Archive for December, 2009

Will ‘Anything Turn Up’ for President Obama in 2010?

December 31, 2009

” ‘And then’, said Mr. Micawber…, ‘I have no doubt I shall, please Heaven, begin to be beforehand with the world, and to live in a perfectly new manner, if – in short, if anything turns up.’

‘I never will desert Mr. Micawber.  Mr. Micawber may have concealed his difficulties from me in the first instance, but his sanguine temper may have led him to expect that he would overcome them.  The pearl necklace and bracelets which I inherited from mama, have been disposed of for less than half their value; and the set of coral, which was the wedding gift of my papa, has been actually thrown away for nothing.  But I never will desert Mr. Micawber.  No!’ cried Mrs. Micawber, more affected than before, ‘I never will do it!  It’s  no use asking me!’

‘I never will desert you, Micawber!’ she exclaimed.  ‘My life!’, said Mr. Micawber, taking her in his arms.  ‘I am perfectly aware of it.’

‘My other piece of advice, Copperfield,’ said Mr. Micawber, ‘you know.  Annual income twenty pounds, annual expenditure nineteen nineteen six, result happiness.  Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.  The blossom is blighted, the leaf is withered, the God of day goes down with the dreary scene and – in short you are forever floored.  As I am!’ “

To make his example the more impressive, Mr. Micawber drank a glass of punch with an air of great enjoyment and satisfaction, and whistled the College Hornpipe.

Charles Dickens, David Copperfield 1850.

Well, in the singular case of Mr. Micawber, something did turn up, Mrs Micawber did not leave him,  and he was not forever floored.  Will such be the fortunate outcome for President Obama?  His national budget is not exactly just a sixpence short, nor is his runaway deficit remotely under any kind of control.  His family jewels have long been hawked out to the People’s Republic of China.  And the ‘something’ that must turn up to save him from being floored is ‘something indeed!’

Unlike Mrs. Micawber, President Obama’s electoral spouse is known to be much more fickle.  Surely she will run off with a younger, more conservative companion,  should her dissolute husband fail quite quickly to mend his profligate  financial ways.

Perhaps tonight,  at midnight, President Obama should drink a glass of punch as he sings  the  welcoming verses of  Auld Lang Syne.

Winston Churchill’s Hard Learned Lesson From A Half-Century Of Wars

December 31, 2009

Winston Spenser Churchill was a truly Great Man of the first half of the Twentieth Century, Great Statesman, Great Writer, Great Historian, talented painter and builder, but most especially and importantly for Western Civilization,  a Great War Leader. In the opening statement of  each of the six  volumes of his momentous narrative of the Second World War, Churchill defines the Moral of  the Work and, one might say,  the wisdom of his lifetime experiences, in the following short passage:

In War:          Resolution

In Defeat:     Defiance

In Victory:   Magnanimity

In Peace:     Goodwill

The United States currently is engaged in two major wars, one in Afghanistan against the Taliban to protect its citizens from the re-establishment of a base for terrorist attacks on its own mainland, the second worldwide against a network of terrorist cells coordinated by al qaeda. At this time, the United States confronts a real prospect of defeat in Aghanistan and, at best, of stalemate against al qaeda.

President Barack Obama either has not read, or has not understood the wisdom passed down by the Statesman who saved Western Civilization from barbarism. From the outset of his administration, President Obama has behaved as though the United States is celebrating victory or peace, rather than war or defeat.  Magnanimity or Goodwill are misplaced responses, Mr. President, to the two war crises that confront our country.  Resolution or Defiance are the required responses at this time.  

This is no time for indulging your hobbies  in games of  golf and tennis in Hawaii,  no time at all  for soft words and yet softer responses, certainly no time for releasing dangerous war criminals back to their training grounds  in Yemen and Somalia, and for tolerating inexperience, inadequacy and lack of resolution at the very pinnacle of  the  Department of Homeland Security. 

Rather, this is a time for ‘blood, toil, tears, and sweat’, for placing the United States onto a much more serious path to victory over its declared enemies, for preserving and protecting the citizens who rely upon you to carry out your responsibilities to the very best of your ability.

