug and device makers, including $29 billion because companies won't be allowed to deduct these "fees" from their corporate income taxes. Then there's the $4 billion in penalty payments on those who don't buy insurance because all of ObamaCare's other new taxes and mandates have made it more expensive.
  
The Baucus bill also expands ailing Medicaid by $345 billion—even as it busts state budgets by imposing an additional $33 billion unfunded mandate. The only Medicare cut that isn't made merely on paper is $117 billion in Medicare Advantage, which Democrats hate because it gives one of five seniors private insurance options.

Printed in The Wall Street Journal, page A18

Copyright 2009 Dow Jones & Company, Inc. All Rights Reserved.

Health-Care Smoke and Mirrors

So now the Left-Democrats (Social-Democrats) are focused on somehow ramming the health-care public option through Congress – even though they know that a significant minority opposes it (maybe even a majority). They absolutely refuse to hear the word "No"! Anyone who opposes them is a traitor, a stooge of the Insurance Companies, the Hospitals, or some other interested exploiter – never a sincere objector.

But when pushed about the details of the plan they provide one or more of three unsatisfactory responses.

1. The details have yet to be worked out
   
2. The premiums paid to the public provider will cover the costs
   
3. The private insurance companies are expensive because their profits are high – competition from the public plan will solve that
   

Let's consider these.

Number 1. is a cop out. For such a drastic proposal we need details. How is it going to be paid for? Who is going to pay for it? How much is it going to cost?

Number 2. is smoke and mirrors. Somehow the public provider will be able to cover its costs with premiums way below the private providers'. How can this happen? Which brings us to the number 3.

Number 3.- it's all the fault of the private insurance providers and their high profits. A lot of people believe this. They believe that medical insurance premiums are high because medical insurance companies make large profits. I find this puzzling. If their profits are so high (meaning their RATE of profit, not the absolute numbers) then why are there not more competitors. High rates of profit always attract competitors unless there is some real barrier to entry.

When I point this out I am told there is a barrier – the insurance companies are a cartel (a private monopoly) – they prevent entry by lower cost (premium) competitors. Really? How do they do this? And if this is the case, is not the appropriate response to break this cartel and allow vigorous PRIVATE competition? Why do we need a public, aka government, option. The government never does anything efficiently – why would anyone think the government would be good at producing medical insurance?

So where is this private medical insurance cartel and how do we break it up?

Understand this clearly, the public option, if it charges premiums below the competitive level will have to be subsidized. That means an extension of the model we have now for Medicare. Those who have private insurance will face even higher premiums, maybe much higher, because their medical costs will rise, so that the private plans end up subsidizing the public one. Private medical costs will rise becasue hospitals and doctors will not be able to make money on the public reimbursements (from the public insurer) so they will charge more to their private patients. But price-discrimination ("rich" pay more, "poor" pay less) can only be pushed so far. In addition there will be new heavy taxes – probably on the private insurance companies, which they will partially recoup by raising their premiums. The public option will grow. It will become bloated, inefficient and corrupt, like all the other public health systems - even the French one. And you and I will pay through the nose.

You can't get something out of nothing.

Rosh Hashanah and the Jewish Atheist

In the immortal words of Joan Rivers, let's talk:

I must confess that I enjoy the Rosh Hashanah and Yom Kippur shul services – and also Shabbat. I admit also that I love opera (well at least Italian and French opera). Apart from making me appear weird, what do these two things have in common?

Consider the Jewish religious texts, including the prayer books. It seems to me they comprise the most indigenous Jewish literature that we have. Though composed over many centuries, as we contemplate them today, they constitute an organic network of linked artistic achievement. Take the Machzor for example (Rosh Hashanah-Yom Kippur prayer book). This can be appreciated as an amazing work of art replete with poetry (including ingenious alphabetical acrostics and soaring metaphors), beautiful traditional prose verse and multiple allusions and connections to the Jewish experience throughout the ages. It is a carefully structured script, in numerous acts and sub-acts, for a yearly performance, a playing out of a hypothesized interaction between the Jews and their God, and between the Jews themselves. Every year the text is the same (save for minor insertions or omissions), yet every year we can approach it anew. No matter how many times I see La Boehme, or Madame Butterfly, I enjoy it every time – same music, same libretto, different arrangement, different tempo, different sets, different experience.

The Rosh-Hashanah-Yom-Kippur service is its own art-form. And it too can be enjoyed every time it is repeated. I appreciate the music, mostly in the form of East-European cantoral-choir music, if available, but also in the form of congregational communal singing. The music is evocative of shared memories, the harmonies are pleasing to the ear and the melodies provoke the closest thing to a religious experience I am capable of. Truth be told, it is the same feeling I have when listening to a sublime operatic performance. For me the parallel is exact.

But it is not only the music. The poetry and the text are fascinating and intricate. There are riches to be mined beyond the energy to do so – enough for a lifetime. One can appreciate the confluence of music and text when one listens to a chazzan singing the verses with complete understanding of the significance of each word in its context. But to do so one must have the background knowledge. Jewish education is as much about artistic appreciation as about theology.

I face multiple objections to this viewpoint. Both the Jewish fundamentalists (those who are literal believers) and the modern interpreters (who attach nuances to revelation) object to the "reduction" of a Jewish service to mere artistic expression. Many congregations have banished the art of the chazzan and the choir, feeling that a religious service should not be a "performance" – that, in admiring the virtuosity of the performers, one might be distracted from the overriding religious purpose of the service.

I have never found these objections persuasive – partly because I do not share their religious beliefs, but, also, partly because I believe that they involve a false dichotomy. One need not choose between the admiration of artistic virtuosity and religious fervor and sincerity. One can and should combine them. A very close lifelong friend of mine is a world-class chazzan, choir-master, arranger and song-writer – born to a Chasidic family. During his long and wonderful career as a chazzan, he would often introduce new melodies into the service, from the operatic and Broadway musical world, in addition to the wonderful, but now familiar, Carlebach fare. And he sometimes faced indignant protest and the suggestion that this bordered on blasphemy. His response was emphatic. If the music of the Phantom of the Opera could be used to display the grandeur of God, if it could provoke people to an appreciation of the wonders of this world, how could it be blasphemous to use it in that way? If it were not for him I would never have had much appreciation for the Jewish liturgy.

Still, I will not deny that art and religion are different things. The truly religious, if he appreciates the use of artistic expression in a religious context, sees it as being in the service of religion. I see it as art for its own sake. The appreciative experience of a thing of beauty is, for me, its own justification.

But not so fast! Consider this. Can we not see a connection between artistic expression and the human condition – between art and conscience? What makes us essentially human is our capacity for self-reflection. We do not merely observe. We observe and contemplate, we seek meaning in things. You can probably learn much about the nature of a person by observing what they enjoy, what they appreciate, what they find poignant in a poem, what kind of stories move them to tears. Morality and art are inextricably linked.

Which brings me to an old refrain of mine. We Jews like to claim all manor of morality from our tradition. So, for the fundamentalist Jew, looking to the vengeful and exacting God of Genesis, God is a right wing conservative. For the majority of the rest of the Jews, looking to the prophets and their preoccupation with "social justice," he is a modern "liberal" – the Democratic Party variety. (For me he would obviously be a classical liberal, a libertarian who understood the value of liberty and free markets). Did God create us or did we create him?

In any event, when Keats said, "Truth is beauty, beauty truth, that is all ye know on earth and all ye need to know" I think he was talking about more than aesthetics as simple sensual experience. When challenged on the inconsistency of my secular beliefs with my synagogue attendance, I am tempted to reply: "It's the aesthetics stupid." Yes, it is aesthetics, but its not just aesthetics, where aesthetics is understood as a limitation. I think aesthetics is a big deal. A work of art is something we can all appreciate and enjoy together.

This reminds me of a story that I am fond of repeating.

