my boy rand paul

So first of all I haven't updated this thing in over a month, and I have lots of excuses.  I was taking my last few finals in law school, and I also don't currently have a functioning computer.  I am hoping to write several posts in the next week as there is a lot to talk about including potential NCAA football conference realignment, Elena Kagan's upcoming confirmation hearings, and the gulf oil spill has even made some people speculate that the Senate will move on cap and trade this session.  I will address these issues at a different time.

For now I just want to say a few words about my boy Rand Paul.  Anyone who new me during the 2008 election cycle knows that that I was a steadfast Ron Paul supporter.  I obviously knew that he had no chance at obtaining the GOP nomination, but I still thought his campaign did a great job of bringing about a resurgence of the libertarian leaning edge of the republican party.  In fact, I personally credit with Ron Paul for providing at least part of the spark that his given rise to the tea party movement.  Naturally, now that his son (who holds many views that are in tune with his father) is running for Senate in Kentucky, I am fully supporting and following his campaign.

A few weeks ago, Paul committed what many people are calling a huge mistake.  He went on the Rachel Madow Show and said that he did not support portions of the 1964 Civil Rights Law that prohibited discrimination by private individuals and businesses.  He also reaffirmed his belief that the portions of the act that prohibited state and local governments from discriminating based on race (basically prohibiting Jim Crow laws) were necessary, just, and fully appropriate.  Many members of the media jumped on these comments, and although they stopped short of calling him a racist, they claimed the comments showed that he was too radical to hold public office.

First, I must state that I personally agree with what Rand articulated on MSNBC.  I don't believe it is the role of government to mandate who a private actor can or must serve.  However, that does not a racist make.  I believe in letting private actors set their own rules, and allowing the actors to make rational decisions based on the incentives provided to them.  In fact, I think you could make an argument that this would be a better policy.  Not only would individual actors in this scenario have more liberty and freedom, but a public understanding that the government is not the primary tool for eradicating racism could potentially do more to help stop racism than the law itself.

First, let's imagine a scenario where the 1964 Civil Rights Act did not address private discrimination.  Obviously, then any business or restaurant could discriminate an not serve someone based on race.  I believe that a majority of people (including potential customers and suppliers) would find this abhorrent.  In fact, I'm sure many people would not do business with such an institution.  These types of boycotts were already taking place and had been somewhat effective prior to the 1964 Act (for example look at the Montgomery Bus Boycott which nearly bankrupted the line).  Now, after the Act is passed and Jim Crow is dead, it is my belief that that these types of private demonstrations and boycotts would have become even more effective.  With out the state government's racist laws propping up these private discriminators, there would have been far fewer ways for boycotts and sit-ins to be disrupted.  Additionally, I believe far more people would take up the cause of supporting such a cause if they believed that such an action was the only way to remedy the situation.

Now many will argue that racism was so institutionalized in the South that private boycotts would not have been enough.  We needed strong federal intervention to break the spines of the evil racists.  Unfortunately that is an untestable hypothesis as we can't know what would have occurred in that scenario. I don't live in the South (I live in Texas! ha) so I'm not sure how many people are still out there denying black people a seat at the lunch counter, but my general inclination is to say its better than it was.  However, how much is attributable to laws prohibiting private discrimination rather than a shift in attitudes brought about by the fact that these horrors were being put in the lime light is debatable.  Regardless, even if we assume that more discrimination would occur it almost certainly would be limited to smaller business in restaurants that only have one location that serve mostly a racist clientèle.  Obviously it would be unfortunate that people would be denied service in these places based on their race, but are these few disruptions worthy of the long arm of government meddling with the affairs of private actors?  The Civil Rights Act has probably cost billions in attorney's fees and court costs to enforce, and has surely led to many dubious claims over time that burden the justice system and drive up the costs of litigating and of just doing business.  Do the benefits outweigh the costs? Debatable.  But just cause you go one way on that issue does not make extreme, a racist or unfit for office as some of Paul's haters have contended.

why the current financial reform proposals are fundamentally flawed

Last night GOP senators blocked an attempt by the Democratic majority to bring Chris Dodd's (D-CT) financial reform bill the the floor of the Senate so that it could be debated and voted upon.   Majority Leader Harry Reid has already said that he would bring the bill back to the floor for another cloture vote this afternoon.  Democrats are attempting to characterize this GOP opposition as purely political: according to their storyline the Republicare in the bed with the likes of Goldman Sachs and are only attempting to block reform so that they can increase their campaign contributions.  This blatant partisan attack does little more that distract from the substance of the bill, and I have no doubt that the Democratic attacks are designed to do just that.  Anyone who has followed the housing and financial markets over the past decade understands that one of the major causes of the financial crisis were some of the policies enacted by Dodd's Banking Committee and his counterpart in the House, Barney Frank (D-MA).  Obviously neither man admits any of this, and their financial reform bill does nothing to stop many of the practices that led to the housing bubble.  So, in the interest of having a informed debate, rather than one of rhetoric, I will lay out may objections to the current financial reform proposal and explain how I would address the problem instead.

From what I can tell, Dodd's bill has three major sections: 1) The creation of a Consumer Financial Protection Agency that will regulate the so called "predatory lending practices" that dooped so many people into buying homes they couldn't afford and spending to much money on their credit cards; 2) Ends the over-the-counter treatment of most derivative investment contracts (CDOs, MBSs, etc.) by forcing them to be traded on an exchange; and 3) Creating a "Resolution Authority" within The FDIC that would be capable of dissolving banks, bank holding companies and other financial institutions deemed to be a systematic risk if they fail.  Man that is some exciting stuff.  Now you can see why it is so easy for the Democrats to claim that this is major reform because 98% of Americans have no idea what any of these things mean.

Starting with number one, my basic beef with the Consumer Financial Protection Agency is that it even if one was in place prior to the recession, it probably would have done very little to help stop the financial crisis.  We all now agree that many people were taking on more loans that in retrospect they could not afford.  This was based on the faulty presumption that the housing market would continue to climb in value, and that even if borrowers were paying very high interest rates after the teaser rate of a sub-prime or Alt-A loan expired, this imbalance would more than be made up for by the increase in equity owned by the homeowner based on the home's increased value.  Presumably he could use this increased equity to refinance if payments could not be met.  Well guess what?  The market fell out, and now many homeowners owe more than the total equity value of their house.  This makes defaulting a rational decision in many cases. 

