Taking the theories of economist John Maynard Keynes as gospel, our most highly respected contemporary economists imagine a complex world in which economics at the personal, corporate and municipal levels are governed by laws far different from those in effect at the national level.

Individuals, companies or cities with heavy debt and shrinking revenues instinctively know that they must reduce spending, tighten their belts, pay down debt and live within their means. But it is axiomatic in Keynesianism that national governments can create and sustain economic activity by injecting printed money into the financial system. In their view, absent the stimuli of the New Deal and World War II, the Depression would never have ended.

On a gut level, we have a hard time with this concept. There is a vague sense of smoke and mirrors, of something being magically created out of nothing. But economics, we are told, is complicated.

It would be irresponsible in the extreme for an individual to forestall a personal recession by taking out newer, bigger loans when the old loans can't be repaid. However, this is precisely what we are planning on a national level.

I believe these ideas hold sway largely because they promise happy, pain-free solutions. They are the economic equivalent of miracle weight-loss programs that require no dieting or exercise. The theories permit economists to claim mystic wisdom, governments to pretend that they have the power to dispel hardship with the whir of a printing press, and voters to believe that they can have recovery without sacrifice.

As a follower of the Austrian School of economics I believe that market forces apply equally to people and nations. The problems we face collectively are no different from those we face individually. Belt tightening is required by all, including government.

Governments cannot create but merely redirect. When the government spends, the money has to come from somewhere. If the government doesn't have a surplus, then it must come from taxes. If taxes don't go up, then it must come from increased borrowing. If lenders won't lend, then it must come from the printing press, which is where all these bailouts are headed. But each additional dollar printed diminishes the value those already in circulation. Something cannot be effortlessly created from nothing.

Similarly, any jobs or other economic activity created by public-sector expansion merely comes at the expense of jobs lost in the private sector. And if the government chooses to save inefficient jobs in select private industries, more efficient jobs will be lost in others. As more factors of production come under government control, the more inefficient our entire economy becomes. Inefficiency lowers productivity, stifles competitiveness and lowers living standards.

If we look at government market interventions through this pragmatic lens, what can we expect from the coming avalanche of federal activism?

By borrowing more than it can ever pay back, the government will guarantee higher inflation for years to come, thereby diminishing the value of all that Americans have saved and acquired. For now the inflationary tide is being held back by the countervailing pressures of bursting asset bubbles in real estate and stocks, forced liquidations in commodities, and troubled retailers slashing prices to unload excess inventory. But when the dust settles, trillions of new dollars will remain, chasing a diminished supply of goods. We will be left with 1970s-style stagflation, only with a much sharper contraction and significantly higher inflation.

The good news is that economics is not all that complicated. The bad news is that our economy is broken and there is nothing the government can do to fix it. However, the free market does have a cure: it's called a recession, and it's not fun, easy or quick.

But if we put our faith in the power of government to make the pain go away, we will live with the consequences for generations.

By PETER SCHIFF
DECEMBER 27, 2008

Mr. Schiff is president of Euro Pacific Capital

http://online.wsj.com/article/SB123033898448336541.html

Hat tip: Len Salonsky

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I don't agree with the argument that an Obama-Pelosi-Reid government is a one-off, that good old nonideological American pragmatism will temper their ambitions. Not true. With this election, the U.S. is at a philosophical tipping point.

The goal of Sen. Obama and the modern, "progressive" Democratic Party is to move the U.S. in the direction of Western Europe, the so-called German model and its "social market economy." Under this notion, business is highly regulated, as it would be in the next Congress under Democratic House committee chairmen Markey, Frank and Waxman. Business is allowed to create "wealth" so long as its utility is not primarily to create new jobs or economic growth but to support a deep welfare system.

The political planets are aligned to make this achievable. In the aftermath of the financial crisis, prominent Democrats, European leaders in France and Germany and more U.S. newspaper articles than one can count have said that the crisis proves the need to permanently tame the American "free-market" model. P.O.W. Alan Greenspan is broadcasting confessions. The question is: Are the American people of a mind to throw in the towel on the system that got them here?

This would be a historic shift, one post-Vietnam Democrats have been trying to achieve since their failed fight with Ronald Reagan's "Cowboy Capitalism."