• Mr. Cohen's son: Dad, how come you go to shul?
• Mr. Cohen: What kind of a question is that?
• Mr. Cohen's son: I know you are a non-believer, an atheist, an agnostic, or whatever; so why would you go to shul?
• Mr. Cohen: Goldberg goes to shul.
• Mr. Cohen's Son: So what? What kind of an answer is that?
• Mr. Cohen: Goldberg goes to shul to talk to God, I go to shul to talk to Goldberg!

Some of my non-Jewish friends have misunderstood this story. They think it means that Cohen cynically talks to Goldberg about business (interesting interpretation!). Of course, what it really means is that Cohen likes to be among friends with whom he has centuries of tradition and much modern experience in common. He is far from cynical. He is affirming the value of friendship, of community and the enjoyment of beautiful things together.

Economics, Politics, Education and Religion.

Representative democracy may be compatible with the existence and maintenance of a free society, but it is neither necessary nor sufficient for it.

Representative democracy gone wrong can be a very dangerous thing. There are numerous examples from history, the most alarming being Nazi Germany – Hitler was elected and used the legislative process to get the laws he wanted. This example, while extreme, is only one of many. In fact it is probably more the rule than the exception, that representative democracies tend, gradually or rapidly, to erode the very freedoms that allowed them to be established in the first place. A dictatorship of a majority (or a plurality) is a dictatorship none-the-less, and it is not surprising that it often gives in to the temptations facing most dictatorships. In representative democracies this erosion comes from the tenacious pursuit by powerful interest coalitions of their economic and ideological self-interest (labor unions, environmentalists, steel producers, farmers of every kind, trial lawyers, you name it) – trying to obtain through the coercive political process what they cannot achieve through the competitive, but non-coercive, marketplace.

Barak Obama is the quintessential messiah of this erosion. It is his mission to use the democratic process to erode the respect shown to the competitive private property system on which our very civilization depends. How does this happen? Why do civilizations like ours flirt with suicide? Too big a question to answer fully in this space. The short answer consists of two elements – the free-riders and the economically-ignorant. Sometimes they overlap. The special interest groups, like the teachers unions who oppose the existence of free choice in education because they know it will threaten their incompetent existence, are free-riders; imposing the costs of their incompetence on the uneducated and mis-educated youth of America and the rest of us. The "liberal" ideologues who think that all the wrongs of the world are the result of the inequality in wealth and circumstance that accompany economic growth, and the evil intentions of those who benefit the most from it, are eco-ignoramuses. Sad to say, the majority of American Jews, who should know better, are part of this group.

Today's Wall Street Journal contains two pieces that address these issues. In a short editorial the editors bemoan the fact that, while the media's radar is fixedly tuned to the nationalization of health-care, the Obama administration has quietly killed a resoundingly successful education voucher program, benefitting 1700 low-income kids in Washington DC. This is a real scandal that deserves to be blasted from the rooftops. It is a sad and cynical example of both free-riding and ideological hubris backed up by economic ignorance.

The other piece is an article by Norman Podhoretz bearing the title of his just-published book, "Why are Jews Liberals?" It is truly astounding the extent to which America Jews evince a basic ignorance of the dangers of allowing government to accumulate too much power. It is astounding because if any group in history should understand that the power for good is also the power for abuse, it is they. It is they moreover who have been amongst the most prominent beneficiaries of the free-market system over the last 150 years. It is they who should understand that without freedom all of their other "progressive" social aims must fail. It is they who should understand that without freedom and secure property rights there can be no escape from poverty, that onerous taxation results in disinvestment and inefficiency and corruption – they should know this from their history if they would take the time to remember it.

As Podhoretz points out, however, the secularization of American Jews has resulted not only in the abandonment of their fundamentalist religious roots, but also in the passionate embrace of a new religion – the secular religion of the Democratic party that they call "liberalism" which should more accurately be called "statism." Having being given the freedom in America to choose to abandon their fundamentalist religious identities they are now leading the charge to have America abandon the essential ingredients of that very freedom itself. Could anything be more frustratingly ironic?

Secularization – the separation of religion and state, or, more importantly, the preventing of any religion from becoming law – is an absolute necessity in a free society. But if the benefits of freedom are to be sustained, the secularized must not be allowed to succeed in harnessing the power of the state for the achievement of their newly adopted secular "religion." This simply puts new, and deceitful clothes, on the same old pretender. The solution, however, is not a return to fundamentalism, as right-wing religious enthusiasts (Jews and Christians) think it is. It is rather an affirmation in concrete terms of the virtues of individual autonomy and the necessity of maintaining a break on the accumulation of power by any branch of government no matter how well-intentioned.

If this be seen as its own "religion," so be it. It is the only one that can save us from ourselves.

Post Summer Developments - is rational conversation possible now?

One senses that we are at a pivotal moment in the early history of this administration.

Highest on the agenda of course is the health care initiative. What will happen when Congress reconvenes fresh from the experience of the summer town-hall meetings? The Republican strategy of full-out opposition to the health-care bill, in its various incarnations, will be put to the test. Will the bill die, or will some variant, however watered down, pass in both houses? The former would be the preferable outcome. But whatever happens, this has been an eye-opening episode not only for the Obamaniacs, but also for the rest of us - to realize what makes these guys tick. They are not the sophisticated idealists they portrayed in the slick presidential campaign. Rather, as one might have suspected, they are brutal, power-hungry politicians in single-mined pursuit of a slew of unrealistic goals designed to buy them support with special interests and a legacy in history. But what will they, the Obamaniacs, really be remembered for?

The health-care power-grab should have been an opportunity to clarify for the American people. instead it has left us even more confused. To be sure, health-care is multi-faceted and complicated. But the various proposals have not helped. They are long and involved and only those energetic enough to examine them carefully know what they really say. In addition, the picture has been clouded by the Obamic spin-doctors - who say things like "America has the highest cost health-care in the world" and various other untruths and half-truths designed to sow dissatisfaction and expectation for improvement if only we will accept "change." As complicated as it is there are a few simple facts and propositions worth noting - these should form the basis of an understanding prior to any intelligent conversation about change.

1. When comparing the cost of U.S. health-care with that in other countries, like France and England, one needs to include the cost per taxpayer in taxes to fund the health-care system.
   
2. The numbers frequently presented for the number of "uninsured" in the U.S. are misleading. They are overstated in that they fail to include many who have insurance - like illegal aliens insured under false identities. They also mislead by not noting that almost no-one in America gets turned away from health-care - though there are great variations in quality, even the lowest quality care in America is better than most places in the world. The poorest patients, who cannot pay, are routinely subsidized by the rest of us, who pay high prices for care and, consequently, for insurance premiums. We don't need a government initiative to make this happen, it's happening already and it does not work so badly. It is what economists call price-discrimination where those who can, pay more to help those who can't.
   
3. Having said this, it is undeniable that the price of health-care is high and rising at a rate out of sync with other technology-driven sectors of the economy. There is something fishy going on. But to sort this out one has to begin from the most basic and undeniable of propositions: To reduce the price of health-care one has either to increase the supply or decrease the demand or both. There is no escape from this basic logic. If the price is "too high" it can only mean one thing - the supply is too low relative to the demand. In all of the various health-care proposals out there now and in the past generation I do not recall one proposal to significantly increase the supply of health-care services. Instead they all amount to pushing down the cost of what we have or reducing the demand - though they seldom say so. They all involve some sort of costly and frustrating rationing system.
   
4. Chief among the restrictions on supply-growth is the shortage of doctors. This can be remedied by graduating more doctors - increasing the number of medical schools and their enrolment, by reducing the costs of training, for example by allowing entry to medical school without an undergraduate degree (as is the case in most other countries who produce very fine doctors), by expanding the scope of tasks that can be done by lesser trained professionals, like physician's assistants, by breaking the stranglehold that the medical profession has on the production of doctors and by recreating the attractiveness of medical practice for young idealistic, ambitious Americans.
   
5. This last assertion relates to the fact that the various initiatives over the years, producing more administrators, more regulations and restrictions on doctors and patients, have resulted in a beating down of the joy of medical practice. The doctor-patient relationship needs to be restored - managed-care has not worked. With more doctors and less regulation second-guessing what they do, prices will come down and satisfaction will go up.
   