So according to the Democratic pundits the Consumer Protection Agency would have stopped these bad loans from happening and all would be well.  BULLSHIT.  If there is one thing that is true about all governmental regulators it is that they are backward looking.  All regulators were created because of some event in the past that caused a large amount of financial hardship.  The regulators attempt to stop that specific type of situation from happening again.  The sub-prime crisis was a novel problem in the financial markets.  The very large majority of people, including many sophisticated investors who are much smarter and more savvy than any potential regulators, did not see it coming and lost A LOT of money.  When people lose that much money, then it is a sign that the downturn was very hard to foresee.  It is easy in hindsight to try and stop things that have happened in the past, but in reality it is impossible to predict the problems that will arise in the future.  The next "crisis" will probably have nothing to do with the mortgage market, and even if it did the CFPA would probably fail to stop it anyway.  This really is about a government power grab, so that the government can set all the applicable rates and provisions of almost any financial deal.  They will outlaw certain kinds of loans, favor others, and basically attempt to micromanage decisions that should be made of individual, case-by-case basis.  As is always the case, lobbyists will have a field day because their clients will want to get tight with the regulators so that their offerings will get preferred treatment over that of a competitor.  This will inevitably lead to crony capitalism at its worst.

Secondly, I really think that derivative contracts have gotten a bad name from all of this.  Yes, I ONE HUNDRED PERCENT AGREE that the proliferation of mortgage backed securities and credit default swaps (which were instruments that were intended to spread risk) led to a situation were counter parties were dependent on each others' solvency.  However, why, fundamentally, is this a bad thing?  Because it leads to "too big to fail" says Paulson/Bernacke/Geithner/Summers.  No it does not.  Period.  No one, and I mean no one, is too big to fail.  Let's look at what happened to Lehman Brothers.  They failed.  They went bankrupt.  Did it have an extremely negative impact of financial markets?  Of course.  Credit was extremely hard to find, people started calling debts and most firms had short term liquidity issues.  Did it lead to the end of the world?  No.  That is because we have a bankruptcy system in this country for a reason.  Just because Lehman was forced to take huge losses and dissolve does NOT mean that the good assets of the company went away.  Lehman provided many profitable services and products even up to and after its bankruptcy.  These sectors were sold off during their bankruptcy to help pay off creditors and finance losses in other business areas.  To this day I am not convinced that AIG/Goldman Sachs/CitiBank bankruptcies would have led to the end of the world.  Are you?  Would things have been bad for a while?  Yes, but they are also very bad right now.  But what happens when you allow of a market correction rather than a bailout is that you get the bad assets out of the system immediately.  Instead, we prolonged the problem and helped pass it on to our kids through ridiculous amounts of debt.  In a non-bailout world, the smart firms who could afford to buy up Goldman's bad assets in  bankruptcy would be the ones with market share today, and the moral hazard of bailouts would be eliminated.  Nothing sends a better signal to market actors to rethink their positions than the knowledge that they bare both the risk of failure and are entitled to the benefits of success.  Instead, we rewarded failed firms that that in retrospect misused many derivatives to the detriment of firms that did not.  No amount of regulation of derivatives would do more to temper there use than allowing firms that use them in ultimately unprofitable ways to fail, just like any other multiparty contracts. 

Additionally, derivatives serve many important roles in the financial system such as providing a hedge to risk.  A lot has been made about Goldman's supposed "fraud."  That type of "fraud" (selling a security to two sides: one side with a long position, one side with a short position) helps drive markets to their true value by increasing total information built into the product prices.  Even if people were using derivatives to bet against the housing market, that is a good thing.  It shows that people believe prices are overvalued, helping to deflate the bubble earlier than it would have been absent the derivative trades.  Rather than forcing all derivatives to be traded on exchanges, counter-party solvency and fear of default would provide enough incentive for firms to contract accordingly.  That is only true, however, if firm failure is an option.

Lastly, and in my mind most importantly, is the resolution authority granted to the FDIC.  First, you just read my take on too big to fail, but that doesn't mean that we currently have a perfect mechanism for dissolving failing financial firms.  We don't.  But the best place to do that is in a bankruptcy court, which can provide at least a little bit of insulation from political interests interfering with the process.  But anyway if all the bill did was to create this resolution authority for the purposes of liquidating of a firm entering resolution, that wouldn't be too bad.  However, the Dodd bill gives the FDIC clear authority to engage in loan guarantees during a crisis for any company deemed to be systemically important to the financial system.  This is a bailout authority for creditors in addition to the resolution authority!!!!!  The FDIC can accept any collateral it chooses to borrow up to 90% of the assets value to provide guarantees for for these companies creditors.  And nowhere in the bill does it say that these guaruntees must be made equally and fairly for all creditors.  WE ARE JUST ASKING FOR THE SAME KIND OF FAVORITISM SHOWN TO CREDITORS IN THE CHRYSLER/GM BAILOUTS.  This is simply unacceptable.  Obviously it makes legislators' jobs very easy to simply leave it to the FDIC to determine how and when to exercise this authority, but this puts the the U.S. taxpayer on the hook for the mistakes of political favorites.  For example, take CitiBank.  If the FDIC had used this authority to bailout Citi's creditors it could have borrowed up to $1 trillion. 

Finally, it is absolutely ridiculous that the role of Fannie Mae and Freddie Mac played in the financial crisis is completely ignored in the bill.  Together the two firms have already borrowed $125 billion from the feds and the Congressional Budget Office predicts they ultimately will drain $380 billion.  This is far more than any of the TARP expenses for all the financial firms and auto makers combined.  And we probably have no chance of ever being repaid.  Almost of these losses were realized because of a misplaced government mandate that Fannie and Freddie provide loan guarantees to spur home ownership among low income individuals.  These companies were a moral hazard in the housing market.  They were implicitly backed by the government and were more than willing to back some of the riskiest loans in the housing market.  But alas, they are ignored in the legislation..  Hopefully, the CFPA will crack down on Fannie and Freddie's predatory lending practices.

government run healthcare at any cost

The Democrats are in a tough spot. Their healthcare bill is unpopular. They don't have any idea how to create private sector jobs. The House and Senate are so far apart when it comes to financial reform that it makes their differences on healthcare look like the differences between Kristina and Karissa Shannon (see Exhibit A). Basically, the Dems are now coming upon the realization that they have no path to anything other than complete and utter decimation in November. At this point it does not matter if they scuttle Obamacare or not.