Of course Cowboy Capitalism built the country. More than any previous nation in history, the United States made its way forward on a 200-year wave of upwardly mobile, profit-seeking merchants, tradesmen, craftsmen and workers. They blew out of New England and New York, rolled across the wildernesses of the Central States, pushed across a tough Western frontier and banged into San Francisco and Los Angeles, leaving in their path city after city of vast wealth.

The U.S. emerged a superpower, and the tool of that ascent was simple -- the pursuit of economic growth. Now China, India and Brazil, embracing high-growth Cowboy Capitalism, are doing what we did, only their cities are bigger.

Now comes Barack Obama, standing at the head of a progressive Democratic Party, his right hand rising to say, "Mothers, don't let your babies grow up to be for-profit cowboys. It's time to spread the wealth around."

What this implies, undeniably, is that the United States would move away from running with the high GDP, high-growth nations rising today as economic and political powers and move over to retire with the low-growth economies we displaced -- old Europe.

As noted in a 2006 World Bank report, spending in Europe on social-protection programs averages 19% of GDP (85% of it on social insurance programs), compared to 9% of GDP in the U.S. The Obama proposals send the U.S. inexorably and permanently toward European levels of social protection. This isn't an "agenda." It's a final temptation.

In partial detail:

Obama's federalized medical insurance system starts the transition away from private medical care and toward Obama's endlessly promised "universal health care." This has always been the sine qua non of planting a true, managed-market economy in the U.S.

Obama's refundable tax credits are direct cash transfers from the federal government. This would place some 48% of Americans, nearly half, out of the income tax system. More than a tax proposal, this is a deep philosophical shift, an American version of being "on the dole."

His stated intent to renegotiate free-trade agreements such as Nafta is a philosophical shift. It abandons the tradition of a hyper-competitive America dating back to the Industrial Revolution, toward a protected, domestic workforce, as in Western Europe. The Democratic proposal to eliminate private union votes -- "card check" -- ensures the spread of a static, Euro-style workforce.

Eliminating the ceiling on payroll taxes changes Social Security from an insurance to a welfare program. Obama's tax credits requires performing government-identified activities, the essence of a "directed economy."

All this would transform the animating American idea -- away from creation and toward protection.

Many voters -- progressive Democrats, the asset-safe rich, academics and college students -- regard this as where America should go. They explicitly want America's great natural energies transferred away from unwieldy economic competition and toward social construction. They want the U.S. to reduce its "footprint" in the world. Monies saved by stepping down from superpower status can be reprogrammed into "investments" (a favorite Obama word) in a vast Euro-style hammock of social protection programs.

One wishes John McCain had been better able to make clear what the truly "historic" meaning of Tuesday's vote is.

Once it's done, it's done.

By Daniel Henninger

http://sec.online.wsj.com/article/SB122533132337982833.html

Hat tip: Pam Tulman

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Response by Marty D.:
Once it's done, it's done, not unlike a suicidal or delusional person putting a weapon to their head and pulling the trigger. There is no turning back at that point, not for 350 million people and their future generations. Excellence, initiative, integrity, faith, family, and the American Dream of success through the pursuit of personal achievement will have been exchanged for an 'existence' on the plantation.

One of the most important consequences of a Democrat-controlled Congress is that market forces will be tamed (regulated) and subordinated to the notions of politicians (even more so than they are now, which many argue is the source of the problem in the first place). If you are pleased with the state of our nation, it is Congress whom you have to thank, not some past or future president. Presidents come and go; Congress endures.

In the old U.S., when individuals achieved success in business, they were able to direct much of the profit into further expansion which resulted in jobs by the thousands and a high standard of living for everyone involved. Moreover, high profits acted as a signal to others that the market would be a good one to enter - providing even more jobs - and spreading prosperity. The social welfare state model sees profits as a resource to be endlessly tapped (expropriated by force of government) for use by politicians so they can "share the wealth" and fund their numerous "investments" in things that no one would willingly risk his own capital on.

Under democratic socialism, the goal is equal outcomes for everyone, except the elite who will be the politicians. Everyone else shares a meager existence and works for the state in one way or another.