6. Reform of tort law is absolutely key. The cost of malpractice insurance is debilitating. It is driven by the propensity of ambulance-chasing lawyers to prey on the predilection of juries to make ridiculous awards to patients they identify as powerless and poor against doctors they identify as powerful and rich, regardless of the law; as a result of which insurance companies prefer large settlements to even costlier law-suits, hence we have astronomical insurance premiums. First, abolish jury trials for malpractice suites. They are too complicated and involve statistical and medical evidence - there is precedent for this. Second, tighten up the standards for proof of malpractice and allow the use and upholding of private contracts to limit liability. This could all be done without spending a cent and would save hundreds of billions of dollars.
   

This is what an intelligent conversation in health-care would look like. What about some of the other issues on the table? Here are a few pointers.

Global warming: fact - there is not much we can do to stop it (if it is real). The latest evidence indicates that European economic growth will benefit slightly as a result of it. Third world countries would face the costliest adaptation, but its hard to predict. Methane reduction makes more sense than CO2 reduction. Taxing CO2 emissions is stupid.

Cash for clunkers. Newsflash - when you subsidize the purchase of an item and make it artificially attractive you do not improve the economic prospects for the long-term production of that item. The subsidies have to be paid for and should be added to the price of the car. This does nothing for the auto industry. It is simply an exercise in expensive and futile feel-good income re-distribution. This is not rocket science.

The stimulus - ah the stimulus! It has not worked, it has not even been tried. Most of the money created by the Fed is sitting in the balance sheets of the commercial banks waiting to explode into inflation. Hero Bernanke says he can stop this from happening. I want to know how. About 10% of proposed Treasury spending has actually been made and most of it has gone to the state governments for them to use in their favorite interest satisfying projects. The number of jobs lost since Obama said he would create three million jobs is about three million jobs. Not to worry, genius Nancy Pelosi tells us that in the absence of the (absent) stimulus, six million jobs would have been lost. I wonder how she knows this. Anyway, it's a nice idea, very hard to disprove.

The truth is, the economy is recovering in spite of and not because of anything the government has done. The market works - if it is allowed to. When housing prices fall to reasonable levels and resources have moved to other sectors, the economy will begin to grow again.

After the summer will we have a muting of this brash bunch of beatniks and the possibility of more rational conversation? Once certainly hopes so.

From incompetence comes hope?

Recently the bad news has been mitigated by glimmers of hope – not exactly good news, but some intimations of a possible turn in the road ahead.

The President sees that some of his proposals are having severe labor-pains and may not emerge intact. So he is going to the airwaves – TV and radio, to address the American people. How ironic! This is a tactic most recently employed by the great communicator, Ronald Reagan. But Reagan did it in pursuit of smaller government – to bring about deregulation and a cut in entitlements. Now Obama uses this tactic to achieve the exact opposite. We will find out if this American public is so different from Reagan's or if they can be made to believe anything the President says eloquently enough. Eloquence rather than logic is being employed, when he says, for example, that the status quo in health-care is unacceptable, and, therefore, (any) change is to be preferred. It should not take a rocket scientist to realize that a very bad situation can almost always be made worse by ill-advised legislation.

The monstrosity of a health bill is having a rough time in Congress. Almost certainly what comes out of these deliberations will be very different from the blueprint the President provided. Hopefully, it will be much, much leaner. It is very important that this be seen as the President's first major failure, and a big one. The public needs some hard evidence to become disabused of the messiah illusion.

Signs of this surfaced recently in President Obama's laughable missteps surrounding the Gates arrest. Usually so smooth and so careful, the President found himself unable to control the link between the honest part of his brain and his mouth. Barak Obama, the first "black" president, ran a campaign that purportedly rose above race. He was first an American and second an "African." Race was pace. He was too sophisticated to stoop to Jesse-Jackson-like victimology. Well, it seems that this time the temptation was too great, and he succumbed. He paid the price, and came as close to an apology as his, much deemphasized, pride would allow. Retrospectively, it is hard to maintain that this incident was about race – though, clearly, stupid mistakes were made all round. Still, it has served a useful purpose in the exposition of fallibility.

Now the Congress has parted company with the President in seriously considering linking international trade barriers to emissions standards. The President, to his credit, is opposed. But, predictably, politicians, venal as they are, see a golden opportunity to buy votes by providing their local constituents with protection from international competition – at the expense of everyone else. This enviro-imperialism could cripple the world economy as successive rounds of retaliation lead to a "beggar thy neighbor" policy, as happened in the 1930's. There are some signs that the Europeans (the UK and Germany, in particular) will pull back from this, and hopefully so will we.

On foreign policy, the Obama administration has adopted a curious and shameful moral-ambiguity – abandoning the liberal universalism of its rhetoric for some type of inverted self-interest – in Honduras, in Israel, in Iran, in North Korea, in Russia – for God's sake find me an instance I can praise! Dare one hope the public will see through this before too long?

Price inflation has not surfaced yet, mainly because, as explained in earlier blogs, the lending-borrowing environment is very uncertain (mainly owing to the unpredictability of government regulation). So the massive expansion of bank-reserves (high-powered money – deposits held by the commercial banks at the Federal Reserve) are being stockpiled. Bernanke promises to mop them up. One wonders how, and one wonders why were they put there in the first place just to be "mopped-up" with great difficulty later. Whatever he does now will result in an explosion of the National Debt and will burden Americans for generations to come. Still, if, by some miracle, inflation can be avoided, that is to the good. This one is a long shot.

So you see it is not really good news. It is just a series of signs that the incompetence of government may result in helpful sorts of government paralysis that will lead to a return to the healthy skepticism of its powers.

Jews in South Africa - The Fundamentalist Turn

Having just returned from a short visit to South Africa, to celebrate a traditional Jewish wedding, I find myself thinking about the Jewish experience in South Africa, from the origins of the Jewish community until the present.

The last thirty years or so have been characterized by a fundamentalist turn in the South African Jewish community. What is this all about and how do we feel about it?

The extent of this shift is debatable. To me it seems very significant in scope, especially among the young. This mirrors developments in other parts of the world. Jewish communities in America, for example, have experienced a decline in the number affiliating Conservative and an increase in the numbers affiliated Reform and the various branches of Orthodoxy, especially Chabad and the Haredi outreach groups like Or-Sameach and Aish-Hatorah. But the latter movement, toward Orthodox affiliation, is dwarfed by the numbers in Reform and the numbers opting out of Jewish identification altogether through intermarriage or disinterest. Orthodoxy remains a small minority among American Jews (maybe around ten percent). In Europe, where these denominations do not really exist, the number of Orthodox has likewise increased, but not as fast as those assimilating. In Israel there has been a noticeable increase in Orthodox affiliators, and an increase in overall religiosity, allowing for the development of Conservadox alternatives, like the Shir-Chadash synagogue of the Shalom Institute of Rabbi David Hartman in Jerusalem.

In South Africa, where Reform has always been tiny, and Conservative Judaism non-existent, the shift has been from the unique variant of South African Orthodoxy, that developed in the generation after the first main Jewish immigration, to some variant of strict Orthodoxy, like Chabad or some other black-hat type. So the shift has been almost exclusively to the right, that is, out of the center toward more stringent Orthodoxy – in contrast to the U.S.

The reasons for this shift are also debatable. Most likely the uncertainties of the South African situation (high crime, rapidly changing demographics and technologies, economic fluctuations) have something to do with it. The revealed word provides a source of unchanging comfort for many. More specifically, the precipitous and ongoing decline in the size of the South African Jewish community (from a peak of about 120,000 to around 50,000!) may be a cause as well. Emigration tends to be selective, and perhaps the more secular are also more mobile. The matter awaits more scientific scrutiny.

Whatever the reasons, however, it is real and it has completely changed the character of the Jewish community.