Exhibit A

With this backdrop, Pelosi, Reid and Obama have decided to simply go all-in. They have accepted these losses and now want to force through the most liberal, far-reaching and redistributive healthcare bill possible. They have decided that since they are not going to have the power to do anything after November, they might as well do as much dirty work as possible now, making it almost impossible to roll back these unpopular and tremendously expensive initiatives until at least 2012 (when Obama leaves office), which is effectively too late to stop it. Just look at all the talk about bringing back the public option.

I watched several hours worth of coverage of last week's healthcare summit at the Blair House. Basically, I came away with the fundamental understanding that the two parties fundamentally see two different healthcare problems. In the democratic paradigm the world works like this:

Health insurance is so important that every single american should get it regardless of their ability to pay for it.  It should be an affirmative, government provided right.  The 60 million Americans who don't have health insurance need and want it, they simply can't afford it.  This is the biggest problem with regards to health care in America.  Health insurance companies face no competition and can gouge consumers, pricing people out of the market.  The federal government should mandate both the minimum protections private insurers can offer, the minimum coverage that a citizen must buy, and will provide subsidies for people up to four times the federal poverty level to purchase this insurance.  This manipulation of the health insurance market will not have many unforseen consequences, and people will be able to keep their current coverage if they like it.  The subsidies can be paid for by taxing just the rich.  

On the other hand, the GOP sees the problem this way:

Healthcare costs are rising too fast.  Perversions in the market destroy the price incentives that normally provide information regarding the relative supply and demand for a given product or service by allowing the customer (you and I) to receive full services without having to realize the full costs of those services (through use of  co-pays, premiums and low deductibles).  By disturbing these incentives, the price system is not allowed to function correctly, allowing for an efficient allocation of resources.  This situation inevitably will lead to excess demand, driving up costs.  Excess demand is also created when doctors practice defensive medicine in fear of malpractice lawsuits down the road.  Capping non-economic pain and suffering damages can reduce this defensive medicine.  The solution is to add market discipline to the health insurance market, by opening competition (like allowing people to buy insurance across state lines) and re-instituting price discipline (like by promoting health savings accounts and eliminating the differential tax status between employer and individual purchased health insurance).  High risk pools can be created to help insure those with preexisting conditions. 

Both sides are open to criticism.  Democrats say the republicans plan does little to help the uninsured get insurance.  That is mostly true, although there plans would drive down healthcare costs in the private market, making insurance more affordable for everyone.  This would allow some people currently priced out of the market to purchase insurance.  Republicans counter with the argument that the Democratic plan would be vastly expensive, would drive up the costs of insurance in the private market (through the coverage mandates) and amounts to little more than a vast wealth redistribution system.  In addition, by adding millions to the insurance market on the public dime, Obamacare will eventually lead to healthcare rationing when the program becomes underfunded (like all other public entitlements).  The true costs of providing healthcare to these individuals will be shifted to private payers whose premium costs are not mandated by the federal government, which could either lead to increases in private insurance premiums/decreases in quality of care or to the destruction of the private market all together when people begin dropping costly private insurance that is subsidizing the entitlement.

In my opinion, both sides are missing the larger point.  What was the original point of health insurance?  To hedge against the risk large healthcare costs if you are in a accident or are diagnosed with an unforeseeable disease.  The reason health insurance today provides the much different service today of covering not only unforeseen injuries and illnesses but everyday check-up and dental visits is because of the tax structure that was in place over the past 25 years that allowed employers to purchase health insurance for their employees using tax free money.  This made it cheaper for employers to offer an increase in health insurance value to their employees (which they paid for before being taxed) to a corresponding increase in pay (which would be paid for post taxes).  This scenario inevitably lead to hugely expensive insurance plans that covered all types things instead of simply increasing an employees pay.  Until the U.S. moves away from the tax system that heavily favors employer purchased plans, it will be difficult to have any price discipline in this market.

The most effective way to reform the health insurance market would be to simply give move away from the employer provided system and towards and individual market system.  In this scenario, consumers would be better able to gauge their true health care costs, and make rational decisions using a cost-benefit analysis.  Despite all the talking points about "waste" in the health care system, the only way to truly keep costs at an appropriate level is to allow effective market signals (using the price mechanism) establish the equilibrium level for these services.  History has shown that when a market is able to provide such incentives, resources will be distributed in the most efficient way possible.  This is perhaps the most important reform that could be considered in any health care overhaul, unfortunately neither side seems to grasp this important point.

obama is failing, but can the gop succeed?

By now everyone has heard about the revolution (as my Dad likes to call it) that occurred in Massachusetts last week.  Scott Brown was elected Senator, taking away the Democrats filibuster proof majority in the Senate (which, by the way, they never should have had because Al Franken manufactured votes last year in the Minnesota recounts).  Everyone is proclaiming that Obamacare is dead and that the Democrats are going to get murdered in the midterm elections in November.

Well I do agree with the first point; Obamacare is probably dead in the water, at least anything close to its current form.  I am not sold, however, on the fact that Democrats will be wiped out in November.  I understand that it will be a tough year for Democrats, but unless the Republicans stop simply being the party of "no" (which I am completely fine with if they are the minority party) and put out ideas of their own, their gains will not be substantial enough to effect real change (i.e. for them to take control of one or both houses of Congress).

Well guess what GOP?  I am here to help.  I have identified FIVE issues that can lead the Republicans to the promised land.  These are issues that in my opinion can not only bring victory to the party, but would also put America back on the path of unbridled economic vitality and sustainability.  Although I think each of these issues is important, they are listed in reverse order of importance (at least in my opinion).  The first two deal with foreign policy, while the last three are domestic issues.  Here we go!


5.  Legal Status of Terrorists
Scott Brown showed that even in Massachusetts more of the public support the more conservative view of the rights of enemy combatants and other terrorists.  The attempted Christmas Day Bomber, however you say his stupid name, was taken into custody by the FBI immediately after he landed in Detroit, was read his Miranda rights, and then he immediately lawyered up.  He still isn't talking.  It's pretty hard to fight a "War on Terror[ists]" when you cannot legally get the best possible information on your enemy.  Look, I am about as libertarian as you can get, and even I don't think these murders are entitled to all the rights afforded by the Constitution.  These guys are (for the most part) not U.S. citizens and they entered this country solely to attack civilians.  That is an act of war, not crimes in an ordered society.  The protections of the Constitution are rights that U.S. citizens hold and that the government cannot encroach.  In my opinion, these foreign terrorists should be treated like the shits they are, and that Constitutional rights are reserved for U.S. citizens.  Now I understand there are many, many situations were non-U.S. citizens should be afforded Constitutional rights, but this is not the case here.  They kill indiscriminately and are no different than any other barbarians that have emerged throughout history.  They should be dealt with accordingly.