The alternative is to work for yourself, instead of being the socialist slave of others, and be all that you can be, beginning young with your dreams and without government imposing limits (taxes) on your certain success. We have, of course, been sliding down the welfare state slope into a politicized economy for many decades, in fact for many generations, not unlike boiling a frog, but an Obama presidency would mean finally going over a cliff.

In the wake of the 2008 election, we will have plenty of time to play "catch-up" with American history and heritage. At some point those who can still read and write will realize instinctively they have lost something big.

Corporations by the thousands have already fled our shores, driven away by Congress, state legislatures, unions and the dismal state of American socialized education. Ambitious and talented young Americans might also want to start thinking about heading for the lifeboats. Their future looks dismal.

The United States of America was founded on the notion of a government of the people, by the people, for the people. In stark contrast, the antithesis is socialism, i.e., a government of the elite, by the elite, for the elite. Here's your chance to choose. Keep in mind that once it's over, it's over.

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Response by David R.: We may get economic "deliverance," like Ned Beatty got it in "Deliverance."

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Mr. Obama reiterated this view earlier in the week while traveling in the Middle East, in an interview with ABC's Terry Moran. Mr. Moran asked the Illinois Democrat whether -- "knowing what you know now" -- he would reconsider his opposition to last year's surge of U.S. troops in Iraq. "Well, no," Mr. Obama replied.

What Mr. Obama "knows now" is that the surge he opposed has saved Iraq, much as Harry Truman's airlift saved Berlin and underlined America's intention to defend Europe throughout the Cold War. The surge has also saved American lives in Iraq, with combat-related deaths (so far, there have been seven this month) at an all time low.

Mr. Obama offered his own unwitting testimony to this fact by not donning body armor upon his arrival in Baghdad and during a helicopter tour with Gen. David Petraeus.

"There have been few if any attacks of late on our aircraft, and the situation did not require them to be wearing body armor," explained Gen. Petraeus' spokesman.

Mr. Obama also knows that Gen. Petraeus opposes setting a fixed timetable for withdrawing U.S. forces from Iraq. This military judgment ought to count for something, particularly since Congressional Democrats have long scolded President Bush for failing to pay sufficient heed to the advice of generals such as former Army Chief of Staff Eric Shinseki. Yet Mr. Obama, who has always been careful to cite the views of military commanders to justify his 16 month withdrawal schedule, now says that heeding less congenial military advice would mean an abdication of his responsibilities as a prospective commander in chief.

The Obama campaign now makes much of the fact that Iraqi Prime Minister Nouri al-Maliki seems to have endorsed the idea of a timetable for withdrawal, with 2010 as the approximate date. This is being played as a great political coup for Mr. Obama -- which, we suppose, it is, if only because the media plays it that way.

But the significant debate is not over whether and when the U.S. will withdraw. It's over whether the U.S. will win. In his Berlin speech, Mr. Obama was at his most forceful when he insisted that "this is the moment when we must defeat terror," adding that "the threat is real and we cannot shrink from our responsibility to combat it." This is well-said and true.

But it squares oddly with a political campaign whose central premise is that losing in Iraq -- and whatever calamities may follow -- is a matter of little consequence to U.S. or European interests. It squares oddly, too, with Mr. Obama's broader promise to "stand for the human rights of the dissident in Burma, the blogger in Iran, the voter in Zimbabwe" and virtually every other global cause.

It is hard not to be moved by the sight during the speech of hundreds of American flags being waved, rather than burned. Then again, the last time a major American political figure delivered an open-air speech in Berlin, 10,000 riot police had to use tear gas and water cannons to repel violent demonstrators. It was June 1987, the speaker was Ronald Reagan, and his message was: "Mr. Gorbachev, tear down this wall." Press accounts characterized the line as "provocative"; the Soviets called it "war-mongering"; 100,000 protesters marched against Reagan in the old German capital of Bonn. Two years later, the Berlin Wall fell.

Reagan's speech is a lesson in the difference between popularity and statesmanship. Watching Mr. Obama yesterday in Berlin, and throughout his foreign tour, was a reminder of how far the presumptive Democratic nominee has to go to reassure people he is capable of the latter -- "people," that is, who will actually get to cast a ballot in November.