The founding immigration to South Africa occurred from about 1890 – 1930, overwhelmingly from Lithuania. These were mainstream, non-Chassidic, Litvaks. Many of them were religious, like my grandfather. But, very soon their children faced hard choices and made predictable decisions. Similarly to America, this generation became rapidly secularized, choosing to work on Saturday and drive on Yomtov, eschewing kosher food, etc. but nevertheless holding fast to their Jewish identities. Unlike in America, there was no melting pot, no Conservative Jewish movement, very little intermarriage. In South Africa an affiliated Jew was affiliated Orthodox, even though the vast majority of the congregants were secular. This is not unlike the Conservative congregations of America, except that the religious leadership were Lithuanian (and sometimes other East European or British) orthodox Jews. Furthermore, the religious leadership was not theologically sophisticated, like the innovative Conservative rabbis of America. In fact theology, and religion as such, played very little role in the communal Jewish life of most South Africans. It was tradition more than religion. To be sure, the rabbis did their level best to increase the sorry state of awareness and observance among their congregants. But for the latter the rabbis were not very important. Mostly South African Jews of this generation, my and my parents' generation, went to shul to listen to the chazzan and the choir, rather than the rabbi – and to be with family and friends. Some rabbis attracted disproportionate attention with their oratorical eloquence (form rather than substance) and their charisma. But it was their personal magnetism, rather than their theology that was admired. And Jewish liturgical music was key – the choir and the chazzan were the center of the service, Friday night, Saturday morning and on Yomtov.

This mixture of loyal affiliation and secular pragmatism resulted in a vibrant, fiercely Zionistic, high-achieving Jewish community. Members of this community can be found all over the world today in successful businesses, leading professions, artistically prominent positions and community leadership. Their achievements were astounding for such a small proportion of the overall population. They are generally free-thinkers, modern in their approach, requiring reasonable evidence for any claim, not particularly troubled by the schism between the teachings of their religious leaders and their own critical beliefs. They are mostly secular and liberal (in the classical sense of upholding universal individual human rights). Many of their children in South Africa have succumbed to the temptations of the evangelical fundamentalists. Many have left. More will leave.

For me this is very sad. It is the final chapter of the losses I have experienced in the four-decade long emigration process. The country, the culture and the community I left no longer exists. In its place a narrower, more doctrinaire, superstitious, unthinking mixture of alternatives has arisen. To be sure, old-style South African Jews still live there, but they seem to be in the minority – just one of the many alternatives, and their numbers may be dwindling. South Africa may well be alright. It may overcome the multiple challenges it faces and remain the hope and salvation of Africa. But the golden age of South African Jewry has passed.

Will they hear him?

Yesterday's foreign policy speech by Benjamin Netanyahu provides an enlightening illustration of the capacity for self-delusion – an astounding instance of just how far off the plain meaning interpretation can be spun.

The Democratic "liberal" press are interpreting Netanyahu as having departed significantly and importantly from his hard-line opposition to the two-state solution; and in so doing providing president Obama with much of what he needs to co-opt the Arab world to his utopian vision of a regional peace. This interpretation adds to the impression that these Obamites have of their leader as someone who will benignly nudge Israel in the direction it needs to go – good for Israel good for America. And seeing this they give themselves one more pat on the back for voting for him. This includes most prominently the 78% of American Jews who voted for him, who continue reverently to sing his praises at every opportunity. I am as disgusted as I am frustrated at this unseemly arrogance and naiveté.

The only accurate interpretation of Netanyahu's speech is the one provided by the Arab press (how ironic!). They correctly understand that Netanyahu greatly clarified his continued opposition to their vision of a two-state solution. He did not move an inch toward Obama, but he did provide an articulate, reasoned explanation. A "two-state" solution is an empty phrase until one spells out the kind of states we are talking about. Israel is already a functioning, mature nation-state, operating under the rule of law, providing opportunities and free-choices for its citizens. It is also the only Jewish state in the world, in which capacity it provides a spiritual center for all identifying Jews around the world. There are at least 20 countries who identify as Islamic nations. They are all repressive dictatorships committed to the destruction of Israel. What kind of state is the Palestinian state going to be in this "two-state" story? That is the main, almost the only, theme in Netanyahu's address.

Do the fuzzy thinkers really think they can conjure to life a peaceful, secure neighbor from what now exists on the ground in the Palestinian territories? That would be nice. Who would not want that? Who would not accept that? Bring it about, says Netanyahu, and we will embrace it. Just make sure that in the process of trying, a belligerent, militarized alternative does not result. It would not be the first time.

As it stands there is no hope for a two-state solution that could satisfy Israel, the Palestinians and the Arab world. Netanyahu explained why. In so doing he did not move closer to the two-state solution and to Obama. Rather he delineated clearly the differences between them. This is not a cause for celebration – though I personally greatly welcome the clarity provided. It is rather a cause for concern – concern that Obama, with the support of the influential American Jewish community will pressure Israel into costly and exceedingly dangerous concessions – concessions that will cost lives as well as dollars.

Netanyahu spoke clearly to those who care to read what he said and not what they wish he had said. I cannot improve on it. But it is worth emphasizing one key point. The central stumbling block to any kind of peaceful coexistence is a refusal to accept the legitimacy of Israel as a national Jewish homeland. The whole Palestinian "problem" is dedicated to the eradication of Israel as a Jewish state. Before any kind of progress toward peaceful coexistence can be made, a credible recognition of Israel's right to exist must be given. As Netanyahu explains, Israel did not create the Palestinian problem and it cannot solve it. The Arab world created it and it does not want to solve it. Israel is an insult to the Islamic world. According to Islam, a non-Moslem governing body cannot be established in territory that was once in the heart of the Islamic empire. As the only valid religion, Islam has a claim on the entire world – the continued prominent existence of a successful, western, Jewish state in the heart of the Middle East is intolerable. This is not a controversial point of view held by a radical fringe in the Moslem world. It is a commonly held point of view – shared by hundreds of millions of Moslems. The Palestinians are pawns in this struggle. And the settlements have almost no relevance in the big picture.

The Obama-liberals great mistake is one of cultural arrogance. They assume that everyone thinks, or can be made to think, like they do. Netanyahu was addressing them as much as anyone. But will they hear him?

Barbarians are at the gate

I recently read Infidel by Aayan Hirsi Ali. This remarkable book has been widely read and reviewed. I will not try here to provide another critical review. Rather I would like to attempt some general appreciative observations.

The book operates on the reader's consciousness at a number of different levels - probably not all intended by the author and probably varying a lot with the background of each reader.

At its most simple level, it is a compelling autobiographical story. Ali is not a sophisticated writer – but she has a clarity of expression that reflects her clarity of thought. Her descriptions are graphic without being flowery or intrusive. One gets a good sense of the streets and houses of Mogadishu or Nairobi and the claustrophobia of Saudi Arabia. Some of her obviously traumatic experiences seem understated. But this is perhaps not surprising in an autobiography – at the time they occurred she was perhaps not completely aware of the trauma or of its significance. Also, Ali gives the impression that her overriding purpose is to provide a case-study of a general condition, that of girls growing up and of women living under the yoke of traditional Islam. For this a certain studied detachment was probably necessary. Her story is the story of the passage from infancy to adulthood and beyond and it is a common story. Ali was resourceful and fortunate enough to escape, at great cost, the oppressive world into which she was born, but the vast majority of Moslem women are not so fortunate. Ali's story is the story of untold millions, without the happy ending, without redemption.

So, first and foremost, it is her personal story – and the reader is spared few details. It is a courageous tale, told with grace and dignity. One senses a little egocentrism, probably necessary to achieve what she has achieved in such a short time, facing such overwhelming odds. This needs to be emphasized. Aayan Hirsi Ali's achievements are astounding. Coming from a small village in Somalia, through many trials and traumas, she obtained a graduate degree at a university in Holland and became a member of parliament, while still in her twenties. And now, in her thirties, she is an articulate spokesman for oppressed women around the world (as a resident fellow at the American Enterprise Institute in Washington DC). Her books have sold millions of copies and have been translated into many languages. She is an inspiration to many and an example of what can be achieved.