4.  Make Freedom, Liberty and Security, Rather than Climate Change, the Focus of Foreign Policy
Since Obama took office the overriding theme of his foreign policy has been that global warming is the most serious international threat of our time.  Guess what?  That simply is not true.  At least in my opinion.  And I think the majority of Americans would agree with me.  Nuclear proliferation is a much, much larger problem both now and into the future.  Rogue regimes like North Korea and Iran are pushing hard to develop weapons that could be used against the U.S. and its allies.  This should be the focus of foreign policy.  We should make it known that we support anyone in the world who shares our belief in freedom and liberty.  This includes dissenters in China and the Green movement in Iran.  Democracy and individual liberty are the greatest pacifiers our civilization has ever seen, and as those beliefs proliferate, the world will become a much safer place.


3.  Swear off Earmarks, and Cut Domestic Discretionary Spending
So apparently Obama is going express support for a cap on discretionary spending in his state of the union on Wednesday night.  Well it seems like a great idea, but in all reality it is nothing more than a political farce.  In his first two budgets Obama raised total federal spending from about 21% to 26% of GDP.  So after this huge hike, he is now trying to claim fiscal discipline.  Please.  What's more is that discretionary spending is only approximately one-sixth of the federal budget, so capping its growth will do little to stop the deficits.  It is however, a good start if it is done right.  The Republicans should go a step farther than announce their attention to not only halt, but to cut domestic discretionary spending.  Republicans need to stand up and say they will not support another pork-riddle farm bill or unproductive funding for the departments of energy, education or labor.  If that means we lose Iowa, then we lose Iowa.  Fuck em.  Pork is pork whether it is in farm subsidies, bridges to nowhere or other wealth distribution programs.


2.  Make the 2001 Bush Tax Cuts Permanent
Everyone is hoping that 2010 will be better than 2009.  And that 2011 will be better than 2010.  Guess what?  That probably won't happen if we allow the Democrats allow the Bush Tax cuts to expire.  All of the marginal income tax rates will rise, the capital gains tax will rise and the tax on dividends will close to double.  Is this smart policy during an economic recovery?  The bad consequences of such a policy have been chronicled in numerous sources, but check out this WSJ editorial by Peter Du Pont for some grim predictions.   I find Arthur Laffer's analysis in his January Economic Outlook very compelling as well (the analysis is also mentioned in Du Pont's editorial).  Obviously I think this issue is a self starter for the Republicans.  I'm not one for litmus tests, but any Republican who does not support this policy should not be running for federal office.


1.  Entitlement Reform
In my opinion this is the most important, most contentious and most difficult problem that the U.S. will face in my lifetime.  Everyone knows the narrative: These programs (Social Security/Medicare/Medicaid) were initiated originally to help the the poor and indigent.  Over time they expanded to cover more and more Americans.  They are now approaching fiscal disaster as payouts are increasing far more than revenue.  This is the one and only issue (barring any major wars, knock on wood) that could simple bankrupt our country and our currency.  Without this problem all other problems seem very solvable.  If we could kick the habit we could end our reliance on foreign financing, increase economic productivity by stopping this huge drain on our resources, and focus on more pressing domestic and international issues.  The problem is in the pudding (I don't know what that means).  The problem actually is that at this point so many people have been promised benefits and have paid into the system their whole lives that it would be fundamentally unfair to deny them their benefits.  However, a large chunk of the population is aging fast, and there soon will not be enough productive workers to pay for their benefits.  Do I know a politically feasible answer to this problem?  No.  Personally I am for a combination of benefit cuts, allowing young people to opt out of the program instead rely on personal savings accounts, and cutting spending in other areas to fill the gap.  We need to tell young people today that social security in its current form will not be around when they retire.  Unfortunately, because of the largess of their parents and grandparents, they will be forced to pay for the program while not benefiting from it.  There is no feasible way that last statement is not true.  We might as well own up to that fact now, and end any reason for a sane American to rely on these programs for retirement in 50 years.  Obviously I don't have all the answers, but it is at least time for Republicans to start the debate.

iran again, and obama's reqorking of the financial regulation system

Well since my last post, things in Iran seem to be getting worse. At this point the government has begun cracking down on protesters and several innocent people have been killed while trying to assemble peacefully and voice their outrage over this sham election. Earlier today President Obama made a statement condemning the "unjust actions" being taken by the Iranian government. Many Republicans have criticized the the president for not being more forceful with his condemnation. Although I had been critical of President Obama for not speaking out more clearly, I think he took a step in the right direction today. I think the President is right not to issue a harshly worded statement condemning the Iranian government in general. Although that is how every American feels, doing so would simply give fuel to the regime to spew anti-American propaganda and use it as an excuse to crack down on the dissenters. This type of harsh crackdown could end the protests altogether, along with any chance of seeing real change in Iran anytime soon.


The President should denounce the violence against the protesters. The U.S. stands for the principles of freedom of speech and assembly, and we should tell the world that any regime that does not respect those rights is no friend of ours. However, attacking the regime directly and threatening direct military action will probably do little more than given the Ayatollah an excuse to quash the protests even further. Things are currently moving in the right direction without the help of the U.S. and we should let the people of Iran continue their push for basic human rights. I'm not saying that we should never get involved, but until the regime starts using even more brutal tactics and killing its own citizens on a wider scale, we should let the Iranian people do the heavy lifting. The U.S. should allow the Iranians to contest the issue of whether the election was free and fair, and then focus the government's efforts on standing behind the rights of Iranians to peacefully protest election results that they believe have been manipulated.


But just because we won't intervene militarily, or threaten to do so, does not mean we should do nothing. First we should impose an oil embargo on Iran. Unfortunately, doing this through the U.N. will prove ineffective. The U.S. should come out and say that any country that buys or sells oil from Iran will no longer be a favored trading partner. This must include China. The consequence of doing business in Iran should be a large tariff place on any good imported from that country to the United States. If we make the penalty strong and stick to it, not even China will be able to skirt around it. They are much to dependent on U.S. imports.