Churchill’s clear advice is that you should be working in the war room of the White House, planning and executing war strategies designed to obliterate the Taliban and to paralyze al qaeda and its networks by the most brutal and effective techniques available to you as the leader of the world’s only Superpower.  For should you fail to protect your people, who by a significant majority, elected you into office, you will have failed to honor your oath of office.

The Scandal Widens to Both Ends of Pennsylvania Avenue

December 30, 2009

‘Sherlock Holmes puffs on his long-stemmed pipe and quietly plays a haunting melody on his violin, thinking deeply about the Scandal at Pennyslvania Avenue.  ‘I am now quite sure, my dear Watson, that the scandal does not rest at Number 1500′, he murmurs. ‘A small-time operator like Secretary Geithner would not act alone on such an extensive adventure. Surely, he is controlled by more powerful actors.  In politics, money is the Book of All Power. Let us follow the money and see where it leads.  Watson, kindly review for me the movement of political campaign contributions from Fannie Mae and Freddie Mac. In the meantime, I shall explore the network of  relationships between US politicians and the GSEs that they oversee.’

As always, Dr. Watson pursued his task with meticulous professionalism while Holmes used his intuition to identify the key political players in the Scandal.  The facts entirely supported Holmes’ theory:

Over the period 1989 to 2008, political action committees financed by Fannie Mae and Freddie Mac contributed $3,017,797 to liberal  members of both Houses of Congress.  Barney Frank (Democrat: Massachusetts), since 2007, Chairman of the House Financial Services Committee (and a member of that Committee since 1981) is ranked 16th on a list that includes both Houses and 5th among his colleagues in the House as a recipient of this funding.  Other prominent Democrats in receipt of such funding include former Congressman Joe Kennedy (Democrat:Massachusetts),  Senator Chuck Schumer (Democrat: New York)  and Senator Christopher  Dodd (Democrat: Connecticut).  In addition, Fannie Mae and Freddie Mac funded the presidential campaign of Barack Obama, as well as such media lobbyists as Paul Krugman and Steven Pearlstein.  All of these political operators, and many more,  have provided continuous support for Fannie Mae and Freddie Mac throughout the mortgage market debacle.

Sherlock Holmes identified an important personal link between Barney Frank and Fannie Mae in the form of  a long-time homosexual relationship between Frank and Herb Moses (then a senior executive with Fannie Mae and personally responsible for developing high-risk mortgage relationships between the Corporation and poor rural farmers).  The personal relationship ended in 1998, when Herb Moses left Fannie Mae.  Frank served on the House Banking Committee throughout the ten years that they were together. That Committee has jurisdiction over government-sponsored enterprises.

The consequences are entirely predictable.  Here are a few examples.  In 1991, Barney Frank and Joe Kennedy lobbied for Fannie Mae to soften rules on multi-family home mortgages, despite the fact that such dwellings showed a default rate twice that of single-family homes.  In September, 2003, Frank aggressively thwarted reform efforts by the Bush administration, stating that the problems of Fannie Mae and Freddie Mac were ‘exaggerated’.   On October 8, 2003, Frank opposed giving the Bush administration the right to disapprove business activities that could pose risk to the taxpayers. In April 2008, Frank blamed short-sellers for Fannie and Freddie’s problems, stating that the two corporations ‘are better off than the market thinks’.  In June 2008, Frank stated that ‘Fannie and Freddie are fundamentally sound.’   In July 2008, Dodd strongly defended Fannie and Freddie stating that ‘these are viable strong institutions’.  Not once on the campaign trail was Barack Obama motivated to say anything controversial on the GSE issue. And he had plenty to say about almost everything else.

The political consequences of this scandal are serious indeed.  Since September 2008, Fannie Mae and Freddie Mac have been bailed out with $1.5 trillion in direct and indirect government aid.  The Obama administration is banking on them to end a three-year housing market slump and is delaying plans to lay out a new framework for them. Congress has not scheduled any meetings on their future.  On Christmas Eve, 2009, the Treasury Department removed a $200 billion limit on aid to each of the two companies, and promised to cover their losses through 2012 (note the year). Earlier, the Federal Reserve extended a mortgage-bond purchase program by three months, through March 2010.  The Federal Reserve has purchased $1.1 trillion of the two corporations’  home-loan funds and $124.1 billion of their corporate debt in 2009,  pushing mortgage rates to record lows.  The Treasury has also purchased $191 billion of their mortgage bonds and made $112 billion of preferred stock purchases. In the meantime, the two corporations have lost $188.4 billion over the past nine quarters and are set to lose a great deal more as the housing market continues to struggle.