At another level this book is an expansive window into the worlds (plural) of Islam. For those of us hailing from South Africa (many years ago), it may come as a surprise to discover the nature and extent of African Muslim culture in Central Africa (not confined to North Africa). Speaking for myself, I admit that, prior to reading this book, Somalia was a place without content for me, a wilderness - scene of "Black Hawk Down" – location of a humiliating experience for America, a failed state, not worth bothering about. So it was revealing to learn a little about the history of Somalia, a region with an ancient and rich tribal culture, swallowed many centuries ago by the insatiable appetite of the expanding Islamic empire, into the modern colonial period to become a colony of Italy and Britain, and then in the post-colonial period a brutal communist dictatorship (sponsored by the Soviet Union). Colonialism left a power vacuum in its wake that was filled by the hopes and dreams of socialism. While the colonial governments seriously compromised tribal institutions, the communist regime forcefully tried to suppress them completely and the result was a complete breakdown of law and order, a horrible civil-war in which hundreds of thousands were killed, wounded and displaced. This is a tragic story of ethnic cleansing and genocide that occurred before these words acquired the widespread familiarity they now have and it deserves to be more widely known. Ali, brings us into this world of inter-tribal destruction and brutality. We are introduced to people who have names, families, loved ones, personal histories; people who have had their lives destroyed, who have been brought low-down to pitiful animalistic conditions, human skeletons without hope, grasping at survival – a picture familiar to us Jews. It is a picture of the collapse of civilization without recovery.

I was fascinated to learn about the nature of Somali Islam, which has its own idiosyncratic characteristics, quite distinct from the Arabic and other versions, and is intimately intertwined with tribal distinctions and traditions. Lineage is key in determining status and young children are indoctrinated in the details of their family tree up to many generations past – so that at a moment's notice they can recite it. And tribal identity is key as well, its importance can hardly be overstated. Reading this book one learns that "racism" is not necessarily about race – these tribal distinctions, as we have learned from Rwanda, can have life and death consequences. Witness Sudan as you read this. They are all Moslems, these Somalis, yet everything hangs on clan-membership. It is the extended family writ large. And, like all strong families, it can be an immensely caring and efficient social institution. There is a far-reaching Somali diaspora. The clan to which Ali belonged has vast international network connections – providing sustenance and resources to any member who shows up. It is powered by an unswerving commitment to the tenets of hospitality and charity to clansmen found in the teachings and traditions of Islam.

Ali spent time growing up in different worlds, in Kenya, Saudi Arabia and Ethiopia – the first of which was her introduction to a non-Muslim society. This provided her, and the reader, with a new perspective. While Kenya was by no means a prosperous society, it was more prosperous than Somalia and palpably freer, especially for women – tribalism still played a very important role, but Islam was absent from the mix with notably liberating results.

Back in Somalia and in Kenya she encounters the Muslim Brotherhood, the organization that ultimately spawned Al Qaida and other radical Islamist organizations. Radical Islam filled the moral vacuum left by the collapse of society in post colonial, post communist Africa. Radical Islam, like all fundamentalist creeds (meaning that its moral claims are based on revelation of the word of God), has a moral clarity about it. It has a clear structure and permanence about it that provides security in a terrifying world. The reality that is Al Qaida today began many decades ago – out of the ashes of a collapsed power base in Africa and the Middle East. When seen through the eyes of Aayan Hirsi Ali one gets a sense of the power and intransigence of this multi-faceted movement that transcends regional differences. It is a movement with deep fundamentalist roots that brooks no critical examination of its tenets whatsoever. All criticism is met with various degrees of violence. And the kicker is that, according to Islam, it is a sacred duty to convert non-Muslims to the faith, by force if necessary. Like all fundamentalist systems, Islam claims a monopoly of true belief. And their agenda is clear, announced for all to hear, they are out to get us!

This may be familiar, but it seems not be completely understood by those present-day intellectuals who, in the name of multiculturalism, advocate understanding and dialogue. There is no talking to these people and there is no way to accept their vision of society. For anyone who believes in freedom, in the sacred value of individual autonomy, in individual human rights; pure Islam is simply evil. The most glaring manifestation of this is the brutal repression and dehumanization of women, including the obsession with virginity and the widespread practice of clitoral and labial circumcision in order to ensure it. With Ali we wonder, where are the voices of condemnation? Why are the defenders of women's rights so mute when it comes to the teachings and practices of Islam? And why are thousands of Muslim women being killed in "honor" killings and thousands of young girls being violently circumcised on kitchen tables in Europe today?

This is the final and most general level at which this book operates. It speaks to the question of identity in this post-modern world. When she finally escapes to Holland, Ali is awed by the freedom and civility of European culture, but she ultimately comes to understand its awful, terrifying vulnerability in the face of Islam. She finds herself besieged and physically threatened by her former co-religionists while living in a welcoming society that is ill-equipped to deal with the threat. Coming ultimately and painfully to abandon her belief in Islam, she embraces European social democracy only to abandon it as well to finally arrive at a realization of the value of classical liberalism.

The essence of the asymmetry between Islam and the West (especially Western-Europe) lies in their different approaches to identity. This is well captured in Natan Sharansky's new book (Defending Identity), but Ali has it too. Islam provides its believers with secure identities that tell them how to live their lives and for which they are wiling to kill and to die. There is no similar cause animating the identities of Western Europeans. Pan-European identity does not have much traction by comparison. In fact, the prevailing worldview of Europe today is anti-identity, post-identity – an undifferentiated universalism. There is antagonism and self-consciousness about "being different." They think that by denying "essential" differences they will make them go away. They think that the Muslim immigrants to Europe, if treated with non-judgmental, non-demanding forbearance, will become good Europeans. They don't realize that unless they take a stand, the descendants of today's Europeans will be tomorrow's Muslims.

Ali, and Sharansky, recognize the unique strength of America. All Americans have un-self-conscious hyphenated identities, as in, Jewish-American, Irish-American, Italian-American, etc. To become an American does not entail the giving up of one's ethnic traditions, one's religion, one's customs; as long as they do not deny the freedom of others to maintain theirs. To become American means to become committed to American ideals, to liberty and democracy in the broadest sense - to a respect for the individual regardless of his or her multiple identities. In America we do not regard it as a threat for an American citizen to feel Irish or Jewish and to indentify with Ireland or Israel. In fact, we respect people with loyalty to their heritage and a commitment to preserving it. Freedom means being whoever you want to be as long as you do not deny others the same privilege. And many times Americans have been willing to defend these ideals and to die for them. This respect for individual differences and choices categorically does not imply the need to tolerate or ignore intolerance, as exhibited by Islam's orientation to non-Muslims or to women. Intolerance does not have to be respected or tolerated. The American ethos is well-positioned to respond vigorously to this behavior and to this threat – and indeed it is probably true that, in general, American Muslims are more comfortably assimilated than their counterparts in Europe.

Having said this however, there is nevertheless ample reason for grave concern. America, in many ways, at this juncture in its history seems to be in danger of abandoning these core essentials and of becoming more like a morally-relativistic Europe, unable and unwilling to defend itself against a very real threat to destroy its culture by violence or, perhaps more effectively, by exploiting and abusing the very freedoms that make it great. The lesson of Infidel (and of Sharansky's book and of the work of others like Brigitte Gabriel) is that we ignore these threats and tolerate them at our peril – peril to our bodies and our souls. As someone once said, the price of liberty is eternal vigilance.

This book needs to be read.

What the hell in going on?

As I absorb the fresh assault of news items reporting on the latest incursion of Congress or President into the lives of Americans, I feel somewhat at a loss as to how to characterize what the hell is going on!

A simple list of the threats to life as we know it and want it to be is a great challenge. I am sure to leave something out. Anyway, it's a good place to start. Just the list. The book, the article, the commentary cannot be written just yet because the ground is changing to rapidly under our feet. The earthquake is not over.