On a very different note, I just want to say a few words regarding Obama's recently passed retool of the financial regulation system imposed by the federal government. The premise behind the whole bill was that although their were several agencies overseeing individual players and institutions in the financial markets, there was no single entity on the lookout for problems that posed a "systematic risk" to the system as a whole. According to Obama's flawed rhetoric, Wall Street bankers gamed the system and took tremendous long term risks in order to make large short term profits. According to the administration, the bankers deliberately packaged volatile investments such as mortgage banked securities so that they could hide risk and sell them to banks and other financial institutions for short term profits. How could anyone believe such a statement? Most Wall Street bankers are extremely intelligent people who were simply using the information available to them at the time to try and make profits for the investors they represent.

Investment bankers are logical decision makers like anyone else, and they make decisions based on two factors: potential returns and associated risks. The real cause of the crisis was not greedy bankers trying to make a quick buck, but the distortion of actual risk in the marketplace. And who caused that distortion of risk? I'm my opinion there were three principle causes: the federal government's implicit backing of Fannie May and Freddie Mac, failure of the ratings agencies and the federal reserve's easy money policy of the first half of this decade.

The first I think is quite obvious. Fannie and Freddie have always been semi-public entities, and the federal government has pressured them to finance mortgages for lower income people, even if those borrowers would not have received the loans absent the government pressure. By giving these loans to people who would not otherwise be deserving, at rates that do not reflect this risk of default, the government created bubble whereby they were almost statistically guaranteeing that default rates would be higher than would have otherwise have been expected. Additionally, by not adjusting the interest rates of these mortgages to reflect these higher probabilities of default, they did not hedge the risk of default with a higher rate of return. However, since the mortgages were backed by Fannie and Freddie, investors assumed they adequately reflected market conditions and even if they weren't that the federal government would take any losses (which they are doing now).

This also plays into the second point, that the rating agencies gave many mortgage back securities AAA ratings. What in hindsight could be considered extremely risky and small return securities received the highest ratings possible. Why? Well first there are tremendous conflicts of interest associated with these agencies. They are paid by the sellers, so they have strong incentive to inflate their ratings to make their clients happy and earn repeat business. The ratings agencies should work for the buyer, as they are evaluating risk for the buyer, not the seller. However, only federally approved agencies can perform this work, and the federal government dictates their structure. Until the federal government gets out of the rating picture, forcing buyers to independently rate potential securities investments by use of private rating entities, thereby imposing on the buyer the known risk of what happens if they trust a faulty rating, these mistakes will continue.

Lastly the federal reserve fueled a bubble mentality by keeping interest rates artificially low for too long, making them effectively negative in terms of real dollars. An effectively negative interest rate makes it more profitable to borrow money even if you don't have too, because you will be paying off the loan with a dollar that is worth less in value in the future. This lower dollar value even made up for the interest being paid on the loan under prevailing rates. By flooding the system with excess liquidity, the fed ensured that more risky investments would be made for less chance of profit. The result is the bust we are currently enduring.

So how is the Obama administration solving the problem. BY GIVING THE FED MORE POWER. He is giving an unelected body that already wields way too much power in our monetary system even more influence. It is outrageous. They will now have the power to inspect the books and require certain actions to be taken by any entity that the chairman deems to be a "systematic risk" to the financial system. Not to mention the rating agencies are not being reformed at all. For an example of how ignorance at the fed has contributed to the current collapse please read the following three articles in order: Speed Demons at the Fed, Slack Labor Markets Will Hold Down Prices, and Bernanke at the Creation. The first is an editorial by the WSJ in 2003 which predicted many of the problems were are seeing today, and criticised the fed as creating the environment for them. The second is Bernanke's remarks from a 2003 open market committee meeting were he dismisses the journal as being out of touch. The final is an editorial which points out why the journal was right, Bernanke was wrong, and that he is now pursuing the same type of policies that caused the problems in the first place. So get ready for another boom/bust cycle, except this one will probably be marked by much higher inflation. So what is the only logical thing to do? I know, let's give the fed even more power.

why do republicans let sean hannity represent the party?

I don't know why I am still a registered Republican.  The party is increasingly at odds with my beliefs and values, and its not for the reasons professed by the media that I feel disinterested with the party.  The media likes to say that Republicans are too far to the right, and that this is turning off voters and causing them to become a minority party.  I have to disagree.  The problem is not that the GOP is moving too far to the right, but that it doesn't have an identity right now,  and no one is attempting to rally the party behind ideals and general policy that apply on a fundamental level to all the issues facing the country.  Instead the GOP is left to people like Sean Hannity, a small-minded, religious-right ideologue, who repeats the same rhetoric on every issue, toting the party-line of Bush/Cheney.  For instance, check out his ridiculous comments about President Obama's choice of condiment.  

Now I personally prefer regular yellow mustard, put I have to admit that I dabble in the spicy mustards from time to time, so I hope that doesn't make me some kind of elitist.  Instead of attacking a popular president's credibility on food, the GOP should be challenging some of his policies that are fundamentally changing the landscape in America.  The current handling of the Chrysler bankruptcy and restructuring is a perfect opportunity.  

In the current plan put forward by the government, the UAW is receiving a majority equity stake (~55% in exchange for relinquishing rights to about $10 billion in liabilities it held for pension payments) in the restructured Chrysler.  The government will receive around a 10% equity stake in return for around $4 billion in loans so that the restructuring can move forward.  The remaining 35% or so of equity will go to Italian manufacturer Fiat, in exchange for access to its fuel efficient engine technology and ability to open Chrysler up to the European market.  Notice how Fiat is not investing a single dime of capital in the restructuring.  Left holding the short end of the stick are Chrysler's senior secured creditors and bondholders.  Now in a traditional bankruptcy bondholders are almost always left out to dry, as there are no guarantees on their investments, and that is the risk they have taken.  However, the secured creditors are a totally different story.  Traditionally, they are near the top of the list in receiving payments, as the loans were issued with the companies real property and tangible assets as a backing for the loan.  When a company declares bankruptcy these secured creditors are guaranteed to receive at least as much as the value that the assets upon which the loans were secured.  These values are calculated through an estimate of what the property would be sold for if the company was liquidated under Chapter Seven.  