‘What did the President know, and when did he know it?’  muses the great detective, still puffing on his pipe.  Ultimately that is a question that even a biased media will have no option but  to confront.

On Liberty

December 29, 2009

For the most part, my columns so far have focused on economic issues, notably the forces that encourage or discourage growth in per capita income in the United States.  I must confess that the wealth of  a nation has always been a secondary consideration (albeit an important secondary consideration) in the focus of my own writings and thoughts. Far more important, for me, is the promotion and protection of individual liberty.  So I am devoting this column to a brief discussion on liberty.

What is liberty?  This is a very important question because, in my judgment, many individuals  (I would say perhaps a majority of economists)  allow themselves to be confused between two competing notions, only one of which is correct.

The correct definition of ‘liberty’ or ‘freedom’ (I use the terms synonymously) is ‘the condition of men in which coercion of some by others is reduced as much as possible in society’  or ‘ independence of the arbitrary will of another’ (Friedrich von Hayek, The Constituion of Liberty 1960).  This oldest meaning of liberty, is sometimes described as its ‘vulgar’ meaning.  However, given the confusion that clever philosophers have caused by their attempts to improve upon it, I prefer to stand by this description.  In this definition, liberty is sometimes criticized  as an entirely negative concept; but this criticism is misplaced:

“It is often objected that our concept of liberty is merely negative.  This is true in the sense that peace is also a negative concept or that security or quiet or the absence of any particular impediment or evil is negative.  It is to this class of concepts that liberty belongs: it describes the absence of a particular obstacle – coercion by other men.  It becomes positive only through what we make of it.  It does not assure us of any particular opportunities, but leaves it to us to decide what use we shall make of the circumstances in which we find ourselves”  (Hayek, 1960).

Negative freedom, so defined, is entirely distinct from the concept of positive freedom which commonly, but erroneously is placed beside it in unsophisticated discussions of freedom.  The positive sense of the word freedom derives from the wish on the part of the individual to be his own master, to be independent of external forces of whatever kind.  As  Isaiah Berlin, concluded, positive freedom is the greatest enemy of negative freedom:

“The freedom which consists in being one’s own master, and the freedom which consists in not being prevented from choosing as I do by other men, may, on the face of it, seem concepts at no great logical distance from each other – no more than negative and positive ways of saying the same thing.  Yet the ‘positive’ and ‘negative’ notions of freedom historically developed in divergent directions, not always by logically reputable steps, until, in the end, they came into direct conflict with each other” (Berlin Four Essays on Liberty 1969).

In essence, negative freedom is the concept that defines classical liberal thinking. Positive freedom is the concept that defines the  bastard philosophy of ‘liberalism’ as currently practised in the United States, a philosophy that  has become a favored weapon of  liberal fascism or even of despotism.

Why would one pursue the objective of liberty or freedom, correctly defined?  There are several possible answers to that question, but let me focus on just two. The first reason, the one that primarily motivates my thoughts, is that liberty requires no justification at all:

“For the man devoted to liberty, there is nothing which makes liberty important.  And he has no reason for his devotion.” (R. Rhees,  Without Answers)

Most economists (including Charles Rowley to some secondary degree) however, if they do  have positive feelings for liberty, are motivated by utilitarian or Aristotelean notions that liberty leads to human flourishing:

“He who lets the world, or his portion of it, choose his plan of life for him, has no need of any other faculty than the ape-like one of imitation.  He who chooses to plan for himself employs all his faculties.  He must use observation to see, reasoning and judgment to foresee, activity to gain materials for decision, discrimination to decide and, when he has decided, firmness and self-control to hold to his deliberate decision…. It is possible that he might be guided on some good path, and kept out of harm’s way, without any of these things.  But what will be his comparative worth as a human being?  It really is of importance, not only what men do, but also what manner of men they are that do it” (John Stuart Mill, On Liberty 1859)

On that splendid note, I draw this column to a close.  Because, from time to time, I shall write about liberty in these columns, I think that it is essential to let my readers know just how I define the term.