1. Government spending obligations continue to rise- no end in sight and no good plan to pay for it.
   
2. Taxes are starting to rise everywhere – as predicted.
   
3. Environmental initiatives imply new taxes, new restrictions – I challenge any honest person to deny that this will have no effect whatsoever on so-called global warming – it may, however, destroy the economic recovery.
   
4. Labor union power is on the rise – my report that this initiative had died was premature. As resources are moving from the private sector to the government sector the power of labor movements is increasing. Unemployment in the governments sector is about 2%. Unemployment in the private sector is about 9%. We are seeing strikes, and expensive political initiatives against any attempt to introduce fiscal responsibility into government. Government workers, unlike workers in the private sectors, are refusing to make sacrifices – like foregoing salary increases and bonuses. These can only be paid by taxpayers. Those who take are increasing at the expense of those who give. The reincarnation of union power in America is an ominous development, one that could destroy its economy.
   
5. Health care reform is downright scary. The details of the President's plan have been left deliberately vague, but the indications are that this is really about bringing more of the health care insurance and delivery system under the control of the Federal government – in short it looks like it is a move to make all of health care more like Medicare. Medicare operates at a huge loss, with great waste and corruption, and succeeds in spite of this to deliver health care to millions of mature Americans, only because of the very high-priced-high-quality private health care system that subsidizes it. The impending deficit for Medicare dwarfs the huge social security deficit. This initiative is a power grab to nationalize medicine and it will make health care less accessible, less innovative, less responsive, and less attractive to doctors, nurses, paramedics, patients and everyone involved. The ultimate human and monetary cost defy estimation and imagination. An aspect of this is the bringing of health-care insurance under the umbrella of the Federal government. This will discourage access to new and effective medicines and strengthen the hand of the FDA in denying such important treatments to millions of Americans each year, in the treatment of cancer and other life threatening diseases. It will also mean a centralization of medical records with the Federal government gaining enormously increased power.
   
6. Protectionism is on the rise – initiatives to protect domestic industries with trade barriers and subsidies – very dangerous.
   
7. Incipient Inflation is a real threat. The level of reserves created by the Fed is very high and the prospect of "mopping" this up very dubious to my mind. Inflation is the most insidious tax of all.
   
8. The power of government continues to expand everywhere you look. The President is talking about controlling the actions of even those companies who have not accepted TARP money, while those who have are already being micromanaged by government bureaucrats. And the Fed now has control over all manner of "banking" not only commercial banks, but investment banks and brokers as well. Big brother has grown very big.
   
9. Antitrust – there are alarming indications that this administration is going to move toward a European approach to anti-trust – competition in which there are any losers is a bad thing (witness the recent butchering of Intel in Europe). In fact the Europeanization of American public policy seems to be a common theme in much of the above.
   

Have I left anything out?

I cannot talk authoritatively about foreign policy, but I worry about it.

Actually, with the Democrats so powerful in Congress, there are some things that the President could do, some real opportunities to do something good amidst this madness. I can think of three – maybe there are others.

1. Immigration – surely Democrats could get behind an initiative to free up the movement of workers across borders to the north and especially to the south. Lets declare amnesty for all those who have lived peacefully and gainfully employed in America for at least two years and make is easier to get a work visa. On what basis could "liberal" Democrats oppose this.
   
2. School Choice- President Obama supports the public school systems in America, but, like the vast majority of Democratic members of Congress, sends his kids to expensive private schools. What hypocrisy! It does not have to be like that. School choice can be extended to all parents in America, starting with the poorest in Washington DC where the mayor (who is black) is leading a movement in favor of school-choice. Charter schools are a start and Obama can begin by refusing to destroy the charter movement in DC that is immanent in a bill before Congress. But parent scholarships or vouchers is a logical step for the whole country. On what basis could "liberal" Democrats oppose the giving of school choice to parents of lower-income children? It could hardly be worse for them than it is now. The real obstacle is the unscrupulous, self-serving power of the teacher-unions. President Obama could really show intelligence and courage on this one. He could get lots of non-partisan support.
   
3. The Drug War - is prohibitively costly. The collateral damage is accumulating and is not worth it. Even if one does not believe that people have a right to decide what substances to consume, there is no way to justify this "war" in any realistic cost-benefit terms. The resources committed, the corruption produced, the private lives violated and destroyed, it is a catastrophe. President Obama can get out ahead on this - change the focus from enforcement to education - reallocate resources. Decriminalizing the drug traffic would put the violent cartels out of business. Surely "liberals" can support this.

Who Shall Decide?

I often tell my students that, when it comes to economic policy, the most important question is not "What shall be done?" but rather "Who shall decide?"

Each of us, informed and trained in matters of economics or not, is opinionated about what should be done to "save" the auto companies, achieve energy-independence and similar important questions. While low-level, relatively simple, decisions in our every-day lives, often paralyze us, we have almost no compunction deciding what steps should be taken to save the nation, its poor and its unemployed, its rich and its old. Of course, most of these statesmen-like decisions are prefaced with such phrases as "we ought to … " without specifying who this "we" is. What it really means is that someone, like the president or the Congress for example, ought to have the power and the resources to do this or that. And there's the rub.

This is an exercise of the fatal conceit of thinking that human-will is all that is necessary to fix the world. Give the power to he-who-has-the-will. And in this case many Americans think that Barak Obama is that guy – the guy who should have the power and the responsibility to put everything right. He thinks so too and he has not been shy about accumulating as much power as possible for this purpose.

Just this week we have him deciding which cars GM should produce – now that the Federal Government is a shareholder – having previously decided who should be the CEO. This includes deciding that GM should produce less SUV's, tucks and mini-vans and more Chevy Volts. No matter that more consumers want the former and pretty much shun the latter. As economic czar he gets to exercise his preference for environmentally friendly cars, regardless of consumers' preferences. (It gives me no pleasure to note that I predicted this would happen – but why do I feel that I am the old one who is terrified by it?)

This week he is also deciding how the credit card companies should run their businesses, what interest rates they should charge and under what circumstances. Pretty much the whole banking industry, including banks and other financial institutions, are now subject to the veto of the Federal government in one form or another in what they do. Is their any part of the economy that is not at risk?

The whole point of a civilization that runs on laws and markets, and not on the decisions of individuals or committees of individuals, is that such things do not have to be decided by our leaders. The leaders are subject to the rule of law and the laws of economics just like the rest of us. In such a society I get to decide, without interference from the president, what kind of car I want to drive. What gives him the right to decide for me? The usual answer is that my car may pollute the air by causing global warming. (Actually even if we abolished all of the high carbon footprint cars, the affect on global warming would be about zero – so this is a terrible answer.) Even if it were true, this would just mean that ways need to be found to cause me to take this into account when I make my decision. If my private act of consumption causes harm to someone-else then I should be made to compensate them. So, theoretically, the price of the car could reflect the cost of cleaning up that pollution – by, for example, levying a tax or a toll (I hate taxes or government tolls – but this is much preferable solution to micromanaging the auto companies). [See GM Is Becoming a Royal Debacle in the WSJ].

At the twilight of the first 100 days of this president I keep trying to find something to cheer about. Its really tough. You might think he would favor parental choice in education for their kids through vouchers or charter-schools, but he is flip-flopping on this, anxious not to offend the toxic teacher-unions. [see The Union War on Charter Schools in the WSJ] And, though I am not an expert on foreign affairs, I cannot but feel uneasy about the enthusiasm with which he is prepared to be seen with the likes of tin-pot dictators like Hugo Chavez of Venezuela and Daniel Ortega of Nicaragua, thereby undermining the credibility of the domestic opposition in these countries who often need at least our moral support to fight for human rights and freedom; and I wonder why he feels it necessary to apologize to the whole world for everything bad America has ever done or to deny the reality of American exceptionalism. [see The President's Apology Tour in the WSJ ]. Why, at least, is he not talking straight on human-rights abuses around the world, including in, most prominently, Russia?

This messiah-president is getting to make a lot of important decisions. God help us.

A Microeconomist's Protest

Check out this incisive analysis of the "stimulus" by my colleague Mario Rizzo.

Worth reading carefully.