In this case the secured creditors are owed about $7 billion by Chrysler.  In exchange the administration only offered them about $1 billion and no equity stake in a restructured Chrysler.  The creditors knew they could get more through liquidation, so they forced a Chapter 11 filing.  However, the majority of these lenders are the big banks receiving federal TARP bailouts, like Citi, J.P. Morgan Chase, and Bank of America, although many smaller companies own smaller shares of debt.  Administration officials put pressure on the banks receiving federal bailouts to accept the offer at the expense of the smaller debt holders who received no federal money.  The squeeze proved successful, and last Friday the debtors acquiesced to the deal, accepting less than $2 billion and no equity.  This is probably half of what they could have gotten if Chrysler had liquidated.  And yet there has been no talk about how this major conflict of interest has allowed the banks and feds to put the squeeze on Chrysler's remanining secured creditors.

Although Chrysler's restructuring is not going to destroy the economy or put taxpayers on the hook for too much money, it does illustrate a much larger, and scarier, problem.  When we allow the government to get involved in private business affairs, it gives one side an unfair advantage in the bargaining process and prevents the even-handed negotiating that is both fair and and necessary for the free markets to function effectively.  For instance, Obama is big on fuel efficiency, so Fiat is getting a major stake in Chrysler because they can offer fuel efficient technologies for Chrysler's next generation of automobiles.  However, they were included in the deal because Obama decided it was a good idea, not because they bargained for their equity stake.  In contrast, secured creditors that made arms length bargains under the rule of law are being short-changed so that Fiat can move in.  They played by the rules, secured their debt, but now are being muscled out by the government.  Republicans need to point out this hypocrisy, and let the public know that similar injustice will occur when the government gets involved in the private business sector.  If the government is allowed to come in after the fact and use its tremendous influence and power to change the rules of the game at any time, there will be a chilling effect on how companies do business, especially if their is a risk of insolvency.  This could have a devastating effect, causing credit to seize up any time a company could potentially go bankrupt, as lenders will not want to risk the government changing the rules so that they cannot recoup their investments.

jack kemp, becker and posner, and the federal reserve

First, I would like to start off with the sad news the former NFL quarterback, Congressman, and 1996 Vice-Presidential candidate Jack Kemp died over the weekend. Kemp was one of the few voices for truly free markets and limited government over the past half century. One of the biggest mistakes the Republican party has ever made was nominating George H. W. Bush for President in 1988 instead of Kemp.  The first Bush's anti-free trade and pro-tax growth policies undercut the Republican message and its legitimacy, leading directly to Bill Clinton's election in 1992.  Kemp also co-sponsored Reagan's 30% across the board tax cuts in the early 1980's, which were a major factor contributing the sustained economic growth of the United States during the 1980's and 1990's.  Today's WSJ had an excellent collection of partial op-eds written by Kemp over the past 30 years.  The link is here, and I highly recommend checking it out, as Kemp's consistent policies and dedication to free markets, show that he understood the problems facing the nation and how to address it.  If more of Kemp's ideas had been put into place, we may not be facing as serious economic problems as we are today.

Secondly, I recently stumbled upon a blog written by Gary Becker (a Nobel Prize winning economist at the University of Chicago) and Richard Posner (Judge on the 7th Circuit Court of Appeals, leading scholar on economics and the law, and probably the most cited Circuit Judge in United States history).  Located at http://www.becker-posner-blog.com/, the blog breaks down important issues in economic terms.  For instance, in their latest posts, the two independently analyze the economic consequences of a pandemic such as swine flu, the costs associated with preventing such an outbreak, and posit several viable options as the most economically efficient way to tackle such a problem.  I highly recommend it to anyone interested in economics and its application to real world political issues as well as policy in general.   Both Becker and Posner have great economic and analytical minds and are able to succinctly breakdown very complex issues, thereby making them understandable even to someone with only a modest economic background.  

In one of his more recent posts, Judge Posner addressed the Independence and fundamental role of the Federal Reserve system, which got me thinking.  It is unfortunate and extremely disheartening that so many Americans do not even understand what it is that the Fed actually does or what its role is in the American financial system.  Fundamentally, many Americans understand that the Fed adjusts interests rates, but they do not understand how they accomplish this goal, what the Fed's objectives actually are, and how it is responsible for the entire monetary policy of the United States.  Therefore I am going to briefly describe the Fed and its role in our financial system and address what I consider potentially devestating powers available to the Fed with regards to monetary policy.

The federal reserve was originally created in 1913 as a lender of last resort in order to prevent runs on banks that were common at that time.  After the Bretten Woods agreement collapsed in the 1970's when Nixon took the U.S. off the gold standard, the Fed gained increased influence by affecting monetary policy in order to attempt to maintain low inflation as well as maximum employment.  But how does the fed actually affect monetary policy?  In times of economic downturn, the money supply will become more scarce, as more people will save in an expectation that they will need it later during more tough times.  In order to keep the credit markets flowing and provide the capital necessary to spur investment, the fed will buy government securities/bonds (mostly short-term bonds), which pumps cash into the economy when the cash is deposited in bank accounts and then withdrawn and spent.  This increase in monetary supply held by banks will allow for more money to be lent, decreasing the demanded interest for such loans (i.e. lowering short term interest rates).  Long term interest rates will inevitably follow (at least to some degree) the short term rates, which will increasing lending, hopefully spurring economic growth and growing the economy.  Conversely, if the Fed wants to raise interest rates (probably to combat inflation) it will sell some of the government bonds it holds, thereby removing money from the financial system.  Presumably, it could then prevent that money from re-entering the system, which decreases the total amount available, thereby increasing the demand for the currency.  This increased demand will lead lenders to value their money higher, an charge an increased rate of interest on the money that they loan.

All of this sounds good, but missteps by the Fed over the past few decades have had extremely detrimental effects on the U.S. economy.  Additionally, the Fed's tremendous power as the sole decision maker with regards to the U.S. money supply (and effectively the entire world's money supply as many major currencies are fixed to the U.S. dollar) has the potential to have a devastating effect on the country's growth and the standard of living of all Americans.  Today, there is almost uniform agreement that the Fed's easy money policy of the late 1990's and early 2000's was a major contributing factor to the housing bubble that lead to the economic collapse we are currently facing.  In order to spur current economic growth, the Fed has increased the money supply by over $1 trillion this year alone.  If the Fed gets its job right, then it should increase the money supply as total U.S. output increase, thereby stabilizing prices relative to growth.  However, this rarely happens.  In order to prevent devastating deflation from occurring, the Fed must over estimate the amount of money to produce, thus increasing money supply relative to total economic output and causing inflation.  In fact, for the past three decades the fed has doubled the money supply every ten years.  This inflation is a hidden tax, which is in fact extremely regressive.  How is it that we allow a completely private, unelected board decide how much to tax the American consumer in the form of inflation?  It just doesn't make sense.  Unfortunately I do not have time to outline my solution here, but I will in a future post.