Wall Street Journal
July 25, 2008; Page A14

Comments are welcome at redstatepatriot@hughes.net. Please include the title of the article as your subject line. Selected responses, in whole or part, may be published (appended to the article).
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Response by Len Salonsky:

The Europeans have a long history OF BEING WRONG: geopolitically, socially, economically, and immigration-wise. Many Americans, nevertheless, continue to incorrectly believe that European socialism and pacifism are where America should go.

Most of these Americans are collectivists ("From each according to his ability to each according to his need."- Karl Marx)

What are they smoking? Ironically, as Europe is finally moving away from their FAILED socialist programs, foolish American collectivists are insisting that we EMBRACE socialist policies despite their virtually universal failure, and the resultant human misery that they have caused throughout history.

Without American intervention there would have been no speech in Germany by Obama, whose ancestors would have been executed or enslaved by the Third Reich. Such nuances are LOST on those Euro-sycophants who amazingly feel that America can do no right and that the Europeans can do no wrong. IS that why the Europeans BEGGED America to intervene in Bosnia to end the conflict there, with FORCE?

A force that the Europeans are INCAPABLE of delivering? How convenient to depend on America for a bailout (without ever offering America any compensation for the (lives or the) expense of such military "insurance." Europe never paid America back for World War II, but they'll gladly burn the American flag.

For now, if the Europeans are waving American flags for some cause, I'll probably be opposed to it. If they are burning American flags for some cause, I'll assume that cause is just. History will bear me out.

There will come a time when the Muslim demographic burden in many European countries, because of the European welfare state mentality, will threaten to overwhelm those nations who have foolishly allowed Muslim immigrants to become a substantial portion of their population. Many pundits expect that Europe will be renamed "Eurabia" in the foreseeable future. This time an American "rescue" is not in the cards, and Europe will suffer the horrific consequences of its stupidity.

Comments are welcome at redstatepatriot@hughes.net. Please include the title of the article as your subject line. Selected responses, in whole or part, may be published (appended to the article).

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California law requires children between six and 18 to attend a full-time day school. Failure to comply means falling afoul of the state's truancy laws, which say kids can't play hooky without an excuse. But kids who are taught at home are less likely to be truants. Their parents choose to spend their time teaching English, math and science precisely because they don't think the public schools do a good enough job.

The case was initiated by the Los Angeles Department of Children and Family Services after a home-schooled child reportedly complained of physical abuse by his father. A lawyer assigned to two of the family's eight children invoked the truancy law to get the children enrolled in a public school and away from their parents. So a single case of parental abuse is being used to promote the registration of all parents who crack a book for their kids. If this strikes some readers as a tad East German, we know how you feel.

That so many families turn to home schooling is a market solution to a market failure -- namely the dismal performance of the local education monopoly. According to the Home School Legal Defense Association, the majority of states have low to moderate levels of regulation for home schools, an environment that has allowed the option to flourish, especially in the South and Western U.S. Between 1999 and 2003, the rate of home-schooling increased by 29%.

For some parents, the motive for home schooling is religious; others want to protect their kids from gangs and drugs. But the most-cited reason is to ensure a good education. Home-schooled students are routinely high performers on standardized academic tests, beating their public school peers on average by as much as 30 percentile points, regardless of subject. They perform well on tests like the SAT -- and colleges actively recruit them both for their high scores and the diversity they bring to campus.

In 1994, a federal attempt to require certification of parent-teachers went down in flames as hundreds of thousands of calls lit up phone banks on Capitol Hill. The movement has since only grown larger and better organized, now conservatively estimated at well over a million nationwide. But what they can't accomplish legislatively, unions are now trying to achieve by diktat from the courts.

If John McCain wants an issue to endear him to cultural conservatives, this would be it. Hillary Clinton and Barack Obama rarely stray from the preferences of the teachers unions, but we'd like to know whether they really favor the certification of parents who dare to believe they know best how to teach their children.

Wall Street Journal Online
http://online.wsj.com/article/SB120614130694756089.html

Comments are welcome at redstatepatriot@hughes.net. Please include the title of the article as your subject line. Selected responses, in whole or part, may be published (appended to the article).

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