A Microeconomist’s Protest

Deconstructing Obamanomics

In this month’s issue of Commentary Magazine just published, John Steele Gordon has an analysis of the contradictions in Obama’s economic plans. I have extracted the relevant parts below. (The rest of the article is bad history). 

This analysis greatly clarifies the horrendous disregard of basic common sense and elementary economic logic. It also suggests the nature of Obama’s single-minded determination to pursue his activist agenda – effecting a green revolution, strengthening unions, nationalizing health-care, restricting international trade, etc. all under the smokescreen of claiming to cure the economic crisis. Steele analyzes just one of these insane initiatives (energy) but it applies with equal force to all. The Obama economic program is blatant doublespeak – what it claims and what it really means are exactly the opposite.

The truly Orwellian nature of the rapidly unfolding transformation that is occurring has not been fully realized by most people. When they do realize it they will be shocked to find an administration every bit as tenacious, scary and utilitarian in its pursuits as the much-maligned neo-conservatives of Bush-the-younger. Team-Obama seems willing to do just about anything to achieve its goals. As they see it, the worthy nature of the ends they seek justify extreme means. Just because they are dressed up in the garb of leftist propaganda should not make them any less scary.

There are signs, reflected in some Congressional pushback, that realization is beginning to dawn. Let us hope so. 

The Economic Contradictions of Obama-ism

JOHN STEELE GORDON

April 2009

In February 9th, President Obama visited Elkhart, Indiana, the American community with the country’s highest unemployment rate, 15.3 percent. (It had been only 4.7 percent the year before.) He was there to sell his stimulus bill, then moving through Congress and since signed. He noted that the bill would provide help for the workers who had lost their jobs and, more important, help them get their jobs back by reviving the economy.

The jobs that have vanished in Elkhart are predominantly in the recreational-vehicle industry, which is concentrated in the city of 52,000. With the severe recession the country is now experiencing, it is hardly surprising that this industry has been devastated. After all, an RV is expensive both to purchase and to operate and is hardly a necessity. But when the economy recovers, will those jobs come back as demand for RV’s returns? Or, in the meantime, will new environmental regulations championed by Obama work to impede the sales of vehicles that get only a few miles to the gallon and thereby make job growth in Elkhart an impossibility?

The latter seems to be the case. In its proposed budget for fiscal year 2010, the Obama administration has also said it would inaugurate a “cap-and-trade” program to reduce the emission of carbon dioxide into the atmosphere. This program would require all companies to buy at auction the right to emit the gas, which all fossil fuels—oil, gasoline, coal, natural gas, etc.—do, in varying amounts. The total amount of emissions allowed would be strictly limited.

While billed as a program to reduce greenhouse gases, cap-and-trade is, inescapably, a tax on virtually all economic activity, as fossil fuels are an input in nearly all economic outputs. Even a lawyer, after all, has to use electricity to have the lights on in his office and power his computer. And electricity is mostly generated by fossil fuels, especially coal, the biggest emitter of carbon dioxide.

This will be no small tax. The Obama budget estimates that the carbon tax will bring in revenues of $78.7 billion in 2012. The Congressional Budget Office estimates that it might net as much as $300 billion. The administration says that in 2019 this carbon tax will be the sixth-largest source of federal revenue, after personal and corporate income taxes, payroll taxes for Social Security and Medicare, and excise taxes.

Cap-and-trade will have a profound impact on the recreational-vehicle industry in Elkhart, whose pain Obama professed to feel. The cost of manufacturing the vehicle will rise because of the new tax, which will in turn increase the retail price of RV’s and thus inevitably decrease sales. The cost of operating them will also rise substantially as the tax raises the price of gasoline, further limiting demand. Nor will the tax’s effect on Elkhart and its environs be limited to RV’s. The entire mid-section of the country, where Elkhart is located, will be especially hard hit, because the region is far more dependent on manufacturing and coal-fired electric generating plants than the continent’s two coasts.

Limiting carbon-dioxide emissions may (or may not) be a worthy goal, but a cap-and-trade system to further that goal will take a disproportionate toll on the sort of people who are now out of work in Elkhart, Indiana and not the bicoastal elite, whose members can more easily afford the tax.

The Obama budget envisions an explosion of economic growth as the country recovers from the current recession—more than four percent a year from 2011 through 2013. This will supposedly be sufficient to halve the $1.75 trillion deficit it projects for 2009. But there is something off here. Many of the policies Obama and his team are pursuing, cap-and-trade being the most obvious, are likely to interfere with growth in exactly the sectors in which the United States will need it. If the goal is growth, as it should be, the role of government should be to determine ways in which its conduct can fuel that growth. And that is precisely what Obama is not doing.

The cap-and-trade tax will inescapably and adversely impact the economic recovery and future growth rates. If passed, it will act on the economy as a whole exactly the way a governor acts on a steam engine, increasingly resisting any increase in revolutions per minute. With the supply of licenses to emit carbon dioxide fixed, the price of the permits will inevitably rise as economic activity picks up. That means that any increase in overall demand will increase the price of energy, and thus, in a feedback loop, nearly everything else. That will damp down demand. The more the economy tries to speed up, the more the carbon tax will work to prevent it from doing so.

The same is true of many of the other policies embedded in Obama’s budget. He will raise taxes on high earners rather than lowering them to give those earners an incentive to put their money into the private markets. He intends to increase the number of federal regulations on private business and industry, rather than reduce the number of those regulations for the purpose of eliminating barriers to growth. Taken together, these counterproductive actions will make job creation in the private sector difficult, because they will make it more expensive to hire new workers. The Obama plan will, in general, make it more expensive to do business at a time when one would think he and the nation as a whole have every reason to make it as inexpensive as possible to do business.

There is, it appears, a contradiction between the economic growth Obama says he wants and has promised to produce, and the goals his policies actually indicate he wants to achieve. Those policies suggest there are financial goals he values more highly than economic growth. But can he succeed without growth? And what, at this moment, could be more important?

------------------

Mark Twain once said that “history doesn’t repeat itself, but it rhymes.” That goes double for economic history, especially in the industrial era when the economy has evolved so quickly from generation to generation. But certain patterns are clear. In modern times, the more that government has controlled the economy, the more bureaucrats, politicians, and intellectuals get to choose winners and losers instead of the marketplace, the less economic growth and innovation there is, the more persistent unemployment is, the slower the improvement in the standard of living.

If you want a vivid example, just compare post-war Britain, which both moved in a socialist direction and became the sick man of the Great Powers, with Margaret Thatcher’s Britain, in which the welfare state was pared back, socialism was reversed, and the forces that had made Britain great were unleashed once again.

It is worrisome in the extreme to realize that Obama’s policies have much more in common with those of Clement Attlee, the prime minister who took over from Winston Churchill when the Second World War ended and put it on the socialist track, than with those of Thatcher, who took charge in England at a time of desperate economic straits. At a time when the United States needs dynamism more than ever, the nation’s voters have chosen to be led by a president whose animating philosophy has led him to adopt policies that will make that dynamism impossible to achieve. If the contradiction proves costly to the American economy, as history suggests, it will exact a profound tribute of its own from Obama’s political future as well.

About the Author

John Steele Gordon is the author of An Empire of Wealth: The Epic History of American Economic Power, among other books. His articles for COMMENTARY include “Look Who’s Afraid of Free Trade” (February 2008) and “Speculators, Politicians, and Financial Disasters” (November 2008).

© 2009 Commentary Inc.

The Pain of Being Right

I can say with the utmost sincerity that I take no comfort in being right in my warnings about President Obama and some other things - like the dangers of FANNIE and FREDDIE (which can be found on this blog over the few months preceding the election and in my many emails over the last few years).