specter and everything else that is wrong with the gop

As I'm sure most of you have heard, my Senator from the state of Pennsylvania, Arlen Specter, has decided to defect from the Republican Party.  Specter has stated that the reason for leaving was because the Republican Party has moved too far right while he has remained true to his moderate record.  That's some of the biggest bullshit I've heard in a long time.  First, Specter's move is a purely political one.  He's a lifetime politician, the scourge of the country.  He realized that Pat Toomey, who unsuccessfully ran for Specter's seat in the 2004 Republican primary, was leading him by 21 points in polls among likely Republican voters in 2010, and that he wasn't going to be renominated as the Republican candidate for Senate in the next election cycle.  He then made a deal with Democrats that he would caucus with them as long as they didn't put up a Democratic challenger in 2010.  Some ideological struggle indeed.  

Although this looks like a major defeat for the GOP, and it is in many respects, I think this could be a turning point for the party if they use this defection to begin moving in a better direction.  Many pundits are claiming that this is a huge loss because Democrats will now have a filibuster proof majority in the Senate.  In reality, Specter was already going to vote with the Democrats on many issues, so his switching party affiliations really didn't get them any more votes.  The real test of whether the Democrats can prevent a filibuster will come from moderate Democrats in traditionally Republican states like Kent Conrad of North Dakota, Evan Bayh of Indiana, and Ben Nelson of Nebraska.  Their votes on issues like cap-and-trade will determine whether it will become law because Specter was already going to vote with the Democrats.

Specter claimed that the Republican party has been moving too far right for his tastes.  Doubtful.  Republicans have abandoned the principles upon which the Reagan revolution was founded: belief in restraining government spending, pro-growth policies, tax reduction, sound national defense, and maximum individual liberty. First, when it comes to personal freedom as well as personal responsibility issues,  Republicans have betrayed their roots of classical liberal ideology.  In our current political environment, the question always seems to be, "How can the federal government fix the problem?"  If this is the question that is being debated in Washington, then Republicans are always going to lose.  Democrats are the party of government run solutions, and instead of offering a watered-down democratic solution, the Republican party needs to articulate free market and private solutions to the issues facing us as a nation.  

More than anyone, former President Bush is the most to blame for this destruction in fundamental ideology.  Far too often he caved to political pressures and rather than attempting to fundamentally reform government expenditures.  He expanded the size of government through programs like Medicare Reform, No Child Left Behind, and other federal economic regulation.  During Bush's term in office, the  Federal Registry, which contains the rules and laws for federal regulation of all types of industries, grew from 64,438 new pages in 2001 to 78,090 in new pages in 2007, a record amount of regulation. Economically significant regulations, defined as regulations which cost more than $100 million a year, increased by 70%.  Spending on regulation increased by 62% from $26.4 billion to $42.7 billion.  Now that's what I call a limited government voting record.

Not to mention a relatively new wing of the Republican party, the Christian Conservative, has come to dominate the GOP agenda.  Southern Republicans, who gain most of their political support from deeply religious conservatives, has caused the party to move away from a belief in limited government and personal freedom.  Instead of supporting individual rights, the GOP has demonized ethnic, racial and political minorities, believing that supporting the Christian conservative agenda is more important than protecting individual rights.  This has caused groups like gays, hispanics, african americans and jews to feel alienated from the party, preventing the GOP from winning even small minority support.  Until the GOP fundamentally restructures their view of how the government should be run, and what the appropriate role of the government should be, they will continue to lose support nationwide.

So what should the GOP do?  I am glad you asked.  Below are 5 points I believe would fundamentally overhaul the party and could make them into a majority party once again.  Not to  mention it will begin moving America back in the direction of freedom and prosperity.

1. Explain why government is not the solution.
   Government spending is wasteful.  Everyone knows it.  We can't let the the government pick economic winners and losers in America because it is only going to lead to entrenched bureaucracies with no objective other than attempting to force the government to continue giving them funding.  The deficits we are running are unsustainable, will lead to rampant inflation, and will destroy the financial system beyond repair.
   
   
2. Begin offering free market solutions to today's economic problems.
   Republicans are not articulating why Obama's policies are going to bankrupt America in the long term.  They need to stress that free market solutions are inherently more economically efficient than government spending programs, and that prosperity will be maximized, especially in the poorest classes, when government allows entrepreneurs to create new opportunities.  This sounds like a win-win, but they must also stress that free market solutions means allowing bad investments to fail.  In other words, no more bailouts for failing companies like the domestic auto industry.  Failures of these companies, although painful in the short term, create tremendous opportunities for new economic growth in the long term as new suppliers will emerge to meet the newly found surplus in demand created by the fall in supply.
   
   
3. Support individual rights and liberties.
   The federal government should have no role in deciding who should be allowed to get married, and Republicans need to recommit themselves to protecting individual liberties all all costs.  Rights belong to individuals, not groups, and that is the message they should stress.  By strengthening individual rights, they can meet two important goals: preventing future government encroachment of personal freedoms (including economic freedoms), and opening up the party to traditionally democratic voters like gays, pro-choice moderate women, and other minority groups who believe strongly in personal rights.  
   
   
4. Stress the importance of the citizen politician.
   Now this might just be a pipe dream of mine, but I think it could be a winning issue for Republicans.  They should push for term limits in both houses of Congress.  My recommendation would be you can be re-elected into the house three times (four terms totaling eight years), and as many times as you wished in the Senate, but you cannot run for re-election in the term directly after you served.  By rededicating themselves to the idea of citizen politicians, a notion strongly supported by the founding fathers, we can eliminate lifetime politicians, thereby limiting the control of special interests.  If politicians are not constantly running for re-election, there is no incentive for them to constantly raise money, greatly reducing the influence of special interest groups.  Unfortunately this is not going to happen.  Too many Republicans themselves are career politicians to support such a matter. 
   
   
5. Explain that Americans are not getting what they are paying for.
   The U.S. budget this year is in the trillions of dollars.  Many Americans are paying between 30-60% of the income in taxes of some kind, be it federal income tax, state income tax, local wage taxes, state sales taxes, etc.  In some cases, that is the equivalent of working Monday through Friday and only getting paid for working Monday and Tuesday.  And for what?  With the massive government spending, Very few people see any concrete benefits that come anywhere near the tremendous amount they put into the system.  These high tax rates destroy the incentive to work hard, not to mention they are fundamentally unfair.  Republicans should emphasize that when a government grows to the size ours has currently achieved, it is unable to effectively govern in an efficient way.  We essentially work half the time to support ourselves, and half the time to support the government.