.

On Motivating US Soldiers Destined For Foreign Battlefields

December 28, 2009

Suppose, dear reader, that you are a young new recruit to the US Army, destined for a foreign battlefield, where the fighting is known to be fierce, where death and severe injury rates are expected to be at least moderately high, and where those taken prisoner are not always treated in accordance with Geneva Conventions. Which of the following  two speeches (I provide balanced extracts of each,  purged in one case of a considerable amount of profanity) is the more likely to motivate you to give your last full measure, which is the more likely to raise your trust in the leadership that is on display?:

1.  “Men, this stuff that some sources sling around about America wanting out of this war, not wanting to fight, is a crock of…  Americans love to fight traditionally.  All real Americans love the sting and clash of battle.  You are here today for three reasons.  First, because you are here to defend your homes and your loved ones.  Second, you are here for your own self-respect, because you would not want to be anywhere else.  Third, you are here because you are real men and all real men like to fight….

There are four hundred neatly marked graves somewhere in Sicily.  All because one man went to sleep on the job.  But they are German graves, because we caught the…asleep before they did. ..

My men don’t surrender.  I don’t want to hear of any soldier under my command being captured unless he has been hit.  Even if you are hit, you can still fight back….

Each man must not think only of himself, but also of his buddy fighting beside him.  We don’t want yellow cowards in this army.  They should be killed off like rats.  If not, they will go home and breed more cowards.  The brave men will breed more brave men.  Kill off the …cowards and we will have a nation of brave men….

We want to get the …over there.  The quicker we clean up this …mess, the quicker we can take a little jaunt against the … Japs and clean out their nest too.  Before the …Marines get all the credit….

Sure we want to go home.  We want this war over with.  The quickest way to get it over with is to go get the … who started it.  The quicker they are whipped, the quicker we can go home.  The shortest way home is through Berlin and Tokyo.  And when we get to Berlin, I am personally going to shoot that paper-hanging  …of … a  … Hitler.  Just like I’d shoot a snake. …

When a man’s lying in a shell hole, if he stays there all day, a German will get to him eventually.  The … with that idea.  The … with taking it.  My men don’t dig foxholes.  I don’t want them to.  Foxholes only slow up an offensive.  Keep moving.  And don’t give the enemy time to dig one either. …

I don’t want to get any messages saying, ‘I am holding my position.’  We are not holding a … thing.  Let the Germans do that.  We are advancing constantly and we are not interested in holding onto anything except the enemy’s … Our basic plan of operation is to advance and to keep on advancing regardless of whether we have to go over, under, or through the enemy. …The more Germans we kill, the fewer of our men will be killed.  Pushing means fewer casualties….

You may be thankful that twenty years from now, when you are sitting by the fireplace with your grandson on your knee and he asks you what you did in the great World War II, you won’t have to cough, shift him to the other knee and say, ‘Well your Granddaddy shoveled … in Louisiana.’  No Sir, you can look him straight in the eye and say, ‘Son, your granddaddy rode with the Great Third Army and a …of .. a …- …  named Georgie Patton!’

The Famous  Patton Speech to the US  Third Army, Somewhere in Southern  England,  early June 1944. Lieutenant-General George S. Patton Jr. (Old Blood and Guts) had been entrusted by General Eisenhower to lead the US Third Army as part of Operation Overlord to open up a Western Front assault on Germany’s  Third Reich.

2.  “Still we are at war, and I am responsible for the deployment of thousands of young Americans to battle in a distant land.  Some will kill.  Some will be killed.  And so I come here with an acute sense of the cost of armed conflict – filled with difficult questions about the relationship between war and peace, and our effort to replace one with the other.

Over time, as codes of law sought to control violence within groups, so did philosophers, clerics and statesmen seek to regulate the destructive power of war.  The concept of a ‘just war’ emerged suggesting that war is justified only when it meets certain preconditions: if it is waged as a last resort or in self-defense, if the force used is proportional, and if, whenever possible, civilians are spared from violence.

We must begin by acknowledging the hard truth that we will not eradicate violent conflict in our lifetimes.  There will be times when nations – acting individually or in concert – will find the use of force not only necessary but morally justified.  I make this statement mindful of what Martin Luther King said in this same ceremony years ago – ‘Violence never brings permanent peace.  It solves no social problem: it merely creates new and more complicated ones.’  As someone who stands here as a direct consequence of Dr. King’s life’s work, I am living testimony to the moral force of nonviolence.  I know there is nothing weak – nothing passive – nothing naive – in the creed and lives of Ghandi and King…

So yes, the instruments of war do have a role to play in preserving the peace.  And yet this truth must coexist with another – that no matter how justified, war promises human tragedy.  The soldier’s courage and sacrifice is full of glory, expressing devotion to country, to cause and to comrades in arms.  But war itself is never glorious, and we must never trumpet it as such.”

President Barack Obama’s Speech when accepting the Nobel Peace Prize in Oslo, Denmark on December 10, 2009 . President Obama is Commander-in-Chief of the United States Military Forces, World-Wide.

A Scandal at 1500 Pennsylvania Avenue, NW

December 27, 2009

In the gathering dusk of Christmas Eve 2009, long after the closure of the healthcare debate, long after the US  Senate has closed its doors, long after the US President has departed for his vacation in Hawaii, long after the US Press has shut down its political surveillance for the upcoming festivities, a misleadingly innocent-looking figure flits  furtively through the darkened rooms of 1500 Pennsylvania Avenue, NW.  A computer whirrs  into action as Treasury Secretary Timothy Geithner, fortified by the knowledge that he is entirely alone in the building,  presses the Send button of his computer  to despatch a carefully-timed  Press Release to a hopefully  slumbering media.  His task well-executed, Secretary Geithner shuts down his office, turns out the lights,  and slips quietly into the enveloping  darkness of a largely diverted metropolis…

Stirred into action by the curiousness of this event, Sherlock Holmes and Dr. Watson decide to investigate the strange case of A Scandal at 1500 Pennsylvania Avenue, NW.  “Let us start with deductions, my dear Watson”,  murmers Holmes, as he quickly inserts and withdraws the needle of his syringe into one of his veins.  “From these deductions, we can locate the relevant facts and solve this mystery.”

“Now why would the Secretary of the Treasury, a man appointed into office with a mandate  from his President to bring a new transparency to the US  government, engage in such behavior in the darkness of a festive night?”  Holmes inquires of his loyal associate.  “Well Holmes, perhaps Secretary Geithner was so obsessed with the important events of the day that he had simply  overlooked this message” responds the cognitively more-limited, but well-meaning doctor.  “Not so, Watson”,   Holmes laconically responds.  “Secretary Geithner does not appear to me to be a man who would ever forget his mission to indulge in the unbearably boring  trivia of a Senate session.  Watson, mischief is afoot in the District of Columbia!   Let me advance the hypothesis that a message sent out under such circumstances is designed to be unseen, while yet satisfying a facade of transparency. “

On the basis of this supposition, Holmes quickly assembles the facts relevant to his case.  The facts lead Holmes inexorably to a determination that this indeed is a case of government by stealth, a determined attempt by a desperate public servant to outwit  a public rendered largely witless by seasonal exuberances.  On a dark and stormy night,  this is how the story ran…

Government-sponsored enterprises (GSEs as they are called in the Washington dialect) are a group of financial services corporations created by the United States Congress.  Their function, in principle,  is to enhance the flow of credit to targeted sectors of the economy and to make those segments of the capital market more efficient and transparent.   Of course, as with almost everything involving government, the reality is almost exactly the opposite.  GSEs are designed to divert funding opaquely and inefficiently to constituents courted politically  by members of the Congress and/or by the President.  Nowhere is this divergence between principle and reality more marked than with regard to the behavior of the Federal National  Mortgage Corporation (FNMA or Fannie Mae) and of the Federal Home Loan Mortgage Corporation (FMLMC or Freddie Mac) in expanding the secondary market in mortgages throughout the United States.

The residential mortgage borrowing segment is by far the largest of the borrowing segments in which the GSEs operate.  Currently GSEs hold or pool approximately $5 trillion of mortgages.  Of course, if marked to market, this official book value would shrivel to a tiny fraction of that estimate, because much of the portfolio is composed of highly toxic assets.  Because the US mortgage market had slowly unravelled over the prior two years, on September 8, 2008, the Federal Housing Finance Agency (FHFA) placed Fannie Mae and Freddie Mac under its conservancy.  The enterprises were insolvent and would be propped up by Henry Paulson’s Treasury Department which acquired billions of dollars of their preferred stock, paying at a rate of 10 per cent per annum. The total ‘investment’ was expected to rise to some $100 billion.

The facts unravelled by Sherlock Holmes are as follows:  The insolvency of Fannie Mae and Freddy Mac has worsened sharply through the fall of 2009 and will worsen still further once the current program of Federal sub-prime mortgage provisions expires early in 2010.  At that time, the market will openly recognize losses of hundreds of billions of dollars in the GSE mortgage pools, where the face values of the mortgages hugely exceed property market values or foreclosure amounts.  Secretary Geithner clandestinely is trying to set the scene for full nationalization of the GSEs and for a full specific guarantee of the GSE debt by the US Treasury.

Geithner’s nocturnal machinations set the scene for placing official GSE debt on the US government’s sovereign debt balance sheet.  Actually, that is exactly where it belongs, since this has been a game of deception over an implied guarantee and it is more than time for that to stop.  Foreign sources and domestic US institutions see through the deception and are loathe to buy GSE debt. In consequence, the Fed has had to step in with over $1 trillion to bolster the US housing market. In so doing, it has downgraded its own balance sheet no doubt to a Baaa3 rating  if any of  the rating agencies had the nerve to call the Fed’s bluff.

Secretary Geithner is a truly desperate man.  Had he not acted in the dead of night, and had the markets responded by pricing GSE debt at wide spreads to Treasury debt, the home mortgage interest rate in the United States would  have increased significantly, the nascent housing recovery would have been choked off, and the House of Representatives assuredly would have fallen into Republican hands in  2010.  Undoubtedly, Secretary Geithner was acting upon the highest authority to preserve and protect, not his country, but the administration that he currently serves.

Mystery solved.  “Elementary, my dear Watson!”

The Economist Flashes The V For Victory As US State Capitalism Confronts A Black Hole To Economic Ruin

December 26, 2009

“It has become known as the ‘Great Recession’, the year in which the global economy suffered its deepest slump since the second world war.  But an equally apt name would be the ‘Great Stabilisation’.  For 2009 was extraordinary not just for how output fell, but for how a catastrophe was averted.”

The Economist December 19th 2009

The definition of words is fundamentally important in a single-sentence media world where many individuals confront serious problems of attention deficit.  The word catastrophe deserves close scrutiny.  For The Economist  the term is viewed in a macroeconomic perspective, as rising aggregate unemployment, falling aggregate real income, and price deflation.  Indeed, these are symptoms of serious economic problems.  But when we are passing judgments on ‘catastrophe’  it is to the underlying causes, not the symptoms, that we must direct attention. 

For the United States, as I have argued before in these columns, the underlying causes of the financial crisis and economic contraction lie deeply in the immediate gratification psyche of  too many US citizens and in the political-economic institutions that feed this psyche.  Until individual Americans return to time-honored traditions of thrift, wherein they balance their household budgets and limit debt to dealing with unforeseeable downturns, until US citizens become aware of the ongoing drift away from laissez-faire capitalism towards state capitalism, until they become aware of the sacrifices in liberty that they make in responding to the short-term temptation of liberal fascism, there is no prospect of true long-term stabilization and economic recovery.

The US government and US citizens are  afflicted at this time with the same institutional incentives to run up unsustainable debt that drove the 2008-9 crisis.  Indeed the situation is now worse because the government has indicated that poor economic behavior will always be bailed out by coerced transfers from those taxpayers who play by the rules and accumulate the wealth that can be taxed.  Until the taxpayers revolt, until Atlas shrugs, the US economy will lurch from one crisis to another until, ultimately,  it will pass the point of no return, and descend to second world status.

The extent to which The Economist, the once highly respected classical liberal thunderer, has now become an unthinking mouthpiece for state capitalism demonstrates just how far Western Europe and North America have drifted from the  nineteenth century economic principles that grew their wealth and promoted their economic freedoms.

God Bless Us, Every One!

December 25, 2009

“Scrooge was better than his word.  He did it all, and infinitely more;  and to Tiny Tim, who did not die, he was a second father.  He became as good a friend, as good a master, and as good a man, as the good old city knew, or any other good old city, town, or borough, in the good old world.  Some people laughed to see the alteration in him, but he let them laugh, and little heeded them;  for he was wise enough to know that nothing ever happened on this globe for good, at which some people did not have their fill of laughter in the outset;  and knowing that such as these would be blind anyway, he thought it quite as well that they should wrinkle up their eyes in grins, as have the malady in less attractive forms.  His own heart laughed:  and that was quite enough for him.

He had no further intercourse with Spirits, but lived upon the Total Abstinence Principle, ever afterwards;  and it was always said of him, that he knew how to keep Christmas well, if any man alive possessed the knowledge.  May that be truly said of us, and all of us!  And so, as Tiny Tim observed, God bless us, Every One!”

Charles Dickens, A Christmas Carol  (1843)

“Glory to God, and on earth peace,  toward men of goodwill”

Luke (2:14)

Some Consequences of Health Care ‘Reform’ for Medicaid and Medicare Patients

December 24, 2009

“If the price elasticity of individual demand, i.e. the responsiveness to a (small) change in price, is significantly higher than zero over the applicable range, governments cannot efficiently “give away” goods or services.  This is one of the most widely accepted principles in the theory of public finance…If government tries to supply goods or services that are privately divisible among separate persons at zero prices to users, the quantity demanded by all individuals in the aggregate will be significantly larger than the quantity that would be demanded at prices set by (marginal) cost except where the price elasticity approaches zero.”

“The presumption has been that, should governments try to give away services that fail to meet the required elasticity condition, they will find it necessary to extend supply to meet expressed demand, even at the expense of relative over-investment in the services….The alternative response that government might make in such situations seems rarely to have been considered.  They may make decisions on the supply of the service independent of the demands on the service, and on the basis of quite different considerations.  As a result, the inefficiencies may take the form of deterioration in the quality of the services themselves, including congestion of available facilities.”

“In his capacity as a participant in collective choice, the individual must balance costs against benefits.  The individual will quite rationally indicate a preference for an aggregate supply of services that falls below such satiation levels.  His choice, in a political-decision context, will be for a quantity of gross investment in health services much lower than that which would be required by a policy of providing constant-quality services to the extent indicated by privately expressed “needs.”

James M. Buchanan 1965

(James Buchanan was awarded the Nobel Prize in Economic Sciences in 1986)

Today, Christmas Eve 2009, a decisive majority of the United States Senate believes that it is acting as Santa Claus. Not so!  For the poor and the elderly,  the US Senate is Ebenezer Scrooge, before his visitation by the three Spirits,  financing a small, inadequate  goose,  not a fat turkey, for the  Christmas dinner table  of  the impoverished, starving family of  his employee,  Bob Cratchit.

The US Senate Chambers On the Eve of Christmas 2009

December 23, 2009

“Leeze me on drink! It gies us mair

Than either school or college.

It kindles wit, it waukens lear,

It pangs us fou o’  knowledge.

Be’t whisky-gill or penny-wheep,

Or any stronger potion,

It never fails, on drinkin deep,

To kittle up our notion,

By night or day.”

and

“How monie hearts this day converts

O’ sinners and o’ lasses

Their hearts o’ stane, gin night, are gane

As saft as ony flesh is.

There’s some are fou o’ love divine,

There’s some are fou o’ brandy;

An’ monie jobs that day begin,

May end in houghmagandie.”

Robert Burns, The Holy Fair


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