In fact, I write now with a heavy heart. I wish I had been wrong, I really do. I wish I could have been pleasantly surprised by the moderation and incipient conservatism of President Obama. Maybe I still will; I hope so. But, as I am coming to learn more about "what makes him tick" I have less and less expectation of this. My wife has taught me that one's strengths are often also one's weaknesses. So it is with Obama. He is a man of vision (maybe a vision borrowed from an earlier time, but a vision nevertheless). He has opinions, he has insight. He is eloquent, despite the increased use of the teleprompter. But it is this very vision that is his problem. He is dedicated to it and he is going to pursue it even in the face of severe obstacles. He displays these qualities of dedication and perseverance, admirable in themselves, but fatal in pursuit of flawed goals.

Here is what I was right about.

1. For years I have warned about the dangers of taxpayer exposure resulting from the government underwriting of the exploding mortgage debt in quasi-government agencies. Not my insight of course. I used the authority of those I respected from the WSJ, Barrons, and other publications to alert my students and my email list participants. But, in truth, I never anticipated that it would be this bad. Denial is a strong mechanism. And by the way, the real villains are not the AIG executives who received bonuses, or the bankers. The real villains are, among others, Barney Frank, Chris Dodd, and Nancy Pelosi. We ought to throw garbage on their lawns or, better still, indict them. 
2. For years I have warned about the dangers of propping up the American automobile companies. There is no doubt in my mind that the auto unions played a large role in this fiasco. And this ought to teach us something. 
3. I warned that Senator and candidate Obama had endorsed the bill now going through Congress that will do more to strengthen the declining power of labor unions than any piece of legislation in the last fifty years. This bill will scrap the right that workers now have to vote by secret ballot on the issue of unionization. The President is behind it. While he is talking tough on GM and Chrysler he is supporting the establishment of union power elsewhere. This is VERY bad news. Unions are a curse on prosperity. They are violence-prone legal monopolies. We are going precisely in the wrong direction at the worst possible time. 
4. I warned repeatedly about this president's environmentalist inclinations. I warned that he would try to use the crisis to foist expensive, "clean" cars on the American public. And with his increased power over the auto manufacturers this is exactly what is talking about doing – at the taxpayers' expense of course. Carbon taxes and jobs "created" by subsidizing clean energy are also in the mix. And for what? For economically destructive outcomes that do little if anything at all to reduce the pace of this alleged global warming. Everyone agrees that, if it is true, there is very little we can do about it short of crippling the world economy into starvation. 
5. I warned repeatedly about the potential for crisis to bring protectionism. The world has made giant strides in expanding world trade and benefiting hundreds of millions of people at home and abroad in the period since WWII. Now with the crisis, predictably, but stupidly, countries, the U.S. included, are putting up trade-barriers in the name of protecting jobs. This is a recipe for Depression (with a capital D). Trade creates jobs. Even expanding imports create domestic jobs. Restraints and barriers to trade destroy jobs. 
6. And, with appropriate irony, heavy-handed environmentalism, in the name of climate-policy, has now been linked to protectionism. There is talk now of using trade policy to punish those countries who do not match our levels of carbon taxes on their industries! A double whammy – high taxes and higher tariffs. One could be forgiven for thinking that the aim is to destroy the economy to achieve a kind of pathetic equality – we will all be equally poor and miserable – but at least we won't be envious any more, right?
   

It all adds up to rapidly expanding power. The president's inclination to use the first person, as in "this is what I am going to do" should give us pause. This is a power-grab, have no doubt. His supporters know this. They have forgotten the lesson that power, in itself, is a dangerous thing. No matter that when the cronies of the much-maligned Bush the younger stealthily pushed the power of government through mechanisms like the Patriot Act, executive initiative, etc., the current Obamites cried bloody murder in the name of freedom. But, now that their government is expanding its reach into our lives and our pockets at a rate which dwarfs even the worst of the Bush excesses, they are strangely overjoyed. This is easily explained of course. Its not arbitrary power that they are against. It is power for those with whom they disagree that is the problem. As long as the "right people" are in charge (an echo from J.M. Keynes) we will be alright. Then it is power for good. This is hubris at its most dangerous, this is, as F.A. Hayek has taught us, the Fatal Conceit, this is the Road to Serfdom.

The right people do not necessarily know what to do and how to do it. The right people have to rely on others in a giant and unpredictable and slow, corrupt bureaucracy. And the right people invariably get replaced or controlled by the wrong people.

Here are some things I hope I will be wrong about.

1. The current bailout will not work. Because of it the recession will deepen and last longer than we expect and hope. Attempts to "save" homeowners amount to trying to re-inflate the bubble at precisely the time when resources ought to be moving elsewhere. So recovery will be postponed and savings further depleted. And bailout money will continue to be spent in ways that produce scandal and outrage.
2. The liquidity behind this bailout, an explosion of the money supply, accomplished by Federal reserve purchases of Treasury bonds, will produce inflation, rising interest rates, rising government debts, rising taxes, falling real incomes and wages. Chairman Bernake tells us inflation is no problem and the money will be "mopped-up" when the time is right. When will that be? And how will it be done? In order to reverse the explosion in liquidity the Fed will have to sell the bonds it has been purchasing. Who is going to buy them? At what prices? In order to sell them, when the economy is healthy again, the Fed will have to lower their prices (aka raise interest rates). This is politically very unpopular, especially during recoveries. (Even if it could be done, it would mean a massive increase in the national debt held by the private sector, implying large future tax liabilities to pay the interest.) So forgive my skepticism. Kiss those bonds good-bye. The money is here to stay, and once it begins to circulate more rapidly, prices will rise, and the rest will be history. Remember that American word Stagflation. 

I REALLY hope I am wrong.

I Protest

NPR - The Diane Rehm Show. 

Dear Diane,  

I am a long-time listener. Although I frequently find myself in disagreement with your guests, and also with your implicit and sometimes explicit, presumptions, I respect the quality of your program and your own particular dedication as a radio-journalist-editorialist.  

I am writing to register my strong protest against the un-rebutted slurs and misstatements made recently on your program - in the two morning shows, one after the other. The subject concerned the withdrawal of the nomination of Charles Freedman as President Obama's chairman of the National Intelligence Council. The statement was made, a few times, that his withdrawal was simply another instance of the power of the Israel Lobby that has produced a reluctance on the part of the media in general to have an open discussion of the Israel-Palestinian situation. Reference was even made to the scurrilous and largely discredit article by Melshheimer and Walt. 

Space considerations prohibit my providing a complete response to these remarks. However, I urge you please to consider doing some in-depth research on these issues. You might start with two of Alan Dershowitz's recent books - The Case for Israel and The Case Against Israel's Enemies (I wonder if you have ever had Professor Dershowitz on your show). The truth is the exact opposite of what was asserted. The media (excepting the shrill right-wing radio talk shows, and Fox in general) is actually constitutionally biased against Israel. It has been well documented that the media coverage during the latest Gaza action was scandalously distorted - to the point of reporting as news what later turned out to be outright lies (as in the case of the UN school that was never bombed). There has never been an honest, open accounting of the activities and finances of Hamas who steals American taxpayer money donated to the UN. Israel's enemies are all dictatorships. They lie with impunity and refuse open investigation by the media. Israel is a democracy with a critical internal press. Israel's actions are routinely and openly examined and criticized in spite of the power of AIPAC or any other pro-Israel lobby.  

On the other hand, there are numerous, effective pro-Arab-anti-Israel lobby groups. Billions of dollars of Saudi money is being used to fund "Islamic Studies" departments in this nation's universities in which hatred of Israel (and America) is being taught. Numerous "panels" are being organized in which pro-Israel proponents are denied a voice. I have personally witnessed one of them at Binghamton University - (see for yourself here). There is absolutely no shortage of analysis of Israel's actions.

Charles Freedman's views need to be examined. When they are you will find him unfit to fill the position for which he was nominated. Both in regards to the far-east and the middle-east his position is quite extreme and very idiosyncratic. To attribute his withdrawal to the actions of the "Israel Lobby" was quite unjustified. The rush-to-judgment of your guests, without so much as a mild protest from you, was most unfortunate.  

I will continue listening to your show and hope never to encounter this type of event again.  

Best wishes, 

--- 

Peter Lewin 

Clinical Professor, Economics 

University of Texas at Dallas 

School of Management