Now I don't kid myself into thinking this is the path the GOP will follow.  Unfortunately I think they are in too deep at this point, and it is going to take a major economic collapse (and if you think the current recession is bad just wait until will have major negative economic growth coupled with skyrocketing inflation from unfunded debt - 2008-09 will look like rosy economic times) to overhaul the system.  Hopefully I'm wrong.  We are going down a path that will bankrupt the country.  Additionally we are taking away both economic and personal freedoms in the name of protecting the common good.  One of my favorite quotes is from Supreme Court Justice Louis Brandeis who in his dissenting opinion in Olmstead v. United States stated, "Experience should teach us to be most on our guard to protect liberty when the Government's purposes are beneficent. Men born to freedom are naturally alert to repel invasion of their liberty by evil-minded rulers. The greatest dangers to liberty lurk in insidious encroachment by men of zeal, well-meaning but without understanding."

more i love money, pirates, president obama and the new gop

First and foremost, there was a brand new I Love Money 2 last night, and it was a good one.  For the first time in weeks it looks like Taylor Made is not in charge anymore.  Prancer, Myamee and Ice made an agreement to work together until the end, leaving Taylor Made and It high and dry.  Although they should be safe until Frenchy and Saphari are gone, unless they start winning some challenges and become paymaster, it may be

over soon for the two guys left on the show.  After 20 Pack got bounced last night (Myamee decided not to honor his deal with Taylor Made) there are no dominant male competitors left, so it really is anyone's game.  I'm excited to see what happens.

In other TV news, MTV has started up the Duel 2, and its season premier was awesome.  CT punched out a dude and the challenege was a rugby hybrid.  Not to mention there are no teams, so no one will be throwing challeneges.  I really like I Love Money, but the Duel 2 has more athletic competitors, hotter girls, more intense challenges and a better house, so it may be my new favorite reality TV program.  I'll be sure to comment on Wednesday's new episode.

Also in the news, Somali pirates recently attempted to highjack a U.S. merchant ship in the Indian Ocean near the Gulf of Aden.  Although unsuccessful, they did manage to take the ship's captain hostage for a few days.  However, the U.S. Navy was quickly on the scene, sending the U.S.S. Bainbridge, a destroyer which leads the U.S.'s antipiracy battle group, to deal with the situation.  As I'm sure you heard, during the negotiations the pirates became "hostile" and so orders were given to do what was neccessary to protect the captain.  Navy snipers shot and killed three pirates and another was captured.  The captain was unharmed.  

First, I want to praise Obama's handling of the situation.  Reportedly he gave the order to "do whatever was necessary" to maintain the safety of the captain if the situation grew more intense.  He trusted the military officials to make a good judgment and do their job, and that's exactly what they did.  The SEALs that attacked the pirates along with the Navy commanders on the Bainbridge are the best trained warfighters in the world, and Obama was right to allow them to handle the situation and not to take any options off the table.  He sent a message that the U.S. does not negotiate with terrorists/pirates and projected American strength thousands of miles away from our border.

The next question is what will the pirates in Somalia do next, and how will the U.S. react.  In the aftermath of the rescue mission, officials from several European countries condemned the U.S. action, stating that it will only prompt an escalation in the piracy.  Fuck that.  These are the same officials who think it is great that shipping companies are paying tens of millions of dollars in ransom to have their ships and crews returned unharmed.  Let's see.  If you were a pirate and you could attack one of two ships, the first bears the flag of country with a powerful navy that has already killed three of your colleagues and taken a fourth captive, while the other bears the flag of a country that will assuredly pay a hefty ransom for the ship without any type of military conflict, which would you choose?  International law regarding piracy is clear.  It is perfectly legal to use force to defend against pirates attacking a ship, and a sovereign nation is in the right to defend its nationals on the high seas, whether that means destroying the pirate presence or capturing them bring back to the home country for trial.  As far as I am concerned, shoot them all.  Its the only way to send the message that unlike Somalia, the U.S. is a nation of laws and that piracy is an abrogation of those laws which we take very seriously.  That message will be much more resounding than paying a ransom.  

Now although I think Obama handled this foreign crisis well, his lack of a plan for his domestic agenda has been disturbing.  For some reason, the Obama "change" mantra was a pop culture phenomenon, and even after his election it seems as though people still think he is this great savior, without really asking any tough questions.  Obama is cut more slack in both the media and by the mainstream public (by mainstream public I mean people who have no idea what politicians in Washington are doing, or what they do ever) than any major political figure since FDR.  Doesn't it scare you that the president of the United States has not articulated his philosophical direction for the country as whole besides the fact that we need change?  

Obama has never stated what his ultimate goals for the country are.  If I could ask him one question it would be, what do you want the United States too look like in 50 years, and how do your policies put us on the path to getting there?   I have a feeling that many Americans would not like his answer to that question.  He will take us down a path of less freedom to run our own lives, massive debt, and government controls over almost all aspects of our lives.  The problem is the Republicans are not forcing his hand.  They are not articulating an opposing view point on the issues Obama has decided to push.  

The GOP needs to return to its classical liberal roots.  Republicans need to put their foot down, say government is not the answer to all life's problems, and start providing free market solutions to the problems that face us today.  We are going down the unsustainable path of a entitlement society that will bankrupt the country.  The Government Accountability Office estimated last year that the federal government's unpaid obligations for social security and medicare is over $43 trillion.  That's over three times the countries GDP.  That is unsustainable.  And we are only moving down an exponential curve.  As the baby boomers retire and try to start cashing in on social security, the federal deficit is going to go to unheard of levels: upwards of 10-20% of GDP.  And that's not federal spending, just the deficit.  At that point government spending will be well over 50% of GDP.  

Republicans need to stand up now and say that the American people won't stand for it.  We are turning into a society where 50% of the population pays no income tax and the top 10% pay over 75% of the tax burden.  And its going to get worse.  We need to go back to where Americans relied on themselves, and not the government to run their lives.  The american dream has always been that if you work hard you can move up in the world.  That's what relying on a market economy does.  It rewards hard work, which is what our society is all about.

This is the sickest picture ever: